Moonlighting in Academia

When Otto Eckstein, Professor of Economics, founded Data Resources Inc. (DRI) in 1969 he probably knew that he would be at the forefront of the now booming econometric forecasting business. But what he probably did not know is that he would be the leader of a flock of Harvard professors who are currently going outside the University to supplement their academic salaries. "I could never live on my academic salary," says Eckstein. "Indeed I don't see how anyone can."

The Faculty of Arts and Sciences currently keeps no tabs on professors who choose to work outside the University, but Richard G. Leahy, associate dean of the Faculty for resources and planning, estimates that "a surprisingly high number" of them are taking advantage of the over 50 consulting firms in Cambridge to supplement their academic salaries. And executives of these companies confirm that Harvard professors are regularly taking advantage of the boom in their business.

The president of one firm said that his company pays $100 an hour or $500 a day for the professors' services, and the vice president of another says he has heard rumors of "one Harvard professor receiving $1000 for just one day's worth of work," although he has never been able to confirm them.

Leahy says the Faculty of Arts and Sciences has an informal rule limiting professors to only one day a week of outside work but adds that there is no limitation on the amount of money a professor can receive for this work.

"Doing outside consulting is a way to stay on top of your field," Leahy says, and University Hall looks favorably upon the practice as long as "the primary obligation remains to teaching and scholarly research." But at least one administrator says he is concerned that "if it is a question of allocating time between academics at a low rate of pay and consulting at a high rate of pay, an unhappy influence can develop on how someone allocates their time."

Eckstein, as president and founder of DRI, one of the largest economic forecasting operations in the world, is undoubtedly the emperor of the Harvard consulting network. What lies behind his success is the invention of a computer system which uses statistical analysis to predict economic outcomes. The firm became such a success that Eckstein found he could not run the company and maintain his academic committments, and worked out a special "half time" arrangement with Dean Rosovsky in 1972. Eckstein now teaches just Economics 10, "Principles of Economics," and a graduate course in economic theory.

A computer expert who has worked for DRI calls the operation "incredible." "They have one of the largest computer selections in the world, and the computer alone must be worth over $5 million," he said.

A list of DRI clients "reads like a list of who's who in American business," the New York Times reported. Eckstein says that included in the more than 600 clients are Union Carbide, Harris Trust and Savings, Shell Oil, Morgan Guaranty Trust and Xerox. Some of the firm's government clients are the President's Council on Economic Advisors, the United States Treasury and the Canadian Ministry of Finance.

Although DRI will not release its financial figures, sources in the company say that annual revenues have increased by 70 per cent every year since 1970. The firm grossed more than $10 million in the past fiscal year, an average of $20,000 per client, the source said.

Though no one has yet matched Eckstein's success, by any other standards Harvard professors are doing remarkably well. The average Business School professor does about 20 days a year in outside work, Walter J. Salmon Jr. '30, associate dean for educational affairs at the Business School says. Business School professors earn a salary of about $100 an hour--about that of a top lawyer in a large firm," Salmon said. This means, Salmon adds, that the average Harvard Business School professor earns about $10,000 a year from outside work.

Although the Faculty at the Business School numbers only around 180, in 1973-74 the outside activity of faculty and administrators accounted for a total of 3802 "man days," a Business School report shows. A breakdown of this outside work indicates that 2294 of these days went to consulting, 708 to directorships, and 41 to trusteeships and ownership of companies.

Sources at the Business School say that Lawrence E. Fouraker, dean of the school, was concerned about the amount of time professors were spending away from academic work. "Fouraker was upset," a source said, "and started to exert pressure on certain professors to stay around Cambridge more." Salmon, however, denies that time spent away has become a problem. "As long as it is an average of only 20 days a year," he says, "and loyalty remains to the Business School, there is no conflict." Salmon adds that the School even encourages outside work on the grounds that it is often consistent with the professor's field, exposes the professor to real business problems, and can often lead to case studies.

Although individual professors are free to offer their consulting services to any group or country on their own time, Harvard does sometimes place restrictions on consulting work that it does as a university. Harvard does not accept contracts when restrictions are placed upon the personnel of a given project, Daniel Steiner '54, general counsel to the University, said last week. Because the government of Saudi Arabia wanted to veto the employment of certain Harvard personnel on religious grounds, President Bok refused Harvard involvement in a health manpower project there a year and a half ago.

But despite these University restrictions many professors have chosen to work for the Saudi Arabian government on their own. A.J. Meyer, professor of Middle Eastern Studies and an expert on Middle East economics, took a leave of absence last year to work on a five-year plan for the Saudi Arabian Central Planning Office. Although Meyer will not comment on remuneration for his work, a source in the Economic Department says that "Arabia is incredibly lucrative and Meyer would be crazy if he were not making lots of bucks from the Arabians."

Dr. Roger L. Nichols, Given Professor of Microbiology, responded to the University's refusal to deal with the Saudi Arabians by setting up a private corporation of academics to do the public health consulting work the University turned down. The non-profit group, University Associates, included professors affiliated with Harvard, Johns Hopkins University and the American University of Beirut.

Dr. William A. Reinke, treasurer of University Associates and professor of International Health at the Hopkins School of Public Health, said that when the company was incorporated a year and a half ago, its organizers believed they were entering a promising field. "We had a $100,000 contract and thought that the business would be taking off. But the organizational problems were too much--no work has been done so far."

"Consulting is a Harvard phenomenon," says ZviGriliches, Professor of Economics. "At the University of Chicago we were paid a good salary and expected to devote time to teaching--academics was always number one. But implicit in the offer of a Harvard professorship is the fact that one can take a $10,000 cut in salary because the money can be made up on the outside." At Harvard, Griliches concludes, with the strip of technological firms along Route 128, the more than 100 consulting companies in the Boston area, and the east coast network of law firms, "there is a whole panacea of opportunities for outside work."

"Where there are universities, there are consulting firms," says Peter Merrill, vice president of operations for Abt Associates, a Cambridge-based social research firm, "and here in Cambridge it is a huge industry." Merrill says that Abt, which grossed over $16 million last year, has employed "a high number" of Harvard professors since it was started ten years ago. Abt currently pays Harvard professors between $300 and $500 a day, Merrill said.

Net income after taxes for Abt rose from $149,000 in 1970 to $527,000 in 1974--an increase of just under 30 per cent every year since 1970. Revenues have skyrocketed from under $7 million in 1972 to $16.5 million in 1974. Merrill says that Abt's financial success is paralleled by all the other Cambridge firms that have gone into consulting.

The Cambridge consulting business has proven so successful that in 1972 two sophomores majoring in Economics started their own firm, which has been tripling in growth rate ever since. The president and vice president of the firm do not want to be identified for fear that competitors will hold their youth against them, and because prospective clients may not entrust them with projects.

The vice president says that she and the president "promote, manage and run the firm," adding that they must rely "100 per cent on the consultants to provide the technical know how." "So far we have employed only six Harvard professors at a rate of $100 an hour," the president says, "but you can be sure that many others are working at our competitors' firms."

Professors at this firm usually work on a project as top level consultants, but at times some Faculty have been involved in all aspects of a particular project. The young entrepreneurs have also hired nearly 40 Harvard graduate students and about 20 undergraduates who do research for between $4 and $25 an hour.

"Competition is pretty intense in Cambridge," the president says, "but there is a true resource of academic talent just waiting to be used. Professors at Harvard are smart. They know where the money is."