Former Princeton Endowment Chair on the Depression

Dean Mathey was chairman of the investment committee at Princeton and he ran the endowment for 34 years.

A financial wunderkind who became a partner at the prominent investment bank Dillon, Read in his early 30s, [Dean] Mathey became the de facto sole director of Princeton’s endowment by the mid-1920s. The historical record of just how this happened is not quite clear; at that point Mathey wasn’t even a University trustee. He eventually joined the board in 1927, and proceeded to run the institutional assets for the next 34 years.

Shepherding the endowment through the Great Depression, Princeton Alumni Weekly

He shared the following lessons in a memo that was reprinted in Classics II: Another Investor’s Anthology.

What I Learned from the Depression

    • That once in about every 7 to 10 years there is a period of excessive general speculation culminating in a severe panic or depression when the man that is borrowing money is at a great disadvantage and he who has ready cash stands like a tower, four square to the ill winds that blow.
    • Extreme situations do not last, no matter what the apparent justification. No ladder is high enough to reach to Heaven. While we may have “new eras,” old laws will still operate.
    • Avoid commitments, particularly of the delayed variety, they are more insidious. These birds may be depended upon to come home to roost when they are least welcome. Also, be definite about commitments made to you by others. When the storm comes, misunderstandings are so easy and so natural. What a joy a good clear record is in such a predicament!
    • Both in 1920 and 1929 the so-called “big fellows” in general said everything was o.k. But if the big fellows in general thought otherwise the stage could not be set for the unexpected. Panics occur because the leaders themselves have lost the way. And panics on Wall Street are notoriously periodic.
    • Never borrow money without continuously reviewing and questioning your ability to pay it back under the worst conditions. Never borrow short-term money on unmarketable collateral.
    • It’s right to be an optimist, but be prepared for the worst.
    • Make a practice of not giving GRATUITOUS ADVICE ABOUT THE PURCHASE OF SECURITIES.
    • People borrow money in good times and pay it back in bad times — just the opposite of what they should do.
    • The public are just as blind to recognizing the bottom of a depression as they are in recognizing the top of the boom. While there is no ladder that reaches to Heaven, the ladder that reaches all the way down to Hell in a country like America is just as fantastic.

There will always be panics, be vigilant.

Inside Princeton University Chapel.
Photo by Ömer Faruk Ulutaş on Unsplash

Post by Marcelino Pantoja