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.

Don’t go to grad school in the humanities

There are no academic jobs and getting a Ph.D. will make you into a horrible person: A jeremiad.:

Well, what if I told you that by “five hours” I mean “80 hours,” and by “summers off” I mean “two months of unpaid research sequestration and curriculum planning”? What if you’ll never have time to read books, and when you talk about them, you’ll mostly be using made-up words like “deterritorialization” and “Othering”—because, as Ron Rosenbaum pointed out recently, the “dusty seminar rooms” of academia have the chief aim of theorizing every great book to death? And I can’t even tell you what kind of ass you have to kiss these days to get tenure—largely because, like most professors, I’m not on the tenure track, so I don’t know.

Don’t do it. Just don’t. I deeply regret going to graduate school, but not, Ron Rosenbaum, because my doctorate ruined books and made me obnoxious. (Granted, maybe it did: My dissertation involved subjecting the work of Franz Kafka to first-order logic.) No, I now realize graduate school was a terrible idea because the full-time, tenure-track literature professorship is extinct. After four years of trying, I’ve finally gotten it through my thick head that I will not get a job—and if you go to graduate school, neither will you.

Rebecca paints a very bleak picture of what the job market is like for those who decide to follow the academia route. Glad I’m taking a different path.