Donations to Elite Schools Benefit the 100%

by Kiran Sridhar

It’s time to stop looking at the millionaire and billionaire alums who fund Stanford and other elite universities as self-serving narcissists encouraging a return to the Gilded Age.

It is no secret that elite universities raise massive sums of money. In the 2014–2015 fiscal year, Stanford raised $1.6 billion, shattering previous fundraising records for all universities. And, in June 2015, hedge fund manager John Paulson gave $400 million to Harvard to become the namesake of the University’s School of Engineering and Applied Sciences.

Paulson’s donation ignited a social media firestorm. In a tweet barrage, journalist Malcolm Gladwell condemned Paulson for “giving the world’s richest university $400 mil it doesn’t need” instead of “helping the poor”; and suggested that, as his next charitable act, Paulson should work the “coat check” at Art Basel because “they’re short staffed.”

In many intellectual circles, it is trendy to critique elite universities. In a 2012 New Yorker cover story, Ken Auletta labeled Stanford “Get Rich U,” where students, professors, and administrators “uncritically incorporate the excesses of Silicon Valley” and perpetuate the inequities of today’s society. For Gladwell and Auletta, the ivory tower is the 1%. But these and other critics neglect the unique benefits that donations to elite universities deliver to the 100%. Elite universities are best-positioned to advance basic research and to nurture the brightest students, aiding the innovations necessary for society’s advancement.

Universities are bastions of basic research that corporations are less willing to fund because it is not immediately, or even certainly, commercializable. For example, Dan Kleppner, an emeritus professor at MIT, invented the hydrogen maser — a critical component of GPS — through basic research, and has asserted that “basic science is the best thing that mankind pursues — not so much because it leads to new applications but because it leads to new understanding.” Basic research has uncovered knowledge that proved critical to inventing everything from MRIs, to microwaves, to solar energy observers; these new understandings will be critical in producing future innovations that expand human welfare.

Elite universities are in the best position to foster this basic research. There are few places in the world besides Stanford where world-class engineers, doctors, computer scientists, political scientists and former leaders in business and government work within one mile of each other. Because schools like Stanford are so strong across multiple disciplines, they are well positioned to deploy and combine the various modes of thinking essential for cutting-edge innovation. Indeed, through interdisciplinary collaboration, Stanford and other peer institutions can create positive network effects, drawing in talented people and attracting more capital; peripheral corporate ventures may relocate within the vicinity of the universities, benefiting municipal governments and hiring local residents.

Consider biomedicine: the Dean of the Stanford School of Medicine, Lloyd Minor, noted that in order to “transform our understanding of disease and lead to new methods of prevention and treatment,” researchers would need to “extract new knowledge from large-scale databases.” Fulfilling such a task will require the expertise of computer scientists, data scientists and doctors — collaboration that can easily happen at Stanford. Granted, with the advent of digital communication, it is now possible for academics at different institutions to communicate remotely. But as psychologists Robert Kraut, Carmen Egido and Jolene Galegher have found, even amongst the presence of state-of-the-art wireless technology, academics are most likely to collaborate on research if they are within physical proximity of each other.

Donations to elite universities also ensure that students at all socioeconomic levels can participate in developing these socially beneficial innovations. There are still inequities in the admission process; Stanford economist Caroline Hoxby and Harvard economist Christopher Avery found that there are thousands of high-achieving low-income students who do not apply to the most selective colleges through a phenomenon they call “undermatching.” But the elite colleges of today are more meritocratic than ever: nearly 16 percent of Stanford’s student body receives Pell Grants and Stanford is now tuition free for families earning less than $125,000 per year. As more organizations like QuestBridge — which matches highly qualified low-income students with scholarship opportunities — work to increase equity and access, undermatching will only decrease; the student bodies of elite colleges will comprise of the most talented students in America.

Numerous studies find that the smartest, most qualified people have an outsized impact on economic development and GDP growth: they are the people who found job-creating ventures and create innovations that improve the quality of life for society as a whole. By funding elite universities, donors can ensure that the smartest students are nurtured in dynamic environments, with high-quality research and teaching. Their dollars also ensure that sufficient financial aid — which constitutes nearly ten percent of Stanford’s annual expenditures — is available to provide talented low-income students with the requisite educational opportunities and connections to experience upward mobility.

To be sure, there are diminished marginal returns to some investments made by elite universities. It is difficult to argue that a new, state-of-the-art, earthquake-proof building at the Engineering Quad would dramatically improve social welfare. But it’s wrong to view elite universities as bastions of the 1%, or to criticize well-targeted donations that stimulate the research, collaboration and learning that are lynchpins of innovation and progress.