Thanks to Craig Henriquez and the Academic Council for hosting the annual faculty meeting. It gives me a chance to express my main message to Duke's faculty: my admiration and gratitude for the work you do. This winter I've been going around meeting with members of the faculty school by school. Each session has reminded me how many smart people we have here; how interesting and consequential the problems are to which you've applied your curiosity; how seriously you've thought about the needs of our students; and how imaginatively you've come together to create new programs, indeed new models of education. Add your work on searches, reviews, and other committees your "service opportunity," as I call it and I have to admit, you do a lot for Duke. If this school is flourishing, I know who we have to thank.
Reviewing the topics I could speak on today, I've elected to say a word on three: our financial situation; Duke's global programs; and the way traditional fields of study expand in importance even as we open up new fields.
First the numbers. Two short years ago, in February 2009, the greatest economic meltdown since the Great Depression had been in progress for months and still not found its bottom. We couldn't know what further perils might lie in store, but given the hit to our endowment, it was clear that we would need to move to a budget around $100 million smaller than we had been projecting. By one year back, in February 2010, markets had stabilized and begun to mend. Coupled with the internal discipline Duke mounted in which you each played a part, this enabled us to say that we had closed more than half of the budget hole in the first year of a three-year walkdown.
One year later, our situation continues to improve. For the calendar year 2010, DUMAC posted a return on our investments of better than 15.6%. (When EVP Trask earlier spoke of 13.2%, he was referring to the fiscal year that ended in June 2010). Philanthropic contributions to Duke, which had reached a historic high of $386 million in fiscal year 2007-08, then fell to $301 million in the year of the meltdown, climbed back to $346 million in fiscal year 2009-10, an increase of 15%. With the market crash, many gifts for endowment fell below their initial value and so failed to throw off their anticipated income. But with rising markets, underwater endowments are breaking surface and beginning to supply the funds their donors intended. As of December 31, 2009, $380 million in endowments were underwater, leading to foregone income on the order of $19 million. By the same date in 2010, $235 million of these endowments had recovered their original value, throwing off nearly $12 million in anticipated funds.
Meanwhile, continued austerity and administrative efficiency across the university have kept us on the path to a re-based and sustainable budget, while through decanal leadership and faculty ingenuity, schools have found ways to increase income while creating valuable new programs.
Through this combination of means, we have accomplished around two thirds of the planned reduction, and revenue growth has reduced the remaining shortfall. This is good news. But for a host of reasons, it's not yet time to loosen our restraint.
Having lived through several years of extraordinary volatility and unpleasant surprises, it would be profoundly foolish for us to believe that we can predict the future now, or that our prospects can only go up. Further, even with the rebound, we have not yet climbed back to where we started, and we continue to feel the drag from the endowment's worst-performing years. In addition, if revenues and expenses have come back to something near equilibrium, we will still need spending discipline in order to create a margin for new initiatives and expenditures including the compensation increase we intend to make after two "raise free" years.
Also, our revenue sources have different drivers, and some are newly imperiled even as others return to health. Federal research dollars were augmented by the financial crisis in the short term. The ARRA stimulus bill, one of the first by-products of the downturn, gave an unexpected lift to Duke, which ranked fourth in the competition for ARRA NIH funding. But as the recession eases, the new politics of the federal deficit threaten serious reductions to federal research budgets, and almost certainly an end to growth. Since innovation flowing from research universities continues to be such an important economic engine, we will fervently make the case that cutting research support is a short-term fix but a long-term folly. But given current realities, we cannot be confident that argument will win the day.
In sum, though we have weathered the worst of the storm, we are not yet back on easy street, and we need to continue to exercise virtues you may have grown tired of. Through its maturity, self-discipline, and willingness to set priorities, the Duke faculty has brought this university through a season of great challenge in remarkably healthy state. Let's not imperil that achievement by a return of irrational exuberance. The work that needed doing wasn't fun but we've done it well. Now is the time to see it through.
Global Strategy
At a forum I attended two weeks back, a student asked me, why are we expanding overseas activities while we are still weathering a financial crisis at home? It's a fair and an important question, and I will answer it as honestly as I can. Let me say, first, that I emphatically agree that the excellence of our core business must always be our highest priority. Second, we now understand that the successful launch of our China project will likely bring the central university some cost this is now estimated at between $1.5 and $2 million a year for the first five years, an amount we hope will be reduced through philanthropy. But this is a fairly modest sum in a budget of more than a billion dollars, and it does not significantly trade off against the many other projects we also have in hand. (For scale you might remember that Duke has laid out nearly $5 million a year in strategic funds to launch the highly successful Global Health Institute.)
Third, and for me this is the heart of the matter, our global projects are indeed distractions if they are not of high strategic value. But if they are strategic, it's crucial that we not relinquish them in lean times. The greatest threat that downturns pose to universities is to stunt forward movement and lock in the status quo. The university that fares best will be the one that, while protecting existing activities and commitments, is alert to emerging opportunities and willing to take the steps to seize them.
It's a truism but not less true for that: Globalization, the interconnection and reciprocal modification of physically remote human communities along every axis of interaction (economic, cultural, demographic, climatic), is the most salient feature of modern reality. As places devoted to understanding the world and transmitting that understanding to the rising talent of the future, universities have a fundamental stake in deepening their grasp of the globalizing world. Put negatively, universities that refuse to expand their horizons will pay the price for this failure to evolve. You know the reasons but let me enumerate the main ones.
(1) Through the communities of talent they assemble, universities catalyze breakthroughs and discoveries and the higher the talent, the more potent the result. Since talent pools are now transnational, a university must draw the most powerful and creative minds from around the world to stay at the forefront of discovery.
(2) Intellectual work is increasingly done collaboratively, in partnerships not limited by physical location. The university that fails to build connectivity to a broad array of high-end partners will be the backwater of tomorrow.
(3) The expansion of quality higher education outside the US and developed world is in our interest, not just that of others. Education is the unlocker of human potential: no country should wish for a monopoly on that market. Also, education trains people to work constructively on the great human challenges. In a world where all major problems have global determinants, it will not suffice to have well-trained people in a few favored sites.
(4) Plus we need international connectivity to teach students well at home. One function of universities has always been to de-provincialize us, to throw the world open for appreciation and discovery when we are at the age of maximum receptivity; and for each generation of students, the relevant horizon becomes wider. To continue to draw the best students and give them what they need, we must ensure that going "to Duke" means initiating a mental journey into a broader world even when they stay in classrooms here.
To my mind, an international project will be truly strategic to the extent that it hits these multiple targets in a fairly direct way. Our Singapore project showed how this might work. In a 2001 study called the Oxburgh Report, Singapore diagnosed itself as lacking a form of higher education it judged critical to its further development: the sort of research-based medical education that prepares for careers in biomedical and translational research. To cure this deficiency, the government of Singapore invited Duke to partner in creating a new school that would feature the Duke medical curriculum. The Duke-National University of Singapore Graduate Medical School, which graduates its first class this May, has met Singapore's goal of human capital formation while yielding many benefits to Duke. It has made our name visible across Asia as synonymous with top medical education, strengthening our lure for global talent. It has enabled us to hire faculty who wanted to be affiliated with Duke but had reasons for wishing to work in Southeast Asia, deepening our expertise in fields for which that is a natural research base (for instance, emerging infectious diseases). It has given us a point of connection to other research sites in South Asia, for instance in India. And it has created a space to try out new teaching formats that have proved sufficiently successful that we are beginning to "re-import" them into classes here.
China's extraordinary emergence as a global player would seem a sufficient reason to increase our connection there. The role of higher education in this process has created a place for us to plug in. A nation that plans on a scale and executes with a rapidity unthinkable in this country, China determined fifteen years ago that higher education was a rate-limiting factor on economic and social development, and set out to massively expand educational opportunities. Between 1997 and 2006. higher education enrollment increased by 350%, to a total of 15 million students. China has since become convinced that the quality of higher education is as much a problem as quantity was once. Accordingly, it is differentially investing to build up the high end of its higher education spectrum and reworking not just its size, but its interior intellectual structures.
Two glimpses of this process were particularly revealing to me. Last April, in conjunction with the opening of the Shanghai Expo, the Chinese government convened a gathering of guess which celebrities and global movers and shakers? University presidents, from China and elite schools around the world. If I say such national prioritizing of higher education seems virtually "un-American," I do not mean that altogether as a compliment to us. But what was more amazing was that, after sitting attentively as the presidents of Stanford, Yale, Chicago, Duke, Oxford, and others explained the foundations of our hugely successful form of education, Chinese university leaders gave their own talks on interdisciplinarity, problem-based instruction, in-class debate, and other hallmarks of Western instruction, eager to display their command of international best practices.
One of the Chinese presidents I have gotten to know, an education leader as thoughtful and articulate as any in my acquaintance, told me in a private talk that China's impressive accomplishments in fields like engineering were limited by lack of related strength in the humanities and social sciences. Do you mean, I asked, that you want top departments of Economics and Anthropology and the rest? He replied: What I really mean is that we are a nation with problems that will overwhelm us if we do not address them soon. We are training people in the technical ends of these problems, but to fully deal with them, we also have to think them through at the level of social impact, public policy, culture and behavior-in short, in all their dimensions at once.
If this is the right time to increase our presence in China, it is because our partners want what a school like Duke can provide: broad training to engage in complex problem-solving for the larger human good. You will recall that our first programs will be taught at the junction of business management, environmental management and health. If the Singapore example holds, by projecting such Duke programs in Kunshan, we can help meet a global education need; simultaneously, make Duke globally visible as a leader in cross-disciplinary education; simultaneously, create a workspace for Duke faculty inquiry in China and a base for collaboration with a range of Chinese partners; and simultaneously, build a place for Duke students to work together with their parallel numbers from other countries and for Duke teachers to learn things to bring back to classrooms here.
We continue to make substantial progress working through the preliminaries for the project. We have achieved a major clarification of financial arrangements with the municipality of Kunshan. Duke experts in human resources, land use, purchasing and related fields have traveled to Kunshan to avoid misunderstandings down the road. By Chinese law, a Chinese academic partner must co-sponsor the newly-founded educational entity, and we appear to have found a suitable partner in Wuhan University, a top ten university, which has been highly respectful in our negotiations of Duke's leadership role. We have also found philanthropic support to help defray the costs of the launch. It is our hope to be able to submit the application to the Ministry of Education in mid-March 2011 for an anticipated opening in late 2012. Greg Jones and Peter Lange will keep the Academic Council informed as events unfold.
As we embark on this venture, we must frankly acknowledge that China does not share this country's attitudes toward open inquiry, freedom of expression, and free access to information. These are not trivial things for an American university. The intellectual culture we take such pride in is founded on these exact values. Not only do we need to insist on them to the fullest possible extent in building a Duke in Kunshan; the Chinese themselves must learn to accept and embrace them if they are to get the worth of their bargain. Duke education is the spirit in which it is conducted quite as much as any fixed curriculum. If our Chinese partners want to recreate a world-class form of education, they need to grapple with the spirit as well as the letter of our ways.
For all that, to believe we would enjoy exactly the same freedoms in China as we do in the United States would be to forget the first truth of globalization: we're all connected, but things aren't the same in other places as they are at home. To be a good global citizen, we need to learn how to expose others to our thinking and open ourselves to theirs, and to accommodate differences without violating fundamental beliefs. I cannot guarantee that the process will be conflict-free. We do know that we have worked well with highly responsive partners over a long period, and that if a major conflict were to develop that could not be resolved, it would be in our power to terminate the venture.
But we have to hope the project will succeed. China and the United States have become big power competitors, but none of us can wish to see another Cold War. Our main hope for averting such a scenario will be that men and women on both sides have been schooled to understand one another's issues and to accommodate competing interests, to the benefit of all. Developing that human capital will remain a key function of the world's great universities.
The Role of the Humanities
I'll close with a word on another subject. At the request of a bipartisan group of federal legislators, the American Academy of Arts and Sciences has created a commission to strengthen the role of the humanities and social sciences in American life, which I've been asked to co-chair. This news makes me want to say what I hope is obvious to all: if it's important for universities to keep investing in new initiatives, it is equally important to sustain the traditional bases of liberal arts education.
These forms and newer concepts like interdisciplinarity and internationalization are not mutually exclusive alternatives. They are interdependent to the deepest degree; the example at hand perfectly illustrates the fact. If we are planning to "understand" China in anything but a facile or delusional manner, that won't happen without help from the study of Chinese language, and Chinese philosophy, and Chinese government and economic structures, and the way they have both revised and perpetuated elements from earlier Chinese history. We won't understand the shape of hopes and fears in a changing China without access to Chinese literature, photography, and film, not to mention psychology. If, in our China project, we become perplexed that "universal" human rights are neither universally observed nor even universally valued, and if we then want to know where the idea of universal human rights came from and what its status is worldwide, we'll be at an utter loss if we do not have recourse to ethics, the history of religion, political philosophy, cultural anthropology, international relations, and international law. Tellingly, what China most admires in us is an education built on the broad-based, combinatory learning we call the liberal arts.
For their own importance and the contribution they make to every area of understanding, universities must promote the health of the humanities broadly conceived. The humanities have sometimes felt ignored in the priorities articulated by modern universities, and humanists have not always been as active as they might in communicating their value to those outside their zone. But there will be a cost for our whole project if these fields are not both internally vibrant and rich in connectivity.
We're lucky to have humanistic colleagues whose specialized study has enriched understandings far from their fields. Art History Professor Hans Van Miegroet has built on his expertise in artistic modernity to create bridges to computer science, engineering, and image-based fields emerging in the wake of the digital revolution that we scarcely have a name for, in Duke's Visual Studies Initiative. Divinity Professor Ellen Davis has excavated a forgotten environmentalism in the Hebrew Bible, showing that the covenant to be God's chosen people was a covenant also to care for the land. Through her mastery of ancient Hebrew we learn of a long prehistory of environmental values that modern, typically secular, environmental movements could learn to appeal to.
This January, at the second Winter Forum, the Global Health Institute simulated a pandemic, giving undergraduates virtual experience in decision-making in a situation of urgency, ethical complexity, and confusing, rapidly changing "facts." It will not surprise you that faculty in infectious diseases and health policy helped devise the exercise. But another key architect was Priscilla Wald, Professor of English, expert in American literature, and a pioneering student of the role of narratives in health crises.
When the earthquake devastated Haiti one year back, Duke faculty from many fields came together to create a shared research space, the Haiti lab, with graduate and undergraduate students included as partners. The Haiti Lab was able to draw on the expertise of Global Health faculty like Kathy Walmer, who with her husband David runs a family health clinic in Haiti, and legal rights scholars like the Law School's Guy Uriel Charles. But the lead creators of the Haiti Lab were Laurent Dubois and Deborah Jenson, Professors of History and Romance Studies, meaning that Duke's research and relief efforts were grounded in the understanding of Kreyiol history, language and culture; and the Franklin Humanities Institute served as host for the lab.
The Winter Forum, the Haiti Lab, and the Visual Studies Initiative are wonderful examples of humanistic knowledge extending itself into apparently distant areas to enrich the understanding of all. Like Kunshan, these initiatives were all either launched or matured in the depths of the recession.
I conclude with this. Great universities don't advance by the logic of either-or. Wallace Stevens writes in his poem "Notes Toward a Supreme Fiction"
He had to choose. But it was not a choice
Between excluding things. It was not a choice
Between, but of. He chose to include the things
That in each other are included, the whole,
The complicate, the amassing harmony.
Given finite resources, Duke too is always having to choose. But it is not a choice between excluding things. Arts and sciences, here and abroad, established programs and new initiatives, traditional disciplines and cross-disciplinary inquiry all have their place in the work we do. So our task is appropriately to support each element and to put them in their most illuminating interrelation, to build "the whole, the complicate, the amassing harmony" our partial efforts could compose. Money is scarcer than it was, but our project has never been to have a lot of money. It is to build the liveliest, most comprehensive, and most searching place of inquiry we can possibly envision, with whatever resources we have at hand. My thanks for your work in our common task.