[pastacacioepepe]

I admit I don't know about university endowments, so the question is: what are those $40+ billion dollars sitting there for every year? Does a university really need a balance that may be larger than some nation's GDP?

[gruez]

>Does a university really need a balance that may be larger than some nation's GDP?

This comparison makes no sense.

1. GDP is a per-year measure, but an endowment is accumulated over multiple years. Therefore durectly comparing them doesn't really make much sense.

2. "some nation" includes some pretty small/poor countries. Should it be a surprise that an organization in the US is bigger than a country like Liechtenstein?

[chrisseaton]

> what are those $40+ billion dollars sitting there for every year?

It’s not sitting there - it’s invested and working. Investment returns pay for operating expenses.

[pastacacioepepe]

Thanks for the answer, makes sense from a purely economical perspective, but I wonder if universities should fund themselves through speculation and financial instruments. Sounds way too detached from the actual purpose of the institution.

Would it make sense for hospitals to do the same? Why not theaters next? In the end, if keeping the balance in check is the main thing an istitution is bound to do, why not stop doing education (= expenses) and just focus on investments?

[chrisseaton]

> Sounds way too detached from the actual purpose of the institution.

I literally don't understand what you mean. The purpose of the institution is to educate people (and other stuff.) They do that by investing money that they were given for this exact purpose.

What on earth could the problem with that be?

No only are they providing education to people, often for free, they're also lending people money to build and develop businesses along the way.

I think you've got some idea they have their billions in a Duck McScrooge style vault? They don't - being invested means they lend it to people to build things. It's all being actively used.

> Would it make sense for hospitals to do the same?

Many hospitals and health organisations have endowments. For example the Wellcome Trust has an endowment of $37 billion. I think they funded my wife's PhD in cancer.

> Why not theaters next?

Many art institutions have endowments. For example the Getty uses a $7 billion endowment to fund the arts so they're preserved for and accessible to people like you.

What is the issue you see here? If they kept it as cash in the bank it'd depreciate rapidly and they'd end up with none left.

[pastacacioepepe]

It's just a very foreign concept to me as a european. Perhaps I'm more inclined to the idea that institutions like education and healthcare should be publicly funded and shouldn't aim to be economically sound, as some services can only be done properly at loss.

In 1992 in Italy hospitals became "hospital companies", meaning what was once a public service with the sole aim of providing the best possible treatments to citizens for no cost, became at all effects a business (although still state owned) with incomes, expenses and a budget. You may think this makes sense, but since then our healthcare quality has tanked.

One notable side effect is that all hospital companies cut on the intensive treatment beds to save on costs, which backfired heavily during covid since we didn't have enough beds and many patients died without proper treatment as a consequence.

[chrisseaton]

> It's just a very foreign concept to me as a european.

But it comes from Europe.

https://en.wikipedia.org/wiki/Financial_endowment#History

https://en.wikipedia.org/wiki/Financial_endowment#Modern_col...

> incomes, expenses and a budget

Government-provided healthcare also has an income, expenses, and a budget. They don't just spent whatever they want with no planning and no income.

[pastacacioepepe]

I mean, the roman empire, ancient greece and in modern times Britain. Britain is European as much as USA is. Not really common in contemporary Europe.

The article itself notes that it's common practice only in North america, and when it is used outside of USA it's in a different way:

>In the United States, the endowment is often integral to the financial health of educational institutions. Alumni or friends of institutions sometimes contribute capital to the endowment. The use of endowment funding is strong in the United States and Canada but less commonly found outside of North America, with the exceptions of Cambridge and Oxford universities

> Government-provided healthcare also has an income, expenses, and a budget. They don't just spent whatever they want with no planning and no income.

Of course, but there is a big difference in having a regular accountability and starting to think in terms of business. Suddenly intensive treatment beds become "centers of cost", not vital but expensive tools required to save lives.

[DiggyJohnson]

The whole point is that you don’t draw down the endowment. It’s a long term investment.