- 1B in donations at 5% APR conservatively invested will yield 50M every year.
- At yearly tuition rate of 59K the earned interest is enough to pay for 850 students without drawing down the invested principal.
- Albert Einstein college of medicine admits about 150 freshmen every year and medical school is 4 years long. So at any given time there are 600 students studying medicine at this school.
It seems to me that simply earned interest on this donation should be enough to allow students to attend this school free of tuition indefinitely.
Well, given the numbers in the parent comment they should have a surplus of $14.7 million yearly, so they could just let the surplus go back into the endowment and that would help keep up with inflation
There is no risk free 5% yearly return. The current interest rates may be temporary and there is inflation that erodes the 50M and the Principal amount.
On a large scale a 5% average return is very conservative. No interest rates won't stay where they are, but no one would invest an endowment just by putting it a HYSA.
> On a large scale a 5% average return is very conservative
Any return above GDP growth is not conservative. On average, real world GDP has grown at 3 to 5% per year since 1964 [1]. (We use real GDP because university costs will increase with inflation.)
600 students would have paid $35.4mm in tuition a year at $59,000 per year. That's a 3.54% drawdown per annum, right in line with real GDP growth. A 4 to 5% real return target is doable, but not conservative and certainly not a figure with a lot of margin for error.
Growth is a useless indicator. The whole point of Piketty's argument is that the return on capital tendentially outstrips the rate of growth, and that large investors have access to especially high return assets. The OP is right that a 5% average annual return is conservative.
> Growth is a useless indicator. The whole point of Piketty's argument is that the return on capital tendentially outstrips the rate of growth
I'll sidestep that Piketty measures wealth and calls it capital. Because that observation says nothing about how risk is distributed across those returns.
> large investors have access to especially high return assets
$1bn doesn't make for a "large investor" in institutional terms.
> OP is right that a 5% average annual return is conservative
No, they are not.
There are objective measures for this. I've worked closely with endowments the world over. A manager pitching a 5% target return on a fund with a 3.5% annual drawdown as conservative would be fired. A banker pitching the same would be subject to professional sanctions.
> you don't substantively respond to the core point
Yes, I do. Even if capital returns well in excess of growth on average, that doesn't change that the returns on assets in that excess regime are riskier than those below it. (This actually being formally provable by way of seniority.) Excess returns are never achived conservatively, let alone very conservatively.
Piketty's work has been seriously challenged. It makes good points. But it also contains bad ones, including a couple really sloppy and unsubstantiated assertions. His conflation of wealth and capital being germane to your argument.
> Any return above GDP growth is not conservative.
That would be true if additional GDP was distributed equally. But the rich capture majority of it in their investment vessels. So for a person with capital I think double of GDP is still conservative as long as inequality grows.
“As of October 2023, Harvard's endowment has an 8.2% 10-year return. In fiscal year 2023, endowment returns averaged 7.7%, with smaller endowments posting larger returns. Institutions with over $5 billion in assets have historically had higher 10-year average returns of 9.1%.”
Trailing 10 year performance is a standard reporting metric used to facilitate risk-and-return decisions in an uncertain world.
Here it serves to simply add weight to an argument that expecting a 5% annual return for invested endowment funds is reasonable and supported by historical evidence.
If things do not go as well going forward - all it means that principal will erode over time.
“As of October 2023, Harvard's endowment has an 8.2% 10-year return. In fiscal year 2023, endowment returns averaged 7.7%, with smaller endowments posting larger returns. Institutions with over $5 billion in assets have historically had higher 10-year average returns of 9.1%.”
It's enough not only for that, but to gradually expand the number of students they can afford to admit tuition-free into the future (strictly on interest), as well, should the desire to do so ever arise.
I don't think that's accurate. From my research, the bottleneck is residencies, whose funding is determined by Congress [1]. The AMA has supported laws to increase residencies, such as "H.R. 2389/S. 1302, the
Resident Physician Shortage Reduction Act" [2].
The paper "Physician workforce in the United States of America: forecasting nationwide shortages" [3] mainly blames an aging population and too-slow growth in the number of "residents and fellows".
edit: Found a dissenting view here [4], its main reference seems to be [5].
Med students don't have a lot of money, and hospitals are actually there (from their perspective, at least) to make money. The AMA doesn't have a lot of extra money either.
>> hospitals are actually there (from their perspective, at least) to make money
> Aren't most hospitals non-profit?
"Non-profit" is not referring to how the company operates. "Non-profit" refers to the owners extracting profit. Of course there are extra pieces, such as regulated transparency, but "non-profit" as a category are not wholly the donation-supported organizations that first come to mind.
In other words, if you are the owner of a successful non-profit, you'll have to simply pay yourself a market rate (TM) salary for such a successful executive as yourself. Instead of buying lavish Christmas presents like all those executives at greedy "profit" companies, your family members will only be able to get lucrative positions at your non-profit.
> So hospitals won't pay to train their workforce because... they can save money by forcing Congress pay for it?
They wont train their workforce because they would lose money doing it and can always hire people already trained. It's a tragedy of the commons which is why congress had to step in to subsidize.
> Aren't most hospitals non-profit?
Technically yes, but most are part of massive systems that are run by MBAs like traditional corporations.
They don’t have a lot of money yet. They have a very high amount of lifetime earning potential compared to their peers in other countries (yes, even after debt service and malpractice insurance.)
Are you seriously asking residents to subsidize their own training working 60-80 hours a week [1] and being paid maybe $20-25/hr for 3-7 years while the hospitals make money from their services?
If that were the case, then the only ones who would put up with such a system would be those who have rich families to back them up.
I came from a blue collar background and my family could not help subsidize my training and I could not afford to live, make rent, or afford food if I had to pay for my training as well.
There are so many other things that you are completely glossing over including annual income between generalists vs specialists, pediatricians vs non-pediatricians, reimbursement inequality from Medicare (has not kept up with inflation and is ~40% below inflation), Medicaid pays at best 10-15% on the dollar, and so on.
American physicians also work almost teice as many hours as their European counterparts which would increase their incomes.
[1] it’s considerably more because if you report it then the program can be in danger and lose its credentialing
> American physicians also work almost teice as many hours as their European counterparts which would increase their incomes.
I’d be curious as to where you got that. I was personally suprised to discover that in Germany, doctors in university hospitals can work up to 80 hours a week.
US doctors are among the richest people in the entire world, have an involuntary unemployment rate that rounds to zero, can live wherever they like without serious impact on pay and yet somehow are also the most oppressed and put upon if you ask them. Go figure it out.
It’s inappropriate to link once dissatisfaction with one’s income.
There are multiple reasons why US doctors are unhappy about their profession. I’m not sure where you get being oppressed as being the titular complaint.
I was an engineer before going to medical school and have an outside perspective as well.
I have complaints with medicine as to how it has changed over the last 10 years and not for the best. I have the right to complain to make things better for my patients and my work-life balance. That doesn’t mean that I am oppressed.
You have the right to complain and I have the right to point out that your industry, along with the housing and education industries, has stolen the entire productivity gains of a generation of Americans. I’m not concerned with your work life balance.
Your complaint should be directed towards the hospitals, for-profit insurance companies, and others who profit massively on the backs of patients.
My "industry" is only myself as I am beholden to my patients. I work and am paid by each patient who I treat and receive reimbursement by 50% of them at best.
If you don’t care about my work-life balance and lump me in with the rest of the healthcare system, then there’s nothing much to discuss.
Doctors also massively profit off the back of patients. They make far more and live a far more lavish lifestyle than doctors in other countries. I have multiple doctors in my family, they all work less than 30 hours a week and make more than 300k. And theyre not even in the lucrative specialties. Most are family physicians which Im sure you know is the worst paid doctor.
Doctors are paid by the patients that they treat. As an emergency physician, I treat 20-25 patients per shift on average and I am paid by approximately half of them due to not having insurance or money to pay for my services. I am paid roughly $120 per patient. Is that excessive in your opinion?
I would say that doctors in other countries are not paid accordingly and are UNDER-paid. See the UK NHS strikes as an example.
You should be complaining about is the excessive charges and reimbursement that hospitals receive for the care that they give. It gives me pause that despite having multiple physicians in your family that you do not understand the difficulty of their practice or work environment.
Most white collars jobs including doctors, engineers, and administrators make multiples of our European counterparts. I would say that Europe underpays its workers.
Again, I am a highly paid worker just like the rest of you. If I don’t work and treat patients then I am not paid anything whatsoever.
I would be further much ahead financially if I had stuck to being an engineer 18 years ago and not have put off earning an income for 7 years and going into massive debt. This was a risk because I come from a blue collar, lower middle class background without a safety net.
Yes $120 per patient is excessive. Yes the rest of the medical industry is even more of an excessive rip off. I dont think being a doctor is easy, I just think doctors are taking advantage of the government limited supply of their profession to negotiate salaries that are much higher than they would be if we had enough doctors. Doctor salaries are 9% of medical costs in the US, you cant just brush that off as insignificant.
Health care cost disease in the US has little to do with doctor salaries or demand for doctors. Unfortunately, as that would be a relatively easy problem to solve. The data I've seen indicates physician salaries adjusted for inflation are relatively flat or have even declined since the 1970s.
I agree you should be paid properly. But I don't understand why, if the US has a privatised healthcare system, hospitals are not paying to train their own labour?
US hospitals are almost all nominally non-profit. In practice, they are partnerships run for the economic benefit of controlling employees but the scam the tax code by pretending otherwise.
They do to a degree but most of the money comes from the government to subsidize costs. I’m not privy to the amount or percentage but they do cry about it when the residency union (CIR) asks for inflation adjusted salary increases.
> subsidize their own training working 60-80 hours a week [1] and being paid maybe $20-25/hr for 3-7 years while the hospitals make money from their services
That sounds like an apprenticeship. Many other industries do exactly that. Why should doctors be different?
But why must medical residency require 60 to 80 hours per week of work? AFAICT, it's because residencies are competitive, because there aren't enough of them, because nobody wants to pay for them. (But you can't make them unpaid, because, by circular logic, they require 60 to 80 hours per week.)
As an outsider, the whole system seems completely bizarre to me.
> [AMA president] Dr. Richard Corlin has called for re-evaluation of the training process, declaring "We need to take a look again at the issue of why the resident is there."
Why single out a particular private individual or his publicly traded company when you could simply pressure the institution itself to make tuition free?
Sure, but surely you'd have to dispose that much bitcoin over a really, really long time to not seriously move the price down... People might be disappointed at the amount of real money actually flowing around the cryptocurrency markets...
Or another way to look at it, you only need $50m a year to be the "equivalent" of a billion dollar endowment, and $50m a year is the budget of a smallish county.
There would seem to be about 10 countries with a budget of $50 million or less and most of those are islands you've never heard of with a population under 2,000.
- At yearly tuition rate of 59K the earned interest is enough to pay for 850 students without drawing down the invested principal.
- Albert Einstein college of medicine admits about 150 freshmen every year and medical school is 4 years long. So at any given time there are 600 students studying medicine at this school.
It seems to me that simply earned interest on this donation should be enough to allow students to attend this school free of tuition indefinitely.