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2016: Why don't philanthropists found new colleges to reduce the cost of education?
AUDIENCE MEMBER: Hi Warren. Hi Charlie.
WARREN BUFFETT: Hi.
AUDIENCE MEMBER: I’m Ken Martin. I’m an MBA student from the Tuck School at Dartmouth.
My question is about college tuition and the problem of rising student debt balances.
In the past, prominent philanthropists have founded institutions that are now prominent research universities in our country. Why is this not a bigger part of today’s philanthropic debate, the founding of new colleges? Would not new supply in higher education be at least part of the solution to this problem?
WARREN BUFFETT: Charlie, you want to tackle that one? You’re more of an expert than I am.
CHARLIE MUNGER: Yeah. I think that if you expect a lot of efficiency — financial efficiency — in American higher education, you’re howling at the wind. (Laughter and applause)
WARREN BUFFETT: Well. I think he’s also talking about just more philanthropy to deliver there. Am I right?
Want to give him the light back on there?
AUDIENCE MEMBER: Yeah, that’s right.
CHARLIE MUNGER: What’s the question again?
WARREN BUFFETT: The question about is — maybe — whether more philanthropy ought to be devoted to that relatively because of the cost. But —
CHARLIE MUNGER: Well, I do a lot more than Warren does in this field — (laughs) — and I am frequently disappointed but — (Laughter)
Monopoly has kind of — and bureaucracy — have kind of pernicious effects everywhere, and the universities aren’t exempted from it.
But of course, they are the glory of civilization, and if people want to give more to it, why, I’m all for it.
WARREN BUFFETT: Yeah, it — you know, you’ve got the option of very good state schools and — we spend a lot of money on education in this country.
You know, if you just take — you take kindergarten through twelve, it’s interesting. People talk about entitlements in this country. They say it’s terrible we have all these entitlements for Social Security and everything.
We have entitlements for the young. We spend $600 billion a year educating 50 million kids in the public schools between kindergarten and twelfth grade, and just think what that is as an entitlement.
Nobody ever seems to bring that up. But it’s a huge — and I believe in it, obviously, but — you know, the people in their working ages, generally speaking, I think have an — in a rich society — have an obligation to both the young and the old.
And based on the amount we spend, if we have problems with our school system it’s not because we’re cheap. No, there are other problems that contribute to it. In terms of the money we put out, we’re right up there. (Applause)
But I was the trustee of a college that saw the endowment go from $8 million to over a billion. And I didn’t see the tuition come down. And I didn’t see the number of students go up.
CHARLIE MUNGER: Nothing went up, except the professors’ salaries.
WARREN BUFFETT: Yeah. From 8 million to a billion. I mean — and very, very decent people running the place.
But when you read the figures on endowment of the big schools, you know, and some of them have really got up in the big numbers, the main objective of the people running the endowment is to have the endowment grow larger. And that will be ever thus. That is the way humans operate.
You have any more comments on that, Charlie? You’ve seen a lot.
CHARLIE MUNGER: I’ve made all the enemies I can afford at the moment.
WARREN BUFFETT: OK. (Laughter.)
That’s never slowed him down in the past. (Laughter)