Running one of the world’s preeminent research and teaching universities requires an unstinting commitment to excellence in every aspect of its operations. And excellence is expensive. Professor Val Fitch, a Nobel laureate in physics, expressed the point well some 25 years ago, in a memo to Bill Bowen, who was then Princeton’s president. Another university had made a lucrative offer to one of Princeton’s best physicists.

Fitch, who was the chair of the physics department, reassured Bowen that money alone could not lure his colleague away from Princeton. But, Fitch added, the University needed to make some improvements to the department’s laboratories. “Excellence cannot be bought but it must be paid for,” he told Bowen. Bowen authorized the renovations that Fitch had requested—and he frequently quoted Fitch’s language to explain the costs of higher education!

Groundbreaking Financial Aid
In the last several decades, the price of leadership has risen even more dramatically than the University’s endowment. Some costs have gone up because of choices that Princeton has made. I have already mentioned our unprecedented initiative in undergraduate financial aid. This University has done more than any other to ensure that every student admitted, regardless of background or economic circumstance, can come to our campus and share fully in the benefits of a Princeton education.

These improvements to the financial aid program increased not only the size of each award but also the number of students receiving aid. For example, at the time that Princeton eliminated loans, 38% of each entering class received financial aid. Just a few years later, some 55% of each class is on aid—far more than at many of our peers—and the average grant now exceeds $30,000 per year. That change is wonderful, but it is also expensive, and the strength of the endowment, together with gifts for scholarships and Annual Giving, made it possible.

Exceptional Faculty and Staff
Other costs have risen for reasons that are, for the most part, beyond the University’s control. Labor, which is the largest part of any university’s budget, provides a good example. In general, labor costs tend to increase more rapidly than overall inflation, and Princeton cannot escape the impact of these changes. The University seeks faculty members who are the best researchers and teachers in the world. These people are few in number and very much in demand; scholars who can get a job at Princeton can get a job anywhere, and we face intense competition for them. The endowment enables us to create an environment that attracts not just the most talented individuals but collaborative groups who will work together to expand the frontiers of knowledge. Princeton is one of the very few universities with both the determination and the means to do this.

Faculty members are not the entirety of the University’s labor force, of course. The University also employs librarians, admissions officers, coaches, counselors, information technology specialists, and many others who provide critical support for Princeton’s teaching and research mission. Princeton works hard to minimize its administrative costs, and it is not uncommon for visitors to remark that we are more leanly staffed than our peers. Nevertheless, the University’s staff members do essential work, and the endowment enables Princeton to hire and retain the many people upon whom faculty and students depend.

Advances in Technology
The high cost of leadership has grown rapidly in other areas, too. In subjects as diverse as nanotechnology, neuroscience, and cosmology, researchers now have the ability to explore phenomena that were entirely unobservable in the recent past. Supercomputers have enabled scientists to analyze vast amounts of data, thereby opening up entirely new fields of inquiry in biology and other disciplines. These advances have made possible some of the most exciting research now taking place in the world, but the new techniques are expensive. When new researchers arrive at the University, or when researchers at Princeton launch a new experimental project, the University must help to defray the start-up costs. Fifteen years ago, such investments involved reasonably modest amounts; today, they total millions of dollars each year.

Many of the costs of research are still paid for by grants from government or industry, but increases to government funding have not kept pace with the demands of the scientific enterprise. Just five years ago, for example, the National Institutes of Health funded more than 30% of the grant applications that it received; last year, the grant rate dipped under 20%. In the past, the government was often willing to provide money for laboratory equipment; now, it usually expects universities to pick up these costs. As competition for research dollars has stiffened, universities have had to step in to fill the gap. Princeton’s endowment has helped it to meet this growing challenge in ways that fewer and fewer institutions can.

Preserving the Campus
The endowment has also helped to preserve and enhance the wonderful campus that plays such a defining role in the life of the University. During the difficult economic conditions that prevailed in the 1970s, many universities found themselves forced to pay for basic teaching and research costs by cutting corners on building maintenance and renovation. Campuses suffered from neglect, and universities faced serious problems resulting from deferred maintenance. Princeton’s glorious old dormitories were beautiful to look at, but many were showing the signs of their age—and they were outmoded, given the way students live and study today. If the University did not repair and refurbish them, they would not survive for later generations.

Many universities continue to face pressures that squeeze their ability to care for their buildings. Fortunately, thanks to the endowment’s growth and the spending rule changes that I mentioned earlier, Princeton has been able to address past problems and avoid new ones. The University is now taking very good care of the campus. We are renovating buildings on a fifty-year cycle and restoring the distinctive character of our walkways, vistas, and landscaping. The beauty of the campus has long been a key element of our historic academic mission, and it is one of the strong ties that bind Princetonians to their community. The endowment is helping to ensure that the campus will capture the hearts of students who arrive here in the future, just as it captured our hearts when first we saw it.

Recruiting the Leaders of Tomorrow
Princeton also competes to attract the world’s top graduate students, who will become the leading researchers and teachers of tomorrow. These young people play an indispensable role in the University’s research projects; faculty could not carry out their work without the assistance of talented graduate students. Like our faculty, our graduate students always have choices about whether to come to Princeton. We must offer competitive stipend packages to bring them to Princeton, and the endowment, along with gifts of fellowships and research funds, allows us to do that.

Striving for Excellence
Princeton aims for excellence in many other areas, too. To give just a few examples: We have an extraordinarily low student/faculty ratio, currently about five to one. We continue to make substantial improvements to the undergraduate experience, with new athletic venues and performance spaces, a vibrant campus center, and a sixth residential college that is a modern masterpiece of gothic architecture, added in just the past decade.

We are expanding the University’s world-class libraries—from engineering to the social sciences to art history—and we are enhancing the information technologies that are now indispensable to teaching and learning. The beautiful Frank Gehry-designed Lewis Library, now under construction, will not only consolidate the University’s collections in the sciences but house its most advanced supercomputers. The growth of the endowment through investments and gifts makes all of this possible, enabling Princeton to fulfill its expanding responsibilities to teach, discover, serve, and lead.