How a $1 billion gift could transform a Bronx medical school
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Ruth Gottesman has donated $1 billion to the Albert Einstein College of Medicine in the Bronx. The money will be placed in an endowment, the income from which will fund free tuition for all students in perpetuity.
Why it matters: No one but Gottesman, a faculty member and board chair at Einstein who spent her whole career at the institution, would have made this particular donation. But philanthropy by its nature is idiosyncratic, and this gift in particular has the potential to have some very welcome second- and even third-order effects.
The big picture: Gottesman was bequeathed her fortune by her husband, Sandy, an early investor in Berkshire Hathaway, who died in 2022 at the age of 96.
- At least by her telling, she had no idea the sum even existed until she was given instructions to "do whatever you think is right with it."
Between the lines: Berkshire Hathaway, famously, never pays a dividend, so the Gottesmans never paid any income tax on these shares. And because they never sold them, they never paid capital gains tax, either.
- Eventually, substantially all of the $1 billion portfolio would have been subject to 40% estate tax upon Gottesman's death. But now that too has been avoided.
- Because the college is a nonprofit, it can sell the Berkshire Hathaway shares without incurring any tax liability.
Winners: First and foremost, the beneficiaries of this deal are going to be the medical students at Einstein, none of whom will pay any tuition from August forward.
- Medical students, especially those who choose to study in a very poor area of the Bronx, tend to be idealistic. If they're not forced by the weight of student debt to find high-paying jobs in rich neighborhoods, they're much more likely to stay where they're needed most.
- Because Einstein is now genuinely needs-blind, it can also focus its admissions even more on identifying and recruiting a truly diverse group of future doctors, many of whom grew up in the neighborhood they'll be serving. It's been doing that for a while, with its Bronx HOPE program.
Follow the money: The $1 billion endowment should enable Einstein, which has historically been cash-strapped, to provide a more well-resourced offering.
- The college has always punched above its weight in terms of research, and a better-endowed medical school stands to attract more renowned teachers to the faculty and the associated Montefiore hospital system.
- Money begets money: U.S. donors tend to prefer to give to rich and successful institutions rather than those that are struggling. As such, Einstein's new $1 billion endowment lays the groundwork for a significantly higher level of donations from elsewhere.
Reality check: In principle, a $1 billion investment could transform public health in the Bronx, if it was targeted at something like preventing and controlling diabetes.
- Gottesman's gift won't create more doctors — the class size isn't increasing — and the immediate benefit will accrue mainly to doctors, who are solidly in the upper middle classes, rather than to their much poorer patients.
The bottom line: Philanthropic whataboutism is generally unhelpful. This is a simple and transformative gift, and it's likely to have significant positive and as-yet unforeseen consequences.
