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Guilded Colleges

Blutarskyb

from The New York Times, Stop Universities From Hoarding Money by Victor Fleischer

excerpt

SAN DIEGO — WHO do you think received more cash from Yale’s endowment last year: Yale students, or the private equity fund managers hired to invest the university’s money?

It’s not even close.

Last year, Yale paid about $480 million to private equity fund managers as compensation — about $137 million in annual management fees, and another $343 million in performance fees, also known as carried interest — to manage about $8 billion, one-third of Yale’s endowment.

In contrast, of the $1 billion the endowment contributed to the university’s operating budget, only $170 million was earmarked for tuition assistance, fellowships and prizes. Private equity fund managers also received more than students at four other endowments I researched:Harvard, the University of Texas, Stanford and Princeton.

Endowments are exempt from corporate income tax because universities support the advancement and dissemination of knowledge. But instead of holding down tuition or expanding faculty research, endowments are hoarding money. Private foundations are required to spend at least 5 percent of assets each year. Similarly, we should require universities to spend at least 8 percent of their endowments each year.

Despite the success of its endowment, in 2014 Yale charged its students $291 million, net of scholarships, for tuition, room and board.

In 2012, Harvard spent about $242 million from its endowment on tuition assistance; in 2014, it paid $362 million in private-equity fees, and nearly $1 billion in total investment management fees.

Smaller institutions aren’t any better. The University of San Diego, where I teach, spent about $2 million from the endowment on tuition assistance in 2012, compared with $5 million in private-equity fees in 2014 and $13 million in overall investment management fees.

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Why Intellectuals Hate Capitalism

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Commerce Between Consenting Adults

Uber A

from Uber Crashes the Democratic Party by William McGurn in The Wall Street Journal (gated):

 Marco Rubio, who last year sided with Uber over regulators in Miami, accused Mrs. Clinton of trying to “regulate 21st-century industries with 20th-century ideas.” Jeb Bush pointedly traveled by Uber for his visit to Thumbtack, a Silicon Valley startup. Meanwhile, Rand Paul says he would like our government to adopt the Uber model—more information and customer ratings—while Ted Cruz says his campaign will be as disruptive of politics-as-usual as Uber is of old business models.

Perhaps even more important, innovation by its nature challenges the inner-Elizabeth Warren in so much of today’s Democratic Party. However open Democrats may be to revolutionary new definitions of marriage, the thought that there might be some nonsexual for-profit contracts between consenting adults keeps progressives up at night. So when a business like Uber’s prospers because its model doesn’t quite fit the established regulatory categories, the Democratic response is almost always to try to pound these new square pegs into the government’s old round holes.

But is Uber co-founder Travis Kalanick any different? Even as he struggles with regulators taking aim at his business model, Mr. Kalanick has spoken up in favor of ObamaCare. During a visit to New York last November, he enthused that ObamaCare was “huge” for companies like his, on the grounds that the individual market has democratized benefits such as health care.

That’s true insofar as it means he doesn’t have to provide it for his drivers. But the reality is that ObamaCare is to health what taxi commissions are to transportation. And if Uber’s co-founder can’t see the difference, maybe he deserves the Bill de Blasios and Hillary Clintons coming after him.

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Mysteriously Unexploited Opportunities

from Cafe Hayek Don Boudreaux writes An Intellectual Identifies Yet Another Mysteriously Unexploited Profit Opportunity

Excerpt:

I believe that I’ve put my finger on what ails the American economy!  The people who possess the information, insight, wisdom, and vision to identify profit opportunities are people who lack the interest and practical skills necessary to exploit these opportunities, while the people with the interest and skills necessary to exploit profit opportunities are people not only themselves singularly lacking the information, insight, wisdom, and vision to identify profit opportunities, but who are also too stupid to heed the investment and other business tips forever being dispensed to them by the likes of James Surowiecki and other intellectuals who do know where such opportunities are.  It’s a damn shame that those who most clearly see profit opportunities either will not or cannot take advantage of them, while those who are eager and able to take advantage of such opportunities remain incurably blind to them.  Perhaps business people should spend more time reading the likes of the New Yorker and the New York Times, as well as attending seminars at prestigious universities.

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Uberal Opportunities

From the Washington Post The future of new business is disrupting old business by Barry Ritholtz

excerpts:

There are many lessons to be learned from Uber, the taxi- ­ and car-hailing start-up that came out of nowhere and is valued at $41 billion. Less than three years ago, Uber had zero drivers. Now it has more than 160,000 active drivers who have collected $656.8 million in fares (net of what they pay Uber).

Among the lessons, some point to the rise of the sharing economy, which also includes firms such as Airbnb, Snapgoods, RelayRides, TaskRabbit and Lending Club. Others talk about the “on-demand economy,” which creates a new class of labor that straddles the line between being self-employment and working for a firm.

I prefer a Big Picture view to get the proper perspective on these start-ups. From 30,000 feet, we see what all of these newcomers have in common: They attack an existing market dominated by entrenched incumbents that are inefficient, expensive or both.

What other industries are ripe for disruption? All of the following have some form of restriction which limits supply and reduces competition, thereby keeping prices high even when providing poor service.

Credit transactions: How is it that every time a consumer uses a credit card, the retailer pays a 3 percent (or more) transaction fee to credit-card companies? Most of the new transaction processors — whether it’s Apple Pay, Square or PayPal — still process the back end through the major credit-card firms. This area is long overdue for a new competitor that will be cheaper to the retailer (and, therefore, to the consumer) and more convenient to the shopper.

 Mortgages: The way we finance homes in this country is slow, filled with middlemen, who run a nonstandardized evaluation process. This makes financing a home cumbersome and difficult. Whoever figures out how to replace this inefficient process stands to make a fortune in residential real estate. The same is true for commercial loans.

read the article fro the rest  of the list.