Forum: March-April 2001


Feeling Blue
Re: “True Blue,” January-February 2001: As an intern at Duke in the Office of University Development for only two summers, with no other alumni background or institutional attachment, I identified strongly with this story. The writing approach was clever, as it investigated the pride in an institution in which one doesn’t necessarily have a direct connection from a psychological standpoint. I look forward to reading more of the same.
Thank you.
Shanna Ackerman , Columbia University ’01 (via e-mail)
I received the latest issue of Duke Magazine and enjoyed reading it. Having written you several times over the years about story selection, I must say this edition seemed to be right on. But your excellent story “Reshaping the Future” [January-February 2001] repeats a statistic that I have challenged The Chronicle for using: that the endowment per student at Duke is $160,000.
The financial statements of Duke University, available from the office of [Executive Vice President] Tallman Trask III, put the value of endowment funds held by the university at $2.754 billion as of June 30, 2000. This report also states there were 6,202 undergraduates and 4,969 graduate and professional students —rounded out to 11,200. Do the division. That’s $245,900. Not $160,000 per student.
And that’s only part of the story:
A) The university is now receiving a sustained $33 million a year from The Duke Endowment, reflecting money automatically accruing to the university plus special appropriations. Were it not for the anomaly of Mr. Duke’s putting Endowment money into a separate entity, the principal that yields this return would be in the university’s coffers, and indeed under modern accounting practice, that portion that accrues automatically to the university is reflected as an asset on its books though not as endowment. The bottom line is that I consider it fair, projecting from the university’s own 5 percent spending rate, to value The Duke Endowment’s holdings at $660 million; so add $58,900 endowment-per-student because of the unique nature of The Duke Endowment.
B) Your comparison to the $1 million per student at Princeton is interesting: 1) Princeton does not have a medical center, with a cash-cow private medical diagnostic clinic ($69 million last year). When Duke Hospital deficits are corrected, and they will be, this will be sterling, like a living endowment.
2) Princeton keeps its pension fund in balance, while Duke has salted $366 million extra in its fund, beyond projected liabilities, as of June 30, 2000. That’s an extra $366 million—above and beyond liabilities. Princeton adds minimally to its pension fund each year; Duke curiously is making annual contributions in excess of $35 million. Any corporation with $366 million extra in its pension fund would not only stop annual contributions but would also raid the principal. In Duke’s case, this could be added to endowment.
All these factors distort the comparison with Princeton.
Ed Rickards ’63, J.D. ’66 (via e-mail)

John Burness, senior vice president for public affairs and government relations, replies:
The endowment-per-student statistic cited in the article was based on the university’s endowment at June 30, 1999, $1.069 billion. Using an enrollment of 11,200, the calculated endowment per student is approximately $160,000 per student, as reported. The comparable audited endowment figure for fiscal year 2000 was issued in October, too late to be used in the article. Support from The Duke Endowment is an important source of annual income and is reflected in our total university assets. However, the underlying assets are owned by The Duke Endowment and cannot be reported under appropriate accounting rules as permanent endowment on the university’s financial statements. The income stream also fluctuates from year to year depending on The Endowment’s investment gains and funding priorities.

Income from the private diagnostic clinic helps support the research and educational mission of the School of Medicine but does not directly benefit other segments of the university. Nevertheless, when compared to universities with academic medical centers, Duke’s endowment per student lags other institutions: Stanford ($460,000), Yale ($660,000), and Washington University ($365,000). It is worth pointing out that the endowment “owned” by Duke’s Trinity College of Arts and Sciences at June 30, 2000, $565 million, is substantially less than the endowments at a number of liberal-arts colleges with much smaller enrollments, including Williams, Swarthmore, Pomona, and Grinnell.

Pension fund assets have grown in recent years as a result of unusually strong gains in the capital markets. Because such gains cannot be sustained indefinitely, Duke’s trustees and the trustees of Duke Management Company, which manages those funds, have established policies designed to safeguard our pension assets against possible future market downturns. The university is studying its pension fund balances and long-term employee obligations with help from an outside consultant. In the interim, the university has suspended new additions to the fund, pending the results of this analysis. Dramatic downturns in the stock market have provided useful evidence of the importance of taking a conservative approach to managing the university’s assets.
‘Stealing’ Music?
In the story “A Music Free-For-All” [November-December 2000], I was disturbed by the cavalier attitude of the Duke students quoted regarding their use of Napster.
Illegally downloading music hurts companies and creative artists beyond the RIAA and the major record labels. The creative process necessitates the work of musicians, singers, engineers, producers, lyricists, staff, and innumerable support companies, all of which collaborate to bring the finished product to market. Only a small portion of the people involved in the entertainment industry make the sums of money of, say, Eminem, Metallica, Clive Davis, or Tommy Mottola, while the vast majority earn a more modest living.
In the story, Duke student “Brian” boasted of having 200 music files in his computer. That figure extrapolated to the rest of Duke’s 6,500 undergraduate students totals 1.3 million downloads—at just one college campus
—where artists, record companies, and others aren’t compensated. Napster users who think this is some kind of consumer revolution, instead of theft on a large scale, are either remarkably naïve or completely disingenuous.
In fact, consumers frustrated by the high prices of compact discs have a variety of legal alternatives. The most obvious, and most pow-erful, is simply to choose not to purchase the product. Consumers could buy the music on a cheaper format (i.e., audiocassettes) or opt for the music of another, less expensive, band. Each is an honest and fair-minded approach that would affect market demand and, ultimately, market-driven prices. Stealing music through software like Napster should not be an alternative, particularly for students at a university like Duke, where enlightenment and integrity are supposed to be held in high regard.
Perhaps one day these same Duke students, who so blatantly flout the copyrights of others, will dedicate years of effort to write a novel, music for a CD, a screenplay, or code for new computer software. Perhaps the student’s livelihood will depend on his or her creative work being brought to market to be purchased by consumers, aided by thousands of hours of work and dollars of support from other individuals and companies. And when it’s time for that student to reap the just rewards a company like Napster will facilitate the theft of thousands—even millions—of copies of the work so that the student, and the other entities involved, aren’t compensated. Perhaps then these students will change their perspective.
Alfred C. Martino ’86 (via e-mail)

I’m a staff music writer at the Nashville daily, the Gannett-owned Tennessean, and I spend half my time on music business and intellectual property issues like Napster. So, I just wanted to say that your feature on digital music was the best synopsis of the issue I’ve ever read.
Thanks for the legal insights. They’re helping me in my coverage.
Craig Havighurst ’91 (via e-mail)

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