Stein’s faulty challenge to alumni giving

Celebrity and Law School alumnus Ben Stein publicly challenged the logic of donating to an increasingly wealthy Yale in a New York Times editorial this week, questioning the idea of contributing to an institution with a professionally managed $15.2 billion endowment. But Stein’s argument, which centers on a reductive and misleading comparison of the University to an investment bank, is unconvincing.

Stein’s column offers two key points. He expresses reluctance to bolster the salaries of Yale’s expert team of money managers, and he argues that his gifts will be dwarfed by the endowment’s huge returns. Factually, the first claim is simply unfounded. The second rests on a logical fallacy.

The first point relies on the false assertion that Yale’s investment managers — particularly Chief Investment Officer David Swensen — earn vast incomes comparable to those of private investment bankers. But while Swensen earns a high-six-figure salary, this is a paltry figure compared to his potential earnings on Wall Street. It is a fraction even of what his competition receives at Harvard, where several money managers take home seven- and eight-figure salaries.

The investment managers’ payroll comprises a miniscule fraction of the University’s operating costs, and Stein’s implication that alumni giving augments these salaries is groundless. Investments officers’ earnings must be approved by committees made up of staff, faculty and administrators, ensuring that these payroll decisions are at least somewhat vetted. More importantly, these salaries do not come close to the vast returns these managers earn for the University.

As top universities like Yale develop increasingly sophisticated, professionally managed financial portfolios, it is also important to recognize that they retain the distinct character of educational institutions. Ultimately, Yale’s endowment exists as a means to the end of fulfilling the University’s educational mission, and this is a critical distinction.

Stein’s point about his “pitiful little gifts” failing to make an impact on Yale is at first glance more persuasive. But this argument is akin to the logic used to argue that voting is a waste of time. Admittedly, each individual vote — and each small contribution to Yale — has a small impact. But just as democracy would fail if no one voted, Yale could not function as it does today without individual alumni gifts.

While it is legitimate to question alumni giving on the grounds that other charitable causes may represent areas of greater need, Stein’s point seems grounded in a less relevant desire for visible results. He contrasts giving to Yale to helping small charities for which several thousand dollars make an identifiable impact. But the greater scale of Yale’s work does not make giving to the University less worthwhile. The work done by an individual contribution is simply less apparent, and perhaps therefore less rewarding to the donor.

This does not undermine the validity of donating to Yale. While the University’s investments have yielded extraordinary returns, the endowment still covers only 31 percent of its operating costs. For the University to continue supporting groundbreaking research, undertaking progressive environmental initiatives, and providing the aid necessary to afford low-income students a Yale education, it must also continue to rely, in part, on the generosity of alumni donors.

Comments