Harvard is a hedge fund with a school attached

Jim Manzi, in a post from back in 2008:

The overall Harvard corporation gets to make money through investment returns on its endowment (or, more precisely, the General Investment Account, which currently includes about $6 billion of investable assets in operational accounts in addition to the $34 billion endowment) that doesn’t get reported as revenue. Last year, Harvard made more than $7 billion of tax-free investment income.

So if you just think about how much cash went into the shoebox and how much came out of it, a more accurate accounting for Harvard for FY 2007 would, in rough numbers, be a lot more like the following:

Receipts = $2 billion of operating revenue + $7.3 billion of investment income + $0.6 billion of gifts to the endowment = ~$10 billion.

Operating costs = ~$3 billion.

Profit = $10 billion – $3 billion = ~$7 billion.

This explains why Harvard’s net assets increased about $7 billion in 2007, from about $35 billion to about $42 billion.

Viewed purely in terms of economics, Harvard is really a $40 billion tax-free hedge fund with a very large marketing and PR arm called Harvard University that has the job of raising the investment capital and protecting the fund’s preferential tax treatment.

Of course, Harvard isn’t doing quite so well as of late. Here’s the chart of the university’s net assets from the latest Harvard University Financial Report:

Screen Shot 2013 07 13 at 4 45 40 PM

The fact that Harvard’s endowment fund isn’t doing well doesn’t mean that the comparison to hedge funds just goes away (hell, if anything it just makes it more apt).

That’s why Reuters’ Felix Salmon suggests that private universities like Harvard should lose their tax-free status:

The dollar value of universities’ tax exemptions is enormous — and it almost goes without saying that if we simply abolished those exemptions, and used the proceeds to spend on higher education, we would get vastly more bang for our buck. The overwhelming majority of the tax expenditures go to the richest universities — the ones who need the money the least. Meanwhile, great institutions like the University of California are slowly starved to death: direct fiscal expenditures, it seems, are much, much easier to cut than more-hidden tax expenditures.

George Orwell on why early socialists got things so wrong

In an essay from 1941, George Orwell explains why socialists like H.G. Wells failed to see the dark side of the Soviet movement or to predict the rise of the Nazis:

If one looks through nearly any book that he has written in the last forty years one finds the same idea constantly recurring: the supposed antithesis between the man of science who is working towards a planned World State and the reactionary who is trying to restore a disorderly past. In novels, Utopias, essays, films, pamphlets, the antithesis crops up, always more or less the same.

On the one side science, order, progress, internationalism, aeroplanes, steel, concrete, hygiene: on the other side war, nationalism, religion, monarchy, peasants, Greek professors, poets, horses. History as he sees it is a series of victories won by the scientific man over the romantic man.

Now, he is probably right in assuming that a ‘reasonable,’ planned form of society, with scientists rather than witch-doctors in control, will prevail sooner or later, but that is a different matter from assuming that it is just round the corner.

There survives somewhere or other an interesting controversy which took place between Wells and Churchill at the time of the Russian Revolution. Wells accuses Churchill of not really believing his own propaganda about the Bolsheviks being monsters dripping with blood, etc., but of merely fearing that they were going to introduce an era of common sense and scientific control, in which flag-wavers like Churchill himself would have no place. Churchill’s estimate of the Bolsheviks, however, was nearer the mark than Wells’s.

The early Bolsheviks may have been angels or demons, according as one chooses to regard them, but at any rate they were not sensible men. They were not introducing a Wellsian Utopia but a Rule of the Saints, which like the English Rule of the Saints, was a military despotism enlivened by witchcraft trials.

The same misconception reappears in an inverted form in Wells’s attitude to the Nazis. Hitler is all the war-lords and witch-doctors in history rolled into one. Therefore, argues Wells, he is an absurdity, a ghost from the past, a creature doomed to disappear almost immediately. But unfortunately the equation of science with common sense does not really hold good.

The aeroplane, which was looked forward to as a civilising influence but in practice has hardly been used except for dropping bombs, is the symbol of that fact. Modern Germany is far more scientific than England, and far more barbarous.

Much of what Wells has imagined and worked for is physically there in Nazi Germany. The order, the planning, the State encouragement of science, the steel, the concrete, the aeroplanes, are all there, but all in the service of ideas appropriate to the Stone Age. Science is fighting on the side of superstition. But obviously it is impossible for Wells to accept this. It would contradict the world-view on which his own works are based. The war-lords and the witch-doctors must fail, the common-sense World State, as seen by a nineteenth-century Liberal whose heart does not leap at the sound of bugles, must triumph. Treachery and defeatism apart, Hitler cannot be a danger. That he should finally win would be an impossible reversal of history, like a Jacobite restoration.

Why freelance journalists aren’t making any money

The days of freelance journalists making $500 per article are over, says the founder of Bleacher Report.

Bryan Goldberg, in a PandoDaily post from a few months back, explained the realities of publishing economics.

Unless a journalist’s personal brand is particularly large compared to the publisher in question, paying a premium price for an individual piece of content simply doesn’t make sense:

An individual piece of content is valuable when it helps its publisher get past that line. Because if the publisher is on the wrong side of the line, then they cannot build a sales team and earn premium CPM rates. And no publishing business can thrive on third party sales.

[…]

Unfortunately for Nate Thayer, The Atlantic already has a great brand, so he alone will not move mountains for them. For that reason, newer publications like PandoDaily, TheVerge, or Bleacher Report can get more mileage out of “big name” contributors who can do more to advance the brand.

But what about advertising dollars? Surely even a moderately well-known journalist with a good piece of content can bring in enough revenue to justify a decent paycheck, right? 

Probably not:

To bring this to life, let’s use an example… A very successful article will attract 100,000 readers. If there are two impressions per page and a $1.00 CPM, then that article will generate $200. For most blogs, those rates are a best-case scenario. It would be very difficult to make a living in such a manner.

But for a successful website that has crossed “the line” and employs a strong sales force, then those rates could be much higher. Let’s say $5 CPM’s: An article for such a site might be worth $1,000 if it attracts 100,000 readers.

Could a tyical rate of $500 per article work in such a scenario? Probably not. Because then the publisher has a “gross margin” of about 50 percent, which will likely not be enough to pay for the rest of the operation, starting with the salesperson who will take his or her commission right off the top.

There is one hope for journalists looking to make big paychecks, but they might not like it – sponsored content:

This is a great opportunity for writers to align their efforts with that of the advertisers in a very direct manner.

And while most writers must still understand that the publisher could just use some other writer instead of them to create the sponsored content, there is usually a fair middle ground. Most publishers pay more to create sponsored content, because it just seems reasonable when it contributes to a seven-figure check.

The Economist’s perfect critique of America’s hypocrisy

Ever notice how we start wars in order to “promote democracy” abroad, then use secret courts to limit those same freedoms at home?

All this somehow got me thinking of the doctrine of “democracy promotion”, which was developed under George W. Bush and maintained more or less by Barack Obama. The doctrine is generally presented as half-idealism, half-practicality. That all the people of the Earth, by dint of common humanity, are entitled to the protections of democracy is an inspiring principle. However, its foreign-policy implications are not really so clear. To those of us who are sceptical that America has the authority to intervene whenever and wherever there are thwarted democratic rights, the advocates of democracy-promotion offer a more businesslike proposition. It is said that authoritarianism, especially theocratic Islamic authoritarianism, breeds anti-American terrorism, and that swamp-draining democracy-promotion abroad is therefore a priority of American national security. If you don’t wish to asphyxiate on poison gas in a subway, or lose your legs to detonating pressure-cookers at a road-race, it is in your interest to support American interventions on behalf of democracy across the globe. So the story goes.

However, the unstated story goes, it is equally important that American democracy not get out of hand. If you don’t want your flight to La Guardia to end in a ball of fire, or your local federal building to be razed by a cataclysm of exploding fertiliser, you will need to countenance secret courts applying in secret its own secret interpretation of hastily-drawn, barely-debated emergency security measures, and to persecute with the full force of the world’s dominant violent power any who dare afford a glimpse behind the veil.

Go read the whole article. It’s the single best piece of writing that’s come out of the NSA scandal.

Check out the first Grand Theft Auto V gameplay video

This game just became a must-buy for me. The character switching – both between and during missions –  makes the game seem much more dynamic than previous offerings in the series.

It also seems like the different personalities for the characters will remove some of the cognitive dissonance that happened in GTA IV when you’d take Niko, a character trying to make a new life for himself, on a massive killing spree. Now, if you want to play “responsibly,” you can switch to Michael or Franklin and if you want to cause chaos you can switch over to Trevor and not feel like you’re not playing out-of-character.

Mos Def force-fed under standard Guantánamo Bay procedure

This is disturbing. I have much respect for the man for going through with this to show just how terrifying the procedure is:

As Ramadan begins, more than 100 hunger-strikers in Guantánamo Bay continue their protest. More than 40 of them are being force-fed. A leaked document sets out the military instructions, or standard operating procedure, for force-feeding detainees. In this four-minute film made by Human Rights organisation Reprieve and Bafta award-winning director Asif Kapadia, US actor and rapper Yasiin Bey (formerly known as Mos Def), experiences the procedure.

The first thing sold on the Internet was a bag of marijuana

Online highs are old as the net: the first e-commerce was a drugs deal – Mike Power:

News in this year’s Global Drugs Survey that internet drug dealing was on the rise will have alarmed, surprised or intrigued many people. But the very first thing bought and sold on the net was a bag of marijuana – over 40 years ago.

In 1971 or 1972, Stanford students using Arpanet accounts at Stanford University’s Artificial Intelligence Laboratory engaged in a commercial transaction with their counterparts at Massachussetts Institute of Technology. Before Amazon, before eBay, the seminal act of e-commerce was a drug deal. The students used the network to quietly arrange the sale of an undetermined amount of marijuana.

The Velvet Underground’s Lou Reed on Kanye’s new album

The Velvet Underground’s Lou Reed put up a great review of Kanye West’s new album, Yeezus:

Kanye West is a child of social networking and hip-hop.  And he knows about all kinds of music and popular culture.  The guy has a real wide palette to play with.  That’s all over Yeezus.  There are moments of supreme beauty and greatness on this record, and then some of it is the same old shit.  But the guy really, really, really is talented.  He’s really trying to raise the bar.  No one’s near doing what he’s doing, it’s not even on the same planet.

He gives some great insight into aspects of each song that give a simple breakdown of what Kanye is shooting for. Here’s what he had to say about New Slaves, my favorite song on the album:

There are more contradictions on “New Slaves,” where he says “Fuck you and your Hamptons house.” But God only knows how much he’s spending wherever he is. He’s trying to have it both ways — he’s the upstart but he’s got it all, so he frowns on it. Some people might say that makes him complicated, but it’s not really that complicated. He kind of wants to retain his street cred even though he got so popular. And I think he thinks people are going to think he’s become one of them — so he’s going to very great lengths to claim that he’s not. On “New Slaves,” he’s accusing everyone of being materialistic but you know, when guys do something like that, it’s always like, “But we’re the exception. It’s all those other people, but we know better.”

“New Slaves” has that line “Y’all throwin’ contracts at me/ You know that niggas can’t read.” Wow, wow, wow. That is an amazing thing to put in a lyric. That’s a serious accusation in the middle of this rant at other people: an accusation of himself. As if he’s some piece of shit from the street who doesn’t know nothing. Yeah, right — your mom was a college English professor.

Facebook single-handedly made its home county the best-paid in the nation

Facebook employees made so much money from the company going public last year that it shot San Mateo County, where the company is headquartered, to the top of the charts for highest average weekly income in the nation.

San Mateo average wages rose to a rate equivalent to yearly earnings of $168,000, significantly higher than even New York County, home of Wall Street and several other high-earning industries.

The Wall Street Journal’s Scott Thurm verified that Facebook’s IPO was responsible for the massive increase by looking at the wages by job sector.

He found that the roughly 6,200 “industrial” workers (which Facebook employees count as) earned $6.8 billion in the fourth quarter of 2012 – which works out to almost $83,000 a week. This lines up with the timing for many Facebook employee’s stock options, which vested in November of last year.

This isn’t the first time that a tech company going public has made a significant number of its employees exceedingly rich. Microsoft compensated many early employees with generous stock options. After a hundredfold increase in its stock price between 1986 and 1996 it was estimated that at least 10,000 “Microsoft millionaires” were created by 2000.