President Bacow on Harvard in the Months Ahead
On an afternoon when he might have been expected to take a year-end victory lap on behalf of Harvard—students had a successful semester of in-person learning, faculty members conducted their research—President Lawrence S. Bacow found himself issuing the latest set of reminders and warnings about the continuing coronavirus pandemic. Shortly after an exam-week interview on December 16, he and his senior COVID leadership team emailed the community to advise that:
•vaccine boosters will be required for the spring semester;
•the Omicron variant was likely already circulating within the community (which reported 178 new cases during the week ended December 14, up nearly fourfold from an average of 52 during the fall semester); and
•University coronavirus workplace policies in place since March 2020 (emergency excused absences, flexible use of sick time, dependent well care) will be extended through April 1.
Acknowledging that the pandemic had overshadowed life for “going on two years, it’s hard to believe,” since Harvard scientists began working on the virus in January 2020, Bacow remained very much in keeping with his pragmatic, unflustered character. “Just when you think you can focus on something else,” he continued, “the virus rears its ugly head”—and had begun to force peer institutions, like Cornell and Princeton, to curtail campus activities and move to online exams. Through the end of the term, Harvard at least managed to stay the course, urging community members to behave carefully (minimizing contacts, masking, maintaining distance, and following their required virus-testing schedule) to stave off more drastic actions. Doing so safely has been important not only to protect health but also, he noted, because “Everybody’s tired, we all have data on the impact this is having on student mental health,” and on faculty and staff members’ sense of well-being.
As he has said throughout the crisis, Bacow observed, “All plans are subject to change.” [And how: on December 18, just two days later, the president and Harvard’s other senior pandemic leaders advised the community that January-term activities would move to remote operations, a step aimed at minimizing the COVID-19 case surge then building, as a precautionary measure meant to enable in-person activity to resume when spring-term classes are scheduled to resume, on Monday, January 24. By December 22, Yale had decided to delay spring classes a week, until January 25—and then to begin with remote instruction until February 5. And on December 30, bowing to the inevitable, Harvard Athletics announced that public spectators would be kept from attending events scheduled through January 23.] Despite the depth of Harvard scientists’ expertise and their role in advising on University responses, he said, “My crystal ball is no better than yours.” Community members are overwhelmingly vaccinated, but given the contagiousness of the Omicron variant and the possible waning of immunity, boosters are obviously warranted. From a lay perspective, he continued, “We’re sort of in an interesting race against time.” Omicron may spread widely, even among vaccinated individuals, but it may, or may not, cause severe effects. (If it is not as dangerous as the Delta variant, the effect might be immunization by universal infection—the vaunted “herd immunity”—rather than by vaccination, which has stalled out in much of the United States. And the longer the virus spreads, the more it has opportunities to mutate—possibly becoming more dangerous.
In light of the uncertainties, Bacow said, “I wish I could tell you what the spring term will bring.” For now, the College plans winter and spring sports and a late-April Visitas weekend for admitted applicants who are making their final decisions on where to enroll. The Arts First celebration is on the schedule. Harvard is preparing a full, in-person Commencement on May 26, and make-up Commencement events for the pandemic-afflicted classes of 2020 and 2021 the following weekend. And so on—but everyone will have to stay attuned to evolving public-health conditions.
In light of everything, Bacow said, “I’m really proud of how the whole institution has responded to this.” Mistakes were no doubt made, but in general, he said, the community had adapted well. In some cases, decisions made in the moment have had beneficial, if unintended, effects. For instance, Harvard’s decision not to lay off idled service workers, to spare them severe economic disruption at a time of health crisis, has paid an unexpected dividend: with campus operations resumed, Harvard is essentially fully staffed; other institutions that did lay off service staff members are now struggling, in the tight labor market, to operate dining halls and other essential services. That was luck, rather than prescience, he conceded, but “it turned out to be very important to our ability to function.”
Academically, he said, Harvard has stayed the course successfully, with students learning and faculty members teaching online before returning to in-person operations this past fall semester, research operations resumed beginning in mid 2020, and progress on significant University priorities:
•the quantum science and engineering initiative, for which he said upward of $100 million had been raised;
•research on artificial intelligence and neuroscience, underwritten to the tune of $500 million by the Chan Zuckerberg Initiative;
•work on inequality and on climate change; and
“In the face of all this stuff,” Bacow said of the pandemic (and perhaps other challenges, like the related economic upheaval, and the unsettled political situation in the United States and around the world), “good work continues to be done” consistent with the University’s academic mission.
That mission expanded geographically as the new engineering and applied sciences facilities in Allston were animated by the return of students this past fall. Nearby, plans are advancing for the new home for the American Repertory Theater and the commercial enterprise research campus (including a University-funded, -owned, and -operated conference center), and in turn commercial development unrelated to Harvard is booming. The Allston campus, Bacow said, is no longer “somewhere over there.” Given the teaching and research presence, “It’s real now,” he continued, and “only going to become more real over the next two years.”
At the same time, work on important issues arising from the past has advanced, too. In recent weeks, the Faculty of Arts and Sciences (FAS) discussed a comprehensive report on visual culture and signage, part of its equality initiative. The University has received its report on criteria for reconsidering the names conferred on buildings, professorships, and programs. And the initiative on Harvard’s ties to slavery, led by Radcliffe Institute dean Tomiko Brown-Nagin (profiled here), is progressing toward issuing its findings this spring.
The Endowment and Harvard’s Economics
Turning to other matters, the president was asked about how Harvard might respond to the historic endowment returns reported this past October. In light of the 33.6 percent investment return, and $11.3-billion gain in the endowment’s value, was the Corporation considering any special distribution to the faculties?
Bacow said that rather than reacting in the short term, the Corporation would retain a “collar” on endowment distributions. The normal distribution formula (which smooths large gains and losses, buffering budgets from market volatility), he said, would yield an 8 percent increase in the distribution right away: an increase of about $200 million in spendable funds from the current level (accounting for gifts and other sources of endowment growth; the distribution was essentially unchanged during the pandemic fiscal year ended June 30, 2021, squeezing budgets). But the collar would limit the increase in the distribution—the largest source of funds for University and school budgets—to a more sustainable 4.5 percent annual rate over a number of years.
That assumption is predicated on the reported gains persisting, of course; many of the reported gains are unrealized, and as Bacow noted from his experience at MIT, it enjoyed superb results one year, only to see the endowment’s value decimated in the subsequent “dot-com” market meltdown. “The market giveth and the market taketh away,” he noted.
Beyond the possible undesirable effects of schools and operating units assuming an outsized distribution (that 8 percent growth) might be the new normal, and building in fixed costs they could not sustain, he emphasized that more modest, but likely more sustainable, increases in the endowment distribution would promote better academic planning in the long term. He said the deans, whose school-level plans are critical to Harvard’s academic ambitions, given the institution’s decentralized structure, are hard at work considering what they might do with the increased funds. At the same time, he said, the central administration is examining things it might have to do, such as addressing the renewal of the two River Houses (Eliot and Kirkland) that have not yet been renovated per FAS’s extensive, but debt-burdened, construction plan.
When Harvard Management Company (HMC) reported its results, returns, though robust, were lower than those of peer institutions. Some of the variance is historical: other institutions invested in venture-capital pools assembled a decade ago that are yielding spectacular results now, but Harvard did not participate, as it recovered from the financial crisis and the severe losses the endowment suffered then. But another factor is at work, too: in response to that adversity, Harvard has adopted a more cautious appetite for investment risk. HMC and the University have explored what level of investment risk might be appropriate for the endowment now and in the future, and the Corporation has taken up the discussion, Bacow indicated. “We know where we are going directionally,” he said, suggesting that perhaps some changes are being considered or adopted. But if so, that “doesn’t and should not occur in ways people would notice immediately” (or that are likely to be disclosed in a way that would telegraph HMC’s investment policies or shifts in strategy).
For now, he said, after a long period of instability in HMC’s management and a structural disadvantage in competing for talented investment professionals (HMC managed all its funds internally for several decades), the organization has the right people, processes, structure, and incentives to succeed on Harvard’s behalf for the long term. Given the discussions between HMC and the strengthened University financial-management team and disciplines, he said, “We are managing risk more prudently than we were in the past,” and have buttressed Harvard’s position in terms of cash management, credit management, and other critical metrics.
Asked for his perspective on FAS’s ambitious strategic-planning effort, Bacow said, “I give [Dean] Claudine [Gay] huge props for having engaged the faculty in the way she has. Drawing on some of the amusing, but vivid, advice he has given other university leaders and deans, he said, “I always tell people to try to make your problems other people’s problems”—that is, to engage constituents in the hard work of identifying opportunities and overcoming challenges. (Many academic leaders can no doubt tell stories about how willing faculty members are to make their problems other people’s problems—especially including deans and presidents.) Gay, he said, had done so in pandemic planning, and was now earning faculty colleagues’ goodwill by inviting them to peek under the hood at FAS’s finances and operations and join in the work of reshaping it for the future.
No doubt faculty members’ perspectives on any potential changes will differ. “Younger faculty,” Bacow said, drawing on his economics training, “have different discount rates than do very, very senior faculty—they have a greater interest in the future than those of us who have been around for a very long time.” Even though FAS has benefited from the recent appreciation in the endowment (on which it currently depends for more than half its operating income), he said, it has long-term structural issues it must address: the work Gay has undertaken.
Turning to climate change, Bacow said he couldn’t be more pleased that the position of vice provost for climate and sustainability had been created, and that environmental economist James Stock had accepted the position. “We didn’t have anybody at the center for whom [these issues] occupied 100 percent of their mind share,” he said. In Stock, he continued, Harvard had entrusted the work to a scholar of the field who has both internal and external institutional experience (as department chair and as a senior environmental and economic adviser in the White House), and who is energetically committed to “what it takes to get something done.” Stock has been on an extensive listening tour within Harvard, and has begun meeting with donors who will support work in the field, Bacow indicated. Stay tuned.
At the level of governance, Harvard faces a significant change this spring, when William F. Lee, senior fellow of the Corporation, concludes his service. The first term-limited rotation of a senior fellow and election of a successor—from Robert Reischauer to Lee—worked smoothly, and Bacow said there are “excellent potential senior fellow” candidates on the Corporation now.
Lee has been a powerful leader, ranging from matters internal (he paired Corporation members with deans on an annually rotating basis, enhancing the governing board members’ understanding of the schools and the deans’ connection to the Corporation) to external (he served as counsel in the University’s defense of its admissions policies in the Students for Fair Admissions litigation, which may be heard by the Supreme Court). Bacow praised him as a highly valuable “thought partner,” and joked that “I wouldn’t be having this conversation…apart from Bill”—given Lee’s role, during the last presidential search, in persuading Bacow, then a Corporation and search-committee member, to become a candidate himself. (In the normal course of a senior fellow’s service, presumably during the second of her or his two six-year Corporation terms, and the usual course of modern university presidencies, the new senior fellow elected this spring may be in the position of leading Harvard’s next presidential search, so the community will be interested in who is elected.)
Such weighty issues aside, if the spring semester proceeds normally, there is a reward at the end. Bacow said that the University expects more College graduates than professional-school alumni from the classes of 2020 and 2021 to attend the special May ceremony, but there is plenty of room to accommodate all takers. And, he said, “terrific speakers” are lined up for both May 26 and the following weekend—look for announcements in late winter or early spring.
It would obviously come as a great relief, and joy, to the president and the community he leads if Harvard gets to that point with nothing more to worry about than whether the weather is clement on Commencement day.