Why does Yale need to accumulate $20.8 billion?

Things like the Constance Bagley story are one reason. A contract-to-contract business school professor who’s been canned (she was apparently told she’d get another five year appointment if she did okay, and she seems to have done okay) has sued the school and three professors for age and gender discrimination. She’s an impressive person, apparently a good teacher and scholar, and she’ll probably force a large settlement out of the place.

But Yale (which has weathered very high-profile sexual misconduct problems lately) can afford such suits because of that massive endowment.

The bottom line is that whatever programs see themselves protecting (a certain intellectual orientation, a certain culture, whatever) by expelling people who don’t fit in can continue to be protected because the school will pay through the nose when those people sue.

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5 Responses to “The Uses of Massive University Endowments.”

  1. dave.s. Says:

    You have a perspective problem. The way to phrase your question is: “Why does a great big $21 billion hedge fund find it useful to have a little old university attached?” and then the answer falls out easily: undemanding investors, social cachet, and tax benefits. Yale’s the tail, the hedge fund is the dog. Wag, wag.

  2. Stephen Says:

    Out of curiosity, do you think it is a problem that Yale has a $20B endowment? Clearly it gives them a lot of financial power, but most endowments are also used to help fund university operations, including settling legal disputes. However, I don’t think Yale’s endowment encourages professors to be ageist and sexist bastards. They probably don’t need any help in that regard.

    But on the issue of the endowment, is it preferable for a university to have a much smaller endowment (or no endowment) and fully fund operations through tuition and other fees?

    You are right in that the endowment protects the university by allowing them to fight and or settle legal claims. But that seems to be a good thing, in that 99.99% of the university had nothing to do with this case and the university shouldn’t be forced to bankruptcy by the actions of a few neanderthals. $20B is above and beyond what is needed in almost all instances, but you could make your same argument about much smaller endowments as well.

  3. Margaret Soltan Says:

    Stephen: I have nothing against robust endowments, but Harvard (approaching 40 billion) and Yale are ridiculous. It’s obscene money-hoarding in the context of a world in need.

  4. In the provinces Says:

    The badly underfunded midwestern R-1 where I work has an annual budget of $1 billion. Yale, I would tend to suspect, spends more money annually. Applying the standard rule that one can take about 5% out of an endowment each year and still retain its inflation-adjusted purchasing power (as a result of lower interest rates, a number of institutions have reduced that 5% figure to 4%, or even less)a $20 billion endowment would just about fund the midwestern R-1 where I work. As a public institution, we receive money from the state government–not as much as we might like, but, of course, Yale does not receive such funds. Seen in that light, a $20 billion endowment is not such an exorbitant accumulation of wealth.

  5. Margaret Soltan Says:

    In the provinces: How large is your student body?

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