[crazygringo]

The point is, it's eating your seed corn.

Spending a billion of it is not just spending a billion. It's spending the many billions it was meant to provide, in interest, over the next decades.

It's extraordinarily expensive to spend it directly, as opposed to spending the income it generates.

You can certainly do it, in a true emergency. But you certainly don't want to make a habit of it.

[empath75]

> The point is, it's eating your seed corn.

I've seen arguments of this general shape and form many times about this, and yes, this is true. In general, Harvard should not spend down it's endowment when it has other sources of revenue.

I think the issue here is that this _is_ an emergency. Harvard should consider that Federal money gone for the near future and spend and plan to spend as if they will not have it. There is no point in them continuing to exist as an institution if they accede to these absurd demands.

[davorak]

> You can certainly do it, in a true emergency.

This seems to qualify for many people though. Less pain than complying in many minds I am sure.

[unclebucknasty]

>You can certainly do it, in a true emergency. But you certainly don't want to make a habit of it.

Harvard's endowment returned 9.6% last year, growing the total by $2.5 billion. In the previous year, the endowment returned 2.9%, though the total endowment decreased as the gain was offset by contributions to operating expenses. [0]

In other words, Harvard already operates somewhat from their endowment, and can realize net endowment gains in spite of that.

[0] https://www.harvardmagazine.com/2024/10/financial-report-fis...

[gruez]

>In other words, Harvard already operates somewhat from their endowment, and can realize net endowment gains in spite of that.

The argument isn't that Harvard should never draw from its endowment, like it's saving for retirement or something. The argument is that they shouldn't raid endowments by doing additional withdraws to fund the current shortfall.

[unclebucknasty]

>The argument isn't that Harvard should never draw from its endowment, like it's saving for retirement or something

The argument I was replying to was actually of exactly this form.

That argument also implied that any endowment spending to cover shortfalls would necessarily be of the principal, but that is also incorrect.

In fact, the White House just responded with a $2.2B funding freeze—an amount that would have been covered by last year's endowment return.

[forrestthewoods]

> the many billions it was meant to provide, in interest

THATS WHAT WHAT THE FIFTY BILLION IS

It’s a war chest that has been carefully cultivated over decades. The fifty billion is the result of a hundred years of investment and management.

If it can’t be spent now then when the fuck exactly can it be spent? In 200 years you’d still be saying “this is the seed corn for tomorrow!!”

I’m not saying burn it down to zero. But the whole fucking point of an endowment is to provide stability during trying times. If you can’t use the interest that has been accumulated now then when the fuck can you??

[crazygringo]

No. You misunderstand endowments.

Their principal is not intended to be spent, ever. The point of an endowment is not to "provide stability during trying times".

The point is to spend the interest that it generates, in normal times, in perpetuity. Which Harvard already does and has always done. Interest from their endowment is already a large part of their revenue. That's what the endowment is for.

[forrestthewoods]

How much is the principle? Because I bet you $3.50 it’s multiple billion less than the current balance.

[crazygringo]

Returns fluctuate wildly, while expenses are roughly constant. So obviously expenses are drawn conservatively. And if investment works well, you can grow the endowment too. Obviously it is up to the university to strike the right balance.

The more it grows, the less risk there is in the future. But if you start spending it more than the levels of its average returns, that's high risk. And the point is it's supposed to last forever.

You also need to grow it simply to account for inflation and other rising costs.

[forrestthewoods]

Sounds like they have significant buffer to scratch the surface of their dragon hoard for one, perhaps even two, years.

They’d probably want to reduce spending and hit up donors if they felt they need to power through a four year stretch.

[saagarjha]

> The point is to spend the interest that it generates, in normal times, in perpetuity.

Yes, but these are not normal times.

[xienze]

> The point is, it's eating your seed corn.

How much is “enough” money to hoard in an endowment though? We hear lots of arguments about how the concept of a billionaire is itself obscene, why can’t we apply to same logic to institutions? E.g. much like people say “billionaires shouldn’t exist”, perhaps endowments over some similarly arbitrary value shouldn’t exist either.

[crazygringo]

Well, it's proportional to their spending to some degree. It takes a world-class endowment to fund a world-class university. And it's all from private donations.

Harvard doesn't make a profit. It educates students and does research. It sounds like you're arguing Harvard should be broken up or something? But based on what? Is it abusing its power or something?

[JumpCrisscross]

> it's eating your seed corn

Paraphrasing J. P. Morgan, the man, in the midst of the Panic of 1907 reassuring a banker concerned about dipping into reserves to pay out depositors: "what are reserves for if not times like these."

Eat the seed corn. Fight. Then raise unencumbered donations from the billionaires whose balls haven't fallen off. If Harvard plays this correctly, they could become one of the flag bearers of the legal and financial resistance to Trump.