Stanford Scandals Stain Silicon Valley’s Favorite University

The school steeped in wealth and prestige is looking for a new president at a time of multiple challenges.

(Bloomberg) — As a new crop of undergraduates starts classes at Stanford University this week — having beaten out tens of thousands of other applicants — they’ll encounter reminders at every turn of the school’s wealth, prestige and deep ties to Silicon Valley.

Buildings emblazoned with the names of tech luminaries such as Hewlett and Gates. A new climate school funded by a $1.1 billion donation last year from venture capitalist John Doerr. Twenty living Nobel laureates connected to the university, including four since 2020.

But behind the scenes, there are some less-impressive occurrences. A search is underway for a new president after the resignation of neuroscientist Marc Tessier-Lavigne following questions over his research. The Stanford name has been dragged into the scandal surrounding FTX, founded by the son of two law professors, leading the school to pledge to return millions of dollars from the bankrupt crypto exchange.

And in the Silicon Valley environs surrounding campus, the technology industry that’s intrinsically tied to the university has faltered as companies pull back on hiring, valuations fall and the spigot of easy money slows.

Such blemishes are unlikely to mar Stanford’s bountiful wealth and status as a world innovation center. But they mark a notable turn after a tech boom that elevated the school to even more prestigious levels in higher education, while pushing the boundaries of a relationship between a university and an industry. Now, the conversation around Stanford is as likely to veer to its foibles as its victories — making the search for a new president all the more crucial.

“The challenges are real. I don’t think it’s like people are blind to them,” said Reid Hoffman, the billionaire venture capitalist and LinkedIn co-founder, who graduated in 1990. At the same time, Stanford’s reach remains profound, he said.

“A lot of people like myself feel very grateful for the role that Stanford has played in their life,” he said.

The tumult stretches beyond the tech slowdown to the free-speech controversies sweeping campuses across the country. In March, students shouted down a conservative federal judge invited by the Federalist Society during an event, leading the administration to issue an apology.  Jenny Martinez — who was the law school dean at the time and last month was promoted to provost — wrote a 10-page letter about academic freedom and condemning threatening messages that followed.  

Last month brought a shock for the storied athletic department with more than 100 NCAA titles: The disintegration of the Pac-12 conference, where Stanford was a member for more than a century. The Cardinal will compete starting next year in the Atlantic Coast Conference against mostly East Coast schools. As part of the deal, Stanford agreed to sacrifice millions of dollars in television revenue.

It’s too early to determine the impact of these challenges on a university that has been a money-making machine, supercharged by the tech industry’s wealth. But as it searches for a new president, Stanford will need to find a leader who can keep innovation flowing, handle increased social pressure from students and maintain its prolific fundraising. 

 “It’s an opportunity for them to gauge where they are and take into account all the things that have happened and the general direction of the institution,” said Bill Funk, whose firm has conducted searches for university presidents over the last 35 years, including for the University of California system, Cornell University and Texas A&M University. Even amid the challenges, it’s likely to be a highly sought-after job, he said.

Earlier this month, Stanford named a 20-person search committee of alumni, faculty and current students. It’s co-led by Gene Sykes, the co-chair of global mergers and acquisitions at Goldman Sachs Group Inc.; Lily Sarafan, co-founder and executive chair of home-care company The Key; and Bonnie Maldonado, Stanford’s senior associate dean of faculty development and diversity and a professor of pediatrics and infectious diseases. 

“More than just finding an individual to serve in that capacity, this is an opportunity for us to collectively shape the future of our university, and to help write the next chapter for how Stanford will lead,” Jerry Yang, the Yahoo co-founder who’s the chairman of the board of trustees, said in a Sept. 14 statement announcing the committee.

A Stanford spokeswoman declined to comment further.

‘Pixie Dust’

It’s hard to overstate Stanford’s importance to the tech industry, whose modern incarnation was born in a nearby Palo Alto garage when two graduates, Bill Hewlett and David Packard, formed their iconic electronics company. It’s the world’s top undergraduate and graduate university for attracting founders and entrepreneurs, according to rankings released by Pitchbook this month.

The campus borders Sand Hill Road, the center of the venture-capital industry, and there’s a revolving door of money and people between the two. Lecturers include Andreessen Horowitz’s Scott Kupor, an alum and instructor for “Entrepreneurship and Venture Capital.” Former General Electric Co. CEO Jeff Immelt, who is now a venture partner at New Enterprise Associates, is teaching a systems leadership course.

The fluidity between industry and academia, as well as Stanford’s close physical proximity to the companies, directly impacts education, said Ann Miura-Ko, co-founder of venture firm Floodgate, who received her Ph.D. from Stanford and also teaches there. “The feedback loop is powerful, because they can respond to what is needed.”

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While the school has long ranked among America’s elite universities, the surge in the tech economy only bolstered its status as a desired landing spot for entrepreneurial-minded students looking to found the next Google, Snapchat or Instagram — all created by one-time Stanford students. It also fueled massive wealth for the school itself: Over the last six fiscal years, Stanford’s fundraising alone exceeded $7 billion. Less than two dozen US universities have endowments that are bigger than that figure. Its annual haul in recent years surpassed that of Harvard University, the oldest and richest US college.

The university has a business impact that stretches well beyond its more than 17,000 students and 2,300 professors. Stanford’s hospital system ranks among the top in the country; health-care services accounted for 61% of the school’s consolidated operating revenue in fiscal 2022. The school generates investment income from its more than $36 billion endowment, and $7.7 billion of the university’s investments were tied to real estate on its more than 8,000 acres of land in one of America’s most expensive real estate markets, according to an annual report. 

That includes the land under the Stanford Shopping Center, whose tenants include Apple, Tiffany & Co. and Neiman Marcus, and the 700-acre Stanford Research Park, home to 150 companies. When Elon Musk announced in February that he would move Tesla Inc.’s global engineering headquarters to Palo Alto, he selected space at the research park that once housed Hewlett-Packard.

The university’s multifaceted role as employer, landlord and job creator gives it a dominance in the Bay Area economy, functioning as a business and “town square” for people to connect, said Margaret O’Mara, a professor of history at the University of Washington and author of The Code: Silicon Valley and the Remaking of America. 

“Stanford has this pixie dust that no other institution has,” said O’Mara, who previously worked at Stanford.

But scandals such as the fall of Theranos, whose founder dropped out of Stanford and was later convicted of fraud, exposed cracks in Silicon Valley’s booming ecosystem. This year, thousands of layoffs and the collapse of Silicon Valley Bank has roiled the industry. And while Stanford still churns out an extraordinary collection of graduates, the assessment of the impact of the technologies it has had a hand in has radically changed, O’Mara said. Its challenges dovetail with the disenchantment over Big Tech in an era when everything from the industry’s market-stifling dominance to its potential to undermine democracy comes under criticism.

A decade ago, for both institutions, when it came to their role in changing the world for good, “there was an incredible amount of optimism, and a very earnest, naïve optimism,” O’Mara said. “Now, it’s being replaced with this cynicism.”

At times, that’s filtered through to the student body, such as in a 2019 protest over Stanford’s ties to Palantir Technologies Inc., whose co-founders include onetime students Peter Thiel and Alex Karp. More recently, limitations on parties and alcohol — along with the free speech issues — have increased the ire of alumni. Stanford assembled a task force of alumni and students to help it “accelerate” social life again at the university. “Stanford’s long been known for its fun, irreverent, whimsical social scene. Yet it just hasn’t felt as vibrant as it could be,” the task force wrote.

More issues have spilled into California courtrooms and on athletic fields. A medical-school professor last year was ordered to pay almost $30 million in restitution after a judge ruled he misled investors in his biotech startup. The family of the captain of the women’s soccer team sued the school after her suicide that rattled the campus.  

Then there’s the resignation of Tessier-Lavigne, whose appointment as president aligned with a changing of the guard in Silicon Valley more broadly. He arrived the year after Sundar Pichai became CEO of Alphabet Inc.’s Google, replacing co-founder Larry Page, and five years after Tim Cook replaced Steve Jobs as CEO of Apple Inc. Just like those two, Tessier-Lavigne had a legendary predecessor, John Hennessy, who was president for 16 years. “It’s hard to follow a big act,” O’Mara said.

Tessier-Lavigne began the Stanford presidency on Sept. 1, 2016. The next day, the spotlight turned to Brock Turner, an undergraduate swimmer released from jail after serving three months for raping an unconscious woman – a case that gained national attention for his relatively lenient sentence. Tessier-Lavigne’s tenure went on to encompass four professors winning Nobel Prizes and the notoriety of being ensnared in a sweeping US college admissions scandal, dubbed Varsity Blues, in which Stanford’s sailing coach pleaded guilty to accepting $610,000 in bribes.

It was reporting in the student newspaper that ultimately led to Tessier-Lavigne’s downfall. A special committee, formed after articles raised questions over the integrity of research years earlier, uncovered instances of manipulation of data by members of his lab. The panel found that Tessier-Lavigne didn’t engage in any research misconduct. A spokesperson for the former president declined to comment. 

Stanford is being run on an interim basis by Richard Saller, a scholar of Roman history and former provost at the University of Chicago. Its search for a new leader comes as other top-tier schools, including Yale and the University of California’s schools in Berkeley and Los Angeles, also are looking for presidents. 

The new president will likely follow the model of someone well versed in the fields of science, technology, engineering and math, and the search can also help serve to rally donors, said Funk, the recruiter. And it will be an opportunity for someone looking to leave a mark. Some Ivy League schools were founded to advance religion. Stanford’s charter explicitly mentions creating usefulness in life.

“Stanford, it’s always been an entrepreneurial university,” O’Mara said. “It’s always been kind of hustling.”

–With assistance from Bill Faries.

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