Friday, June 5, 2015
John A. Paulson Is Free to Donate $400 Million to Harvard, or Anyone Else He Wants To
John Paulson and Harvard University announced Wednesday a $400 million contribution from billionaire hedge fund operator to fund engineering programs at Harvard. The engineering school will now be named the John A. Paulson School of Engineering and Advanced Sciences. It’s the largest gift in the history of Harvard, but only the third most significant. The first was in 1636 when the “Great and general Court” of the Massachusetts Bay Colony approved £400 for a new college, renamed Harvard in 1639 after a gift of £779 and 400 hundred books by the reverend John Harvard. Instead of hosannas the response has generally been negative. John Paulson is free to spend his money any way he wishes. He earned it legally, based on financial brilliance and betting against the housing market before its collapse. Joe Kennedy and Bernard Baruch pulled their money out of stocks before the 1929 Crash. This is America. John Paulson can donate his entire fortune to Harvard, give it to Goodwill, blow it in Vegas, leave it to his family, dole it out in campaign contributions, or die intestate. It’s his money – his call. The objections to the Harvard gift ate threefold: 1) Harvard doesn’t need the money; 2) Paulson should have given it to the poor; 3) Taxpayers subsidize the contribution. Harvard is both the most prestigious and richest university with an endowment approaching $36 billion, about $10 billion higher than the runner up University of Texas System. . It is Harvard because it is Harvard. It is Harvard because successful alumni give back to Harvard. Harvard technically does not need the money, but in reality it does. Harvard, despite its greatness in the arts and sciences, business, law, medicine, and public health, is an also-ran in engineering. It has an engineering program, but like the other IVYs with the exception of Cornell and to a lesser extent Princeton, does not heavily invest its resources in engineering. It mostly left engineering to neighboring MIT about a mile away. The top 4 engineering schools in the United States are, in alphabetical order, Berkeley, CalTech, MIT and Stanford. Then comes a cluster of Carnegie Mellon, Cornell, Georgia Tech, Illinois, Michigan, Northwestern, Purdue, Princeton and Texas. U.S. News ranks Harvard 26th in undergraduate engineering and 20th in graduate engineering. Harvard can easily hold its own against Princeton and Yale, but Stanford is the wave of the future. Stanford, once an exceptional university on the West Coast, is now one of the world’s premier universities, built around engineering and Silicon Valley. Route 128 has been good to MIT, but Stanford created Silicon Valley. Provost and Dean of Engineering Frank Turman is considered the Father of Silicon Valley. He encouraged his students to set up their own companies and established the Stanford Industrial Park in 1951. David Packard, William Hewlett, and the Varian Brothers led the way. The rest is history. The Silicon Valley successes have poured their moneys back into Stanford, boosting not only engineering but also all of Stanford’s academic programs. I once read a former President of Harvard explained the Neglect on engineering in the statement “Our people don’t like to get their hands dirty.” To quote Bob Dylan: “the times, they are a changing.” Engineering, computer and biomedical, are the future. Thus Harvard established the School of Engineering and Applied Sciences (SEAS) in 2007. It recently created undergrad concentrations in biomedical engineering, electrical engineering, and mechanical engineering and a masters program in computer science and engineering. SEAS will be in a new building in Allston, Massachusetts across the Charles River from Cambridge. SEAS was in the planning process of Harvard when the economy collapsed in 2007. Harvard is now bringing the dream to fruition. This is America. If John Paulson wants to fund SEAS, then that is his right. The second argument is that John Paulson should give to the poor rather than the rich. So much of this prate is Harvard envy. The United States has poured trillions in alleviating poverty in the United States, especially in the inner cities. We have Baltimore, Camden, Detroit, Flint, Oakland, St. Louis, the South Bronx, and South Central to show for it John Paulson’s $400 million would accomplish little. Paulson was a NYU graduate and then received his MBA from Harvard. Harvard Business School grads are not social workers. They go into business, especially banking, investment banking, Wall Street and corporate management. They succeed and give back. He has given to other organizations, including $100 million to the Conservancy for Central Park and sits on the boards of NYU and the Met. That John Paulson should donate his fortune to the less fortunate is based on the premise that others should tell you what to do with your money, how do spend it, and upon whom to bestow it. Chuck Feeney is a co-founder of Duty Free Shops, which made him a billionaire. He quietly gave away almost all his fortune, including at least $950,000,000 to Cornell from which he received his degree from the School of Hotel Administration. This is American. It is a personal decision. The third argument is that taxpayers subsidize these contributions through the tax code. We can deduct our contributions to non-profits rather they be educational institutions, museums, poverty fighting organizations, hospitals, or advocacy groups. The effect is to reduce our taxes, as do solar credits, that is, the taxes paid to government. They do not create funds paid to the donors by the government, unlike the Earned Income Credit, which is a cash stipend to lower income taxpayers. Better that John Paulson give away much of his fortune rather than let it be sucked up upon his death by the federal and state bureaucracy. It’s his money.