Thu 17 Apr 2008
I had breakfast yesterday with a rich Eph who was then off to have lunch with Chief Investment Officer Collete Chilton. The conversation reminded me that, instead of just whining and complaining, I ought to make some substantive suggestions for the management of the endowment. So, how about an Eph Combinator?
Background: Paul Graham founded Y Combinator three years ago. Start here for an introduction. Let’s steal his genius idea, but in a Williams context.
So it’s not surprising to me that the Y Combinator model is being adopted and adapted by others. Last summer my friend Brad Feld helped sponsor TechStars in Boulder Colorado and a number of interesting startups have come out of that program.
I was at a meeting recently where a University was considering starting a venture fund to back companies coming out of their school. I encouraged them to look at the Y Combinator model for inspiration and suggested that they back 10 teams at $25k each instead of one team at $250k. Two reasons. First it’s hard to know who will get it right, by backing 10 opportunities instead of one, you vastly increase your chances of success. And second, you can get a lot done on $25k now, particularly if you back young software engineers right out of school (or even in school) who can live for at least six months on $25k.
This stuff is transformative.
Indeed. Basic idea is to fund 5 or so sets of Williams students in the class of 2008 who want to create a start-up. (Recent alums would also be welcome.) Give them enough money to live on for six months in exchange for equity. Plug them into the Williams network, starting with Village Ventures. Have the teams live in Williamstown, all the better to encourage them to focus on their work and continue bonding with Williams as an institution. After 6 months, set them free. If they have built something even vaguely interesting, they will be able to get some more funding, move to a big city and away they go.
This idea (stolen completely from Graham, see his essays for more details) is a win for everyone. The student founders are much better off working for a start-up then being a drone in some larger organization. The endowment probably makes money on the investments. (This is the main reason why others are trying to copy the plan.) The Williamstown community is invigorated with small business formation. Even academic departments like Economics and Computer Science have a chance to become more directly connected to the outside world.
In fact, I am sure that there are alums who would write a check tomorrow to fund the first year or two, either as a gift to the College or as a split-the-profits deal.
Would someone like Collette Chilton ever go for this? Not in a million years. (This is one prediction that I hope to be very wrong about.) She does not live in Williamstown. She does not care that much about Williams. She does not know the names of more than a handful of undergraduates.
The larger picture is that Williams as an institution has two goals when it comes to wealth. First, it needs to turn its $2 billion dollars into $10 billion dollars over the next 20 years or so. Not as easy as it sounds! The best place to put the marginal investment dollar is probably in the human capital of its graduates. Second, Williams wants to take care of (future) wealthy Ephs now so that those Ephs become big donors 20 or 30 years in the future. Funding them at the age of 22 is a great way to earn their loyalty.
April 17th, 2008 at 10:22 am
A nit: don’t call it “Eph Combinator”! Graham’s name is clever pun, Y being one of the fundamental recursion combinators in lambda calculus (λ f. (λx. f (x x)) (λx. f (x x))).
While we’re on this geeky topic: if KCM really wanted clever interns, you’d be asking for Lisp / Haskell / OCaml hackers, not Perl monkeys. (Jane Street Capital and DE Shaw, to some extent, use this recruiting strategy and it seems to be working for them AFAIK.)
April 17th, 2008 at 10:44 am
I love this idea so much I can barely think straight. You could put the businesses in North Adams if you needed more/cheaper space, too.
April 17th, 2008 at 11:01 am
I actually read through this piece thinking it was an interesting idea that for once didn’t have your bizarre editorializing about the private motivations of people you have no idea about, until the quote above.
She doesn’t care about Williams? I’m unsure what you’re basing that on, or what it has to do with anything in your post. Additionally, not living in Williamstown has little to nothing to do with whether or not this makes sense for Williams. And knowing the names of undergraduates seems far less important than knowing the names of graduates involved in finance or willing to give buckets of money…or am I confused as to what her office does? Is it suddenly an academic position or invovled in student life? If the test for Williams involvement is knowing undergraduates, than most of the trustees (for whom knowledge of students IS relevant) would fail. This leads into my confusion about why you think it is inapproriate that the office is not in Williamstown.
I read a couple of the old posts on Chilton that you linked, and wanted to say that I actually met a recent alum a few weeks ago at an alumni event in Boston who works at the investment office. She seemed extremely happy to be working there, and maybe wouldn’t have taken the position if it were in Williamstown. I hate to tell you, but most Ephs are happy to stretch their legs a bit and spend time in a larger city after they graduate. If we want to encourage Ephs to work in the office, the Boston location might make more sense.
You can be a supporter of Williams from far, far away and still have strong connections to the college (see the participants in ephblog for evidence of this).
April 17th, 2008 at 11:32 am
I like the idea of a college investing in its students as long as it involves a variety of endeavors…which is probably where the real complications begin; determining who gets what, and why. Talk about a can of worms…
Also, I agree with JG in that by the end of four years, it’s time to break away…fly the coop.
April 17th, 2008 at 11:42 am
1) Chilton had, at the time of her hiring, no meaningful connection to Williams. She would have just as well taken the same job at Amherst or Wellesley. If those schools tried to hire her, she is just as likely to love as to say. This lack of an emotional connection (with students, faculty and staff) makes it less likely that she will, like Ben Fleming, recognize what a great idea this is.
2) FM, Williams should only make profitable investments, whether in its students or elsewhere. I am not sure what you mean by “variety of endeavors” but I suspect that I would be against devoting College endowment money to any of them.
3) JG writes:
Of course it does. For this to work, someone needs to play the role of Paul Graham, the one selecting and supervising the investments. That would be a natural role for the CIO. Indeed, I am not sure that I would entrust it to anyone else. Moreover, a CIO who lived in Williamstown would know the students. She would have a real edge in deciding who to back and who not to. She would have a personal relationship with college faculty that would inform her judgments.
April 17th, 2008 at 1:04 pm
David -
There is nothing stopping you from setting this program up on your own, succeeding at it, and bringing it to the endowment as a successful program except, I guess that you’d have to move to Williamstown, by your analysis.
April 17th, 2008 at 1:22 pm
You morons - this program, if implememted, is fraught with great potential for claims against the College by students whose proposed business endeavors have been disfavored and by alumni who believe that the College has invested its resources negligently - altogether a recipe for major troublesome frictions and possible legal liability.
April 17th, 2008 at 1:31 pm
Actually David, your argument is why the program should be directly managed from Williamstown. I asked why Chilton couldn’t make the decision about supporting such a program from outside of Williamstown.
You jump nicely from there to saying that Chilton wouldn’t approve the program because of your supposition, but the two are not necessarily tied together. If you truly think this is a worthwhile project and try to pursue it with the powers that be at Williams, I’d hope you’d be just a *smidge more open minded about how the program could be managed and avoid calling into question the loyalty of those making the decisions.
An all of us started out with no “meaningful” Williams connection at some point, but managed to form one over time. It is possible that, after having enough respect for the insitution to apply for and accept a job, she has developed a connection to the school. Just maybe. She could have accepted jobs at other schools, but she didn’t. She might have turned down offers from other schools - you don’t know.
April 17th, 2008 at 1:38 pm
Frank,
Exactly what I meant by “can of worms” and determining who and what.
But of course, that is before I knew that David knows how to guarantee a ‘profitable’ investment, no matter what.
David, as far as ‘endeavors’ in which to invest?
That would be the least of where you and I differ. You would be aghast at some of the choices I have made over the years…and further aghast out how they have panned out.
April 17th, 2008 at 1:43 pm
1) Without the active involvement of the College, it would be almost impossible to create such a program on my own.
2) JG wrote:
First, my main objection to the whole Boston-based stuff was always the dishonesty displayed by the College in asserting that this was necessary. If the College had just said, “Chilton is the best candidate. She wants to live in Boston. And that’s that,” I would have had many fewer complaints.
Second, I agree with JG (other post) that I should be open-minded on where the program is located. Graham (see his essays for more details) insists that the start-ups all move to the same location with him for the initial six months. So, I would do the same. If Chilton started this program and had everyone move to Boston, that would be OK with me. It is much better to have the program than not to have it, whether it be in Williamstown or Boston, though I still think that the former would be better.
Third, the city-preferences of 23 year-olds in the investment office are irrelevant to where that office should be located. If Chilton can produce Swensen-like results, than the College should locate the office wherever she wants. But the best way to mimic Yale’s returns is to mimic Yale’s process. Hire someone who bleeds purple and who will, obviously, want to live in the College community, teach undergraduates and so on.
April 17th, 2008 at 2:04 pm
Not duplicating, but innovatively creating a variant.
P.S. Does someone we know wish he had Chilton’s job? Just wondering …
April 17th, 2008 at 4:07 pm
“Altogether a recipe for major troublesome frictions and possible legal liability.”
And what, isn’t nowdays?
April 17th, 2008 at 6:04 pm
Agree that the program would still have tons of value if it were sited in Boston. That would be pretty cool in its own way, as long as space could be found to house x start-ups in the same place; a little Eph warren of entrepreneurs.
The college would get more bang for its buck locally, of course, both in terms of how many people can be housed and supported and the economic impact of keeping potential businesses around. But it shouldn’t be a dealbreaker. Assuming anyone would ever be interested in this in the first place.