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Remarks at Harvard Administrators Forum

Cambridge, Mass.

There’s actually a simple test for defining what’s real authority and importance, which is, which people, if they collectively went away, all of them, would bring the place grinding to a halt most quickly? And, truth be told, presidents sometimes go away for a three-month sabbatical, faculty go away every summer for three months, students are actually here only half the year. If the administrators and the staff of this university went away en masse for a month, chaos would ensue well before that month ended. And that says something that’s very, very important about the people in this room.

The first thing I want to say today is that one of the things that people don’t tend to think about when they think about a university is that if you take faculty and you take students and you add them together, you are talking about less than half the people who work at the university. And when we think about the entire university community, that is something that is profoundly important to realize.

I will get much more out of a session like this if we spend time talking about whatever is on your mind rather than what’s on my mind. But let me just highlight three things briefly. One, a view about management and leadership. Second, something about the importance, as I see it, of the university coming together in the years ahead. And third, some of the priorities that seem most important to me for the university in the years ahead.

There was a time when people thought that non-profit organizations like Harvard needed to be managed in an entirely different way than for-profit organizations, where money could be kept in shoe boxes; doors could be left unlocked; competitors could be something that you never thought of, that we never thought about. And there was a time when that’s the way universities in this country were managed, a time when that’s the way hospitals in this country were managed, and it was a time, in some ways, that had something to recommend it.

It seems to me that one very important responsibility that we all have is to manage this institution in as effective and an efficient a way as we can. Because we are in a world that is more competitive with other universities than the world we used to be in. And let me be frank: my guess is, we are headed into more difficult economic and financial times than we have seen in the recent past.

The Harvard Management Company has done very well with the Harvard endowment in the last few years. What that means is that they’ve earned roughly a zero return over the last three years. And that’s much better than almost anybody else who’s managed money has done. But what does that really mean? Each year, we’ve spent about 5 percent of the endowment; each year, the costs of running Harvard go up a little faster than general inflation. What that means is that, at the end of this year, if things stay where they are, our endowment’s purchasing power will be about 25 percent lower than it was three years ago. That makes it very, very important that we manage our resources well.

Here’s a way I like to think about the benefits of managing well: multiply by 20. One of the most important rules of financial management in a university is that if you have an endowment, you can spend about 5 percent of that endowment each year. Here’s another way of thinking about it: What would we have to mobilize from donors to do the equivalent of saving $3 million a year in expenses, like a group of administrators were recently able to do when they came together and found a way to pool Harvard’s purchasing power and save $3 million a year in computer procurement expenses? We’d have to mobilize $60 million to produce an endowment that would do that much.

If we are able to save 5 percent of the university’s $2 billion budget through being more efficient in everything we do, that’s $100 million a year. That is the equivalent of $2 billion in extra endowment. That’s a very large sum relative to the last time we had a multi-year capital campaign. Managing effectively is something that’s crucial.

Now, we are not here to make a profit. We are not here to have the best balance sheet that we possibly can. We are here to teach students in the best way that we can. We are here to do the most important research that we can. We are here to provide the best experience that we can for everyone who’s here. So when I talk about efficiency, I don’t mean sacrificing quality. But I do mean pushing the envelope to make sure that we are doing the most that we can, in as efficient and effective a way as we can. And as the numbers I just gave you suggest, this is something that is very important to the university’s future in terms of its capacity to move forward and it’s something that really depends very, very much on all of you.

I have tried to bring that spirit to everything that I have encountered since I’ve been here. I’m always asking whether we can do things better. I always think that we should ask why we do things the way we do. There’s almost always a good answer to that question. But there’s only one unacceptable answer to that question and that is, “We do things this way because that’s the way that we have always done them at Harvard and it’s the Harvard way.” And that is not a sufficient answer. And so my first request to all of you would be to think about how in your area, whether it’s managing a building, directing a portion of the athletics department, managing the university’s relationship with the tax system, how we can be as efficient and effective as we possibly can.

Here’s my second observation, which in a way goes with this challenge of being as efficient and as effective as we can. We at Harvard are very much engaged with the fact that we are comprised of 10 different tubs, that every tub rests on its own bottom. And it has been decentralization that has allowed schools to pursue projects with autonomy — and that autonomy has had enormous benefits and we wouldn’t want to lose those benefits of autonomy. But there are some other things we need to recognize. The first is that, outside of Harvard, nobody much notices that we’re different schools. They notice that we are Harvard University. The reputation we have is the reputation of Harvard University, not the Harvard Education School or the Harvard Business School or the Harvard Faculty of Arts and Sciences. Much of what we can most effectively do does not respect the departmental and school boundaries that were established 100 years ago based on the intellectual conventions of that moment.

That’s true intellectually. Who can decide in any objective way whether understanding what happens inside the nucleus of a skin cell is the task of medical research, which occurs in the Medical School, or the task of biological research, which takes place in the Harvard Biology Department? Who can decide whether understanding how a 6-year-old’s brain changes and what physiological changes take place as that 6-year-old learns to read and new pathways are developed, is something called research in psychology or something called research in education? Who can decide whether an understanding of the way in which prices fluctuate and the terms are best structured on the bonds that are issued by a developing country, is a topic in business and finance or is a topic in economics and politics? And I could keep giving examples of that kind. That’s one part of it.

There’s another part of it. The people who sell airline flights to faculty at this university don’t know the difference between the different schools of Harvard unless we go out of our way to tell them. The people who print brochures for this university don’t know the difference between the different parts of Harvard unless we go out of our way to tell them. The people who sell us cement, they don’t know the difference either. Now, maybe they will sell better at lower prices to 10 small groups, each approaching them separately, than to one large group approaching them in a coordinated way. Somehow that doesn’t seem so terribly likely.

People who come here and decide to spend their careers at Harvard, do they want to think of themselves as spending a career at Harvard University or do they want to think of themselves as spending a career in one-tenth of Harvard University, a single tub? Somehow, I think we’ll recruit better people, we’ll give them more satisfying experiences, if they think of the university as being the place where they work, rather than one individual part of the university.

How will we be more effective in addressing our alumni community who have gone forth and are interested in supporting the university? If we try to tell them you’re only allowed to support one part of the university because that’s the place that you have a particular connection to, or if instead we ask them, what are your interests? The university is engaged in a wide range of things that may be of concern to you and we’d be very interested in getting you involved in any of those things.

Each of these areas, resources, people, the way in which we administer and deal economically with the outside world, what we do intellectually, are areas where we will be much stronger in a unified way. And that’s why groups like this, where people from all over the university, come and get to know each other and discuss important issues, are so very, very important. This is an area that Harvard presidents have been working on for a very long time. I think it is something that will work enormously to our advantage and I encourage you, in each of your areas, to push in that direction.

Third, a word about academic priorities. It’s always difficult to talk about this because there are so many things going on and you can never talk about everything. But let me highlight four things that are particularly to the front in my mind. First, with Dean Kirby and Dean Gross’s leadership, the Faculty of Arts and Sciences has embarked on the first broad review of the undergraduate experience at Harvard in a quarter century. The core curriculum has been an enormous success but I think it’s a safe statement about organizations that there is no innovation so good that it should not be reviewed in a comprehensive way every quarter century. [LAUGHTER] And much has changed in that quarter century. The phrase computational biology didn’t exist when the core curriculum was invented. Think about the geopolitical situation of Russia or Afghanistan at the time when the curriculum was invented. Think about the fact that at the time when the core curriculum was invented, people went to their chemistry classes with slide rules. And it’s something that we have to review and it’s an opportunity for us to build on the tremendous strength we have in terms of star professors. And it’s also an opportunity for us to address what are some traditional weaknesses at Harvard. Too many students feel that they don’t have the kind of contact with faculty that their friends at other schools have and that they crave, given the remarkable faculty that we have here.

Second, the sciences and especially the life sciences. Think about what a history written today has to say about the period 1700 to 1725. It doesn’t actually have an enormous amount to say. So if you take a 300-year perspective, all that remains are the things that are really, truly most important. And I’ve done a lot of thinking about what this time is going to be in those history books 300 years from now? I actually think there are only two answers to that question. First is going to be the revolution in the biological sciences that’s happening right now that is going to change what it means to be human and that is going to allow us to interfere in a profound way with disease processes. We here associated with Harvard University have the five leading institutions in the world as measured by the capacity to attract peer-reviewed funding from the National Institutes of Health. We have the leading medical school in the world. We have the business school that is furthest ahead in thinking about the uses of intellectual property and the distribution of technology. We have a remarkable tradition in biology. It is hugely important that we be at the vanguard of this profound change in the world because there is a concentration of biological talent in this city that is unlike any other that exists in the world.

And we as a university also need to be at the vanguard of thinking about what this is going to mean for the broader society. Think about this: a decade from now, doctors will be able to give somebody in this room a blood test and come up with a pretty good idea of how long they’re going to live. What will that mean for the market for insurance? What will that mean for the way people hire people? What will that mean for the way people choose their spouses? It is something that will have profound implications and if the knowledge to work through those implications doesn’t come from places like this, I don’t know where it will come from.

Third. If you think about the world that lies ahead, the other great challenge of this moment, the other thing that will be remembered 300 years from now, will be the coming together of rich countries, where a fifth of humanity lives in relative splendor, and of poor countries, where four-fifths of humanity live in abject poverty. There are going to be some profound challenges brought about because of this coming together or rich and poor – whether we find the systems and the techniques and the modes and the ways of negotiating that preserve peace; whether we address the pandemic of AIDS, where what will happen in Africa, even if we were as effective as anybody could hope we would be, will be three times as bad as what has already happened; and where what happened in Asia will be substantially worse than what happens in Africa. Whether we succeed in a world where a third of the people on this planet cannot read.

Now, those are challenges for leaders of our society to meet. Those are public challenges. Those are challenges that are going to be met by people who want to make a contribution to society and who aren’t going to be seeking to maximize the size of the house they’re able to buy over their lifetime. Because the people who are working on those challenges are not in our society going to be the people who are able to live in the biggest houses. And the question for American universities, the question for universities everywhere is, because the people who address those problems aren’t going to be the people who make the largest charitable contributions – is that the reason why the people who choose to go into those fields should get the least financial aid; should go to campuses that have the weakest facilities; should have faculty who are paid the lowest salaries? Or should a university like this one, as part of becoming the university that it can be, find ways to make sure that we are, in every way we can, meeting those challenges of public service?

The final thing I want to just say a word about is something that I think will make it possible for us to do these things; make it possible for us to provide a stronger undergraduate experience with more faculty; make it possible for us to meet the challenges of what’s going on in the sciences; make it possible to build our strength in profound ways across the whole university. And that’s the remarkable opportunity that this university has almost uniquely among major American universities, which is the opportunity for very substantial physical expansion in an urban setting. A quarter century from now, there will be four Harvard Yards’ worth of academic space in Allston. The decisions about whom we admit as students will shape Harvard five years from now. The decisions about whom we hire as faculty will shape Harvard 15 years from now. The decisions about what basic forms of organization and structure we have at Harvard will shape Harvard a quarter century from now. The decisions about what we do in Allston will say something about what Harvard is a century from now. It is a profoundly important set of choices for us. Many, many people are engaged in planning along various scenarios. As many of you have heard, there are alternative visions, some that emphasize bringing professional schools together, some that emphasize responding to the opportunity in the sciences. I don’t know what the right choices will be. I do know that it’s much more important to choose wisely than to choose rapidly. And I do know that this is a remarkable gift that we have been given, the opportunity to basically build a new campus, aligned with the campus we already have, to meet the very large challenges that lie ahead for our university.