Cathedral Round-Up #14: The Business of being Harvard

Harvard has an endowment of $37.6 billion.

Yale’s is $25.6 billion.

Princeton’s is $22.7 billion.

Stanford’s is $22.2 billion.

For comparison, the GDP of the entire country of Serbia is about $37 billion per year, and the Apollo Space program spent only $2.18 billion (inflation adjusted) on the flight that landed Neil Armstrong and Buzz Aldrin on the moon.

How did these colleges get so rich? Mostly through investment. According to Wikipedia:

Harvard University‘s endowment (valued at $37.6 billion as of 2015)^[1] is the largest academic endowment in the world.^[2] Along with Harvard’s pension assets, working capital, and non-cash gifts, it is managed by Harvard Management Company, Inc. (HMC), a Harvard-owned investment management company.^{[3] …}

HMC employs financial professionals to manage the approximately 12,000 funds that constitute the endowment. The company directly manages about one third of the total endowment portfolio while working closely with the external companies that manage the rest.^[4] …

Jack Meyer managed HMC from 1990 to September 30, 2005, beginning with an endowment worth $4.8 billion and ending with a value of $25.9 billion (including new contributions). During the last decade of his tenure, the endowment earned an annualized return of 15.9%.^[5] …

The university hired Mohamed El-Erian to succeed Meyer as HMC’s next president and CEO. … He announced his leaving September 12, 2007 to return to PIMCO after guiding the endowment to a one-year return of 23%.^[7]

From the Atlantic, “Is Harvard so rich that it should be literally illegal?“

But these colleges aren’t just rich. Harvard is a brand–a famous brand.

The big-name colleges are famous for their alumni, the wealthy people whose donations to their alma maters go back into their voluminous coffers, to be invested in the stock market and pay HMC’s multi-million dollar salaries:

• Jane L. Mendillo, president and CEO: $9.6 million ($4.8 million)
• Stephen Blyth, head of public markets: $11.5 million ($5.3 million)
• Alvaro Aguirre-Simunovic, natural-resources portfolio manager: $9.6 million ($6.6 million)
• Andrew G. Wiltshire, head of alternative assets: $8.5 million ($7.9 million)
• Daniel Cummings, real-estate portfolio manager: $5.4 million ($4.2 million)
• Marco Barrozo, fixed-income portfolio manager: $4.8 million

Numbers for fiscal year 2013; numbers in ( ) for 2012.

All this, and colleges are still taxed as non-profits.

Getting the right students, then, is critical. What interest has Harvard (or Stanford, Yale, or Princeton, for that matter) in accepting ordinary, hard-working Americans–even exceptionally intelligent ones–who will not become rich or famous? Harvard wants future Kennedies, Bushes, Obamas and Paulsons (John A. Paulson, founder of Paulson and Co., recently gave Harvard $400 million.) Best case scenario, their students absorb Harvard’s particular brand of secular Puritanism, furthering its spread. Worst case scenario, they get a Scalia, who doesn’t share their values but still increases the value of their brand.

(Okay, the actual worst-case scenario is a Nixon, who studied at podunk Whittier College, CA, and thus didn’t help their brand at all. I’m sure you’re all familiar with how the Cathedral treated Nixon.)

People discuss Affirmative Action as though universities had some sort of obligation to–or interest in–providing education for the good of the general populace. The point of the university, though, is to make money and promote the university’s brand. Low-class universities do this via sports, pumping billions into their football programs. High-class universities do this by attaching themselves to future leaders, like Harvard graduates Sebastian Pinera, President of Chile (2010,) Colombian President Alvaro Uribe, Pakistani PM Benazir Bhutto, three Mexican presidents, Peruvian President Alejandro Toledo, Tanzanian PM Frederick Sumaye, etc. According to Foreign Policy Journal:

From 1945 through early 2010, 71 heads of state and government from 41 countries have attended, or earned degrees, or held a variety of special scholarships and fellowships at Harvard or Oxford. …

In the second half of the 20^th century, Harvard educated more than 11 percent of the top national American political elite, compared to Yale’s less than seven percent.  One Harvard program alone, the Law School, produced 37 national leaders, in contrast with the 38 who graduated from all of Yale’s colleges combined (author and M. A. Simon The Social Science Journal, 2007).

and according to the Washington Times:

The University of Chicago trained the now-famous “Chicago Boys,” a group a Chilean economists who went on to greatly influence that country’s monetary policy. …

The State Department and private groups keep running lists of foreign dignitaries who studied at American schools of higher education, a list that includes a king in Jordan, a crown prince in Norway and a crown princess in Japan. In some countries, the links can be extensive. When Indonesian President Susilo Bambang Yudhoyono, who got a master’s degree at Missouri’s Webster University, convenes his Cabinet, the group includes alumni of the University of California, Berkeley (defense minister), American University (justice minister), the Wharton School of Business at the University of Pennsylvania (finance minister), UC-Davis (trade minister) and the University of Colorado School of Mines (energy minister). …

In the 2010-11 school year, the number of foreign students in U.S. schools shot up to 723,277, an increase of 5 percent from the previous year, Institute of International Education reported. It has increased each of the past five years, and has risen 32 percent over the past decade. …

Chinese students accounted for much of the recent growth, with the total number from the burgeoning Asian power increasing by 23 percent overall and by 43 percent at the undergraduate level.

In the 2010-11 school year, 157,558 Chinese were studying at American schools, far more than from the No. 2 country, India, which had 103,895. Other nations with rocky relationships with the U.S. — Russia, Pakistan and Afghanistan, among others — also have sent their young people to the U.S.

Even if the most powerful guy in Jordan or the Philippines is an idiot (and I’m not saying he is–I’m drawing countries out of a hat,) it’s still more in Harvard’s interest to say he went to Harvard than some random American of equal IQ. The same is true at home: it’s more important for the most powerful black guy in the country to have gone to Harvard than for the second-most powerful white guy. The big universities of course want smart people, but they want powerful people even more.

In 2015, seven students–Fernando Rojas, Munira Khalif, Stefan Stoykov, Victor Agbafe, Pooja Chandrashekar, Harold Ekeh, and Alexander Roman–got into all eight Ivy League colleges. These students have one thing in common: they’re all immigrants.

(Since the Daily Mail is written by idiots, the writer didn’t realize that MIT is actually more prestigious than most of the Ivies.)

Kwasi Enin, another immigrant, was accepted into all eight Ivies in 2014 with a 2250 on his SAT (you can also read his essay here,) which is equivalent to a 1490 on the old, 1600-max score SAT. For comparison’s sake, if I had scored a 1490 on my SAT, my parents would have demanded to know what went wrong during the test.

Kwasi has teemed up at Yale with Shaan Patel, another immigrant and member of one of India’s upper castes, to help highschool students do SAT prep/apply for college. (Step one: Don’t be an American.)

To be fair, the immigrants likely have one thing in their favor independent of Harvard’s preferences: many of them grew up in poorer neighborhoods, unable to buy their way into the “good” school districts, where it was easier to out-shine their less-intelligent peers. While Americans labor under the illusion that schools make a significant difference in how smart students are, immigrants tend to believe that your parents making you study makes you smart.

But keep in mind that every year, Harvard rejects students with perfect SAT. The chances of getting into all 8 Ivy League schools is astronomically low; the chances that all 8 students who did so happen to also be immigrants/the children of immigrants is even lower, unless the Ivies are specifically selecting for them–and many of these immigrants are then used to fill the universities’ Affirmative Action quotas, because it is easier to find high-scoring Nigerians, Kenyans and upper-caste Indians than high-scoring African Americans.

In short: Universities want Affirmative Action because it benefits their bottom lines.