by MALCOLM GLADWELL
The holy grail of scientific inquiry in the Middle Ages was the perpetual motion machine. Was it possible to create a mechanical apparatus that could run—forever—without any external power source? One elaborate mechanism after another was created. Eccentric inventors devoted their lives to this question. To this day, the patent offices of the world receive submissions from people claiming to have solved the puzzle.
But of course a perpetual motion machine is impossible: the concept will always violate either the first or second law of thermodynamics. “Oh ye seekers after perpetual motion, how many vain chimeras have you pursued?” Leonardo da Vinci famously said. “Go and take your place with the alchemists.”
Well, I have news for Leonardo da Vinci. It turns out that there is such a thing as a perpetual motion machine. It’s called Princeton University.
This breakthrough happened quietly, as many epochal events often do, buried in a press release issued by the school on October 29, 2021. Why was the breakthrough ignored until now? I cannot say for certain, except that perhaps few observers of America’s educational system are as unhealthily obsessed with the fine print of Ivy League press releases as I am.
But when I read the news, I will tell you in all candor, I gasped in shock. For years I’ve been quietly predicting that this moment would someday come. And now it has.
Here is the short version. (Because, believe me, there is a much longer version, too.) Universities fund their operations largely through three sources of income: government grants, student tuition, and distributions from their endowment. The proportion drawn from each of these three buckets varies from school to school.
If you are a school that does a great job of winning federal research grants, like Johns Hopkins, then the first bucket counts for a lot. If you’re an elite school that takes in lots of full-tuition-paying rich kids and doesn’t give out a lot of financial aid—like, say, Washington University in St. Louis—then the second bucket counts for a lot.
But the third bucket is tricky. The purpose of an endowment is to subsidize a university’s annual budget. But nobody wants to dip into principal unless absolutely necessary. So standard practice is to divide the annual return from an endowment into two parts—returning one portion to the principal, so the endowment keeps growing, and using the rest to supplement the annual operating budget.
A university that relies on those three buckets to fund its operations is not a perpetual motion machine. It’s a normal machine. It requires an annual influx of money, from as many sources as possible, to keep going. If the annual influx of funds from tuition and research grants goes to zero and you have to dip into principal to keep things going, pretty soon you have no principal left. And before long the school is bankrupt. When you hear about small liberal arts colleges that have shut their doors in recent years, that’s what happened. Shrinking enrollment means overreliance on the endowment, and no endowment has ever been large enough to make up that difference.
That is, until now—in the leafy, gothic cradle of financial alchemy known as Princeton University.
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