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Comment by loeg | Hacker News Reader

> A sizable chunk of the endowment likely has legal restrictions that limit how funds can be spent. E.g., they could be earmarked for undergraduate scholarships or a specific lab at a specific department. The endowment isn't a slush fund.

Some of it has some restrictions, but money is fungible. I do not believe that MIT is actually limited (in practice) from writing their own grants because of donor restrictions (if they wanted to).

> And of course this doesn't even get into the reality that the annual operating costs of somewhere like MIT likely far exceeds the investment returns generated by the endowment.

Somehow they spend $1.2B/year on administration, so, yeah. Don't do that. But they easily have enough principal to cover grant funding for the remaining years of this administration. Especially if they can play on their lib donor heart-strings about how mean the current administration is being to them.

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The vast majority of the endowment isn't money (dollars in bank accounts). University endowments work like private equity funds, most of the funds will be invested in assets, most of which hardly liquid enough to reasonably convert them into cash on short notice. They could try to borrow money against the valuations of those assets, but it's not sane to take on debt in order to sustain a level of expenditures that was adjusted to a much higher level of income (true more generally). Especially when the alternative of temporarily scaling back expenses is relatively easy.

I am very skeptical that endowment funds are as illiquid as you claim. We're talking about amounts less than 10% of the total portfolio size annually.

Money is not fungible when you are a large organization. Many things that should be possible in principle are impossible in practice due to rules, politics, and institutional inertia.

MIT's endowment is ~80% earmarked to whatever purposes the donors considered important. The remaining ~20% is unrestricted, but unrestricted does not mean unallocated. Everything has already been allocated to some purpose, at least implictly. If you want to allocate more money towards something, you need to take that money from somewhere else. And then you get politics.

>practice due to rules, politics, and institutional inertia.

Isn't that the responsibility of the dean to fix? I think a lot of us have no idea how this actually works, but do understand the difference between impossible and hard. This seems more like it's on the hard side than impossible.

A dean is a mid-level manager in an organization, where effective power is widely diffused.

Many things are possible in the same sense as rewriting the US constitution. The mechanism for it exists, but using it in practice would require widespread agreement on the specifics. When there are many people making independent decisions, it's best to see the situation in statistical terms. Outcomes that are too many standard deviations away from the expected are effectively impossible.

> Especially if they can play on their lib donor heart-strings about how mean the current administration is being to them.

Yes, like those famous liberals the Koch family who paid for prime real estate across from Stata.

It's just not as simple as you lay it out to be. Do you _seriously_ think that if hunkering down and paying out of the endowment to sustain nominal operations for a few short years was a viable strategy that they wouldn't be doing just that?

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