HBR – the Center of Brutalistic Capitalism

For a while, Harvard was going to tap into the educational aid relief that was in one of the CARES packages offered by Congress despite having the wealthiest university endowment of roughly $40 or $41 billion dollars. Now, I don’t know how these endowments work so I regarded them as funds for a rainy day to dip into when things get rough and this pandemic certainly qualifies as a rainy day... a very rainy day. So, it seemed like an obscenity to hold out their hands for money when they already have a very rich rainy-day fund.

I had to do some research to find out more about endowments as I’m woefully ill-informed and it turns out that universities do not get free reign on how they spend the endowment money: the donors have put some stipulations on how to spend and where. For Harvard, there is a stipulation, one of many, that the fund (or funds) have enough money in perpetuity and provide enough returns for the future, if I’m understanding it correctly. That could be a huge hurdle and I thought, okay, that could be why Harvard felt they needed the $9 million.

Harvard apparently spends roughly 5% of the endowment so it comes to roughly $2 billion for the current year. The school was going to get about $9 million in federal aid, about .45% of their $2 billion spend – a nothing burger in the scheme of things. Oh well, I guess every bit of penny counts.

One news organization did a deeper dive last year into the endowment and the spending of it, and the news organization found that roughly 30% of the spending was “flexible” spending, sounding like there is some flexibility in using the endowment. To me, it suggests that 30% (which comes to $900 million of the $2 billion spend) could be “redirected” to whatever the current pandemic needs are today. It sounds like they have the money for the current crisis.

Fortunately, there were enough pushback from society and the president that Harvard decided to reject the aid. Originally, they were going to keep their hands out because they were claiming that the aid did not come from the PPP (Paycheck Protection Plan) which was geared towards small businesses but the money was coming from the educational fund. But when the president chimed in on the pushback, it seemed like Harvard capitulated and pulled back in their hands. A wise move because that $9 million can be redirected to other smaller higher education schools that do not have that wealth. That money might just save a few universities from going under during this period.

This is one of the rare instances where the president did some good.

But we must remember, the mindset Harvard brought to bear during this bruhaha is illustrative of the brutalistic capitalist mindset: grab everything you can because you can and greed is good. (Okay, brutalistic is a made-up word but it’s evocative of what our capitalism feels like today.) Harvard University has the Harvard Business School where all the titans of companies are birthed and seeded throughout the world. How the university behaved is just a microcosm of how CEOs, hedge fund managers, private equity managers behaved for the last 40 years when they strode around the world, vacuuming up the money, under the guise of shareholder value.

To change capitalism, we need to change Harvard Business School. I don’t know how – maybe replace the professors with those focusing on social capitalism or stakeholder capitalism, but HBR needs to change in order for our business environment to change.