TimTalks: How Notre Dame can innovate to Zero Tuition

So once you have your mission down and your metrics down, then it's time to iterate. And iteration is the magic of why Silicon Valley works so well. So what you do is what's your mission? Notre Dame is to be a force for good in the world. What are your metrics? Force for good score and our percent opex endowed. And then you say okay, how are we doing on those metrics where our bottlenecks find the bottlenecks and start to iterate. So iteration is really key in startups and in any organization that wants to innovate. So you figure out where your bottlenecks are in your metrics, then you start iterate iterating and then it's iterate, measure, iterate measure, iterate, measure repeatedly. And either you're going to solve for those metrics and get it working or they don't work. And then what you do is you pivot. So you pivot to do a different solution that you discover if the first solution you thought was the answer doesn't get you to good unit economics. When you pivot, then you start the iterate, iterate measure, iterate measure, iterate measure, process all over again. If you don't get it working, you learn something and you celebrate it. If it works, you end up then scaling once it works. So you end up with this really nice method, really simple, not complex. You don't need big 10 year strategic plans and massive documents. It's a one line mission statement. It's a couple high level metrics that each group in the organization can be pointed at. And then you start to go iterate on those top level metrics in each organization within with each department within the organization at nd. It's really interesting because if we get focused here on these two metrics, there's two amazing things that happen. First is we actually achieve the mission of the university to be a force for good. So I think we focus on this. We could probably 100x1000x our impact over the next 10 years. And that's needed because families are struggling, the planet's struggling, parishes are struggling. And if you want to be a force for good, you got to help families planet perish get better. As a Catholic university, the other thing that gets really fascinating is the stewardship metric. If Notre Dame does the right things on these two metrics for the next 10 years, we can actually be fully funded and not need to charge tuition. So the university last year had a $13 billion endowment. And the way endowments work is you typically take around 4 and a half to 5% payout that goes to cover operating expenses. So 13 billion at 5% is 650 million. Notre Dame's total operating budget is about 1.6 billion total. So before you have to do anything else, you already have 650 million of your 1.6 billion covered. Then you have other big categories like tuition, which is about 300 million, and research and football ticket sales and everything else. So you got this, you got a whole bunch of different revenue streams that all come in that get you to break even on your 1.6. Now the investment office had an awesome year last year. So the 13 billion has gone to north of 20 billion. So at 5% of that, now all of a sudden you have a one billion dollar payout. Well, if you add up opex the endowment payout from the 13 billion plus $300 million of tuition, you realize now that a 5% payout on 20 billion generates an extra 300 million a year. So just with the growth in that endowment in one year, as that starts getting paid out, you actually could get rid of tuition now at ND with just the growth from 13 to 20. What's really fascinating is if you get from 20 billion to 32 billion at a 5% payout, now your endowment payout at 5% fully funds the 1.6 billion. So then anything you charge for tuition, any money you get from research, any ticket sales, all that stuff is additive, which can give you a little buffer as endowments can go up and down on any given year. So you could actually take tuition down materially or to zero probably. Now, if you hold the rest of the expenses nice and tight, or certainly within 10 years if you hold your expenses tight and focus on these two metrics. Now what's really interesting is this should not be hard to maintain expenses really tightly. We have 8,500 undergrads and we're keeping that as a flat number. By design. We have a 9 to 1 faculty student faculty ratio, and we have a 4 to 1 student to staff ratio. These ratios are world class. You don't need to change or reduce these numbers at all. So if we have a fixed number of undergrads at 8,500, we should have a fixed number of faculty and a fixed number of staffers. If we have an innovation mindset like Silicon Valley, then we'll say, okay, there's lots of new stuff we want to do every year in Silicon Valley. You get rid of the stuff that doesn't work and you scale up the stuff that does work. If we follow that same methodology at Notre Dame, hey, somebody has a great idea for some new department program center, etc. Awesome. Unless we want to change these ratios. What's the least valuable thing we're doing on these two metrics? And let's get rid of it today on a lot of non profits, a lot of universities, they do everything they did last year plus whatever they can fundraise for for this year. If Notre Dame says hey, we're not going to do that because those aren't tied, that behavior isn't tied to our two key metrics, then we'll hold number of faculty and number of staff flat and we'll figure out how to iterate measure, iterate measure to keep getting better at using those resources to solve for these two metrics. And if we do that, with the investment office doing their thing in 10 years, notream will be fully funded just from endowment payout, not including research dollars and everything else. Then we can start to really get strategic because you can checkbox off this metric and you can put 100% focus on the mission metric. Pretty amazing.