(See Moneyball by Michael Lewis.)
Let's suppose you're trying to hire a star STEM researcher. For our purposes, define "star" as someone who is roughly top 10% in his or her department at a good research university. Although assistant professors are hired in a very competitive process, the success rate for hiring stars in good (but not the very top ranked) departments is (by definitions given above) only about 10%.
Let's suppose you wait a while to do your hiring. Look only at researchers who have already been professors for 5-10 years (i.e., at other schools), and have a significant track record of grants, papers, citations, etc. It seems plausible that at this stage of career (late assistant and early associate professors) one can pick out top 10% candidates with reasonably high accuracy.
Suppose that, on average, researchers in the top 10% bring in $400k more per year than the average professor (e.g., one additional NIH grant). This generates about $200k per year in additional overhead return to the university, which is much greater than the salary bump required to bid such a person away from their home university. If the difference in startup cost between hiring a new assistant professor and someone with 5-10 years experience is, say, $500k, then it would take only a few years to recoup this cost. The numbers have to be adjusted for different fields (in physics the overhead differential might be less, like $100k per year), but the expected return still seems attractive if you can keep the researcher for at least 5 or possibly 10 years.
Seems like an arbitrage opportunity, no?
New lab costs (for experimentalists) have to eat up most of a year or two of the overhead benefit, no?
ReplyDeleteOne challenge grabbing them at that stage: getting them to move at this nearing-tenure stage must mean giving them tenure up front. Possibly hard to get that by the department faculty without going through a whole, tedious, long, involved tenure review process (and BEFORE making the offer, or at least while; you can't do it after they accept as I assume they wouldn't accept without guaranteed tenure if they are obviously good and so on track to get it where they are. They risk the political dynamics in the new department, which they can't know intimately beforehand, putting tenure at risk. Or do I understand this wrong having left academia post PhD?)
Isn't this basically what Harvard does?
ReplyDeleteIn the Moneyball analogy, Harvard is more like the Yankees than Oakland :-)
ReplyDeleteBut, yes, they acquire most of their senior faculty this way. However, they are probably looking a bit later than +(5-10) years into the career. At that later stage there there is broader agreement on the impact of an individual researcher and the market is closer to efficient (i.e., you pay for what you get, but Harvard and other top schools can afford it).
Perhaps we can get CDM sports to set up a nice fantasy research league for us and we can start reading papers and looking for those breakout gems. Do you have a nice spreadsheet of research stats we can start with? So Steve with you being the new STEM GM for team Sparty what cut is a freelance scout in for when they find that next research star? http://en.wikipedia.org/wiki/The_League
ReplyDeleteI understand that so called BIG LAW hires directly from law schools only.
ReplyDeleteMaybe there is some loss in productivity because of the move. There is also the pedigree thing. A top 10% scientist from the "wrong" school may seen as riff raff?
Inside Steve's gentle physics professor persona lies a cunning and ruthless hedge fund manager. A more brilliant Didier Sornette, perhaps.
ReplyDeleteI get the point, and it's a good one. But you also need to get the right people, people you can build a team around. In the end, what attracts talent is a good environment.
ReplyDeleteI have since retired, but I served 37 years on college and university faculties, 35 at Ohio State. I have heard this argument numerous times, but it has flaws.
ReplyDeleteFirst, by definition the stars constitute a small fraction of any faculty, and they contribute a small fraction of the total output of any faculty. This is especially true of the teaching and administration workload, which stars are frequently allowed to buy their way out of. In fact, this is public, written policy at most schools, and a majority of the faculty agree with it. Of course this problem exists in every institution and corporation. So the problem is, How do you provide fair compensation to those people who produce the great majority of your "product," be that teaching, administration, publications, funded research or toasters? If compensation is too strongly skewed towards the few stars, then you can expect the majority to become dissatisfied and unproductive.
Second, if Harvard is to be used as an example then one has to recognize that there is very wide spread corruption among Harvard faculty (e.g., Elizabeth Warren, Lawrence Tribe, Dorothy Goodwin, all guilty of plagiarism and/or fraud) and that many of the Harvard faculty were hired after their productive years and do little for the remainder of their lives. Examples are John Kenneth Galbraith and Stephen J. Gould. It is now known that Gould's "Mismeasure of Man" is fraudulent.
Given that universities are run as non-profits, exactly what becomes of any excess overhead collected? Normally in arbitrage I mean to put the money in my pocket as private income. What does a university do when it has big positive cash flow in this manner? Increase the pay of the profs?
ReplyDeleteIn other words, your question kinda assumes that the overhead associated with research grants is in excess of what is needed to support the research resulting from those grants (at least on a marginal basis). It is not clear to me that is true. But i can think of the name of someone who knows, and his initials are S.H. ....
Overhead on research doesn't actually cover the full cost of doing the work, but the details are complicated. (Donors, state taxpayers, etc. are subsidizing the Feds in producing the nationnal research output.) Nevertheless, using the de facto utility function governing modern research universities, more high quality research has positive utility, as does increasing the quality (impact) of faculty. That is, most university presidents would be very happy if research expenditures and faculty prestige were to increase.
ReplyDeleteIn more practical terms, the overhead on (marginal) research dollars can be used to fund desirable things like improved infrastructure, faculty pay, more student fellowships, etc.
This is a very provocative thing to say:
ReplyDeleteOverhead on research doesn't actually cover the full cost of the work
Do you mean that doesn't cover the whole cost of grad students, facilities and grant managers?
"If compensation is too strongly skewed towards the few stars, then you can expect the majority to become dissatisfied and unproductive."
ReplyDeleteWhy? They, along with the rest of the university community, would benefit from the stars' successes. This isn't some nebulous concept of prestige; it's cold hard cash.
I infer from what you are saying that research contracts are on an average basis a losing proposition and have to be levered with more flexible funds - but marginal contracts are not. If that is the case I expect the university would just re-scale when it got used to the higher level of grants and the flexible funds would again be tied down. However, you would be left with a relatively larger and more prestigious research effort when the new equilibrium set in.
ReplyDeleteNow let's explain to the typical leftward leaning faculty member that in a typical free-markets enterprise it is the highest paid employees that contribute the most value in excess of their pay to the employing institution and that, if anything, income inequality is sub-optimally low!
Therein is the organizational rub. "Though Faculty Member X has not won a Nobel Prize, she is materially more important to the university than you are, [so we will pay her so]" paints a picture that can't be resolved through the typical very-short-focal-length lens. Making that sale effectively would be a brilliant coup.
ReplyDelete"... you would be left with a relatively larger and more prestigious research effort when the new equilibrium set in."
ReplyDeleteYour summary is exactly correct, which places your understanding above the 90th percentile among faculty and senior administrators at research universities.
"... it is the highest paid employees that contribute the most value in excess of their pay"
At a well-functioning place this is true but I'm not sure it's always true. Most faculty (who are somewhat left of center like me) support differential pay and aggressive recruitment of top scholars. It's only the far left fringe who oppose this and they tend not to be in the hard sciences.
If, as you suggested at the outset, arbitrages are sitting on the table that will allow universities to build desirably larger research operations (and I believe 'tis true), then there must be some reason why research universities are not being aggressive enough. I offered the hypothesis that more faculty than you think bristle at "large" pay differentials. Is there a hypothesis that trumps that?
ReplyDeleteDeans have to cover the salaries but the overhead monies end up (e.g., depending on the specific organization of the school) with the VP of Research or perhaps the Provost. So incentives are not aligned, usually. Also, incentives at the level of individual faculty (who have the specific domain expertise) to go out and find the diamonds in the rough are usually lacking. Some faculty are team spirited and want to improve their department, but others aren't sufficiently motivated to do this. It takes a lot of effort and coordination between different players to get this to work.
ReplyDeleteMy recommendation,then,is that you become one of those "VP of Research or perhaps the Provost" kinda guys and attempt to do the arbitrage ;-)
ReplyDeleteI'm sad Ohio State had you on the payroll.
ReplyDelete"...contribute most value in excess of their pay..."
ReplyDeleteAll one can speak of is marginal product. This is impossible to measure in reality, and the demand/scarcity of the individual's labor is not an innate characteristic of the individual.
Within a post-manorial economy however talented and hard working the individual he can't produce anything by himself.
LY should live in the paradise that is Bolivia or Namibia.
And in the case of baseball, the book for which this post is named showed that star baseball players are grossly overpaid.
ReplyDelete