What's wrong with giving $400 million away to charity?
Hedge fund manager John Paulson started getting grief as soon as he committed exactly that amount to Harvard University — the largest gift in the school's history, which is saying something. The donation, announced last week, will put Paulson's name on Harvard's School of Engineering and Applied Sciences.
To get an idea of the kind of flack he got, consider the response from author Malcolm Gladwell in one of several tweets:
"It came down to helping the poor or giving the world's richest university $400 mil it doesn't need. Wise choice John!"
Normally, I'm reluctant to criticize anyone who decides to give away money. But the Paulson gift — and the sheer voraciousness of the Harvard money machine —- shines an unflattering spotlight on the wealth gap in higher education and the ways in which it is perpetuated.
Harvard isn't just a member of the university world's 1 percent. It is the richest school on the planet, and there are some obvious reasons for that.
People give money to places they know, attended, or that helped them along in life. Harvard's reputation allows it to recruit tons of bright kids. It opens a lot of doors. It cranks out a lot of successful people.
If the wellspring of all college charity is alumni, no university has more elite or deeper pockets to tap. It didn't have any trouble connecting with John Paulson, a Business School alum who literally makes billions of dollars in a good year. In remarks last week, Paulson said it was "an honor to be a long-term partner with Harvard."
There's a reason you don't read stories about $400 million gifts to Suffolk University or other schools that charge strikingly high tuition and fees because they have so little of their own money to help the next generation along. Gifts on that scale simply don't exist for those schools.
Sure, there are exceptions. Tufts University, Amherst College, and the Massachusetts Institute of Technology have received donations of $100 million or more at one time or another.
Allen and Kelli Questrom pledged $40 million to Boston University earlier this year. Northeastern University raised a combined $60 million from two alums — Richard D'Amore and Alan McKim — for its business school three years ago. But they are rare.
The concentration of academic wealth is a serious problem for higher education. The struggle to pay for college is a defining middle-class issue, and education remains the most valuable steppingstone to help young poor people move up. The vast majority of those people have no connection to America's wealthiest universities.
It's becomes a system in which the rich get richer and the rest fall farther behind.
And even among elite schools, the scale of the financial strength of Harvard and its $35.9 billion endowment is off the charts. Only a few others — the University of Texas system, Yale, Stanford, and Princeton — have funds of at least $20 billion.
MIT, owner of the sixth-largest university endowment, at $12.4 billion, manages only about one-third of the money Harvard oversees. Harvard earnings on its endowment in a single good but not great year — about $5 billion — eclipse the total amount overseen by all but about 20 American universities.
And here is Harvard's official position on its own wealth: More, please.
Two years ago, Harvard kicked off the public phase of a $6.5 billion fund-raising campaign. The university had already raised about $2.8 billion of gifts in a more private fashion. It was designed to be nothing less than the biggest university fund drive of all time.
With goals like that, Harvard has taken the rare step of naming schools after benefactors. Nine months before Paulson committed $400 million, billionaire Gerald Chan pledged what was then Harvard's largest gift ever, $350 million, to the School of Public Health. The school will be renamed in honor of Chan's father.
There could be more. "If these gifts motivate someone else to make a similarly transformative gift to the university, we'd certainly give it due consideration," said Tamara Rogers, Harvard's vice president of alumni affairs and development.
Recent contributions to Harvard have entered an entirely new league of wealth and generosity. Just last year, another hedge fund manager, Kenneth C. Griffin, had set the school record at the time with a gift of $150 million.
That $6.5 billion goal? Harvard had reached $5 billion by the start of this year, well before Paulson committed his money.
A few points for Harvard: It spends a lot of the money earned by its endowment to fund the actual operations of the university. It says 90 percent of families spend no more to send a child to Harvard than they would to pay for tuition at a state college, thanks to financial aid resources.
Harvard pointed out that the individual endowment benefitting its engineering school represents a small fraction of the university's overall wealth. It said the Paulson gift will "sustain and expand cutting-edge teaching and research at Harvard's newest and fastest-growing school."
Paulson, who earned his undergraduate degree at New York University, has certainly donated many millions to beneficiaries besides Harvard. Among others, he gave NYU $20 million six years ago to endow two business school faculty positions.
But the huge wealth of a few American universities — Harvard chiefly among them — is no solution to the country's higher ed challenges. It makes a troubling economic gap between elite schools and everyone else even wider.