Over the weekend, by the way, the Times ran a fascinating piece by financial columnist Joseph Nocera on the departure of Harvard money manager Jack Meyer and the arrival of replacement Mohamed El-Erian. For Harvard alums, this should be required reading; it raises serious issues about the management of the university.
After establishing Meyer’s success as manager of Harvard’s billions, Nocera posits this thesis: “To talk to people in both the Harvard and the Meyer camps, you come away with the feeling that Harvard is not all that terribly sorry to see him goâand that Mr. Meyer had come to feel that, if he wasn’t exactly being pushed out the door, he was certainly not getting the deference or leeway he was used to.”
Nocera cites two phenomena to explain the changing relationship between Meyer and Harvard. The first is the departure of some of his money managers, under the pressure of bad publicity over their salaries; the men subsequently created their own hedge funds and Meyer invested with them, which meant essentially that their salaries were no longer public and that the staff expertise at Harvard Management Corporation was diminished.
The second change was Larry Summers. To quote Nocera: “One of the raps on Mr. Summers is that he always has to be the smartest guy in any room, tossing off questions he means to be provocative, but which often have the effect of alienating the people he’s questioning. And so…Mr. Summers began questioning Mr. Meyers about everything from the positions in the portfolio to its level of risk.”
Equally interesting, Nocera throws Bob Rubin into the mix, saying that he too started “meddling” (as Meyer appeared to consider it) with Meyer’s decisions.
Soon enough, Meyer got fed up…and now Mr. El-Erian has very large shoes to fill, with many doubts about whether he will be able to do that.
The plot thickens, eh?
I’ve long argued that the key to Summers’ viability at Harvard is money: Are alumni giving it? Is Harvard making it?
Seem from this perspective, Summers may actually be in more trouble than he was last spring. FAS has just announced a $50 million or so annual deficit. (Could be more, could be less.) The long-awaited capital campaign is still awaited. It’ll be a miracle if the performance of Harvard’s endowment continues at the pace it did under Meyer.
And meanwhile, Allston is out there, waiting to suck down every available dollar Harvard throws at it….
Many people at Harvard would like to think that their, and the world’s, image of the university is primarily linked to its intellectual achievements. I think it’s more complicated. In recent decades, many people have formed their high estimation of Harvard, whether they realize it or not, because of the fact that it is not just smart but rich, the richest university in the world by about ten billion dollars, so rich that they’ve come to take this relatively modern phenomenon for granted. What many Harvard alums and the general public really cherish about Harvard is its power, and these days, the source of that power is as much financial as it is intellectual.
So what happens if, under Larry Summers, Harvard’s wealth starts to flatline, or even decrease? And what happens if the departure of Jack Meyer is seen as a watershed in that development?
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P.S. Harvard alums who want to better understand their president should know that Summers almost certainly spoke at some lengthâon backgroundâfor Nocera’s story. (I’d bet ten percent of my personal wealth versus .o1 percent of Harvard’s endowment on it.) How do I know this? First, he’s quoted in a sort of oblique way saying “Jack Meyer did a great job for Harvard.” Short, succinct soundbite.
But later in the piece, when Nocera discusses a new compensation strategy Summers put in place at HMC, Nocera writes, “I don’t believe that Mr. Summers imposed the new system as a means of getting rid of Mr. Meyerâhe simply thought it made more sense for a university endowmentâbut that was the inevitable result.”
How does Nocera know what Summers “simply thought”? In all likelihood, because Summers told himâbut in a way he hoped would obscure the extent of his cooperation with the Times reporter.
SOP in Washington: Give the complimentary soundbite on the record, then go on background to deliver the real dish. It’s only less than obvious if you labor under the idealistic assumption that a university president wouldn’t employ such media strategies.