Harvard Alumni Association
Leaving the commotion at the lottery retailer behind us, we headed straight for Cambridge.
The road ran along the Charles River.
Two red Harvard crew boats drifted lazily across the water.
On the far bank, the Boston skyline was only a pale suggestion through the morning mist, and along the riverside path, joggers and young couples out pushing strollers appeared here and there in ones and twos.
The maples standing along the way had mostly lost their leaves.
A few red ones still floated slowly atop the river.
When we passed Harvard Yard and turned onto Quincy Street, an old three-story building came into view.
Red brick walls, white window frames, and rectangular windows arranged in perfect symmetry.
A pair of small chimneys rose from the roof, and two white columns at the front entrance supported the gabled roof.
It was the kind of architecture that had been fashionable in eighteenth-century Georgian England, the style American East Coast universities loved to adopt.
If you pictured the White House exterior, you’d get something broadly similar.
“We’re here.”
Grace and I looked out through the truck window at the headquarters of the Harvard Alumni Association.
The Harvard Alumni Association, or HAA for short.
Founded in 1840, it was a vast network connecting more than 400,000 Harvard graduates around the world.
The HAA was not merely a social organization; it was also a financial institution that directly managed part of the Harvard Endowment.
The Harvard Endowment was the university’s pool of investment assets.
It was a massive fund built from donations, tuition income, leftover research grants, patent license fees, real estate rents, publishing royalties, and the like, then diversified into stocks, bonds, real estate, hedge funds, and private equity.
As of 1991, its size was roughly 5 billion dollars—more than many nations’ pension funds.
In fact, the annual investment returns alone covered 35 percent of Harvard’s entire operating budget.
Grace had planned from the start to deposit the lottery winnings right here.
“It’s so-called the alumni asset trust program. It’s far safer than leaving the money in a regular bank, and the returns are much better too.”
Graduates entrusted their personal assets to the HAA, and the association’s fund managers invested them on their behalf.
The Harvard Endowment’s average return over the past ten years had been 11.2 percent a year, nearly double that of a typical mutual fund.
You could expect far better returns than if you invested on your own, but of course, they didn’t take just anyone.
“If you deposit it here, you get access not only to returns but to a range of support as well. That matters even more than the interest or dividends. I actually came to Harvard to get that support.”
Grace was right.
Startup support was one of the HAA’s core functions.
When a Harvard alumnus launched a business, the Angel Fund under the HAA invested seed capital.
It was pure support money, with no repayment clause; even if the business failed, there was no obligation to pay it back.
If the company succeeded, however, the HAA would own a portion of its equity.
There were rumors that Bill Gates at Microsoft and Mark Zuckerberg at Facebook had received support from this fund in their earliest days.
Nothing had ever been officially confirmed, but in the industry it was treated as an open secret.
The network brokerage through alumni was even more powerful.
The HAA possessed a database of 400,000 alumni worldwide.
It categorized them in fine detail by profession, residence, area of expertise, investment tendency, even hobbies, and if a member asked, “I want to start a semiconductor business in Silicon Valley,” the HAA office would provide contact information for three alumni in the relevant field within seventy-two hours.
If a member said, “I need a lobbyist in Washington,” they’d be introduced to a law firm partner with ties to a senator.
The HAA membership opened doors to relationships money couldn’t buy.
Investment bankers on Wall Street, senators in Washington, venture capitalists in Silicon Valley.
Most of them had knocked on the door of this building at least once.
I came to Harvard, too, to use this pool.
I thought back to the cases I already knew.
In 1962, a young investment banker had come to the HAA.
He said he wanted to invest in Middle Eastern oil, but didn’t have a local partner.
The HAA introduced him to an alumnus working as an oil engineer in Saudi Arabia, and that connection later became the seed of a giant private equity firm called Carlyle Group.
In 1978, an engineer from MIT had come knocking on the HAA’s door.
He had a vision for a personal computer business, but lacked a sense for marketing.
The Harvard MBA marketer HAA introduced him to was John Sculley, who would later become Apple’s CEO.
As cases like these accumulated, the HAA became more than a mere alumni association and earned a nickname as “the gateway to America’s ruling class.”
The HAA membership was divided into four tiers.
The lowest was Associate, open to anyone after graduation for an annual fee of 500 dollars, with benefits limited to alumni event access and the newsletter subscription.
Above that was Silver.
You qualified by donating 10,000 dollars a year or entrusting 100,000 dollars in assets.
The benefits were access to the alumni database and invitations to two networking dinners a year.
Next came Gold.
The requirement was an annual donation of 100,000 dollars, or entrusted assets worth 1 million dollars.
Benefits included quarterly one-on-one consultations with fund managers, access to investment roundtables, and priority placement in mentorship programs.
And at the very top was Platinum.
An annual donation of 500,000 dollars, or entrusted assets of 5 million dollars or more.
That unlocked observation access to the HAA Investment Committee, invitations to the annual dinner with the president, and most importantly, a low-interest Credit Line secured against deposits.
That’s exactly what I’m after.
Grace probably had come to Harvard for the same privileges.
Becoming a Platinum member was not simply about depositing assets; it was equivalent to gaining entry into the social club of America’s ruling class.
Step—step—step—step—
Grace and I got out of the truck and climbed the steps.
Above the entrance hung the Harvard crest, with the word VERITAS—truth—gilded across it.
But the only truths traded here were the language of money and power.
We told the receptionist why we had come.
“We’d like to discuss asset management.”
“Do you have an appointment?”
“No. But the amount we intend to deposit exceeds five million dollars.”
“······!”
The employee’s expression changed instantly.
She picked up the internal phone at once, and less than five minutes later, a young man in a crisp suit came down to meet us.
“Hello. I’m Steve Connor from Asset Management. Director Winthrop said he’d like to meet you personally. Please, this way.”
We took the elevator up to the third floor.
Along both walls of the hallway hung portraits of Harvard presidents.
John Adams, John F. Kennedy, Franklin D. Roosevelt······.
It felt as if their eyes were looking down at us.
Do you have the right to enter our club?
Steve opened a heavy mahogany door.
“Director Winthrop, I’ve brought the guests.”
Inside the spacious office, behind an old-fashioned desk placed beside the window, sat an elderly man with a full head of white hair.
Charles Winthrop.
He had to be well into his seventies, yet his back was straight, and he wore a Harvard crimson tie over a gray suit.
On his left wrist was a steel Rolex without a gold bezel, and on the ring finger of his right hand was the graduation ring Harvard distributed to its alumni.
I quickly took in the old gentleman’s appearance.
Charles Winthrop was HAA’s financial director and also the chairman of the Oddball Entrepreneur Competition judges’ panel, so there was no harm in making this connection now.
My eyes drifted to the chessboard on his desk.
The black and white pieces were frozen somewhere in the middle game, and since there was no opponent in sight, it looked as though he played alone.
Playing chess against oneself meant taking both sides into account, moving between black and white in search of the best possible move.
A man who enjoyed training himself to think from inside another person’s head.
The kind of person you didn’t want to meet at a negotiation table.
The other things in the room said as much about him as anything else.
The pens on the desk were lined up by length, and the stacks of documents had their edges aligned with knife-like precision.
The bookshelves along the wall held an array of classics bound in leather, arranged by color, and the fact that some spines were cracked and the gilt had faded made it clear they were not decoration but books he had actually read.
There wasn’t a single potted plant by the window.
A man who let nothing unnecessary in.
A man who kept only what he needed and cut away everything else.
And that was the man looking back at us now.
“Hmm.”
Winthrop looked down through his gold-rimmed glasses at the check we had brought.
His gaze moved slowly, as if counting the zeros written on it.
“Freshmen are······ depositing 6.18 million dollars?”
His tone was split evenly between surprise and suspicion.
Grace answered with calm but firm composure.
“We intend to entrust these funds to the HAA fund, and we’d like to discuss the corresponding terms.”
At the word “entrust,” Director Winthrop’s expression changed subtly.
It meant not a donation, but an investment.
They would take the money, and share the returns.
“Terms······? What exactly do you mean?”
“Three things.”
Grace drew a breath and continued.
“First, a share of the operating returns.”
The Harvard Endowment’s average return over the past ten years had been 11.2 percent annually.
If we deposited 6.18 million dollars, the HAA’s fund managers would invest it and generate returns.
The question was who would take how much of those returns.
Asset managers usually used a “2-20” structure.
They took 2 percent of the assets under management as a management fee, and 20 percent of the profits as performance fees.
Only the remaining 80 percent went back to the client.
Grace was asking HAA to apply the same structure to our deposit.
“Please apply the HAA fund’s standard return distribution to our deposited funds as well.”
Director Winthrop’s eyebrows moved almost imperceptibly.
Grace calmly put forward the next condition.
“Second, we want a Credit Line opened. We’d like the rate set at prime.”
A credit line was a kind of overdraft facility.
It meant the right to borrow money whenever needed, up to a limit secured by the deposit.
For example, if you deposited 6.18 million dollars and opened an 80 percent line, you could borrow up to 4.94 million dollars at any time.
What mattered most here was the interest rate.
The prime rate was the benchmark rate U.S. banks applied to their best customers, and at present it stood at around 8.5 percent.
Given that ordinary personal loan rates ran between 15 and 18 percent, it was an extraordinary condition.
Director Winthrop stroked his chin.
“And the third?”
“Access to the alumni network.”
The third condition was the most important.
The HAA’s Investment Roundtable was a private meeting held once a quarter.
Platinum members gathered there to share investment ideas and discuss co-investment opportunities.
Expensive information passed across that table—public offering allocations in newly listed stocks, equity participation in real estate development projects, early investments in promising startups, and more.
The mentorship program was one-on-one pairing with a senior alumnus in the field.
If I said I wanted to start a hedge fund, for example, the HAA would connect me with a fund manager from Goldman Sachs as a mentor.
Whether you could access that network or not determined your success on Wall Street.
“Specifically, we want eligibility to participate in the investment roundtable and the mentorship program hosted by HAA.”
For a moment, silence settled over the room.
Director Winthrop turned his head without saying a word.
...clack!
He picked up the black knight from the chessboard, then set it down again.
Then he looked back at Grace and me.
“Do you two know what sort of place the HAA fund is?”
Winthrop spoke slowly.
“Most people who entrust assets to our fund have spent twenty or thirty years building a record in their industries. Investment bankers who made partner at Goldman Sachs, consultants who became senior partners at McKinsey, serial founders who took companies public three times in Silicon Valley······ that sort of person.”
He looked once more at the check on his desk.
“A ‘verified asset holder’ doesn’t just mean someone with a lot of money. What matters is how they earned it, and what kind of judgment and network they demonstrated in the process. If someone has survived twenty years in Wall Street, that means they’ve lived through dozens of recessions and financial crises and still come out standing. If it’s money from people like that, we can accept it with confidence.”
Director Winthrop removed his glasses and set them on the desk, then fixed us with a steady stare.
“But you’re freshmen, and this money comes from lottery winnings. It’s the product of one-time luck.”
“······.”
“I’m not saying winning the lottery is bad. But if word spreads among our members that ‘those kids got in here because they won the lottery’······ what do you think would happen?”
The HAA was not merely an asset manager; it was a social club for America’s upper class.
People here judged one another’s pedigree.
Someone who had become rich overnight by lottery was likely to be treated as a lucky parvenu, no matter how much money they had.
No one wanted to sit at the same table as that kind of person.
With polite, dignified pressure, Director Winthrop pushed down on us.
Even Grace, holding more than five million dollars in her hands, had to bite back her words for a moment under his momentum.
Then I leaned forward and cut into the conversation.
“I understand. But if you knew how we earned this money, I think you’d change your mind.”
I glanced at Grace.
She snapped back to attention and nodded.
She took out the file she had prepared and placed it on the desk.
“This is our strategic analysis report for the lottery accumulation campaign.”
Grace opened the file and began to explain.
“The Massachusetts Lottery Commission publicly discloses the issuance data for the ‘Power Jackpot Scratch’ tickets. Total print run, sales by round, the status of unsold winning tickets—everything. We tracked those disclosures for eight weeks and built a database.”
Director Winthrop took the report and spread it open.
His eyes moved rapidly down the pages.
Grace kept going.
“In Round 36, out of a total print run of 20 million tickets, 18 million were sold, but no first-prize winner emerged. Since scratch tickets are usually scratched immediately upon purchase, the probability that the first-prize ticket remained among the unsold 2 million was extremely high.”
“······You exploited the lottery commission’s public disclosures to identify a region with positive expected value?”
Director Winthrop murmured.
“Exactly.”
I picked up the thread.
“The cost of buying all 2 million tickets was 2 million dollars. On the other hand, the 8 million-dollar first prize, plus the unclaimed second-, third-, and fourth-tier prizes, came to about 8.6 million dollars total. That makes the expected value roughly four times the cost. Of course, there was the risk that someone else would scratch the first-prize ticket before us, but we built that probability into the calculation too.”
Grace turned to the next page of the report.
“This is our acquisition route analysis. We classified all 3,200 lottery retailers across Massachusetts by region and sales velocity. Boston stores sold out quickly, so inventory moved fast, while remote stores in the Berkshire Mountains held stock for much longer. Using that data, we designed the optimal collection route and recovered the entire target volume in just eight weeks.”
Director Winthrop looked away from the documents and at me.
A faint smile touched his mouth.
“Two million tickets in eight weeks······ logistics and labor costs?”
“About 150,000 dollars. We hired thirty Harvard students at 8 dollars an hour, and we even gave gas-discount coupons to truckers from Texas. Even so, the net profit exceeded 4.8 million dollars, and the return was about 350 percent.”
After putting the report down, Grace spoke carefully and distinctly.
“This is arbitrage using information asymmetry. The lottery commission is required to disclose the data, but most people don’t analyze it. We simply used that gap in information to identify a section with a statistically positive expected value, then executed it systematically. The methodology can be applied to many other areas besides lotteries—limited-edition sneakers, concert tickets, rare collectibles, and so on.”
Grace’s voice turned firm.
“We did not get lucky and win the lottery. We achieved a business return through probability and statistics, and that makes the strategy sustainable. It’s a matter of business.”
Director Winthrop slowly nodded as he closed the report.
“Information-asymmetry arbitrage, huh······.”
He picked up the white knight from the chessboard.
“Have you ever heard of the Oddball Entrepreneur Competition?”
“······.”
Of course we both knew the competition well, but since Winthrop had brought it up first, it was best to keep quiet for the moment.
“It’s a competition Harvard hosts every year. Students bring their business ideas and compete directly. There are three criteria: return on investment, sustainability, and creativity.”
Winthrop continued his explanation.
“You don’t win just by making a lot of money. What matters is how outlandishly you made it, how thoroughly you smashed convention, and what fresh perspective you brought to the existing field of economics. If you win, you become a priority review candidate for the alumni association’s Angel Fund. Wall Street headhunters keep an eye on the winners too.”
“Actually, we’re planning to enter that competition as well.”
At my words, Grace nodded too.
“In fact, this lottery project was designed with that competition in mind.”
Director Winthrop’s eyes gleamed.
“In that case, this conversation is moving quickly.”
Leaning back in his chair, he said, “As a rule, formal membership in the HAA fund is open only to graduates. Undergraduates aren’t eligible, no matter how much money they have.”
“······.”
“But there is an exception clause. It was created in 1987······ a provision granting fund access as part of the alumni mentorship program. It applies specially only to contestants in the Oddball Entrepreneur Competition.”
“Contestants? Not just finalists?”
“That’s right. Simply registering to compete is enough. Whether you make the finals or not, you’re classified as a ‘future alumnus with initiative.’ The official designation is Provisional Associate.”
Director Winthrop took a form from the desk drawer and set it before us.
“As a Provisional Associate, you can make deposits and access the basic network. You can also open a Credit Line. Of course, you’ll transition to full membership after graduation, but until then you can enjoy most of the benefits you mentioned just now.”
He slid the form across the desk.
“Coincidentally, the competition registration deadline is next week. If you sign the entry application here, your Provisional Associate status takes effect today. You can deposit the funds immediately as well.”
Grace and I met each other’s eyes.
We had already planned to enter the competition, and we were confident we could win it too.
At the same time, we picked up the pens.
Lee Sanha, Grace Fairfax.
Our signatures were written side by side at the bottom of the application.
Once we finished signing, Director Winthrop pressed the intercom.
“Connor, register these two students for Platinum Tier membership.”
Platinum Tier.
The highest level of HAA membership.
“Set the deposit-secured credit line at 70 percent, with the rate at prime plus 1.5.”
It was a more conservative condition than the 80 percent and prime plus 1 percent we had requested.
But 70 percent of 6.18 million dollars was about 4.32 million.
That meant we could borrow up to 4.32 million dollars whenever needed at an annual rate of 10 percent, so even that was a substantial win.
Director Winthrop grinned and continued.
“And send guest invitations to next week’s alumni investment roundtable.”
The investment roundtable.
It was a closed investment gathering attended only by Platinum members.
We would be there only as guests, but just stepping inside was meaningful.
Director Winthrop rose from his seat and extended a hand.
“The loan terms are a little more conservative than what you proposed, but for freshmen, they’re extraordinary. The operating return split will follow the HAA standard agreement, and you’ll receive quarterly reports, so keep that in mind.”
I stood and took his hand.
“Thank you, Director.”
“No need to thank me. We’re both getting a good deal here.”
Director Winthrop’s hand was large and firm.
“And one piece of advice······.”
He lowered his voice.
“At this amount, the IRS may ask you to substantiate the source of funds. Keep your lottery documentation safe. You’ll need it in case of a tax audit.”
“We’ve already prepared for that.”
“Good. As expected, you’re thorough.”
A heavy strength flowed through the clasp of our hands.
It was exactly the hand of a gatekeeper leading us into the beating heart of capitalism.
---