Maintaining Harvard's `great good fortune'

BEING the wealthiest university in American takes a lot of money -- Harvard's endowment is $3 billion -- and maintaining this enviable status is not easy. ``Money for Harvard must never on the outside seem more important than education,'' writes Carl Vigeland in his new book, ``Great Good Fortune'' (Houghton Mifflin, $18.95), ``while within the institution its pursuit is an urgent, constant goal, without which Harvard would not be Harvard.'' On the occasion of Harvard's 350th anniversary, Mr. Vigeland has attempted to show how the mighty university pursues that goal. A Harvard graduate ('69) and former news director at Amherst College (Mass.), he has chosen an opportune time to explore an important subject. ``I began with the goal of exploring how Harvard raises money,'' Vigeland said in a recent telephone interview. ``But as I got into it, I realized the issue is how Harvard makes money.''

The recent and prodigious fund-raising drive that garnered $350 million is Vigeland's point of departure. Even with its prosperous alumni, Harvard works for what it gets; being wealthy suggests to others that you don't need more. Vigeland describes in his book the goodwill errands to alumni groups by prestigious faculty such as Robert Coles, the psychiatrist and author. He recounts as well the assiduous courting of ``heavy hitters,'' which might include -- for the heaviest -- a dinner with Harvard president Derek Bok. Harvard is not eager to discuss the files it keeps on alumni to help estimate their giving potential. (Fund raisers have nightmares about receiving a check for $10,000 and then discovering they could have asked that particular ``hitter'' for a million.)

Andrew Heiskell, former chief executive officer of Time Inc. and a member of Harvard's governing ``Corporation,'' was doing some of the courting and working for a number of other causes at the same time. ``Sometimes I go into a guy's office and forget what organization I'm raising money for,'' he told Vigeland. Robert Stone, another member of the Harvard Corporation, observed that the most generous donors were self-made people who ``have confidence in their ability to regenerate the money for their gift. . . . The toughest dollars to get were from inherited wealth.''

Vigeland offers a brief discussion of the brouhaha over Harvard's investments in firms doing business in South Africa. (While he doesn't argue for or against divestment, he thinks that the university could be more candid regarding worries that such a step could affect fund raising.) Rather than focusing on where Harvard invests its money, he looks instead at a question that is at least equally important: How does the university make these decisions? The chapter on the Harvard Management Company, established to manage the university's investments, is the best-reported and most illuminating in the book.

Ensconced deep in Boston's financial district, across the river from Cambridge (and out-of-mind for even some high-level Harvard officials), the company is a showcase of state-of-the-art ``paper entrepreneurship,'' the concocting of gain by trading paper evidences of wealth.

As much a part of Harvard as the Widener Library, the management company is technically ``nonprofit.'' The scene in the trading room, however, is identical to that in hundreds of banks and brokerage firms across the land. Eyes glued to video screens, two and three telephone handsets cradled on shoulders (the phones have 92 buttons), young traders send millions of dollars zipping through electronic circuitry in transactions that range from the exotic to the bizarre: ``enhanced index arbitrage,'' ``winged straddles,'' and the like. One of Harvard's recent contributions to the American university is a portfolio manuever called ``leveraging an asset,'' in which the university loans stocks to brokerage firms, thereby adding interest to the ordinary yields. ``A license to print money,'' is how Vigeland describes it.

These brilliant young traders may betoken a changing of the guard from the tweedy Yankees who have traditionally conducted Harvard's affairs. But larger questions arise. Is this sort of frenetic trading appropriate for a ``nonprofit'' institution? (To be sure, if Harvard entrusted the money to Merrill Lynch, it probably would be handled in an identical manner.) Indeed, is it a constructive economic activity, period? How does a university president exercise any measure of control over these investment maneuvers, which the participants regularly describe in the language of the gambling casino, and which seem to grow more arcane by the hour? Even for a dogged detail man like Mr. Bok, they are understandably difficult. ``He never really understood some of `the games,' '' said George Putnam, Harvard's former treasurer, recently retired.

``Great Good Fortune'' is not without flaws. The meandering, anecdotal style is hard to follow, and biographical sketches of people like Putnam and Bok, while useful in themselves, further derail the line of thought. More important, Vigeland doesn't really delve into how Harvard's financial dealings affect the day-to-day life of the university. (It would appear that the investment company, at least, has been kept strictly at arm's length.) But that is another book.

With parents worrying about how to meet tomorrow's tuition costs, and with the rise of ``tuition futures'' and other odd strategems to that end, there's a need for more discussion of the universities' half of this equation. Where do they get their money and what do they do with it? Mr. Vigeland has provided many trails for other writers to follow.

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