The Simple Solution to UChicago's Money Problems

Put me in, coach!

Apparently, the University of Chicago is in deep shit.

For years, it’s been taking out billions of dollars in loans to build new buildings and hire new hirees, and now its outstanding debt equals “more than 70% of the value of its endowment.”¹

So recently, administrators have been cutting back—they stopped hiring faculty, started selling off buildings, began to dissolve certain majors—all while beefing up enrollment, trying to bring in more tuition dollars.

Many explanations have been offered:

• The University itself blames Trump. They claim that yes, ok, there’s a deficit, but it was totally shrinking and everything was going exactly according to plan until the Trump administration terminated a bunch of grants “totalling $40 to $45 million overall, with $10 to $15 million affecting the current fiscal year.” If that cut doesn’t seem like much relative to the $6 billion debt and $300 million annual deficit, don’t worry, Provost Katherine Baicker’s thought of that! She admits that the loss “was relatively modest,” but insists that “it forecasts potentially much bigger impacts in the years going forward.”

• Professor Clifford Ando, writing in Compact magazine, blames “the debased ideals of the university’s leadership.” Instead of teaching undergraduates useful things, like the Humanities, UChicago is trying to become a kind of “tax-free technology incubator,” funneling millions of dollars into professors’ start-ups and various innovation programs. Those millions had to come from somewhere, and for a while that somewhere was lenders, and now that somewhere is the marginal UChicago student, whose tuition money is spent mostly on activities unrelated to his education.

• The Stanford Review, a conservative paper from another elite school, presumably just hoping to stir up some shit, blames crypto. They cite UChicago sources alleging that “the university lost tens of millions investing in crypto around 2021.” Again, if that loss doesn’t seem like much relative to the $6 billion debt and $300 million deficit, don’t worry, Review writer Teddy Ganea admits that even “beyond this conspicuous crypto failure, UChicago’s endowment returns are abysmal.”

Hold on. That last bit—the “endowment returns are abysmal” thing—it seems fairly important!

Ganea writes:

From 2013 to 2023, UChicago’s endowment returned just 7.48% annualized, versus 12.8% for the stock market and 10.8% for Ivy League schools.

Had UChicago simply matched the market, its endowment would be $6.45 billion larger today—more than enough to repay its entire debt. [emphasis mine]

This is crazy!

Of course, Ganea notes that universities can’t just buy index funds for mumble mumble risk management mumble reasons, and that there are various weird limitations on the use of endowment money to make up deficits, but fundamentally there’s simply no justification for underperforming the market by 40%.

Even making up only half that ground, UChicago could’ve massively reduced their debt load, and/or kept teaching humanities classes alongside their innovation hubs, and/or kept doing research and hiring new professors, and/or kept class sizes small.

This whole debacle is analogous to the perennial debate over growing vs. sharing the pie. While everyone bickers about how Trump took too big a slice, or about how their previously very artsy and beautiful slice looks all mechanical and gross now, or whatever—the principled bystander can look on and say, “Wow, why is your pie so small, you dumbasses? Probably you should fire your endowment managers and hire me instead.”

In fact, that reminds me—UChicago administration, if you’re reading: why not give me a shot?

I don’t totally want to give away my strategy, but let’s just say I’d buy the S&P 500, and also, I dunno, Asian stocks or gold or whatever to mitigate the risk. You’d probably get filthy rich, you could tell Trump to fuck off, and you could even invest some of the surplus in crypto or in bringing back the History of 17th-Century Pan Flute Dirges program—all while hiring new faculty and running your innovation labs as normal.

For my services, oh, I guess I’d accept even a very meager salary—something like 1% of the profit I make for you over the old guys. Sound like a deal?

we’ll build you another castle once I’m in charge!

1. Yes, that University of Chicago!