Comment Of The Day: “You Know, Harvard, When You Have To be Embarrassed And Shamed Into Doing What Should Have Been Your Automatic Response Anyway If You Had Any Decency, It’s Too Late To Save Face.”

Veteran commenter Tim Levier comes to the defense (sort of) of both Harvard and nuance.

Here is his Comment of the Day on the post, “You Know, Harvard, When You Have To be Embarrassed And Shamed Into Doing What Should Have Been Your Automatic Response Anyway If You Had Any Decency, It’s Too Late To Save Face.”

Can I play Devil’s Advocate here? (Maybe just devil’s half-advocate.) I mean, I think it’s delicious that Harvard is getting a first hand experience in “political correctness”, “public shaming”, and “fake news” all in one fell swoop; but this is an Ethics site and saying the truth should always be ethical.

Harvard’s endowment is $38.3 billion, but what does that mean? Endowments are donations intended not for the donation to be “used” but for the donation to be “invested”. The investment grows and pays income distributions to the target recipient. Sure, Harvard has an endowment of $38.3 billion, but that generates an annual distribution of roughly $1.9 billion. That’s a distribution during “good times”. Any bets out there that the distribution might crater this year?

Let’s assume it doesn’t. The $1.9 billion distribution is roughly 1/3rd of Harvard’s annual operating budget. That’s money that they were counting on, budgeted, and spent.

The “fake news” comes into play when there’s an out sized focus on the principal balance of the endowment (like that could be tapped into, withdrawn, and spent) versus the annual income distribution of the endowment. It intentionally causes a mental disconnect in the reader to maximize outrage. However, even focusing on the distribution ignores the fact that the university was relying on the distribution as regular income.

I prefer E2’s comment strategy above that focuses on irrational and exorbitant spending. [E2: “Harvard’s greed is something new? I am old enough to remember the university grumbling when it had to sell off its holdings in apartheid South African kuggerands… “Money is money” was the basis of their argument. I also remember a Harvard magazine article a few years ago praising its investment counselors: both of whom made were awarded between $300 and $400 million as salary by Harvard — in a single year!…”]  I haven’t vetted the claim within the comment, but accepting it at face value, I would query whether the sums of the bonuses paid were reasonable. I’d attempt to do that by trying to understand if the sums went solely to individuals or to a whole firm and what resources were dedicated and expended to attain the investment goals. I could see employing an army of information researchers and strategists to complete game-theory scenarios on hundreds if not thousands of scenarios to achieve the best investment return in a gamble to attain a lofty goal. Conversely, I could see one investment manager getting lucky during “boom times” and unnecessarily collecting $300 million as an individual for no damn good reason.

Suffice it to say, my over-arching thought here is that we should always consider the nuance in these stories, even if we agree with the end result. By diving into the nuance behind the sound-bite headline we acknowledge competing voices, we show our careful consideration, we educate by experience, and above all we are promoting these qualities because they are beneficial to society.

Then we can make the determination that Harvard should have done this from the start and it’s too late to save face.

***

I’m back merely to provide a link for E2’s reference to the large commission paid to Harvard’s money managers. I wrote a post about the controversy on the old Ethics Scoreboard. The story: “Harvard Alumni Denounce $100-Million Payday for Managers of University’s Endowment.”

So E2 over-stated the amount, It doesn’t change the assertion, presumably that the manager “only” got a hundred million rather than three.

One thought on “Comment Of The Day: “You Know, Harvard, When You Have To be Embarrassed And Shamed Into Doing What Should Have Been Your Automatic Response Anyway If You Had Any Decency, It’s Too Late To Save Face.”

  1. Whatever happened to the old (apparently, and now passe, I guess) financial advisor recommendation that we should all have something along the lines of (I forget exactly) three months’ living expenses on hand in cash at all times? If Harvard has money managers who are receiving a hundred million in fees a year, shouldn’t they be maintaining a contingency fund so Harvard can weather an unanticipated situation for a few months? Personal responsibility? Institutional responsibility? Why only taxpayer responsibility? Harvard immediately runs to the trough? Do not pass Go?

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