Institutions are heartless, but they are not impractical. And even hazing becomes impractical very quickly.

When I worked in BigLaw, I knew the long hours were part of the bargain. But something still didn’t quite add up. As the folk theory goes, the long hours are evidence that banking, consulting, and law firms — which rigorously optimize every facet of their business — have somehow failed to update their talent development practices since the 1960s.

That implication is hard to square with how these firms actually behave.

Three Myths about the First-Year Grind

There are three standard explanations for long junior hours in professional services, and none of them explain collective behavior among firms.

1. Extraction: “Firms work juniors long hours because it’s profitable.”

The most serious folk explanation holds that junior labor is cheap relative to the revenue it supports, and long hours pad the bonuses of those higher up the food chain. This resonates because it fits basic intuitions about capitalism.

But the underlying premise is shaky. “More hours worked” does not translate proportionally into “more money made.” Consulting and banking don’t usually bill by the hour, and law firm engagements are increasingly fee-capped.

The question is not whether another hour can generate revenue. It’s whether it generates more value than it destroys in industries where the cost of mistakes is extremely high. John Pencavel, writing for SIEPR, concluded that weekly output is largely insensitive to increases in work time beyond sixty hours, while Dawson and Reid, writing in Nature, found that twenty-four hours of wakefulness degrades cognitive performance to the equivalent of a 0.10% blood alcohol concentration. In first-year analyst terms, that’s about five shots of Fireball.

So pure extraction cannot be the sole mechanism. It can explain the first sixty hours, but not the next twenty.

2. Training: “The hours are an investment in developing talent.”

This HR-approved framing posits that juniors learn by doing and long hours accelerate the learning curve. This reasoning makes a bit of sense, even among some juniors, because the early-career learning curve is steep, repetition builds fluency, and certain skills only develop under pressure.

But again, nothing exhausts like exhaustion, and the learning curve flattens quickly after 11:00pm. No serious person believes late night work is pedagogically rich.

3. Inertia (d/b/a Tradition): “That’s just how it’s always been.”

There’s a partly anthropological, partly psychoanalytic account that treats long hours as the founding myth of corporate civilization, so your boss will haze you as he and his fore-bosses of old were hazed.

Still, tradition is a weak constraint in industries where junior talent is mobile, client relationships are fragile, and reputation is repriced daily. Culture can transmit a practice, but at some point, even the Romans thought that gladiators were too expensive.

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Equilibrium

“Maybe none of these explanations works in isolation, but what if they’re all operating at once?”

I mean, sure. Extraction, training, and tradition each account for some additional junior hours somewhere, and most of us have worked under someone who seemed genuinely animated by one of these three.

But each of the folk explanations depends on the particular culture and economics of a given firm. On the other hand, long junior hours have persisted within firms through leadership changes, within industries through technological revolutions, and across geographies through shifting global fashions. They have even survived headline-grabbing lawsuits.

This points instead to a stable equilibrium created by structural features of professional services markets. The eighty-hour workweek reflects a fairly consistent quantity of labor sold within a relatively narrow band of wages. The status quo persists because firms continue to demand these hours and ambitious grads continue to supply them.

Demand

The demand side of the labor market in professional services is shaped by management’s ability to sell work performed by juniors to firm clients. Here, the structural constraints are coordination problems and adverse selection, but the root cause traces back to the client paying the firm’s bills.

What Rolls Downhill

In professional services, work product is complex. And at marquee prices, it has no excuse to not be perfect.

Because the work must be perfect, the cost of a mistake is convexly negative. Experts are assembled around bet-the-company events, so a material misstatement on investor-facing docs or a missed filing deadline is very expensive. Market share among banks, consultancies, and law firms is also disproportionately allocated by reputation.

Because the work is complex, it’s the joint product of many contributors, with several layers of review. A slide deck must be created by an analyst before it can be reviewed by an associate, pending sign off by a VP or MD.

These constraints incentivize firms to internalize redundancy where it is least expensive, that is, as low as possible on the totem pole. It’s not a partner who’s staying up till 2:00am to re-reread an outgoing memo. It’s the person taking home a tenth of her pay.

So clients demand perfection and responsiveness that match the sticker price. Within the firm, this causes grunt work to cascade downhill. These coordination problems will be smoothed as AI reduces the turnaround time for doc gen and review, but it won’t eliminate them entirely.

The Market for Lemons

Firms and the clients that engage them also face a two-tiered adverse selection problem.

At the lower tier, employers have no actual way of knowing how good you are on the day you collect your badge. When it’s all said and done, the firm got to know the winning candidate by reading a cover letter that may or may not have been written by Claude, and by having six different people talk to him for a half hour each. And he has every incentive to overstate how well he handles pressure, how much he covets my corner office, and how many people actually showed up to his frat’s charity bake sale.

And now some twenty-something I barely know shows up, and I have to pay him $3,000 a week plus insurance and payroll tax until I figure out if he’s any good. This incentivizes me to get that information as quickly as possible. Voluntelling him to fill his plate with enough deals to round out an eighty-hour workweek increases the surface area for performance review per unit paycheck. It’s also a happy coincidence that the traits I care most about — endurance, grace under pressure, prioritization, efficiency, coachability in extremis — only surface when a person is marched into the hinterlands of their bandwidth.

But why do I really care if my fellow partners/MDs largely absorb the dollar cost of the new hire’s underperformance or churn? Because my ability to collect fees from my clients now depends on them believing that the work I’m billing for (which they know is farmed to juniors) is actually worth it.

This is where the upper tier of the adverse selection problem comes in. In practice, a client’s main interaction with a bank, consultancy, or law firm comes through the partner/MD in charge, punctuated by update calls, invoices, and the occasional snappy presentation.

In law, where most everyone except Wachtell gives itemized invoices, the client sees that juniors spent 85% of the time to generate 65% of the bill, and asks, “Are the tasks these people performed worth it, and done well?”

For banking and consulting, the trust problem is even more salient. If a CFO approves $500,000 to $2 million for an MBB consulting assignment, or a percentage of deal size for M&A advisory, she will rightly ask, “I know the MD I play tennis with wasn’t doing all of that by herself...Who else was helping, and how do I justify to the board how much we paid?”

So a partner/MD’s ability to minimize write-downs depends on how much her clients trust her juniors. Employers outsource the burden of filtering good candidates to colleges, who screen applicants. Clients, in turn, outsource the task of filtering good junior bankers, consultants, or lawyers to the firms that hire and train them. If a firm can credibly say, “our juniors are swift as a coursing river,” they signal that their selection process is sound and hence the invoices deserve to be paid.

This incentivizes firms to solve the lower-tier adverse selection problem — namely, to ramp the juniors up to an eighty-hour workweek as quickly as possible — and to tacitly relish their reputation as a hazer.

The eighty-hour workweek then is less a labor practice than a screening technology. And somewhere along the way, it also became a Dickensian form of virtue signaling: you can tell the factory’s working, m’lord, by how skinny the waifs are inside.

Supply

At equilibrium, supply in a known amount meets demand at a given price, which means the workers themselves need to participate. Across professional services, the equilibrium price of junior labor is well known. For lawyers, it’s the Cravath scale; for bankers, it’s around $110K base plus bonus at bulge brackets; and for consulting, it’s around $110K base plus performance and signing bonus at MBB. These are the clearing prices at which recent college and law school graduates are prepared to sell up to eighty hours per week of labor.

Assuming full busyness and top-tier bonus pay, this ballparks hourly wage at around $50, which puts a star first-year at Goldman roughly on par with the top decile of Uber drivers. One could argue that the marginal cost of the sixtieth hour is much higher than the fortieth, so the disutilities (econ-babble for “this sucks”) at a banking job actually outweigh those in professional driving.

Bright recruits know that the wages don’t justify the pain on a one-year time horizon. The real question is how to calculate the expected value of deferred compensation.

Pie-Eating Contests

If we’re honest, most new hires don’t expect to retire as rain-makers from the same firm where they started. But tournament logic still shapes the internal social order of firms: who gets the best work, the strongest mentors, the highest evaluations, and ultimately the best exits. The day-to-day experience of a junior employee is still organized around the proverbial pie-eating contest, where the prize is more pie.

Even if you don’t know or don’t expect to become a partner/MD one day, your dominant strategy is to behave like one. Embodying future-partner/MD material takes immense work, but it paradoxically reduces friction in office life on multiple fronts. Coworkers like to work with dependable teammates. Bosses give interesting work to rising stars. It’s a lot easier to land your next job if you’re crushing at your current one. And who knows, you might even just get promoted.

So the up-or-out structure of professional services firms creates a tournament where your best option is striving to win. Not because you actually hope to win, but because you fully expect to lose.

College II: This Time It’s Personnel

Taking a step back, human capital cannot be sold. It can only be rented.

The labor market is the human capital rental market, where employers rent temporary access to a productive asset whose quality they cannot observe directly. That opacity gives rise to institutions analogous to those in the capital markets, where the information asymmetry between corporate insiders and outside investors is also extremely high.

Universities exist as informational intermediaries that decrease transaction costs and increase liquidity in the labor market. At various turns, universities play familiar roles:

• Underwriters (we diligenced this graduate for four years when he lived in our dorms and took our exams)

• Rating agencies (we are willing to stake the Harvard brand on this graduate)

• Placement agents (on-campus recruiting)

Credible universities reduce search costs for employers and increase trust in entry-level candidates. This results in a labor market where untested graduates find jobs more quickly and in greater volume than they otherwise would.

Few would dispute that a Harvard degree increases your personal future cash flows over baseline and has a positive net present value. This is because a Harvard degree does more than help land your first job. Your Harvard degree is a portable certification that will always sit on the top line of your resume, reducing friction with future employers and helping you win every subsequent job. If we decompose the NPV of a Harvard degree into its constituent value drivers, one of them reflects lower transaction costs each time you bring your labor back to market.

The same dynamics play out in the market for experienced hires, with name-brand employers playing a similar role to prestigious universities. PE and hedge funds outsource the rating and underwriting of mid-career banking talent to bulge brackets. BigLaw or MBB experience certifies a candidate to in-house legal or strategy teams respectively. Like having a Harvard degree, the NPV of being ex-Goldman, ex-McKinsey, or ex-Cravath is large and positive, reflecting reduced friction at every subsequent rental event in the labor market.

So elite employers do not merely consume credentials. They produce them.

This is the deferred compensation that motivates college grads to apply for top firms and new analysts to accept hourly pay on par with an Uber driver. I’d go so far as to say that the portable certification of being ex-BigFirm is not the consolation prize for failing to make partner. It is the prize on probability-weighted terms.

So there’s a reason why landing that first big job feels like winning the lottery. It’s a human capital arbitrage opportunity of the sort I’ve explored before. You play the pie-eating game for a couple years. You get rewarded with a portable, positive-NPV certification, even if you lose. And unlike college, you don’t pay tuition. You get paid.

But like most human capital investments, this trade is gated by a lock-up period of discipline and execution. No partial credit. No early exit. “Ex-Goldman” doesn’t open that many doors if you got fired after three months.

Credential Factories

Elite firms have persisted not because they employ the brightest people, but because they produce trusted information about them. The eighty-hour workweek merely reveals that both the supply side (employees) and the demand side (the firms) have a shared interest in preserving the value of credentials.

The analyst wants “ex-McKinsey” to remain valuable because she expects to carry it into every future labor-market transaction. The MD wants “McKinsey analyst” to remain valuable so that her clients implicitly trust the people staffed on their engagements. Supply and demand converge on the same objective: preserving the firm’s reputation for producing credible information about human beings.

So the eighty-hour workweek is not per se an economic necessity. It’s an expedient manifestation of the structural position that elite institutions play in human capital markets: as informational intermediaries that discover and certify qualities about human beings that the labor market cannot observe for itself.

This also reveals where AI poses its deepest challenge. The obvious story is that AI automates junior work. The more interesting story is that AI changes the production function of elite credentials.

At the start I said that institutions are heartless, but they are not impractical. The same can be said for the human capital markets. If AI changes what can be learned about people at work, universities and elite employers won’t cling to old rituals out of nostalgia. They’ll redesign themselves to manufacture whatever information the market still cannot cheaply obtain. Whether that still looks like the eighty-hour workweek is a different question entirely.

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Works Cited

“Centerview Settles Lawsuit over Analyst’s Need for 8 Hours’ Sleep.” Financial Times, 22 Feb. 2026, https://www.ft.com/content/a5271651-825e-4007-a029-9e2c16b5d770. Accessed 8 July 2026.

Dawson, D., and K. Reid. “Fatigue, Alcohol and Performance Impairment.” Nature, vol. 388, no. 6639, 1997, p. 235. https://doi.org/10.1038/40775.

Pencavel, John. The Productivity of Working Hours. SIEPR Discussion Paper No. 13-006, Stanford Institute for Economic Policy Research, Oct. 2013, https://siepr.stanford.edu/publications/discussion-paper/productivity-working-hours.

Claude Opus 4.8 (Anthropic) was used for spell-checking, proofreading, fact-checking, and citation formatting.

Cover photo licensed from Vecteezy.

Edited 9 July 2026 to make minor formatting fixes.

All ideas, arguments, source selection, and writing are my own.

An idea that crystallized for me during my MBA at Columbia is that much of what happens in higher education can be modeled using the language of financial markets.

For example, I’ve said before that a college app is a call option.

When a student writes her college apps this November, she’ll pay an immediate, known cost for an uncertain future payout. The cost today is the application fee ($75), any fees paid to coaches and consultants, and the opportunity cost of spending a few hours writing the app versus studying for Senior Fall exams, making $20 an hour at Chick-fil-A, or playing Fortnite.

The option’s upside is a chance at admission (i.e., the right but not the obligation to enroll) at Columbia the following April. The full payout may not come until years later, when she’s recruited from a target school for a highly paid job or when she meets a new client mid-career at the University Club.

Her college list is a portfolio of options like these. But here’s the wrinkle: they’re not uncorrelated. The kind of student who gets into Dartmouth is the kind that also gets into Brown. That’s why schools use binding Early Decision programs to lock up talent and boost their yield (the ratio of students enrolled to total admissions offered). That’s also why financial aid packages are sometimes negotiable if you can play offers against each other.

Diversification is still the cardinal risk management principle, but it looks a little different. Applying to HYP is not placing three different bets, but placing the same bet three times. Real diversification in this context means building your portfolio across selectivity bands, geographies, and evaluation frameworks (e.g., applying to essay-driven schools like UChicago alongside numbers-driven schools like UC Berkeley).

A preternaturally patient and strategic student might even run a small-cap alpha long-dated call play: target a regional undergrad, max out their GPA while having time to kite-surf, and leverage killer stats at a top law or med school, which are both very numbers-driven. (Parents usually insist I prep their kids for the Princetons and Yales—I oblige—but the one person who took this advice got into a great med school and had ridiculous fun along the way.)

The early career version of this trade is skipping the bulge bracket after graduation, crushing it at a boutique, and entering PE as an associate. Same logic, different market.

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Wall Street in Slow Motion

But that long-dated, kite-surfing prestige trade only works if the student is actually good, and stays good for four straight years.

The core difference between financial markets and education markets is time horizon, and that difference starts with the assets being traded: human capital and prestige. Both are costly to acquire, hard to exchange, volatile in perception, and painfully slow to reprice.

So while education markets follow the same basic logic as financial ones—valuation, signaling, and risk—they’re slower, stickier, and illiquid.

(I call this the Prestige Asset Model, at least in my head.)

As a result, transactions in education markets unfold on geological time scales. That has consequences.

1. Time Lag Kills Most Arbitrage

A key difference is how long it takes for a trade to “clear.” If you bought MRK last Monday, you knew it was a good trade by Thursday. In education, you “buy” a college choice at 17 but don’t know how it pans out until you’re 27 (or 47).

The student who chooses a lower-prestige undergrad to dominate and get into Harvard Law doesn’t get to realize that trade unless they execute flawlessly for four years. There’s no partial credit, no way to exit the position early, no real-time pricing data.

Arbitrage exists, but it’s gated by performance, discipline, and time. It’s not enough to see the inefficiency. You have to live inside it long enough to prove it was real.

(For institutions, arbitrage is faster, like when a domestic university opens a “Global Center” in Abu Dhabi or another location where they have lower operating costs, all while charging U.S. tuition.)

2. Bubbles Don’t Pop, They Deflate Slowly

In finance, a bubble can burst in a day. In education, even if everyone knows a credential is overpriced, it can take a generation for the labor market, cultural norms, and institutional behavior to catch up.

We’re currently living—and have been for some time—inside an elite college prestige bubble. Everyone’s asking whether $350,000 for a bachelor’s is “worth it.” But top firms, top grad schools, and elite social networks still use those brands as filters.

Economists Raj Chetty, David Deming, and John Friedman, working from tax and admissions records, find that attending an Ivy-Plus college rather than the average state flagship raises the odds of reaching the top 1% of earners by 50%, nearly doubles the odds of an elite graduate program, and almost triples the odds of landing at a prestigious firm. For the typical graduate, though, the Ivy-Plus credential does almost nothing: no meaningful effect on the chance of reaching the top quartile, on earnings rank, or on log earnings.

In other words, the Ivy-Plus brand increases the likelihood that certain gatekeepers will filter your application upward in the tail case, but the median family will correctly view the $350,000 sticker price with skepticism.

So the bubble floats on, buoyed by inertia, signaling, and a lack of short-term feedback. If the current turmoil in higher education signals a long-term devaluation of Ivy League credentials, don’t expect it to affect Chip or Peyton when they apply this fall. Expect it when their Class of 2031 retires.

3. Failure Is Quiet, Not Sudden

In finance, bad trades fail loudly: Greensill, Archegos, Credit Suisse, FTX. In education, failure is much quieter. A student burns out. A résumé doesn’t get callbacks. A school slips a few ranks or loses a few star faculty. Not a collapse, just erosion.

That makes it harder for the market, or its participants, to self-correct. There’s no central exchange for outcomes, and the feedback loop is messy, anecdotal, and delayed.

I’ve watched more than a hundred families go through this process, but my vantage point isn’t typical. Most parents are working off a much smaller sample: their own child, or a handful of family friends.

Fundamental Analysis

There are three things I’d like to emphasize here.

1. Real Markets

First, financial markets aren’t an analogy for education. Education is made up of actual markets:

• The market for students (admissions)

• The market for credentials (recruiting)

• The market for institutional prestige (rankings, endowments, donors)

• The market for executive talent (Columbia just hired a new president)

• The market for grant funding, both internal (among faculty) and external (from the federal government or foundations)

These are slow, fuzzy, but functioning markets, governed by the same logic as financial ones, just with less standardization and a different set of gatekeepers.

2. Drift and Diffusion

Second, the classical purpose of education—to equip a young person with skills, discipline, ethics, and creativity—still matters. Over time, it is the only thing that does.

Recall where we started: a college app is a call option. What options teach us is that the value lives in the (random) Brownian motion of the underlying asset. And here the underlying asset is a person, which is the one thing no one can trade.

By analogy to Brownian motion, the position of your long term human capital has two components: drift and diffusion. The drift is the fundamental: raw human capital, plus the badly underrated knack for turning in your homework on time for four straight years. The diffusion is everything else: the bad first manager, the parent who falls ill junior year, the cruelty of graduating into a spring when no one is hiring.

Drift accumulates with time, while noise only accumulates with its square root. Over a single semester the noise drowns the drift, which is just to say the near term is all sequencing and luck, no partial credit, no live quote.

On the longer timescale of a whole career, the arithmetic flips: the drift has grown compoundingly while the noise has hardly kept pace. This is when your fundamental human capital, the hard and soft skills gained through genuine education, steps out of the static.

A life is not a series of independent trials, each year forgetting the last; it’s a random walk with drift, where the steps compound and the past is carried forward. That dependence makes a bad admissions or recruiting cycle genuinely hazardous. But drift is patient. Run it long enough and it wins.

3. The Absorbing Barrier

So it would be a slight overstatement to say volatility decays. More accurately, transitory noise washes out (you stop being judged on one bad grade or one lackluster performance review), while the permanent differences fan out. This is why the truly capable pull away from their classmates the way earnings curves splay upward over time. In the long run, nothing matters more than fundamentals.

There is one exception, and it’s the dark one. Drift only pays if you’re still at the table to collect it. Every position has an absorbing barrier, a floor you don’t come back from once you touch it. Extreme examples include a felony conviction, dropping out of school with no path to recover, or permanently burning out.

Even a trajectory with strong positive drift carries a real chance of touching that floor, and the danger is front-loaded, with high school and early career carrying the highest risk before track record has bought any distance from the edge.

The market’s slowness is usually benign, since it prices you correctly in the end. The tragedy is reserved for the few who draw a bad hand early and leave the table before the drift can speak. The market takes thirty years to value you fairly, and not everyone gets thirty years.

So in the trenches of a typical semester, my job as a tutor and coach is more akin to a traditional business manager: allocating effort, deploying time, providing feedback, advising on marginal investments (do this summer program, not that one). All this in service of building sustainable, long-term value.

So while my profession involves managing diffusion (hedging risk through an admissions or recruiting cycle), my calling as an educator is to manage drift: the slow accretion of human value over years. But there are forks in the road, like the college admissions sprint, that feel way less businessy and much more financey—and now I can say why. They’re the near-barrier, high-variance moments, when the diffusion is loudest and the floor is closest.

This is why I get most involved in my advisees’ lives early (during high school and college): not because I’m any less useful to someone already established, but because the stakes are asymmetric at the start of a career.

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Works Cited

Chetty, Raj, et al. Diversifying Society’s Leaders? The Determinants and Causal Effects of Admission to Highly Selective Private Colleges. National Bureau of Economic Research, July 2023, https://doi.org/10.3386/w31492. Accessed 29 June 2026.

Diep, Francie, and Nell Gluckman. “Can Jennifer Mnookin Heal Columbia?” The Chronicle of Higher Education, 26 June 2026, www.chronicle.com/article/can-jennifer-mnookin-heal-columbia. Accessed 29 June 2026.

Claude Opus 4.8 (Anthropic) was used for spell-checking, proofreading, fact-checking, and citation formatting. ChatGPT (OpenAI) was used to generate the header image.

Edited 29 June 2026 to add the cover image and make minor formatting fixes.

All ideas, arguments, source selection, and writing are my own.

Preface

When I first began to follow Harvard’s clash with the White House, I intended to write a timely update for families I advise: a strategic briefing for students and applicants navigating a volatile moment in U.S. higher education. But as I began to digest the news, I realized this episode revealed something deeper—a conflict I’ve wrestled with for most of my life inside elite education, from my first day at Phillips Exeter to my JD and MBA at Columbia.

At stake is a fundamental tension. Between the soul of education—its mission to form good citizens and flourishing individuals—and its body: the institutional machinery, the markets, the fundraising, the federal grants, the rankings. What we are witnessing is a collision between the university’s internal vocation and its being-in-the-world.

Yesterday, the temporary restraining order Harvard had secured against the Department of Homeland Security expired. Judge Allison Burroughs of the District of Massachusetts has now granted a preliminary injunction, effectively maintaining the status quo in Harvard’s international student admissions while the case winds through the courts. I believe Harvard will ultimately prevail. But I also believe the damage is already done—and not for the reasons most people think.

What we’ve witnessed over the last eight weeks has been Harvard’s Lehman Brothers moment. Not in the sense that Harvard itself will collapse—it won’t—but in the sense that the world has now glimpsed at structural vulnerabilities in a market many rarely consider: the Prestige Asset Market.

This market trades in an unusual asset class: the college degree and the human formation it supposedly represents. It is illiquid, opaque, and operates on unusually long time horizons. At the micro scale, the market is made up of students and institutions. At the macro scale, it includes sovereign nations competing for global talent. This market is ancient, older than the cursus honorum, Rome’s ladder of public office and credential. And today, even if no university will say so out loud, we have standardized and financialized its mechanisms. Higher education, in short, is Wall Street in slow motion.

So where does that leave families? It demands the mindset of a disciplined, long-term investor, one who sees past headlines and treats education as the durable, identity-shaping asset it is. As Epictetus reminds us, we must focus on what is ἐφ’ ἡμῖν—on what is within our control.

Families can feel like collateral damage as elite universities and the global superpower “bestride the narrow world like a Colossus.” But no institution determines your fate—not even if you’re an international student at Harvard in the summer of 2025. My role, and the role of Highly Selective, is to help you see the market’s decaying structures, and to show you the arbitrage. Not so you can panic, but so you can trade.

Table of Contents

I. Harvard’s Sharpe Ratio Has Fallen: Why a spike in risk—not a decrease in returns—is eroding the university’s prestige asset

II. Prestige, Marked to Market: How Harvard turns prestige into cash—and why the market is re-rating the asset

III. The Structural Risk Beneath the Headlines: Parsing the real and imagined fallout of Harvard’s sovereign risk event

IV. Winners, Losers, and the Long Game: What Harvard’s standoff means for admissions strategy and institutional alignment

V. Don’t Panic—Rebalance: How families can exercise portfolio discipline when the education market turns volatile

I. Harvard’s Sharpe Ratio Has Fallen

Why a spike in risk—not a decrease in returns—is eroding the university’s prestige asset

Harvard’s core asset is not real estate, research labs, or even its endowment. Its core asset actually doesn’t appear on its balance sheet. It’s prestige: a long-duration, intangible asset that underwrites everything from enrollment to donations.

In financial terms, prestige works like any other asset: it has a return (influence, outcomes, future earnings) and a risk (uncertainty, volatility, headline exposure). The ratio of the two is what investors call the Sharpe ratio. And this summer, Harvard’s Sharpe ratio has fallen—not because the returns have shrunk, but because the risks have spiked.

The Risk Event

The first escalation came quietly: on April 16, the Department of Homeland Security (DHS) sent Harvard a letter demanding disciplinary records for all international students allegedly involved in pro-Palestinian campus protests. That demand, based on student political activity, raised alarm bells internally, but it did not explode into the open until a month later.

Then, on May 22, the White House made its move, announcing that Harvard’s certification under the Student and Exchange Visitor Program (SEVP) would be revoked effective July 1. The consequences were immediate: without SEVP certification, Harvard would lose the ability to issue visas to new international students, effectively halting a significant portion of its admissions pipeline.

To be clear, DHS does have statutory authority under Title 8 of the U.S. Code to revoke SEVP status, typically when a school fails to meet reporting standards, poses a national security risk, or lacks academic legitimacy. But courts often distinguish between lawful authority and lawful motive. (See Department of Commerce v. New York, 588 U.S. ___ (2019).) SEVP revocations have historically been reserved for diploma mills and immigration scams—not global research universities.

Harvard argued it was being singled out under the pretext of national security. On May 23, a federal judge partly agreed, granting a temporary restraining order (TRO). On June 5, the court gave further credence to Harvard’s amended complaint. Yesterday, the TRO expired and DHS Secretary Kristi Noem raised the pressure, publishing a Washington Post op-ed that gave Harvard an exploding deadline of Friday, June 27, to comply with its SEVP demands. But later that evening, Judge Allison Burroughs granted Harvard’s request for a preliminary injunction, preserving the status quo as litigation proceeds.

So for now, Harvard’s SEVP status remains in suspended animation. There are whispers of a deal, but no one—not even the White House, probably—knows if it will materialize. The base case sees both sides digging in for trench litigation.

The Long War?

Barring some privately negotiated capitulation, a Supreme Court showdown is likely. Neither side can really afford to blink.

Harvard is unlikely to back down, because it is already fighting other legal battles with the administration, including over research funding. It hasn’t made the sort of conciliatory gestures that Columbia has, and it has given itself breathing room: fundraising has been strong, and the university recently raised new debt to bolster operating cash flow.

The White House, for its part, benefits from delay. There’s no acute market pressure (as we saw with the tariffs) forcing resolution. And politically, the administration may welcome the standoff: it allows them to look tough without taking a definitive loss. Now that the matter is in court, they have every incentive to contest it fully and every procedural excuse to slow-walk it.

Harvard would probably win in the Supreme Court. When I’m not advising students on admissions, I’m a securities oompa loompa at a corporate law firm, not a litigator. But one thing they did teach us at Columbia Law is this: you can sometimes do something for a good reason, and you can sometimes do something for no reason—but you can’t do something for a bad reason.

If the White House is using immigration law to punish a political adversary, that’s a bad reason. And bad reasons make judges uncomfortable, even in the Roberts Court. We saw that just last month in AARP v. Trump, when SCOTUS blocked the administration from using the 1798 Alien Enemies Act to deport Venezuelan nationals without notice. The separation of powers still functions. Unevenly, but not irrelevantly.

But an eventual win on the merits misses the point. Legal resolution could take years, and Harvard hemorrhages with every semester that its international students remain in limbo. The District of Massachusetts may take 6–12 months to decide on the merits. Add 6–9 months for the First Circuit appeal, then 3–6 months for certiorari and 6–9 more for a final SCOTUS decision. That timeline pushes clarity out to late 2027, just as the Class of 2032 begins to apply.

Meanwhile, DHS isn’t standing still. It appears to be tightening immigration channels through administrative means: slowing approvals, delaying visa appointments, and raising procedural barriers.

Some Harvard students, post-finals, have stayed in the U.S. out of fear they might not be re-admitted. Others have returned home and remain unsure whether they’ll be let back in September. If this drags six more weeks, some won’t return. In twelve weeks, seniors at international schools may simply opt out of applying at all.

The Market Reprices Harvard

Their hesitation reveals the core issue at stake. This standoff has already begun to reprice Harvard, both reputationally and financially. Prestige, although absent from the balance sheet, is a long-duration intangible asset—and Harvard’s core asset. It underwrites the university’s long-term strategy and its short-term liquidity.

The return on a Harvard degree hasn’t changed. Employers still hire on it. Global families still aspire to it. The payoff remains.

But the risk attached to pursuing a Harvard degree has gone up. The immigration infrastructure that supported global access is now visibly brittle. The legal terrain is unstable. The perception of elite American education as a safe bet—especially for international families—has cracked. This hurts Harvard’s standing as an international destination of formation.

So Harvard’s Sharpe ratio—the ratio of return to risk—has fallen. Not because the payoff shrank, but because the denominator grew.

This is more than a metaphor. In the Prestige Asset Market, families act as long-term investors in their children's futures. And they don’t just price value, they price reliability. Harvard’s long-term reputational capital once functioned like U.S. Treasuries: safe, liquid, globally convertible. Now, it’s being repriced like an emerging-market bond when the sovereign turns hostile.

But in a world where prestige is financialized, Harvard just experienced a write-down.

II. Prestige, Marked to Market

How Harvard turns prestige into cash—and why the market is re-rating the asset

U.S. GAAP defines an asset as “probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events”. Although it appears nowhere on its balance sheet, prestige is an asset for Harvard because it can turn long-term prestige into money today. International students are just one of the many ways Harvard converts prestige into present cash flow.

A nifty public relations arbitrage

Harvard says it meets 100% of demonstrated financial need for all admitted students, including international ones. But the data (and common sense) say most international students pay sticker. Harvard doesn’t break this out in public reporting, but we can infer it. (Secretary Noem cited $383.6 million as a figure in her op-ed, but this number estimates total economic contribution of international students, including job creation. The true figure is not public.)

First, the street view. I’ve split my time between NYC, Paris and London on the elite admissions circuit for years. Here’s what I see:

• Network effects. Why would a family choose Harvard over ENS, LSE, or Bocconi? Because someone in their network already went. That narrows the pool.

• Sticker shock. In countries with state-funded higher ed, the idea of paying $80,000 per year is hard to fathom. UK and France average household incomes hover around $47,000. Most families don’t even get far enough to read the fine print about financial aid.

• Access and infrastructure. Fewer testing dates, more distant testing centers, and counselors with limited experience navigating the Common App—all of these raise the cost of applying.

One could almost call Harvard’s international financial aid policy a public relations arbitrage. It earns reputational credit for funding students who, in practice, are structurally discouraged from applying in the first place.

C.R.E.A.M. of the crop

Next, the data. Between 2006 and 2025, Harvard’s total cost of attendance and international student enrollment have climbed with inflation, but the nominal average financial aid award stayed flat at $41,000 from 2009–2022.

Figure 1: Harvard College Total Cost, Financial Aid, and International Student Enrollment (2006 - 2025).

During the same period, the real value of the average financial aid package fell by 33%, while the percentage of students receiving financial aid declined from almost 70% in 2009 to 55% last year (Source: Harvard University).

Figure 2: Harvard College Total Cost and Financial Aid (2006 - 2025, adjusted to 2006 dollars)

There was a spike in 2023 when Harvard expanded aid for low- and middle-income families. But long-term, international enrollment rose while the generosity of aid packages declined.

As a scholarship kid, it was jarring to graph this out. It doesn’t make Harvard a villain, but it explains why some Americans don’t see Harvard as a hero either.

Harvard’s international students matter not just for this year’s revenue, but for the long-term yield on its most intangible asset: prestige. They are high-margin customers, yes—but also prestige multipliers. As the Wu-Tang Clan said, cash rules everything around me, and international students are the C.R.E.A.M. of the crop.

The balance sheet revalues, then cash flow reacts

But this is where the pundits invert causality. Observers correctly note that a decline in international enrollment affects Harvard’s bottom line. From there, some argue that shrinking revenues or a smaller endowment will eventually erode prestige. But it's the other way around.

When Harvard’s Sharpe ratio falls—when reputational risk rises relative to perceived reward—that signals a market reassessment of its long-term intangible asset: prestige. In accounting terms, this amounts to a write-down in its non-current intangible assets—the stock of reputational capital Harvard draws on to maintain relevance and command revenue.

And when the market marks down that asset, it constrains Harvard’s ability to convert prestige into present cash flow. So the White House’s attack on Harvard’s prestige is ontologically prior to its attack on Harvard’s bottom line.

III. The Structural Risk Beneath the Headlines

Parsing the real and imagined fallout of Harvard’s sovereign risk event

So far, only Harvard has received scrutiny this severe. But that hasn’t stopped a wave of anxiety from sweeping through higher ed. I would urge a calmer reading.

Overstated near-term risks

Worst-case scenarios dominate headlines, but many of them are less likely than they seem. Let’s examine a few.

Policy Contagion

Some worry that Harvard is the Helvetii: the first tribe Caesar struck in his conquest of Gaul—not for its power, but for what it symbolized. If the White House can break Harvard, what stops it from advancing on Columbia, Stanford, or Penn? Theoretically, nothing. But so far, DHS has issued no similar letters elsewhere. Columbia’s more conciliatory stance may have helped it avoid confrontation. Unless the pattern repeats, this may remain a one-off skirmish rather than the opening of a campaign.

Financial Aid Fallout

Yes, international student tuition helps subsidize domestic financial aid. But so do certain domestic full-pays. Schools might shift recruiting toward high-income U.S. postal codes. Plus, elite colleges have other income streams: endowments, graduate tuition, research grants. Harvard alone raised over $1 billion in gifts last year and hasn’t touched levers like adjusting merit thresholds or loan portions. So this is not a meaningful near-term risk, but what we should be watching is a long-term write-down in prestige across all U.S. higher ed.

College Town Economies

Some argue that local economies (think Amherst, West Lafayette) rely on international students. But the gloomiest forecasts assume those students won’t be replaced. In reality, colleges will likely backfill with high-paying domestic admits.

Long-term, market structure risks in U.S. higher ed

That said, the real risks are structural, longer term and harder to quantify. They play out slowly, or at the level of market and culture.

Sovereign Risk and Short-Term Funding on Long-Term Assets

Let’s strip away the First Amendment and ideological framing for a moment and look at universities’ relationship to government in strictly market-driven terms. Before 2025, few fully grasped the extent to which universities depended on federal support, and fewer still recognized that this dependence posed a structural risk.

Much like Lehman Brothers in 2008, which relied on short-term repo funding to finance long-term assets, universities have spent decades accumulating prestige—an illiquid, long-duration asset—while funding it with short-term federal liquidity: visa regimes, research grants, regulatory favor.

Now, as the sovereign turns hostile, Harvard is being repriced like an emerging-market firm under political stress. The fundamentals may not have changed—but the sovereign risk premium just did.

Long-Term (Human) Capital Management

The policy argument is simple: scaring off international students harms U.S. innovation. The contra view, of course, is that someone else would have built a Stripe if Patrick Collison hadn’t come to MIT as an Irish schoolboy.

But that misses the deeper macroeconomic point. Elite universities don’t just educate global talent—they underwrite it. They serve as market-makers in a sovereign-scale auction for minds. In that sense, the United States didn’t merely host the university that educated Collison. It won him, with MIT acting as lead bookrunner in the global human capital markets.

The trouble is, that market structure has changed. Like Long-Term Capital Management in 1998, elite universities built global strategies on assumptions of political liquidity and structural convergence. But now, as sovereign posture shifts, their portfolios are being marked to reality.

Cultural Erosion

The harder loss to model is cultural. International students make American campuses richer—not just economically, but socially and intellectually. They bring global perspectives, shift conversations, and make late-night dorm debates more interesting.

If international students vanish, domestic students won’t just lose peers. They’ll lose something they didn’t even know they were buying: the cosmopolitan oxygen that gives elite campuses their intellectual character.

This assumes, of course, that internationalization is a positive good. Not everyone agrees anymore. But for most families shopping for elite education, it remains part of the value proposition.

IV. Winners, Losers, and the Long Game

What Harvard’s standoff means for admissions strategy and institutional alignment

When policy shocks ripple through higher education, the impacts aren’t distributed evenly. The White House’s decision to target Harvard’s SEVP certification—whether strategic or symbolic—has created clear beneficiaries, probable casualties, and some parties left nervously watching the headlines. Here's how the early fallout is shaping the strategic landscape. This is also where the strategic implications come into focus for families navigating the new terrain.

Winners

Domestic students who can pay full tuition

These students become more attractive marginal admits at elite universities. With fewer international full-pays in the mix, admissions offices under pressure to meet revenue targets will naturally lean into wealthier domestic zip codes. Even at schools that are nominally “need-blind,” enrollment management is often not.

Selective schools outside the Ivy League drama

Think WashU, Vanderbilt, Emory, Tufts, Wesleyan, and USC. These schools are seen as academically rigorous but less politically radioactive. For international families wary of the immigration-political nexus, they are becoming safer bets, offering global prestige with fewer headlines.

Private and elite public high schools in the U.S.

Schools like Andover, Chapin, and Menlo-Atherton indirectly benefit because elite colleges often see them as pipelines to full-pay, low-risk domestic students. Even when financial aid decisions are made independently, admissions officers view these schools as signals of cultural and academic fit.

Competing global universities

Top-tier institutions in the UK (Oxford, LSE), Europe (IE, Bocconi, ETH Zürich), Canada (McGill, Toronto), and Asia (NUS, HKU) stand to absorb some of the high-caliber international students turned off by U.S. volatility. Many already have English-language programs and smoother visa policies, and many of these institutions are already seeing a dramatic uptick in U.S. applicants.

Losers

International students applying to U.S. colleges

This cohort bears the brunt of uncertainty. Visa risks, long delays, and the specter of abrupt policy change increase the perceived fragility of a U.S. education investment. Even if only one school is directly targeted, the ambient fear can chill the entire applicant pool.

Harvard, and schools like it

Harvard faces immediate risk to revenue, legal costs, and long-term damage to its reputation as an internationally neutral site of intellectual life. Peer schools—especially those who might resist federal pressure—are taking note and bracing for their own tests.

U.S. colleges with smaller endowments but large international enrollments

Public flagships (e.g. Purdue, UMass Amherst, Michigan State) rely heavily on international full-pays to balance budgets. If international students view U.S. education as riskier overall, these institutions will feel the squeeze most acutely.

Academic departments with global pipelines

STEM PhDs, research-heavy economics programs, and policy schools have long depended on international talent. A chilling effect on student inflow can mean fewer research assistants, lower publication output, and eventually less grant competitiveness.

“Stay the course.” — Jack Bogle

Speaking now as someone who’s spent years guiding families through elite admissions, the most important truth I can offer is this: colleges and degrees are tools, not masters. They are means, not ends—stepping stones toward a meaningful life, not its guarantors. They exist to serve your purpose, not to supply it.

Understanding the broader shifts—like the ones unfolding now—can help you devise your strategy. Your task, like that of any disciplined investor, is to interpret the signals, adjust your position, and invest in the future you intend to build.

V. Don’t Panic—Rebalance

How families can exercise portfolio discipline when the education market turns volatile

The Prestige Asset Market is no longer frictionless. Regulatory shocks, geopolitical risk, and institutional volatility have introduced new variables. But for students and families, the correct response is not to panic—it is portfolio discipline. In investing, volatility is a feature, not a flaw. What matters is time horizon and clarity of purpose.

• For international students: hedge your bets. Transfer deadlines in the U.S. may have passed, but a few European schools (like IE in Spain) are still open. Especially if you are a rising senior, the odds are better than not that you’ll be able to return in the Fall to finish your degree. Still, a backup offer might ease the mind.

• For families applying this fall: don’t panic. Applications aren’t due for months, and clarity should come well before the Nov 1 deadline. Your energy is better spent on things you control: crafting your personal statement or maximizing SAT/ACT scores. Think of your college list as a diversified (but not fully uncorrelated) portfolio of call options. Each application costs something upfront but offers future upside. After the first app, the marginal cost of the next app declines. If your list is well-designed, adding or removing Harvard shouldn’t be the make-or-break.

In this market, your capital is not just your money—it’s your time, your mind, your effort, your formation. And the only asset you truly control is yourself. As the Stoics remind us, the external world may shift, but your own judgment, effort, and virtue remain ἐφ’ ἡμῖν—within our power.

Donc, ayez du courage. Even in a turbulent market, calm, long-term investors prevail. Ladder your risks, hedge your downside, and stay focused on intrinsic value. The wise don’t chase prestige—they wield it.

Updated June 27, 2025 to include cover image.

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About Me

I’m the founder of Classical Advisors, where I help students and families think strategically about elite admissions, early careers, and long-term human capital. Over the last decade, I’ve advised high-performing students across New York, London, and Paris—with recent placements at Harvard, Yale, Princeton, Penn, Duke, and the Sorbonne. My career advisees have gone on to internships and full-time roles at UBS, Citi, Carlyle, Piper Sandler, and more.

I currently work in London on the U.S. Corporate Finance team at A&O Shearman, focused on capital markets and leveraged finance. I earned my JD and MBA from Columbia, hold undergraduate degrees in Applied Mathematics and Classics, and graduated from Phillips Exeter Academy. On parle français chez nous, and I also read Latin and Ancient Greek.

If you’d like strategic guidance—or want to work together—reach out anytime: raphael@classical.nyc.