The Harvard Scam: How Elite Schools Steal From You

Summary

The video explores how Harvard and other Ivy League institutions amassed wealth, highlighting a 3500% increase in Harvard's endowment from 1978 to the present. It discusses the role of philanthropic gifts, the shift to aggressive investment strategies in the 1980s, and the influence of alumni in finance. The video criticizes the exclusivity and legacy admissions, suggesting that taxing these institutions could fund public education. It also touches on the potential for elite universities to expand access but chooses not to, maintaining their prestige through exclusivity.

Takeaways

• 🏛️ Harvard University's endowment has grown from $1.4 billion in 1978 to $50.7 billion, a 3500% increase, while the number of admitted students has decreased by 12%.
• 📉 Public universities, in contrast, have experienced decreased state funding and increased enrollment, with institutions like UC Berkeley enrolling more low-income students than the entire Ivy League combined.
• 🔄 The Ivy League's wealth accumulation is not mirrored in upward class mobility for their graduates, with public universities often performing better in this regard.
• 💼 The 1980s marked a significant shift in university endowment management, with a move towards riskier investments like hedge funds and private equity, led by Yale's David Swensen.
• 🤝 A close relationship between Ivy League universities and Wall Street has been mutually beneficial, with alumni returning to influence investment strategies and endowment growth.
• 💼 The U.S. News and World Report College Rankings system incentivizes exclusivity and high spending, reinforcing the elite status of Ivy League schools.
• 💵 Nonprofit status allows elite universities to avoid taxes and access resources that compound their wealth, despite operating like hedge funds.
• 🏦 Harvard and other elite institutions use donations for investment rather than direct spending, leveraging their endowment while borrowing for capital expenditures from government markets accessible to nonprofits.
• 💭 There is a growing call for structural reforms in higher education, including taxing elite private institutions to fund more equitable opportunities.
• 🗣️ Politicians like AOC and Senator Tom Cotton have proposed taxes on large university endowments to fund public education and make community college free.

Q & A

How did Harvard University's endowment grow from 1978 to the present?

Harvard University's endowment grew from $1.4 billion in 1978 to $50.7 billion in the present, marking a 3500% increase. This growth was largely due to a shift in investment strategies, particularly in the 1980s, where the university began to invest in high-risk, high-reward financial schemes like hedge funds and private equity funds.

What role did David Swensen play in the growth of Yale University's endowment?

David Swensen, Yale's endowment manager, was instrumental in developing the 'Yale model' of endowment investing. This model involved allocating a significant portion of the endowment to private equity and hedge funds, which were riskier but had the potential for higher returns. His strategies helped grow Yale's endowment from $1 billion in 1985 to $31 billion by 2021.

How did the U.S. News and World Report College Rankings system influence university admissions and endowments?

The U.S. News and World Report College Rankings system incentivized universities to maintain exclusivity and spend more money on fewer students to climb the rankings. This led to a scarcity of seats, increased rejection rates, and a focus on prestige over accessibility, which in turn helped elite universities maintain and grow their endowments.

What is the connection between elite universities and Wall Street, as discussed in the script?

The script highlights a 'revolving door' between Ivy League universities and Wall Street. Graduates from these universities often go on to work in finance, and later return to their alma maters to hold influential positions, such as board seats. This connection has led to mutual benefits, such as securing early capital for hedge funds and private equity firms, and driving the growth of university endowments.

Why do public universities have a different financial trajectory compared to Ivy League schools?

Public universities have seen decreased state funding while increasing their enrollment numbers. Unlike Ivy League schools, which have grown their wealth through endowment investments and exclusivity, public universities have had to manage with fewer resources and serve a larger, more diverse student body, including a higher number of low-income students.

What is the role of legacy admissions in the context of elite university admissions policies?

Legacy admissions refer to the practice of favoring applicants with a family history of attending the university. The script suggests that this practice, along with other exclusive admissions policies, contributes to the elitism and wealth of institutions like Harvard, often at the expense of working-class students.

How does the script suggest that taxing elite university endowments could benefit public education?

The script proposes that taxing the endowments of elite private institutions could generate significant revenue, potentially in the trillions of dollars over a decade. This revenue could be used to fund public education initiatives, such as making community college free for all Americans.

What is the significance of Harvard's status as a nonprofit in terms of its financial operations?

Harvard's nonprofit status allows it to enjoy tax exemptions and access to resources that compound its wealth. This status is beneficial for the university's financial operations, as it can invest in growth-oriented assets without paying taxes on the income generated, thus contributing to its wealth accumulation.

How does the script challenge the notion that wealth accumulation in elite universities benefits all students?

The script challenges this notion by pointing out that the wealth accumulation in elite universities like Harvard often leads to increased exclusivity and debt for students, rather than benefiting a broader student body. It suggests that these institutions could be doing more to expand access and reduce costs for students.

What are some proposed solutions to address the wealth disparity in higher education as presented in the script?

The script presents several proposed solutions, including ending legacy admissions, taxing elite university endowments, expanding enrollment in elite institutions, and redirecting funds to public education and community colleges. It also discusses legislative efforts to penalize elite schools for using exclusive admissions practices.