Rice-BCM Merger - Risks - Moshe Vardi - Nov. 25, 2008 1. Hubris: Daimler-Benz bought Chrysler for $30.5B in 1998. In 2007, it paid Cerberus several billion dollars (by agreeing to retain pension liabilities) to take Chrysler off its hands. What was their mistake? They thought they can predict the unknowable. The outcome of a Rice-BCM merger is unknowable; to think otherwise is hubris. 2. Unstoppable momentum: The news has created heightened expectations for the merger; it might be hard to stop the momentum. 3. Finance: Methodist Hospital does not seem to have been brought to the table yet. Methodist Hospital is the only solution to Baylor's problems. How will Rice be shielded from BCM's financial difficulties? 4. Risk vs Reward: The financial risks to Rice are immediate and enormous. The benefits are mostly in potential only. 5. Synergy: Barriers to closer Rice-BCM collaboration has been cultural, rather than institutional. (Rice has had difficulties materializing potential synergies with the Jones School and the Baker Institute because of culture gaps.) 6. Complexity: Merging Rice's and BCM's research infrastructure will be highly complex. It is far from clear that such a merger would improve the quality of services. 7. Slackening efforts to improve Rice's academic programs: Improving academic programs is a very hard job. Rice has made little progress on points 1 and 3 of the V2C. A merger with BCM would seem to raise our ranking in one magic stroke, but it may just take our attention away from the hard work needed to improve Rice's programs.