Monday, August 27, 2012

that clinking clanking sound

Weird piece in NYT on private schools. Though expensive ($40,000 or so a year), they can't cover their costs by tuition -- donations must fill the gap.

The author of the piece claims that, if tuition doesn't cover costs, the gap must be covered by past and present donations; that this is both financially unviable and unethical.

Sorry, but I don't get it.  My understanding is that  David Swensen, who manages the endowment for Yale, is seen as a financial wizard - if donations give him serious money to play with, he turns this into super-serious, or even super-super-serious, money. He doesn't mainly spend his time wheedling more money out of alums; he spends it gaming the market.

So. Um. If you've got a private school that is allegedly the fast track to being a hot shot like Dave Swensen, over time you should have a crop of alums some of whom are hot shots like Dave Swensen. But, um, Yale only needs ONE such hot shot to multiply its endowment to the point where savvy investors are following Dave Swensen. So, um. If the school is REALLY the fast track it claims to be, it can deploy the brilliance of a single alum, no? Or, ahem. If the school is NOT the fast track it claims to be, it could just buy in outside talent. If its best plan is to bully parents into donating over and above tuition, this suggests a level of-- That is, the reasonable inference is, not only has no alum EVER achieved the gifts of Dave Swensen, but the people running the school are so stupid they're not smart enough to buy in an alum of some other school with Swensen-calibre alums.

Anyhoo. There's all this browbeating about the hideous costs, bla. Seriously?  A few years ago I tried to get some kind of teaching job at Northfield Mt Hermon, which I attended in 12th grade. I was very strapped for cash; I just needed accommodation and a little money for expenses. My contact sounded people out. If I had really PUSHED for a job maybe I could have wangled something, but I was very tired, in no position to push. So it fell apart.  A reader who had been to Phillips Exeter Academy, gone on to Harvard, had corresponded with me for years; I put out feelers for a possible job; no interest. So, OK, fine. I have a doctorate in classics from Oxford; I'm what I'm told is a critically acclaimed novelist; and I am very, very cheap because I am very strapped for cash.  Is there any sign that the schools facing this alleged gap between tuition and costs are open to overqualified cash-strapped staff? Ääääääääähm.....


David McDougall said...

[Disclaimer on the below: I currently help Phillips Exeter Academy, where I spent a postgraduate year, raise funds from alumni of my graduating class]

While I'd like to see a breakdown of the costs included in such an education, I'd be surprised if faculty salaries was a major driver of costs, and in any case your particular role would likely have been additive to required teaching costs. I'm assuming here that 'if you had pushed' means that there wasn't really a role available, so they would have either had to create a visiting position for you or shoehorn you into an existing vacancy, into which what you offer might ill-fit.

There is also some endowment-strategy in play here, since generally funds used for operating expenses do not come from endowment funds. This enables Swensens of the world to manage their endowments without having to liquidate assets in shorter time horizons, which helps quite a bit in generating compound returns.

I'm also not addressing that the Swensens of the world appear to be very few / far between, in that few managers of his caliber would settle for the vicinity of $5 million per year, which compares poorly with expected pay at any private sector equivalent.

Perhaps more to the point, Felix argues that this is basically a tax-avoidance strategy that would (should) enable schools to raise money at a higher rate than through tuition rises (donations being both uncapped in amount and of tax value to the donor).

Amy joe said...

It does seem that everybody is into this kind of stuff lately. Don’t really understand it though, but thanks for trying to explain it. Appreciate you shedding light into this matter. Keep it up


Helen DeWitt said...

You're right, of course, that Salmon is arguing that donations are a tax-avoidance strategy. My impression from the article, though, was that parents were expected to top up tuition if at all able to do so, whether or not they were on the look-out for schemes to reduce their tax liability.

I expect Swensens are rare, yes, but . . . I don’t know. If donations cover the gap between costs and fees, some must be allocated, presumably, to operating costs; it seemed to me that a single parent or alum with financial shrewdness could multiply the value of such donations. (It's possible, of course, that schools do make use of such skills and the fact isn't mentioned in appeals.) The bursar of one of my Oxford colleges had been its chemistry tutor, took over investments and outperformed the firm they had used; to the best of my knowledge, he took only the standard salary (with perks) of an Oxford don. A school would appear to need only one such benefactor.

With regard to this foray into jobhunting, it may well be that one is inclined to overestimate one's marginal utility to an institution.

It seemed to me that there were various things that might be done that are not usually done (all, admittedly, additive). (Continuing in next comment since Blogger restricts length…)

Helen DeWitt said...

High school students normally study a single language, or perhaps two, before graduation; they don't normally have the chance to engage with literary texts in six or seven languages. Even if Greek and Arabic, say, are on offer at a school, only a minority can try them out (for Greek, especially, Latin is normally a prerequisite). So the student who wants to try a wider range of languages can do so only by allocating scarce college credits to language courses - with no way of knowing whether he or she would actually like a language before taking the course. I thought it might be helpful to students to be able to identify preferences early on. I thought it might be helpful to have the habit of tackling a new language if something interesting was written in it, rather than thinking this must require several years' preliminary study.

It also seemed to me that American students and their parents often don't see foreign universities as a serious option. And yet... I recently met someone who had discovered a pronounced affinity for German when he went to Vienna. As soon as he heard it he knew he could make the sounds he was hearing; the language soaked into him in shops, on the bus, in the streets, he later cleaned up his grammar with little difficulty. (He says French was completely different and much harder.) We know that college-bound students generally have safety schools, colleges where they can be fairly sure of acceptance if they don't get into, say, Harvard or Yale - and the safety schools, these days, are not noticeably cheaper. If one had a strong affinity for a language, though... well, one might not choose the University of Vienna or the Humboldt University over Harvard. But what if the choice is between a safety school in a small American town, at great expense, and a major university in a major European city at negligible expense? Bearing in mind that some of the money freed up could be used, for example, to go to concerts by a world-class orchestra, to opera performed by innovative opera companies? (In other words, the student can see "The Ring" at 19, rather than, say, doing so at age 40 as an established Wall Street lawyer.) Or what if a student is obsessed with a subject and wants to specialize straight away? Oxford and Cambridge are not cheap (by comparison with European universities, anyway), but the student can immerse him- or herself in the preferred subject from the start (and these are normally three-year courses, so a year's tuition is saved).

I also thought of the boy who commits suicide in The Dead Poets Society. Parents who send their children to private schools don't always, of course, expect them to follow a lucrative career as a lawyer or banker, but some do, and some are perceived by the child as having this expectation. Some students think longingly of a career in the arts. I thought it might be helpful not only to know what is involved if one wants to be a writer, but also to understand some of the other opportunities that exist in the literary world.

So, er, it's not exactly that I thought a school would have an opening which required this sort of contribution. Since we are on the subject of donations, though, schools don't only appeal to parents; they also pursue alums. And success here depends partly on the gratitude of the student, partly on the student's financial status. I imagined that the various possibilities touched on might help students in areas not currently addressed. Since I was really only looking for winter accommodation with proper heating, I thought the likely return to the school would be much higher than the cost. But one does, as I say, tend to overestimate the marginal utility of what one has to offer.

David McDougall said...

I'll lead with financial comments and move on to pedagogical ones (the latter when I can find another break at work).

School endowments are composed of restricted gifts designed to create annual income. There are two kinds of restrictions in play -- one, standard to all 'endowment' funds, is that the principal cannot be spent and only the income generated from the endowment can be used for operating expenses. Additionally, many (most?) monies in an endowment are restricted as to their specific purpose (toward a scholarship fund, or an athletic team, etc).

So if I endow a scholarship fund, I donate the principal, and the income generated from this on an annual basis pays for the scholarship. In any true 'endowment' the principal funds are restricted in the sense that they cannot be spent, and any spending of 'endowment' funds is of the income that these endowment funds earn.

There are also quasi-endowments, which house funds free of this restriction on spending principal. This I think is what you're getting at -- that endowment managers should also manage quasi-endowments in which the principal can be spent. Many of these quasi-endowment gifts are also restricted as to purpose. (There's also a term endowment, which is treated as an endowment for a set period of time and then abandons the restriction on principal spending).

The annual funds (donations) spent to finance school operations are almost certainly invested as well, at least in short-term vehicles, but given the vagaries of the market it is very hard to generate safe substantive returns on short time horizons (even if you're Swensen).

More on pedagogy (and this, if it's warranted) later.

Helen DeWitt said...

I am a bit nervous of appearing to be rude by suddenly going off-radar, which is bad because every night I vow not to go online the next day and if possible to stay offline for a week, a month, more...

I think it sometimes happens that one feels impatient with something that looks wrong, imagining that things can be different, and then getting tangled up in the way things are done. It may well be that one is sometimes foolish and ignorant and impractical - and yet, if we look back, we see that there were always excellent reasons why the franchise could not possibly be extended to anyone who did not own property, or to women; there were reasons why it was impracticable to allow women to enter the professions; there were reasons why it was impracticable to free American slaves.

I have a friend, Ann Cotton, who began raising scholarships for Zimbabwe schoolgirls in the early 90s. Conventional wisdom at the time was that rural families were hostile to the education of girls; what she found was that financial constraints were the real obstacle. At first she raised funds in a very small way, selling cakes in Cambridge market; later she won major grants and was consulted by education ministers, when people saw the success of the program.

The core of the program was empowerment. In the first instance, through talking to families, to teachers, to local leaders. Later, above all, through setting up an alumnae association, CAMA, of girls who had come up through the program: the graduates advised current students, managed a microcredit scheme, ran workshops on AIDS, sexual harassment.

Early on, maybe, this looked like a nice-to-have. As it turned out, it was key to the success of the program. The Zimbabwean economy went into freefall; there was widespread violence; many NGOs had to withdraw foreign staff, and so were unable to sustain their projects. The Camfed program continued to support girls through this very bad time, because it was not dependent on foreign staff: the powerful network of graduates ensured that it could operate effectively.

I have heard very good things about Exeter; I know there are many excellent private schools, and no doubt finances are a challenge in ways that an outside doesn't entirely understand. But the human capital available to such schools (and, of course, colleges), both in parents and former students, must surely be much greater than that available to a program for disadvantaged girls in rural Zimbabwe.

Educational institutions in the developed world, as a rule, draw on the expertise of those they educate in a much more haphazard way. If this were not the case, every student would by now graduate knowing how to trade Forex. Every student would have language training on a par with that offered by the FSI. And so on. (As I say, the resources available are much more impressive than those on offer in rural Zimbabwe.)

If you read the websites or brochures of ambitious educational institutions, leadership is one of the qualities supposedly developed - the student might one day be someone like my friend. If this were taken seriously, one would expect that capacity for leadership to feed back into the institution, so that it progressively drew more and more on the abilities it had nurtured. I am not saying that this aspect of development is wholly ignored; my sense is only that, bearing in mind the resources available, even the best schools value this at a much lower rate than does my friend.

David McDougall said...


Firstly, the internet is a wonderful/terrible 'place,' and in many ways even the best of it can be a distraction from real work. If you were to leave this conversation unattended for hours, or days, or months, I would happily pick it up when you return. Focus your energy where it does the most good.

Now, on to pedagogy -- in your two posts you proposed, in different ways, a sort of practical pedagogy that you feel is missing from private schools (and not only private ones...). I can only agree. Even the classroom-centric practicality of your imaginary teaching (as described above) is far more engaged with the world than the model which it competes against / augments / supplants.

The idea that schools can more effectively engage with the outside world, both in their curricula and by creating active links with the community of graduates, is very hard to argue with. I'll describe very briefly how I see the Exeter model (though I'm only an alumnus!) and how it treats the 'classroom' as a place both apart and engaged. I'll disclaim here that these impressions are not fully formed and that these points should be not be taken as overly critical.

Exeter's Harkness method of teaching is a largely student-directed form of inquiry, and extends even to subjects that might seem ill-suited to such instruction such as mathematics. So the classroom itself teaches a set of leadership skills (or rather, offers the opportunity to develop said skills) by promoting small-group leadership of inquiry. Sporting requirements also help in this regard, as do the cultural predispositions towards a) charity (Exeter's primary motto is 'Non Sibi') and b) doing substantial things. Much of this is selection bias, I'm sure, but I can think of a large handful of classmates who were exceptional in endeavors even while in school, whether as Olympians-in-training or as founders of nonprofit projects to build schools in rural Peru (or as budding economists like Evan Soltas). Much of this is incubated by the network of alumni available as a resource -- though students often need to build those bridges themselves, which is itself a form of leadership training. In many ways the philosophy is one *facilitating* excellence and *expecting* that students will choose to pursue it.

I certainly agree in general that forging stronger links between alumni and the school on an ongoing basis would only serve to better leverage the strengths of both students and alumni, and that this use of 'human capital' might indeed form the foundation for an education-form. This education-form that you propose (here, and elsewhere, in fragments) seems to have two main elements, if I've gotten it right: first, it aims at engaging students in the world as early as possible, rather than secluding them in classrooms; second, it has as its aim the cultivation of good citizens in a classical mode, with an emphasis on broad cultural and linguistic appreciation ties to inquiries into how society really functions. I like these models very much, but they are less systematized and thus more problematic to manage. The prep school compromise seems to be: have excellent, challenging classroom education led mainly by students, and augment that with a rich outside environment composed of two elements -- the availability of myriad ways to extend your education & leadership quasi-formally (through music, charity, sports, etc.) and a rich social environment that facilitates encounters between diverse talents and backgrounds.

Finally, I would eagerly sign up for any class that promised to be a carte-blanche tour through Helen DeWitt's cultural touchstones, were it on offer.* There are, as you say, only "excellent reasons" not to develop such offerings.

More as it's warranted -- on whatever time horizon.

*This gives me an idea. I'll be in touch.

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Steve Sailer said...

There has tended to be a correlation between how hard it is to get into a college and the college endowment's ROI. Of course, it would be utterly irresponsible to speculate that perhaps some of the high ROI attained by the most exclusive colleges comes from, say, inside information traded for letting a scion in.

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