Why are Harvard's alumni so wealthy?

JonahS

[Added: Solipsist made good comments that partially account for the phenomenon, and Douglas_Knight pointed out that the figure of $200m+ below should be $30m+]

This article reports that Harvard has 2,964 alumni worth $200+ million, with a total wealth of $622 billion. These figures are staggering:

The university with the next highest figures (University of Pennsylvania) are ~2x less, and the figures for Yale (for example) are ~4x less.
If you assume that Harvard has ~60 living classes of alumni, each of which has ~2,000 students, then the wealth per graduate coming from the alumni worth $200+ million alone is ~$5 million. Furthermore, the fraction of Harvard alumni with $200+ million is on the order of 2%. [Added: from here: "Of Americans, some 30,000 have more than $100m and 2,800 have more than $500m", so < 0.01% of Americans have that much money.]

Note that Bill Gates "only" has ~$75 billion and that Mark Zuckerberg "only" has ~$30 billion, so that they don't account for Harvard's decisive advantage over other universities.

What is going on here? Why would Harvard come out ahead by such a large margin? Its acceptance rate is smaller than those of Stanford, Yale and Princeton, but by no more than 25%. Moreover, this has been true historically

One can ask a similar question of University of Pennsylvania, which is significantly less selective than Yale and Princeton, but has a decisive advantage over them.

Some possible explanations for the discrepancy:

Harvard selects students with higher expected earnings.
Harvard selects students from families who are already wealthy (more than other top schools: the wealthy alumni are not self-made).
Students who aspire to make a lot of money choose Harvard (over other top schools).
Going to Harvard increases students' earning power (more than other top schools), for example, through better networking opportunities.

Regardless of which of these explanations hold, there remains a question of why they would hold.

Is Harvard a better choice than other universities for students who aspire to be wealthy than other top schools?

Even if Harvard has historically been better for increasing expected earnings, this may have ceased to be the case because of the rise of the tech sector and Stanford and MIT's focus on tech.

[Added: Solipsist made good comments that partially account for the phenomenon, and Douglas_Knight pointed out that the figure of $200m+ below should be $30m+]

This article reports that Harvard has 2,964 alumni worth $200+ million, with a total wealth of $622 billion. These figures are staggering:

The university with the next highest figures (University of Pennsylvania) are ~2x less, and the figures for Yale (for example) are ~4x less.
If you assume that Harvard has ~60 living classes of alumni, each of which has ~2,000 students, then the wealth per graduate coming from the alumni worth $200+ million alone is ~$5 million. Furthermore, the fraction of Harvard alumni with $200+ million is on the order of 2%. [Added: from here: "Of Americans, some 30,000 have more than $100m and 2,800 have more than $500m", so < 0.01% of Americans have that much money.]

Note that Bill Gates "only" has ~$75 billion and that Mark Zuckerberg "only" has ~$30 billion, so that they don't account for Harvard's decisive advantage over other universities.

One can ask a similar question of University of Pennsylvania, which is significantly less selective than Yale and Princeton, but has a decisive advantage over them.

Some possible explanations for the discrepancy:

Harvard selects students with higher expected earnings.
Harvard selects students from families who are already wealthy (more than other top schools: the wealthy alumni are not self-made).
Students who aspire to make a lot of money choose Harvard (over other top schools).
Going to Harvard increases students' earning power (more than other top schools), for example, through better networking opportunities.

Regardless of which of these explanations hold, there remains a question of why they would hold.

Is Harvard a better choice than other universities for students who aspire to be wealthy than other top schools?

Even if Harvard has historically been better for increasing expected earnings, this may have ceased to be the case because of the rise of the tech sector and Stanford and MIT's focus on tech.

Very good points, thanks!

2^(-1.9) = 26.7%, so the power law that I obtained fits the distributional claim that WealthX makes.

I spent more time looking for data, and I've gotten varying estimates for income percentiles.

These three sources say that top 1% of Americans is net worth of ~$7 million.
This reference (2012) says that there are 1.8 million Americans with net worth $2m+.
This source (2014) which says that 1.24 million Americans have net worth of $5m+.

The latter two bullet points seem incompatible with the first: I find this very disconcerting. Any idea as to what's going on?

The last source above also reports 132,000 Americans with $25m+. This source (2012) reports 107,000 American households with $25+ million.
The WealthX reference that you cited (2011) says that there are only 57,860 people in the US with net worth $30+ million.

There's some tension between these.

The two points below are in consonance with one another:

A reference (2011) that I cited in my top level post says that there are 81,000 people in the world with net worth $50m+.
The WealthX reference (2011) gives a figure on the order of 100k people with $50m+ worldwide.

The WealthX report on college alumni is from 2013 whereas the other WealthX report is from 2011: stock market fluctuations could have played a major role.

Anyway, if we estimate the number of American $30m+ people in 2013 at 100k, that's 1 in 3,000 Americans.

Assuming that 50% of $30m+ alumni from top universities (I chose Harvard, Princeton, Yale, MIT, Stanford and University of Chicago) graduated from their undergraduate programs (need to avoid double-counting), and that 75% of them are self-made (in consonance with what WealthX says), one gets a figure of 1 in 200 students for undergraduates from top universities (calculated on my own), so your odds are boosted by 15x. If one looks at billionaires, one has more skewing toward the top schools: I get a figure of 1 in 5000 of becoming a billionaire: maybe odds are boosted by 100x relative to the general population.

Circling back to the Harvard MBA thing, even if there's not a representative response to the survey, the prevalence of people of a given wealth is bounded below by the response rate. 23% of respondents reported a net worth of $20m+, given that 4% said $100m+ plausibly at least 15% had net worth $30m+, so at least 5% of the class as a whole. Thus, going to Harvard Business School would boost your odds all the way up to 1 in 20 (lower bound), 10x the base rate of undergraduate students at elite universities.

Is this plausible? Each Harvard Business School class is about 50% of the size of a Harvard undergraduate class, and top students who want to do business who chose to do undergraduate locally are more likely to go to a top school for graduate school: each of these factors pushes in the direction of the class being more select for ability. Then there's the choice of attending: lower caliber students who chose to attend will sometimes have better chances than higher caliber students who choose not to attend. A figure of 1 in 20 seems not unreasonable, but a figure of 1 in 6 or whatever (coming from assuming the survey results to be representative) seems suspiciously high.

I'm disappointed that the figure of $200m+ was off: it was a pretty major update for me when I saw it – it made me think that that promoting effective altruism on elite college campuses, as well as improving the productivity of students at them could have really high expected value. But it was too good to be true – there was major tension between it and information that I had had previously.

Thanks very much for the exchange.

I should add that my figures don't property take into account the ages at which people accumulate the bulk of their net worth. For "number of graduates from top universities" I considered graduates between ages of 22 and 82, but this isn't appropriate, since most people won't acquire most of their wealth until later in life (e.g. the average age of a billionaire is 66), so the prevalence of eventual $30m+ people should be something like 2x what I said, and similarly, for members of the general population (where I included everyone, including chil... (read more)

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Why are Harvard's alumni so wealthy?

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Why are Harvard's alumni so wealthy?

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