15 Dec 2007

### Yale

Professor Thomas A. Smith (Yale Law ’84) contemplates the University begging letter.

Yale University has an endowment of \$22.5 Billion and has been making returns of over 20 percent a year for the last ten years. Last year it was more like 28%. But let’s say 20. So that’s income of over \$4.4 Billion per year. But let’s say 20 percent is more than anyone should expect — so let’s say ten. Ten percent of their actual return would be \$440 million; ten percent of that \$44 million; and ten percent of that \$4.4 million. Per year. So the interest on the interest on the interest on the interest is . . . millions. Well.

It’s that time of year and I have recently received a letter from both the Yale Law Fund and an email from just Yale I guess, perhaps Yale the Platonic entity. Asking me to send them money. If I send more than \$5 to Yale the platonic entity, I will get my name on a list available on the web. Be still my heart. I guess it costs a little less than \$5 by the time you pay union wages in New Haven to enter somebody’s name in an HTML file. Though it’s probably done in India somewhere. I calculate Yale is making \$141 (roughly) every second, just by existing. OK, by investing in hedge funds and private equity funds you have to really rich to have even heard of. God must really appreciate the For God For Country and For Yale thing for them to be getting 28%. It’s the Efficient Market Hypothesis Except for Yale I guess. This means they are making \$5 dollars every 0.03 seconds. That’s about how long it takes me to decide whether to send them money. …

I have thought of asking Yale to stop writing and asking me for money. But why should I? I like getting the letters. They fill me with a kind of awe. They remind me that greatness comes to those who dare to ask for more than anyone can possibly think they deserve. They fascinate me. What can they possibly say to make me think I should send what \$50, \$100? to the people who are making 28% a year on \$22.5 Billion? They say they need the money, which cannot be true… I am astonished. In a way, thrilled. Rock on, Yale. Rock on.

Hat tip to Glenn Reynolds via the News Junkie.

And, in the Wall Street Journal, Fay Vincent observes the logical consequence of elite educational institutions’ burgeoning endowments will be both the good: an evolution in the direction of competition for quality applicants via free tuition, and the bad: even greater independence of self-perpetuating governing boards from alumni supervision.

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