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This is exactly what is meant by the phrase “funding priorities,” which is not coincidentally the phrase I chose to use. Did you miss the ballet academy analogy? I will be more explicit: Caltech has enough money to build a thriving business program, but it doesn’t want to. And please don’t trot out that ■■■■■■■■ “all the cool schools are doing it” argument again to justify why we should feel obligated to add a business school. Caltech does not <em>need</em> a business school (or a full humanities line-up or easier majors, for that matter) to compete with the big boys, as it has clearly demonstrated…and at risk of being misunderstood yet again, Caltech does not <em>want</em> a business school or full humanities offerings, either.</p>
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As a matter of fact, I do know how to increase rate of return with endowment size. The “secret” (hardly a secret - every university does it) is that the endowment is by nature split into many separate funds. For example, Harvard’s endowment is split across over 10,000 funds. Large donations can be and often are made in the form of endowments for particular buildings (e.g. maintenance of libraries), programs, scholarships, etc. The “endowment” that we speak of is the conglomerate of these endowed funds for the university. An endowment of $5N billion is likely to be made up of five times as many smaller funds as an endowment of $N billion. Obviously that investment can be diversified in many ways so that the market does not “move against you” when a small margin of profit is skimmed off each year. If you would like more information on the rate of returns on endowments of various sizes (or “proof” that historically larger endowments have greater rates of return), please consult [this</a> page](<a href=“http://www.nacubo.org/x2376.xml]this”>http://www.nacubo.org/x2376.xml) because I am tired of stating the obvious.</p>