Dartmouth's Wacky Business Model

You Wouldn’t Run a Business This Way. Here’s Why Dartmouth Does.

“Dartmouth creates a world-class product, discounts the price 51 percent, gives an additional discount for certain buyers... then begs for money.”

—Ernie Parizeau ’79

Ernie's got it right. That's Dartmouth's business model in a trim twenty-two words. Some might say it's the only thing trim about Dartmouth.

But inefficiency is partly what makes a school like Dartmouth so good. You want efficient? Put a hundred kids in a lecture hall with a professor. Scratch that: with a graduate teaching assistant. That's much more efficient than ten kids in a room with a mentor who's written the textbook they're reading. if your goal is to save money, take door number one. (And get there early if you want a good seat.)

If your goal is higher than that—say, the kind of education that will equip young men and women to help lead us in a troubled world, the very people you would hire in your own line of work—then your choice is clear.

You focus on value.

If you looked solely at cost, you wouldn't have kids, would you? Talk about pricey and inefficient. You wouldn't serve on your local school board, give blood, or donate a dime to your house of worship or art museum. Why do you do those things?

Because you measure their worth in something more valuable than dollars.

So here's Ernie, a venture capital guy, who stands up at a meeting of Dartmouth fundraising volunteers not so long ago and delivers the quote at the top. You've got a wacky business model, he says. But it's not so wacky once you understand it, once you stop comparing it to the way Wall Street and Main Street do business.

It's the difference between mission-driven and profit-driven enterprises. At Dartmouth, revenues matter only so far as they support the fundamental principles of the institution. Those principles produce an intangible product. Returns to society are harvested over the long term, measured in generations.

Says Ernie: Explain your business model and you'll be in a better position to raise the philanthropic dollars that enable Dartmouth to do its job—which, by the way, it does better than nearly all of its global competitors. (Actually, Ernie didn't say that, but that's what he was thinking.)

Let's tease this apart a bit:

Dartmouth creates a world-class product.

  • An ambitious learning environment to educate the most promising students to prepare them for a lifetime of learning and responsible leadership.
  • A passionate quest for knowledge and perpetual exchange of information between 391 tenured and tenure-track faculty and undergraduates in an environment where original scholarship influences teaching, and where teaching is essential.
  • An 8:1 student-faculty ratio,and more than one thousand undergraduates doing one-on-one research with an authority in their field.

Discounts the price by 51 percent.

  • For everybody. Dartmouth charges $57,996 for undergraduate tuition, room, and board, even though it spends $117,872 per student per year.

Gives an additional discount for certain buyers.

  • 45 percent of Dartmouth undergraduates received need-based financial aid in FY 2013.
  • Average financial aid package in 2012-2013 was $40,600.
  • Tuition is free to families earning less than $100,000 a year.

Then begs for money.

  • Charitable gifts and endowment income underwrite 36 percent of the cost of a year at the College.
  • Tuition, room, and board cover only 43 percent of the cost of a Dartmouth education.

Think of the Dartmouth experience. Think of your Dartmouth experience.

The hike up Moosilauke or the art course that made you think differently about engineering. As a student athlete recently said, it's "heading to class and knowing nine of the ten people you meet along the way...studying Beethoven or flipping a Frisbee on the Green... discussions with some of the nation's brightest minds, who turn out to be peers as well as professors... the devotion of alumni who make the pilgrimage to the Hanover Plain...the opportunities are endless."

The devotion of alumni who make the pilgrimage to the Hanover Plain. The opportunities are endless.

That's the heart of the Dartmouth experience, and that's what the College's business model is founded on. Opportunities for some of the most talented young people to discover themselves and the seeds of the good work they will eventually do in the world. And the devotion of generations who came before them and who make that experience possible.

Is it a wacky business model? Sure it is. But there are those who love it.

Watch the movie: "You Wouldn't Run a Business This Way."