Rarely has so much personal money been spent on something as nebulous and vapid as this: Nike co-founder and chairman Phil Knight has just donated $400 million to Stanford University, to create something called the “Knight-Hennessy Scholars Program”.
The press release announcing the gift is truly something to behold, and should probably serve as Exhibit A in any course on How Not To Give. (Or maybe Exhibit B; it’s not quite as bad as David Geffen’s $100 million UCLA middle school.)
The only way to convey the particular aroma of bullshit in this announcement is to quote it at some length. So, with all due apologies:
Global, multidisciplinary… a new generation of global leaders… complex challenges… foster service, collaboration, innovation and entrepreneurship… education in leadership, innovation and other curricula designed to develop scholars’ capacity to lead ambitious change in a complex world… develop creative solutions to effect positive change… diverse, multidisciplinary and interdisciplinary… the innovation center… leadership training… problem-solving at scale… social startup fund… leverages the full breadth and scope… dynamic, international network… leadership for the betterment of humanity… think outside the box… Global Leadership Program… lead ambitious change… convening hub… entrepreneurial thinking… global challenges of this century…
OK that’s enough, but you get the picture. A lot of highfalutin’ gibberish, basically, which serves to effectively obfuscate what’s really going on, which is that Phil Knight has just poured $400 million into the $22 billion ocean of money that is Stanford’s existing endowment.
Of course, because $400 million is a very large sum of money, a couple of things need to happen when such a gift is made. The first is that Knight gets his name on something—in this case, the Knight-Hennessy Scholars Program. And the second is that the money has to be earmarked in some way—it can’t be fully fungible with the existing endowment.
Knight’s $400 million is going to be used for a project which is core to any university endowment: it’s going to pay for 100 full-ride graduate scholarships per year. If you’re a top student at an undergraduate college in the U.S. or internationally, then you can be nominated for one of these scholarships, which will pay for you to attend Stanford for three years and get your graduate degree in sunny Palo Alto.
I should mention here that both my parents were awarded graduate-level degrees from Stanford; they both had a fantastic time, and received a first-rate education, and they even moved our entire family to Palo Alto in the mid-80s as a result. I’m quite sure that the Knight-Hennessy Scholars will produce similarly happy graduates, and maybe even marriages. What’s more, it’s fantastic that the Stanford endowment is going to be used to provide a free education for students from all over the world.
But still. This donation is a $400 million exercise in sending money where it’s needed least.
The fact is that Stanford’s endowment has been rising vertiginously in recent years, going from $9 billion in 2000 to $22 billion today. Last year, when global markets went nowhere, it managed to see a 7% return on its investments; the year before, its investment return was 17%. On average, it’s been growing by 8.7% a year for the past 10 years, which means that Phil Knight can reasonably expect Stanford to make about $2 billion in 2016, before he donates a single penny.
The Stanford endowment is going to spend about $1.15 billion this year, which means that Knight’s $400 million is pure gravy: it just gets added to the pot and helps to make Stanford richer and richer. Knight’s gift is going to provide about $20 million per year towards the cost of the Knight-Hennessy Scholars Program; Stanford could have covered that itself, very easily, just by increasing the endowment’s annual payout from $1.15 billion to $1.17 billion.
There is absolutely no sense, then, in which Knight’s gift is needed. Nor is it going to transform Stanford in any noticeable way: adding 300 gifted students to the current enrollment of 16,000 gifted students is going to change nothing. What’s more, given Stanford’s stated intention to select only “outstanding, courageous scholars” for the program, all of whom will already have proved their academic bona fides, it’s a fair bet that most of them will end up doing very well for themselves and for the world whether they end up going to Stanford or not.
What’s more, if you try to take the press release’s gibberish at face value, it’s hard not to come to the conclusion that Stanford is precisely the wrong place for Knight to be spending his money. If you really want to “inspire leadership for the betterment of humanity,” the last place you want to send your 100 students per year is the very heart of Silicon Valley, where everybody wants to start the next unicorn and become a gazillionaire before they’re 30. Stanford attracts lots of idealistic students who want to make the world a better place; within a year, however, all too many of them have started handing their professors non-disclosure agreements before asking advice on seed-round funding. If Stanford has an ideology, it’s a kind of ultra-meritocratic libertarianism, coupled with a largely misplaced faith that the solution to any problem is to start a technology company to address it. (Hence, that “social startup fund”.)
Yes, Silicon Valley has changed the world. But Palo Alto’s bubble of otherworldly privilege is arguably the worst possible vantage point from which to struggle with, say, the increasingly deleterious effects of inequality on the world, or to find solutions to such problems.
So, what’s going on here? Most of the gift, I suspect, can be boiled down to a few simple factors. First, and most important, Phil Knight went to Stanford’s Graduate School of Business. In America, there’s a deep culture of giving money to your alma mater, and Knight is simply following that tradition. If he’d gone somewhere else for business school, his money would probably have gone there, instead.
Second, Stanford in general, and its president John Hennessy in particular, are world-class fundraisers. You can be sure that Hennessy has been buttering up Knight for years, and that this gift is testament to the relationship that he has managed to build up with the sportswear mogul.
Third, Knight is 78 years old, and is worth an estimated $25 billion. He can’t take it with him, and any money he doesn’t give away to a registered charity will be taxed at a very high rate upon his death. (It’s reasonable to assume that a good $150 million or so of this gift is a tax expenditure by the U.S. government: it’s money that Knight would otherwise pay in taxes, and which would then be available for public programs, rather than private education.)
By donating $400 million to Stanford, Knight gets to bask in the adulation of lots of important people he admires, without doing any real work in terms of thinking about how his money could be best spent.
Ultimately, however, he did have the choice: he could give to the world’s neediest, or he could give to the rich and privileged. In choosing the latter, Knight might think he’s making the world a better place. But really, he’s more part of the problem than he is part of the solution.