Text of President John Hennessy’s annual address to the Academic Council

Good afternoon and welcome. I am pleased to see you here today. This afternoon, I will begin by giving a brief overview of the state of the university, reviewing some of the year’s highlights, and then turn our attention to future opportunities.

Prominent among those opportunities is our recent expression of interest to a request from New York City, and after my remarks, I have invited three colleagues – Dean of Engineering Jim Plummer; Professor and Chair of Computer Science Jennifer Widom; and Vice President Bob Reidy – to join me in a panel discussion about that effort.

Finances

Let me start with a quick overview of the state of our finances. As you all know, the economic crisis of several years ago led to some very difficult decisions. We responded quickly to the changing economic landscape and established a new baseline budget.

A few months ago, we announced our fiscal year 2010 results, which show the benefits of that quick response. As a result of decisions made across the university, we reduced expenses and were able to further lower our payout from endowment to operations. This reduced payout has allowed our endowment to recover more quickly. In fiscal year 2010, the university’s endowment rose in value by 10 percent. That increase in value was the result of both strong investment gains and gifts to the endowment. Our alumni and friends have continued to be generous in support of the university, and our Office of Development has done an outstanding job communicating our needs and the difference such gifts can make.

This puts us in a strong financial position as we go forward, but we must remain vigilant. The economic climate and reduced federal research funding remain significant concerns. In addition, while investment returns continue to be strong, as the saying goes, past performance is not necessarily an indicator of future results. Thanks to our collective efforts, however, the state of the university is strong, and unlike many other institutions, we can focus on moving forward, rather than on additional reductions.

The Stanford Challenge

We are entering the last six months of The Stanford Challenge, our five-year campaign to transform the university and better prepare us to lead in this century. It has been enormously successful, despite the global economic crisis.

We firmly believe that the work we are doing to address today’s complex problems is essential – not only for Stanford, but for the greater community that benefits. Clearly, our alumni, friends and supporters shared that belief. In the four-and-one-half years since The Stanford Challenge was launched, we have raised over $5 billion, surpassing the original $4.3 billion goal.

Despite that, there is still much to do. Financing for our enhancements to undergraduate financial aid, combined with greater need caused by the economy and a reduced endowment to fund these costs, led us to triple our fundraising goal for undergraduate financial aid. Likewise, threats to federal funding mean we need to increase the university support we provide for our graduate students. Finally, we also want to ensure that we continue to attract and retain the best scholars on our faculty, and restoring faculty positions reduced during the crisis will require new endowed faculty support.

A campaign of this magnitude is necessarily a marathon, and we are entering the final stage. We are definitely on the right track to achieve the ambitious goals we set for ourselves, but now is the time for that final push. We want to finish strong, and I have no doubt that with your help and with the enthusiastic support of our alumni and friends, we will do so.

Campus development

What is the real significance of the success of The Stanford Challenge? It has positioned the university to do the work of this century.

One way it has done so is by enabling us to build 21st-century facilities – such as the one we meet in today, the Huang Engineering Center, and the other buildings in the new Science and Engineering Quad – as well as to update outmoded facilities, many more than 50 years old. Last year, I spoke in detail about the transformation of the campus, so I will just briefly note a few this year.

Last fall we dedicated three academic facilities: the Li Ka Shing Center for Learning and Knowledge, the Lorry I. Lokey Stem Cell Research Building and the Jen-Hsun Huang Engineering Center; we also completed the Center for Nanoscale Science and Engineering. In a few weeks, we will dedicate the Knight Management Center, and next month, the Neukom Law Building. So, The Stanford Challenge has yielded very tangible benefits: It has enabled us to provide cutting-edge facilities in support of the pioneering work for which this university is known.

Next year, we look forward to strengthening the arts at Sanford. We are moving forward on our long-term plan for an Arts District perpendicular to Palm Drive. I am sure you have all seen the steel skeleton rising into the sky off Palm Drive. That is our new Bing Concert Hall. Over the course of the next year and a half, we will see its completion. It is going to be a magnificent performance venue, and we look forward to inviting the public to join us at the first performances in January 2013.

On this side of Palm Drive, adjacent to the Cantor Arts Center, we are moving forward on a new home for the Department of Art and Art History, thanks to the generosity of alumnus and former chair of the Board of Trustees Burt McMurtry and his wife, Deedee. We have just made our selection for the architectural firm to design the McMurtry Building: Diller Scofidio + Renfro (DSR) is an award-winning design studio responsible for major remodeling at Lincoln Center, and among DSR’s current projects are the Berkeley Art Museum and the Broad Museum in Los Angeles.

Another future project is the Biology building, which will be located between Gates Computer Science and the Mudd Chemistry buildings. This lab-focused building will provide state-of-the- art research labs for faculty and will replace our current outdated facilities at Herrin Labs. We are moving forward on the plans and have received a naming gift for the building. We are also examining alternatives for new undergraduate science labs, which we desperately need.

Support for/Excellence of people

As I have noted on other occasions, facilities are nothing without the excellence of the people working in them, and The Stanford Challenge has provided essential support for our faculty and students. The campaign has enabled us to strengthen our commitment to undergraduate financial aid and endowed more than 250 graduate fellowships – both interdisciplinary and within schools and departments. It has also raised money for a host of faculty positions across the institution, with more than 60 endowed professorships, half a dozen directorships and 5 senior fellows, and secured both expendable and endowed support for important new centers and institutes.

Our results reflect both the ambitious and inspiring goals we set for The Stanford Challenge, as well as the tremendous confidence our alumni and friends have in our faculty and students. Our students and young alumni are consistently selected for Fulbright Fellowships, Rhodes Scholarships and Mitchell Scholarships. A few weeks ago, four Stanford juniors were named Truman Scholars – the largest number of any other institution this year. The university’s overall excellence is also reflected in the record numbers of applicants we get each year. As has been the case for several years now, this was the most competitive year in the university’s history: We received more than 34,000 applications for the Class of 2015 and offered admission to 2,427 students.

Our graduate programs are consistently among the best. Eight programs – business, biology, statistics, history, computer science, political science, psychology and physics – were ranked or tied for first in the most recent U.S. News & World Report Graduate School Rankings. Three – engineering, math and English – were ranked or tied for second. Law ranked third; education, chemistry and Earth sciences were fourth; and economics, sociology and our research programs in the medical school ranked fifth in the nation. In 2010, the National Research Council released its long-awaited evaluation of doctoral programs, based on data from the 2005-06 academic year. The results are difficult to interpret, but if we liberally use the upper end ranking for each department, which many other institutions have chosen to use, every one of our ranked departments in engineering, the physical sciences, the biological and biomedical sciences, and the social sciences is ranked in the top 10. Furthermore, our humanities departments showed the most improvement, with 58 percent ranking in the top 10 in 1995 and 85 percent ranking in the top 10 in this evaluation.

Expression of Interest: New York City Applied Sciences Research and Educational Campus

As you have all heard, we are also exploring another opportunity, the possibility of establishing an engineering and technology research and graduate education campus in New York City.

In mid-December, New York City’s Economic Development Corporation announced plans to attract an institution to create an applied sciences research and educational campus. New York’s goals range from raising the capability of institutions in the city in technology and applied science to creating more talented graduates in these fields in support of a growing high- technology sector, to increasing economic growth and diversification through high-technology innovation and entrepreneurism. Stanford was one among 27 institutions that responded. Our interest has been informed by broad consultation over a series of months with the faculty, university leadership and trustees.

Like many other institutions, we have received many invitations to consider setting up campuses and programs throughout parts of the world, especially in Asia. While we are engaged as consultants and partners with a number of institutions around the world, we have so far chosen not to set up another full-fledged Stanford campus, primarily because we were concerned that we could not establish a permanent presence with a cohort of faculty and students whose quality matched that of our home campus.

New York is different: We can attract great faculty and great students committed to Stanford and a New York campus. Thus, we believe this is a great opportunity for us to team up with a dynamic partner, New York City, to create a high-quality institution, which could become the nucleus for a major center of innovation, just as has happened in the Bay Area. New York has its own culture and strengths, which are quite different from those of our present location, and fusing that culture with the technical capabilities and entrepreneurial culture of Stanford could produce a remarkable new center for research, education and innovation. Such a campus is also an opportunity to increase our visibility on the East Coast, and perhaps connect with new sources of philanthropic support.

A New York presence also provides us the opportunity to master multi-site operations – something I believe is essential for the 21st-century university. We already have a strong foundation in distance education, and this would enable us to further refine and expand that foundation. It offers a supportive setting for creating a world-class model for the multi-campus university: Setting up operations in the same country just three time zones away, where there are no issues about academic freedom, is much more manageable than establishing a campus in a different country six or eight time zones away.

Our plan is to create a strong research program, a vibrant graduate education program with both master’s and PhD students that provides both technical education as well as education in entrepreneurial and innovation skills. Our engineering school is among the best in the country, and we are a leader in applied sciences. We have an incredible entrepreneurial culture, and we understand how to partner with industry and successfully transfer research advances to the marketplace. Stanford researchers and alumni have established thriving companies that employ thousands of people – companies such as Google, Yahoo!, Hewlett-Packard, Cisco, Sun Microsystems, Netflix, eBay and many others.

Our plan would be to develop a New York program that is integrated with the programs on the main campus, distributing people and talent and sharing courses and research activities, rather than replicating existing activities at a smaller scale. Rather than have two computer science departments, for example, we envision one department with perhaps 25 percent of its faculty at the New York campus. The School of Engineering, the Graduate School of Business, the Hasso Plattner Institute of Design and the Stanford Technology Ventures Program would all play key roles from the beginning, with other activities added over time.

Of course, the site of the campus will be a critical component as well, and that has not yet been decided. In its Request for Expression of Interest, New York City suggested four potential sites. Of the four sites, we looked at Roosevelt Island in particular and considered how it might be developed, and Bob Reidy will talk about this in a few minutes. At the same time, we are exploring other sites as this process unfolds.

If we pursue this opportunity, it would develop in several phases. In Phase 1, the first five years of the project, we envision about 25 faculty, including visiting faculty from the Palo Alto campus; 150 doctoral students; and 300 master’s students. The focus of the first phase would be on information technology – EE and CS – with special attention given to entrepreneurship education and research. Executive education both in technical fields and in management would also be featured. As we plan the first phase and contemplate a formal proposal, I have asked Dean Plummer [of the School of Engineering] and Dean Saloner [of the Graduate School of Business] to appoint a faculty advisory committee to provide guidance and counsel.

Succeeding phases would expand to include approximately 100 faculty and 2,000 students. There would also be opportunities to take advantage of all that New York City offers, especially in new media and cultural opportunities, and I can see broadening the base of subjects offered to include green technology, biomedical engineering, new media, financial mathematics and urban studies, just to name a few. There would also be opportunities to host other visiting undergraduate and graduate programs: perhaps an academic quarter in New York, similar to our Stanford in Washington program, as well as opportunities to host students in the business school or other disciplines. The succeeding phases would develop over as long as 20 years, allowing for extensive exploration of opportunities as we gain capability in making a distributed program work.

We are at the beginning of a very long process, and we are not alone in recognizing the opportunities in New York. Eighteen proposals were submitted by 27 schools and include responses by Cornell University, Columbia University, New York University, Carnegie Mellon and several international institutions. Final proposals will be due in the summer, with selection by the end of the year.

Conclusion/Introduction of panel

Through our new academic facilities, advances in research and pursuit of new opportunities, we are positioning Stanford for the future, equipping it to do groundbreaking research and teaching, and extending our legacy of excellence. We have a great deal to look forward to, and we are counting on your support and participation.

This afternoon I have invited several of my colleagues to join me to discuss our thinking on this opportunity and our response in more detail, and to answer any questions you might have.

Today’s panelists are James Plummer, dean of the School of Engineering; Jennifer Widom, professor and chair of the Department of Computer Science; and Robert Reidy, vice president for Land, Buildings and Real Estate.