Monthly Archives: May 2014

Without Subsidies, FCS Public HBCU Athletics Losing $130 Million Annually


Humility is a virtue all preach, none practice, and yet everybody is content to hear.  — John Selden

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I needed a word to describe this internal report. The word I ended up settling on was hypovolemic. Healthline.com defines the condition as “Hypovolemic shock, also called hemorrhagic shock, is a life-threatening condition that results when you lose more than 20 percent (one-fifth) of your body’s blood or fluid supply. This severe fluid loss makes it impossible for the heart to pump sufficient blood to your body. Hypovolemic shock can cause many of your organs to fail. The condition requires immediate emergency medical attention in order to survive.” There might not be a better description of the findings of our internal HBCU Money study using NCAA provided data, we were able to get a startling and disturbing look at the athletic departments of public HBCUs athletic departments and their dependency on subsidies. Subsidies reported are a mixture of institutional support, government support, and student fees. Hopefully, this will spark some real conversation and give new light to the debate about whether or not HBCUs as a whole have the means to be athletically competitive long-term or is this a case of poor use of resources that is impairing the overall health of these universities and its students financial health long after they have left their hallowed grounds.

BREAKDOWN BY THE NUMBERS*:

REVENUES

Total: $177.0 million

Median: $7.9 million

Average: $8.0 million

EXPENSES

Total: $178.7 million

Median: $7.9 million

Average: $8.1 million

PROFIT/LOSS

Total: $-1.9 million

Median: $0

Average: $-79 827

SUBSIDY

Total: $126.9 million

Median: $5.5 million

Average: $5.8 million

WITHOUT SUBSIDY PROFIT/LOSS

Total: $-128.6 million

Median:$-5.8 million

Average: $-5.8 million

SUBSIDY % OF REVENUE

Total: 71.7%

Median: 75.0%

Average: 70.9%

*Chicago State University was included in our report of FCS public HBCUs. Considered an HBCU by HBCU Endowment Foundation, the school is a member of WAC, but athletic budget in line with its HBCU brethren.

According to USA Today, “Just 23 of 228 athletics departments at NCAA Division I public schools generated enough money on their own to cover their expenses in 2012. All 23 of the self-sufficient schools are from conferences whose champions automatically qualify for the Bowl Championship Series, which makes sense because that’s where the money is.” That is where the money is. Again, that is where the money is. The FCS public HBCU doing the “best” without a subsidy is Mississippi Valley State University, with a deficit of $2.4 million. In last place, Delaware State University with an egregious $10.5 million deficit without subsidies. With subsidies the most profitable team is Morgan State University at almost $475 000 in the profit column. Florida A&M, as has been reported recently, even with subsidies still manages to run an almost $1.1 million deficit. The report shows that in order for FCS public HBCUs to be able to operate without a subsidy and still produce the $177 million in revenue annually, they would need to set up an endowment of $3 billion. Greater than the sum all HBCUs, public and private, have in their endowment coffers combined. If alumni wanted a number that it would take to make HBCUs athletically competitive this would be it. However, remember this is only for public FCS HBCUs.

I continue to question the strategic investment many HBCUs on this list are currently putting into athletics and not research development or general scholarship. It is not hard to imagine that had FCS private HBCUs been included in the report, these numbers are even more frightening. The FCS public HBCU athletic budgets to research budget ratio approaches 80 percent. Essentially, we are spending $0.80 on athletics for every $1.00 we spend on research. This is unfortunate since all HBCUs do not even breach $500 million combined annually in research. For perspective since we always love to say “well the HWCUs are doing it”, we took a basket of 9 flagship HWCUs in their state and compared their ratio. The schools were University of Alabama, Florida, Georgia, Maryland, Michigan, Mississippi, Texas, LSU, and Ohio State. Combined their athletic budgets are $963.2 million, but their research budgets are a combined $6.8 billion or athletics gets $0.14 for every $1.00 research gets.

Too often HBCU alum and students are being sold a fairy tale of the investment in athletics without actually ever seeing numbers and data to support it. We are asked to just have “faith” that our leadership is doing the right thing. This while schools like Jackson State University and Prairie View A&M University are pining to spend $200 million and $60 million, respectively, on athletic complexes. I have been impressed with Paul Quinn and Spelman College’s decision making to use the athletic funds more strategically, which in the long run will have a major benefit on their institutions health. I love athletics as much as the next HBCUer, but I do not love seeing 90 percent of HBCU graduates finishing with debt to subsidize programs that are nowhere near capable of sustaining themselves. Especially when African Americans are struggling to close the wealth gap. If HBCUs believe they are part of the African American ecosystem and not independent of it, then there will be stronger considerations of how we use resources to maximize our ability to close gaps. Remember, the blood loss from hypovolemic shock eventually will cause ALL organs to fail.

 

 

2014′s 25 Highest Paid Hedge Fund Managers – No African Americans, Again


Wealth will set us fucking free, okay? ‘Cause wealth is empowering, wealth can uplift communities from poverty, okay? – Chris Rock

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On May 6th, Institutional Investors’ released its 13th annual ‘Rich List’ highlighting the top 25 earning hedge fund managers. The 2014 list saw a combined earnings of $21 billion, an increase of 50 percent from the prior year, but still comes in as only the fourth highest total in the list 13 years. This year’s list required a minimum earnings of $300 million also a 50 percent increase over last year’s minimum, had an average earnings of $846 million per manager, and saw four hedge fund managers clear the $1 billion earnings mark. The back to back champion is David Tepper, founder of Appaloosa Management, earned $3.5 billion in 2013. To put in perspective just how much he earned, Lee Hawkins reported in 2007 that all African American professional athletes in the NFL, NBA, and MLB combined earned $4 billion. A look at more recent numbers show that the top ten earning African American athletes earned $383.2 million, meanwhile the top ten hedge fund managers brought in $15.7 billion or the athletes earned $0.02 for every $1.00 the hedge fund managers earned.

A few of these hedge fund managers also left their mark in college philanthropy. Paul Tudor Jones and his wife donated $12 million to the University of Virginia according to Philanthropy.com to “create the Contemplative Sciences Center to explore the intersection between modern science and the classical medical and contemplative traditions of Tibet.” Leon Cooperman and his wife made a $25 million donation to Hunter College for their library renovations and to seed a scholarship fund. David Tepper donated $67 million to Carnegie Mellon’s business school in 2013 and Kenneth Griffin, ranked number five on the Rich List, donated $150 million to Harvard College for scholarships, the largest ever donation in the school’s history. These four donations alone in the past 12 months are equivalent to over 12 percent of all HBCU endowments combined. The $254 million between these four donations if they were their own HBCU endowment would rank tied for third among HBCU endowments and equal to almost half of Howard University’s total endowment. Yes, just these four donations.

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The key thing to remember about all of these hedge fund managers is they founded and own their company. Yes, it is finance and investments, but it is also understanding that entrepreneurship and risk taking is what gets rewarded in this economic system. Far too many of us are still thinking in terms of labor and not enough of us are thinking in terms of ownership regardless of the industry. We want to graduate and get a “good” job. Nor does the business if you decide to start one have to be some social business that changes the world. The president of Hampton University owns a bottling company. It is not sexy, but it does employ a great deal of people and allows him and his wife to be financially generous to Hampton time and time again.

Our intellectual capital continues to be poorly distributed as a community. It often seems the only thing that little African American boys and girls believe they can do is entertain others. We are either singing and dancing or chasing a ball of some sort. The lack of hedge fund managers (among a great many other professions) continues to highlight our perplexing relationship to finance. We like the perks of consumption which requires money, but adverse to the real building of wealth and the vehicles like hedge funds that can create paradigm shifts. It is clear we are playing the game, unfortunately we seem to currently be playing it to lose.

The Slow Fall (Today) Of Apple Is Steve Jobs’ Fault


By William A. Foster, IV

Creativity is inventing, experimenting, growing, taking risks, breaking rules, making mistakes, and having fun. — Mary Lou Cook

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There is a problem that Vince Carter, LeBron James, Kobe Bryant, and Allen Iverson all suffer from in relation to their legacy. They came after Michael Jordan. It will not matter how great they were or are in their careers, all are destined for the hall of fame, they and their legacies will inevitably be talked about in terms of being Jordan’s heir apparent. The reality is none of them were Jordan’s heir apparent because no one was ever going to be able to live up to the standards of one Michael Jeffrey Jordan. Six NBA championships, two three-peats, taking two years off to play baseball, countless scoring titles, and a shoe that over a decade after his last game is still clamored for by youth who were not even born when he retired. In technology, Steve Jobs’ legacy cast an even bigger shadow than Michael Jordan and it might ultimately bring down the company he co-founded in his parents’ garage and yes, it is all his fault.

I have always been wary of organizations and businesses where there is a leader and not leadership. That is too say that if I name an organization/business and what comes to mind is an individual and not a culture there is a problem. Steve Jobs was bigger than Apple much in the way that Warren Buffett is bigger than Berkshire Hathaway. The problem is not when these leaders are at the helm, but when they are no longer part of the organization it leaves a void that is often insurmountable to anyone coming after them. We have seen this become more apparent at Apple since Jobs’ death and the vacuum seems to be only getting larger.

Apple is a luxury brand because of its quality and price point. Outside of NEXT, Apple has never been a major acquisition company. If it did acquire a company it was small and erased all signs of that company’s previous brand at acquisition. There have been red flags of Apple losing its way for awhile, but many of us tried to simply look the other way. This is the company that Steve built and we all assumed that they will just figure it out. Steve’s presence or lack thereof can not be that major, right? Right? First, you had the release of the IPhone 4c which was suppose to give Apple entry into a cheaper price point. Wait, what? Cheaper? Apple should have asked Mercedes how going cheap works out for a luxury brand’s image. Mercedes introduced its under $30 000 model and quite frankly it is just a sad sight. Arguably, it has allowed other brands to catch up because you are producing a price point and quality not in your expertise. Next,  there was the dividend that you wonder if Jobs would have ever approved, especially if it meant caving to activist investors like David Einhorn and Carl Icahn. Then, there was the IPhone release with the bigger screen, but basically nothing else of consequence. Truthfully, Apple has enough cash to make this a very long drawn out demise, but it is a demise no less. It has gone too far from its cultural center. I once said that Apple needed to hoard its cash because it could be the thing that saves it from having to go through the pain that IBM went through facing extinction (bankruptcy) in 1993 as it tried to reinvent itself. It can not be stressed enough how hard it is to turn companies the size of Apple today and IBM yesterday around when things start going in the wrong direction. A strong resource position is vital to the ability to its future survival. Especially if Tim Cook continues to try and leave his mark on the company.

The potential buzz of Apple buying Beats Electronics was the nail in the coffin that left me without any doubt that this company is falling apart internally coupled with the aforementioned question marks. The stern hand of Steve Jobs is missed. He would run you into the ground to produce greatness and often did. Steve Jobs reminds me of my trainer in fact. Demanding as hell and you hate every exercise he puts you through, but you can not help but have a smirk at the results. The company who lost its way when Steve was ousted and only saved by “acquiring” his NEXT software and reinstalling him as CEO. It had a culture centralized to Jobs to the point where I wondered if he assigned bathroom times for every single employee in the company down to the groundskeepers.  Truth be told is that it appears it was centralized and he liked it that way and would have it no other way. From everything you read and interviews you see, it was in his personality to have it no other way. He did not do customer inquiries because customers have no idea what they wanted until Steve gave it to them one analyst joked. Shareholders knew to be quiet and hold their shares. Neither David Einhorn or Carl Icahn would have had the courage to challenge Steve Jobs. I am not sure really anyone did. Why would you? You do not need to question a man who is considered one of the greatest visionaries of our time. Again, that all works fine so long as you have the key to eternal life. I joked with someone recently even prior to the Beats rumor that what Apple should have done is put Jobs’ brain in an android. This company’s culture is built on having a taskmaster and unfortunately Tim Cook is not that man. Tim Cook is trying to not feel beholden to Steve Jobs’ ghost, but it is as inevitable as the comparisons between LeBron James and Michael Jordan despite the fact they are such different players. It is like the old adage goes comparing apples and oranges. In another company or Apple era further removed from Steve Jobs, Tim Cook might be a great CEO, but at Apple succeeding Jobs is not just hard, it is impossible. Steve’s DNA is too engrained in the company and it simply can not function without his stern hand.

If I were investing in Apple today it would be simply on the strength of the dividend and their cash. This current rumor which if it were not true, then Apple has done a poor job of distancing itself from it. Again, it has not been confirmed, but we all know where there is smoke there is fire. I have yet to find anyone who finds this deal good for Apple – myself included. Richard Branson even went so far as to joke that maybe this was Apple’s way of “giving back” to all the artist it crushed with the advent of ITunes. Aside from the obvious culture clash that seems present with these two companies it highlights more and more that Apple is void of the compass that produced the innovation that changed the paradigm of technology’s impact on the world. Apple is a company that is not even forty years old, but has gone through a lot in its short life on its way to becoming one of the world’s most valuable companies. It is hard to imagine a time when Steve Jobs’ ghost will not loom over this company, but its very survival might hinge on exorcising the ghost of Steve Jobs and laying the culture of what was to rest once and for all.

Disclaimer: There is no ownership of any companies mentioned in this article by myself, my business, or my family as of this article’s publishing.

HBCU Money™ Business Book Feature – Another America: The Story of Liberia and the Former Slaves Who Ruled It


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The first popular history of the former American slaves who founded, ruled, and lost Africa’s first republic

In 1820, a group of about eighty African Americans reversed the course of history and sailed back to Africa, to a place they would name after liberty itself. They went under the banner of the American Colonization Society, a white philanthropic organization with a dual agenda: to rid America of its blacks, and to convert Africans to Christianity. The settlers staked out a beachhead; their numbers grew as more boats arrived; and after breaking free from their white overseers, they founded Liberia—Africa’s first black republic—in 1847.

James Ciment’s Another America is the first full account of this dramatic experiment. With empathy and a sharp eye for human foibles, Ciment reveals that the Americo-Liberians struggled to live up to their high ideals. They wrote a stirring Declaration of Independence but re-created the social order of antebellum Dixie, with themselves as the master caste. Building plantations, holding elegant soirees, and exploiting and even helping enslave the native Liberians, the persecuted became the persecutors—until a lowly native sergeant murdered their president in 1980, ending 133 years of Americo rule.

The rich cast of characters in Another America rivals that of any novel. We encounter Marcus Garvey, who coaxed his followers toward Liberia in the 1920s, and the rubber king Harvey Firestone, who built his empire on the backs of native Liberians. Among the Americoes themselves, we meet the brilliant intellectual Edward Blyden, one of the first black nationalists; the Baltimore-born explorer Benjamin Anderson, seeking a legendary city of gold in the Liberian hinterland; and President William Tubman, a descendant of Georgia slaves, whose economic policies brought Cadillacs to the streets of Monrovia, the Liberian capital. And then there are the natives, men like Joseph Samson, who was adopted by a prominent Americo family and later presided over the execution of his foster father during the 1980 coup.

In making Liberia, the Americoes transplanted the virtues and vices of their country of birth. The inspiring and troubled history they created is, to a remarkable degree, the mirror image of our own.

HBCU Money™ Dozen 5/5 – 5/9


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Did you miss HBCU Money™ Dozen via Twitter? No worry. We are now putting them on the site for you to visit at your leisure. We have made some changes here at HBCU Money™ Dozen. We are now solely focused on research and central bank articles from the previous week.

Research

A Solar Commitment, From The White House To America l Clean Technica dlvr.it/5cxb9H

How the Boston Globe totally revamped its IT strategy l CIOonline trib.al/JY6OMFY

In the digital ocean, predators outnumber protectors l CSOonline ow.ly/wGSqp

Granular Materials Aren’t Like Liquids, Except When They Are l APSPhysics bit.ly/1oew8O4

Sandia shows off freshly renovated large-scale test facilities l Sandia National Labs bit.ly/1fUwEyf

31 people have been to Mars and back – plus other surprising space stats l New Scientist ow.ly/wFxOK

Federal Reserve, Central Banks, & Financial Departments

Teachers: St.Louis/Atlanta Fed offer 3 types of professional development options. l Econ Lowdown bit.ly/1iG22S9

Students challenged to come up with their innovative ideas for transforming life for girls l World Bank ow.ly/wHqp1

What can data tell us about Nigerian girls’ educational opportunities? l World Bank wrld.bg/wF7aR

60% of best jobs in the next 10 years haven’t been invented yet. What kind of jobs will Africans invent? l WEF wef.ch/1ixnff7

Why are Americans so bad with money? Is there a way to help them? l CEE ow.ly/wHqHn

Household debt inches higher. Our researchers say the housing data present a mixed picture l Cleveland Fed ow.ly/wHr2A

Thank you as always for joining us on Saturday for HBCU Money™ Dozen. The 12 most important research and finance articles of the week.