Looking to Impact “Real Lives,” a Tech Billionaire Makes a Big Campus Gift for AI

Information technology pioneer Fred Luddy recently donated $60 million to establish a multidisciplinary initiative in artificial intelligence (AI) based in his alma mater Indiana University’s (IU) School of Informatics, Computing and Engineering. The initiative will focus on AI approaches to digital health before branching out to other areas pending additional support.

The school will be named the Luddy School of Informatics, Computing and Engineering in recognition of the gift, the second-largest private gift in IU’s history. The gift will also fund the construction of a new building, the Luddy Center for Artificial Intelligence, which will feature state-of-the-art teaching and learning spaces.

Born and raised in Indiana, Luddy is the founder of ServiceNow, a Silicon Valley-based company with $2.6 billion in revenue. In 2018, Forbes named ServiceNow, which delivers cloud-based, automated IT help desk services, the world’s most innovative company, ahead of Amazon, Facebook and Tesla.

Luddy’s gift bears all the hallmarks of the surging higher ed philanthropy boom. It finds an alumnus giving back to his alma mater after earning his fortune in California. It finds a Midwest school successfully engaging donors and aggressively expanding its footprint in a cutting edge research field. And it finds a regional public university securing another big gift after blowing past its multi-billion-dollar fundraising goal.

“I believe in the importance of people,” said Luddy, who is a member of IU’s Dean’s Advisory Council. “It is the imagination and determination of people that drive technology that make an impact in real lives. My path has been shaped by the people who inspire me, who guide me to pursue the next innovation with the potential to transform everything.”

A “Hoosiers-Like Comeback”

A native of New Castle, Indiana, Luddy came to IU as a student in 1973 before dropping out after, by his own admission, spending too much time programming. He eventually made his way to Silicon Valley and the Amdahl Corp., an early competitor to IBM in the high-end mainframe computer market.

Luddy’s net worth is roughly $1.1 billion, but 15 years ago, he was “pretty much broke,” according to Forbes, after accounting fraud at his previous company, Peregrine Systems, wiped out his $35 million net worth. (Luddy wasn’t charged with any wrongdoing in the criminal case.) “Losing that money was absolutely the best thing that could have happened,” he said.

Luddy regrouped. In 2004, he founded the Santa Clara, California-based ServiceNow. He served as the company's CEO until 2011 and as its chief product officer until 2016, when he stepped into an advisory role. In 2012, the company was worth approximately $2 billion. ServiceNow currently employs over 3,500 people and maintains a market value of approximately $15 billion. Fifteen years after the collapse of Peregrine Systems, Ruddy, according to Bloomberg, had orchestrated a “Hoosiers-like comeback.”

In 2017, the circle was completed when IU awarded Luddy an honorary doctorate.

AI and Digital Health

Luddy’s gift to IU follows a familiar pattern in higher ed philanthropy in which small levels of support often precede a transformational mega-gift. Luddy previously donated $8 million toward the $39.8 million Luddy Hall, which opened last year on IU’s Bloomington campus and serves as the home to most of the informatics school’s departments.

Last year, Forbes telegraphed Luddy’s next big move, writing that success gave him time to work on “making U.S. healthcare more affordable and efficient.” The $60 million AI gift to IU and its focus on digital health will “allow the next generation of researchers and students to bring together their knowledge, wisdom and ideas to create things that we never thought possible,” Luddy said. “I'm thrilled to be able to play a role in helping IU professors and students reach for what comes next.”

Luddy isn’t the only higher ed donor drawn to the tantalizing potential of AI research. This support takes many forms across the education philanthropy space. For instance, last October, billionaire financier Stephen Schwarzman gave MIT $350 million to establish the MIT Stephen A. Schwarzman College of Computing. One of the college’s goals is to explore the “ethical guidelines that anticipate the risks of such enormously powerful innovations,” said MIT President L. Rafael Reif.

Luddy’s gift, which came roughly five months after IU acquired Big Red, the fastest university-owned AI supercomputer in the country, aligns with university’s shift toward “the study of AI and machine learning and their impact on digital health.” By supporting IU’s strategic pivot in a big way, Luddy has joined other higher ed donors who have homed in on AI’s ability to revolutionize health care.

Last year, the Chan Zuckerberg Initiative announced a $5.5 million grant for a partnership with UMass Amherst’s Center for Data Science to develop an AI-powered program to allow researchers to analyze millions of published medical findings. Around the same time, corporate turnaround pioneer Jay Alix made a $200 million commitment to the Mayo Clinic for, among other things, supporting and developing dual-degree programs that integrate AI with medicine.

And earlier this year, IBM Watson Health announced it will make a 10-year, $50 million investment in research collaborations with Harvard’s Brigham and Women’s Hospital and Vanderbilt University Medical Center to “advance the science of artificial intelligence and its application to major public health issues.”

The Regional Philanthropy Boom Rolls On

Luddy’s gift comes as other funders are digging deep to transform regional schools into international research hubs that attract world-class talent, catalyze economic development, and engage donors.

Recent examples include the Grainger Foundation’s $100 million gift to the University of Illinois at Urbana-Champaign’s College of Engineering; businessman Paul M. Rady’s $80 million gift to Western State Colorado University to create the Paul M. Rady School of Computer Science and Engineering; the Allegheny Foundation’s $30 million gift to Carnegie Mellon University, earmarked for the construction of its new Scaife Hall for the College of Engineering; and Rex and Jeanne Sinquefield’s controversial $50 million gift to expand St. Louis University’s research footprint.

Gifts of this nature are often tied to audacious fundraising campaigns. Luddy's gift counts toward the $3 billion For All: The Indiana University Bicentennial Campaign, which is scheduled to wrap up in June 2020. IU’s original goal was $2.5 billion. In August of 2018, officials announced it had blown past that amount. The school raised $1 billion in private philanthropy and external research awards in fiscal year 2018 alone.

Like many other public schools, including the University of Houston and the University of Oregon, IU decided to keep the fundraising campaign machinery humming rather than close up shop. 2019 brought more of the same for IU. In May, local philanthropists Sidney and Lois Eskenazi gave $20 million to the IU School of Art, Architecture + Design.

In related analysis, check out my colleague Sydney Petty’s look at some of the extraordinary donor partnerships that drive IU’s formidable fundraising machine.

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