Thanks!

[sakky]

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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.

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<p>Exactly - it doesn’t want to, which has always been my point. </p>

<p>Yet there was a time when MIT didn’t really want a management program, and didn’t really want any social science programs. Things change. </p>

<p>But the bottom line is, if Caltech does not want to expand its offerings, then Caltech is always going to have a problem with students coming to the school and then later finding out that they don’t really want to stay because they’d rather study something that Caltech doesn’t offer. Furthermore, Caltech will always have the ex-ante problem with yield in terms of attracting students who want to hedge their bets by choosing a school with a wider range of offerings. </p>

<p>Which gets back to my entire involvement in this thread. I pointed out that Caltech has a low graduation rate, relative to its peers. The question is, do you want to fix that or not? If you want to fix that, then I am offering suggestions. On the other hand, if you’re simply not interested in fixing it at all, that’s fine, then just say so and we will at least know where you stand. </p>

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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.

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<p>It has nothing to do with ‘being cool’. Lots of top schools don’t offer business schools, at least not for undergrads. Princeton and Brown don’t have B-schools for any students, grad or undergrad.</p>

<p>On the other hand, Princeton and Brown have significantly higher graduation rates than Caltech does. Hence, they don’t really seem to have a problem. </p>

<p>To be clear, I never said that business schools would by themselves solve all of a school’s graduation problems. I’m simply talking about the general concept of expansion of programs, with B-schools merely being an example. Caltech could instead decide to expand its social science programs which is precisely what MIT decided to do in the mid 1900’s. Caltech could add a media technology program like the MIT Media Lab. Granted, the Media Lab’s degree programs are still only for grad students, but at least it offers undergraduate courses. In fact, that’s a way that Caltech could one-up MIT: by offering a media technology program for undergrads. </p>

<p>But again, the point is to explore the possibility that Caltech could expand its offerings. I don’t see why this is such an outrageous concept, as Caltech has done expanded in the past (and still is). For example, the entire HSS division didn’t exist when Caltech was founded; it was founded only decades later. Similarly, the Caltech biology department - one of the best biology departments in the world - didn’t exist when Caltech was founded. That happened decades later, and in fact, the founding of that division was precisely why Thomas Hunt Morgan, the nation’s most esteemed biologist and soon-to-be Nobel laureate, was brought into Caltech in the first place. Caltech’s geology/Earth sciences department is arguably the best in the world, but it was also similarly a product of expansion.</p>

<p>The point is, if Caltech can and has successfully expanded in the past, why is it so outrageous to think it couldn’t do so again? Is Caltech never supposed to evolve? I put the ball back in your court, snowcpk. Perhaps you could explain to us why Caltech can never expand, given its very own history of successful expansion. </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 page because I am tired of stating the obvious.

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<p>That hardly proves your point, because it completely fails to show how a fund in aggregate can enjoy increasing returns to scale by merely splitting itself up into pieces. So you say that Harvard can split itself into 10,000 separate funds. So? That still means that Harvard has to manage 10,000 individual funds. It is clearly easier to monitor fewer individual funds. </p>

<p>Besides, let me put it to you this way. If you are truly claiming that you have the secret to increasing returns on fund size, then why hasn’t the finance community realized this apparently basic fact? There are literally thousands and thousands of individual wealth management firms out there (not just individual funds, but entire firms). If what you are saying is true, then there should really only be a handful of giant firms out there (with each firm running thousands of funds). In other words, the boys on Wall Street should be smart enough to acquire and merge together as many individual firms as possible in order to take advantage of these increasing returns to scale that you claim exist. So why haven’t they done that? Are they just being stupid?</p>

<p>Look, I am tired of stating the obvious: if you really believe you’ve discovered a secret to fund management success that the finance community has apparently not discovered, then what you are doing in academia? Go take a job in the finance sector, and you will surely make billions. Otherwise, please ask yourself why don’t wealth management firms don’t just engage in a crazy number of mergers such that the world would end up with only a handful of giant firms. How do these thousands of tiny firms manage to stay in business when they’re constantly battling these supposedly increasing rates of return?</p>