While I agree that having a nice sized endowment is helpful, having a large endowment has its own problems. I wish I could pull the paper that discussed this in detail on what huge endowments really mean, but I just can’t find it.
From memory, the paper basically said that a large endowment essentially means the following
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The administration is unwilling or unable to figure out where to make good bets in education so instead they sit on the huge pile of cash (figuratively speaking) thus incurring opportunity costs
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Once the endowment is large enough, it sets up perverse incentives for the administration to build un-needed bureaucracies and eschew promising opportunities
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Large endowments also make the administration less responsive to important stakeholders like alums and faculty and increasingly the university moves away from its educational mission to become more like a “financial services” company with education as its side business .
Yale with its $20 Billion plus endowment is only a threat to UChicago if the administration is entrepreneurial enough to spot opportunities in education that Chicago misses and then uses its financial power to muscle its way in and become the big gorilla in that space.
Can this happen? Of Course, but the more important question is What is the probability of this happening? I wouldn’t bet on it, because college administrators are not a risk taking bunch.
Why has Yale not been able to muscle its way into becoming an engineering powerhouse, by spending down its endowment? Most likely, because it is unwilling or unable to do so. Most administrations are unwilling to use the endowment to make a big strategic bets because if the bet goes bad, their heads will be on the block, so they will play it safe. The President and Board doesn’t want to risk it. They just want to see the money grow.
And as long as Chicago’s richer peers follow this approach, the real difference on the ground between an $8-$10 Billion endowment and a $20-$40 Billion endowment will be negligible.