Why John Paulson Is Right To Give Harvard $400 Million

In the time-honored category of “no good deed goes unpunished,” hedge fund billionaire John Paulson is being criticized for endowing a new school of engineering at Harvard with a $400 million gift. It's the largest in Harvard history. It's a bit hard to believe that such a gift would be criticized, in light of the well-established need for U.S. engineering talent and the central role technology is playing in economic growth. But such experts as the New Yorker's Malcolm Gladwell –an engaging and original writer, to be sure, but whose basis for expertise on the ethics of philanthropy is unclear—chimed in thusly: “It came down to helping the poor or giving the world's richest university $400 million it doesn't need. Wise choice, John!” Gladwell, and other critics of philanthropy that doesn't go directly to the immediate alleviation of need (such as Peter Singer, who urges the focusing on charitable giving on the developing world), are wrong in any number of ways

To observe that a gift intended to nurture engineering talent comes at the expense of improving the prospects of the poor is a self-evidently false choice. Does cellphone technology help only the rich? The poor of Kenya—who are now linked to the larger world economy through mobile devices—might beg to differ. So might the fisherman of Kerala (India), who now call ahead to get the best price for their catch, rather than having it go to waste. Not to mention the improvements in world food supply made possible by the advent of drip irrigation—or any number of medical devices which marry science and engineering. Stanford's breakthrough research on the mapping of the human genome helped make possible a breathtaking world of new cures—which will not be reserved for the rich. Should Stanford convert its endowment to a food bank instead?

Gladwell's pot shot at Harvard is of a piece with criticism that so-called wealthy, established institutions have enough money—and should actually be disbursing more of their endowment income on such goals as tuition reduction. Of course, the fact is that Ivy League schools already admit on a “need-blind” basis (not that they don't charge the middle-class plenty). But, more important, such endowments should not be viewed as what some criticism call “storehoused” capital, or even “dead money”. Far better to call this patient money—directed by institutions with a demonstrated capacity to organize productive activity. This is no easy matter and should not be taken for granted. It is crucial, moreover, for such undertakings to be decentralized–not only government-led.

Paulson has previously made clear his understanding of the prudence of supporting effective institutions that have been around—and will likely stay around. His $100 million gift to the private Central Park Conservancy was criticized as being insensitive to the park maintenance needs of New York's poorer neighborhoods—criticism, like that of his Harvard gift, which missed the point. Not only does Central Park serve all income classes but that the Conservancy has shaped a model of how urban parks are best maintained.

Finally, it's well worth pointing out that American philanthropy does not ignore so-called human needs. Giving USA, the definitive report tracking American charitable giving, reports that in 2013, U.S. donors gave no less than $41 billion for “human services”. One must always keep in mind, moreover, that, in the welfare state era, philanthropists, like most Americans, understand the relief of immediate distress to be a core role for government. Indeed, the nation's most important anti-hunger effort is the Supplemental Nutritional Assistance Program (food stamps), on which the federal government spent more than $70 billion in 2014. Needless to say, much of that tax money came from the pocketbooks of the same wealthy Americans who give disproportionately to charity.

Rather than focusing on immedite needs, philanthropy should be infused with imagination, seeking and supporting original ideas and approaches. So it was with Andrew Carnegie's support for public libraries and the Ford Foundation's support for agriculture's “green revolution”. And so it is with John Paulson's eminently defensible gift to Harvard.

This piece originally appeared in Forbes.com.

This piece originally appeared in Forbes.com