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David Booth · The David Rubenstein Show

• 0:02
  Speaker 1: One of the most successful money managers the last 40
• 0:04
  Speaker 1: years is David Booth. David Booth built Dimensional Fund Advisors
• 0:08
  Speaker 1: into one of the world's most successful money management companies,
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  Speaker 1: now managing more than a trillion dollars. He's best known
• 0:14
  Speaker 1: to some people as the person who gave the gift
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  Speaker 1: to rename the University of Chicago School of Business the
• 0:19
  Speaker 1: Booth School of Business. I had a chance to sit
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  Speaker 1: down with David recently to talk about his new book,
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  Speaker 1: Stay Calm, which contains his investment philosophy and his secrets
• 0:26
  Speaker 1: of life. Well, David, when you started this in 1981
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  Speaker 1: out of a brownstone in Brooklyn, in your wildest imagination,
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  Speaker 1: did you think this was going to be a trillion
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  Speaker 1: dollar asset management company?
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  Speaker 2: No, that was way beyond what we were thinking. We
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  Speaker 2: were just trying to survive. The firm was built around
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  Speaker 2: the idea that finance had developed into a science in
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  Speaker 2: the 60s and 70s. And we wanted to figure out
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  Speaker 2: how to apply the science. Because these ideas, if you
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  Speaker 2: don't apply the ideas, they aren't very useful.
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  Speaker 1: So your role in the beginning was the was everything.
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  Speaker 1: You were helping to raise the money, you came up
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  Speaker 1: with the idea. But in the end, over the last
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  Speaker 1: 40 plus years or so, your role has been to
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  Speaker 1: be what, the CEO principally?
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  Speaker 2: I've been CEO. Now I'm just chairman. We have two
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  Speaker 2: co-CEOs now really running the firm day to day. So
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  Speaker 2: I kind of bring some institutional memory and meet with
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  Speaker 2: them regularly, but they really run it.
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  Speaker 1: Dimensional, where did that name come from?
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  Speaker 2: The idea that started the firm was what we called
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  Speaker 2: a small cap fund. Back in 1981, if you look
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  Speaker 2: at big institutional investors, they weren't holding the stocks of
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  Speaker 2: small companies at all. And so we said, aha, we'll
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  Speaker 2: develop a small cap fund, which back in those days,
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  Speaker 2: there were about, say, 4,000. The smallest 3,000 is what
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  Speaker 2: we mean by small cap. And collectively, they represent about 10%
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  Speaker 2: of the universe, 5% to 10%. And we said, look,
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  Speaker 2: It seems sensible if you're forming a stock portfolio, you
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  Speaker 2: would have stocks of large companies and small. And in
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  Speaker 2: 45 years, everybody's nodded, yeah, that makes sense. Say, well,
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  Speaker 2: you're not holding the small. I go, well, that's true too.
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  Speaker 2: So what we'll do is we'll give you access to small.
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  Speaker 1: So in 1981, if somebody had said, David, you have
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  Speaker 1: a nice idea, but I'm not going to give you
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  Speaker 1: that much of my money, but I'll give you $ 1, 000.
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  Speaker 1: And they kept it with you since 1981. What would
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  Speaker 1: that $ 1, 000 be worth today?
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  Speaker 2: Well, if you didn't pay taxes, it'd be worth about
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  Speaker 2: over $ 140, 000.
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  Speaker 1: So it's gone up 140 times.
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  Speaker 2: Yeah.
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  Speaker 1: They never had to pay taxes. They kept it in.
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  Speaker 2: Yeah, yeah.
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  Speaker 1: It's up 140 times. Yeah.
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  Speaker 2: Amazing. That's the magic of compounding. You know, that's one
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  Speaker 2: of the big lessons in finance, of course, compounding. And
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  Speaker 2: you read about it theoretically, but when it's your money,
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  Speaker 2: you go, holy cow, that's real money.
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  Speaker 1: What Dimensional's premise was, as I understand it, maybe it's changed,
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  Speaker 1: is that If you buy an index of stocks and
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  Speaker 1: particularly smaller companies, not the bigger ones, if you hold
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  Speaker 1: that for quite some time, you're going to probably beat
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  Speaker 1: the market averages or at least you'll do very well.
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  Speaker 1: Is that right?
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  Speaker 2: That's right. And actually, the name of the firm, Dimensional,
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  Speaker 2: came up this idea that we thought of small cap
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  Speaker 2: stocks as a separate dimension of returns.
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  Speaker 1: So David, when people who are smaller investors want to traditionally,
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  Speaker 1: let's say 10, 20 years ago, they wanted to invest
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  Speaker 1: in dimensional. Could they come in if they were very small?
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  Speaker 1: And today, if they want to come in, do they
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  Speaker 1: come in through an ETF if they're a very small investor?
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  Speaker 2: They would come in through the ETF. We've never developed
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  Speaker 2: a marketing program for the small investor. We're there, but
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  Speaker 2: we don't have toll-free telephone lines for people to call in.
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  Speaker 1: What's the difference between a traditional index fund and a
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  Speaker 1: dimensional fund?
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  Speaker 2: A traditional index fund is obsessed with one thing, tracking
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  Speaker 2: the benchmark index. At Dimensional, we say, look, flexibility has
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  Speaker 2: economic value. So instead of slavishly trying to have zero
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  Speaker 2: tracking error relative to an index, we use a little
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  Speaker 2: bit of human judgment in there, particularly in trading and
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  Speaker 2: the way we structure portfolios. So we're willing to deviate
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  Speaker 2: a little bit from straight index tracking.
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  Speaker 1: Now, you've written a book, and this is a book
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  Speaker 1: called Stay Calm. And that is your investment philosophy. Stay calm.
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  Speaker 1: You don't get nervous about where the market's going up
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  Speaker 1: and the gyrations of the market and so forth.
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  Speaker 2: I'm always curious, and I always have a certain level
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  Speaker 2: of anxiety. And that's when I go back to first principles,
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  Speaker 2: the things we learned in school. Control what you can
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  Speaker 2: control is the first. And we can't control the markets.
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  Speaker 2: Investing is complex and uncertain. So is life. So people
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  Speaker 2: have gotten where they are by learning how to manage uncertainty,
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  Speaker 2: which largely means predict what you can, but what you
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  Speaker 2: can't predict, control. You can control that to a considerable degree.
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  Speaker 2: For example, in investing, you can't predict the stock market.
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  Speaker 2: You can control how much risk you take, how much
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  Speaker 2: you have, say, in stocks versus money market funds, that
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  Speaker 2: sort of thing.
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  Speaker 1: So when the markets are going down and plummeting hundreds
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  Speaker 1: of points, you don't panic and you don't get upset
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  Speaker 1: when that happens?
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  Speaker 2: No, you take the most recent big downturn in 2020
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  Speaker 2: when the pandemic had just hit and markets down 30%,
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  Speaker 2: people are stressed out. They go, what's going to happen?
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  Speaker 2: I go, I don't know what's going to happen. Here's
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  Speaker 2: what I believe. And people aren't just going to sit
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  Speaker 2: there and take it. They're going to figure out how
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  Speaker 2: to get back on track. And they're going to innovate.
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  Speaker 2: Their firms are going to innovate. They're going to be
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  Speaker 2: doing new and different things, you know, we probably will
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  Speaker 2: get back on track faster than you might think, which
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  Speaker 2: is what happened. The recession was only like one quarter long.
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  Speaker 2: I mean, that's human ingenuity. In some sense, that's really
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  Speaker 2: what I'm preaching now. Human ingenuity is what will bail
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  Speaker 2: us out.
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  Speaker 1: What is the principal mistake that the average investor makes?
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  Speaker 2: Well, the principal mistake is they think they can predict
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  Speaker 2: things or they think they have to try to predict
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  Speaker 2: things in order to be successful. They have to figure
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  Speaker 2: out which stocks to buy, when to get in the market,
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  Speaker 2: when to get out. And the evidence is none of
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  Speaker 2: that kind of makes sense.
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  Speaker 1: Now, this book, Stay Calm, how long did it take
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  Speaker 1: you to write this book?
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  Speaker 2: It was a couple of years. All of this dealing
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  Speaker 2: with uncertainty, how to manage uncertainty in investing, the parallels
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  Speaker 2: to personal life was so overwhelming. So why not talk
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  Speaker 2: about life experiences and dealing with uncertainty? And once I
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  Speaker 2: went down that path, Then all of a sudden I
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  Speaker 2: thought we had a message that could appeal to everybody.
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  Speaker 2: In fact, one of the things that's been really rewarding
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  Speaker 2: over the last few weeks as the book is starting
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  Speaker 2: to get circulating is how many people have come up
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  Speaker 2: to me and say, I want to give this book
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  Speaker 2: to my kids. I think that's pretty cool.
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  Speaker 1: Let's go through your background, how you came to be
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  Speaker 1: the founder of Dimensional. You grew up in a farm
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  Speaker 1: in Kansas initially?
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  Speaker 2: Well, yeah, a farming community. My parents lived in town,
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  Speaker 2: but my relatives were mainly farmers.
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  Speaker 1: And what city were you in?
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  Speaker 2: Well, it was Garnett, Kansas.
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  Speaker 1: And you have two siblings?
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  Speaker 2: Yeah, a brother and a sister, yeah.
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  Speaker 1: When you and your siblings were ready to college, your
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  Speaker 1: father moved so you'd be closer to the University of Kansas?
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  Speaker 2: They knew they didn't have enough money to send us
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  Speaker 2: away to college, so they came up with an elegant solution.
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  Speaker 2: They just moved to Lawrence, which is where the University
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  Speaker 2: of Kansas is, and we could live at home and
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  Speaker 2: go to school. because the big cost of school in
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  Speaker 2: those days was the cost of living.
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  Speaker 1: Now, not that many college-age kids really want to live
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  Speaker 1: at home, but I guess you and your siblings realized
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  Speaker 1: if you didn't do that, you weren't going to get
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  Speaker 1: a college education.
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  Speaker 2: No, we felt blessed that we were able to go
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  Speaker 2: to school at all. Okay.
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  Speaker 1: So you went to college, University of Kansas, and what
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  Speaker 1: did you major in, finance?
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  Speaker 2: No, my undergraduate was economics and math. In my year
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  Speaker 2: in graduate school at Kansas, I took a finance course,
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  Speaker 2: and I go, wow, that's me. And like a lot
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  Speaker 2: of kids that age, I want to be a professor.
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  Speaker 2: My finance professor said, well, if you're serious about wanting
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  Speaker 2: to study finance, you need to go to the University
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  Speaker 2: of Chicago to the PhD program. So I applied and
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  Speaker 2: that put me on my way.
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  Speaker 1: Did you apply to the business school at University of Chicago?
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  Speaker 2: Graduate School of Business.
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  Speaker 1: And now that graduate school of business is called the
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  Speaker 1: Booth School.
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  Speaker 2: Yeah, Chicago Booth.
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  Speaker 1: So when you went there, did you think the people
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  Speaker 1: were smarter than you thought they were going to be
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  Speaker 1: or not as smart as you thought they were going
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  Speaker 1: to be?
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  Speaker 2: I'd never met people. that many incredibly smart people in
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  Speaker 2: my whole life. Back in those days, none of my
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  Speaker 2: professors had gotten Nobel Prizes.
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  Speaker 1: Now, you write in your book that there's a professor
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  Speaker 1: named Gene Fama, who was a professor at the University
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  Speaker 1: of Chicago, and he changed your life. Totally. Because he
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  Speaker 1: came up with a thesis that inspired you to start Dimensional.
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  Speaker 1: Is that fair?
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  Speaker 2: First year in the program, first course was Fama's course.
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  Speaker 2: And basically, he outlined how markets work. he called it
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  Speaker 2: the efficient market hypothesis, that the market does a really
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  Speaker 2: good job of setting prices. So what pops out are
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  Speaker 2: fair prices so people can get a fair return if
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  Speaker 2: they invest in the broad market.
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  Speaker 1: Well, before he came up with this theory, the conventional
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  Speaker 1: wisdom at that time in Wall Street was if you
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  Speaker 1: hire really smart people that buy good stocks for you
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  Speaker 1: and stock pickers can beat the market averages, but he
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  Speaker 1: kind of showed that it's very difficult to beat the market.
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  Speaker 1: Is that fair?
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  Speaker 2: That's fair. Before 1960, people didn't really have an idea
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  Speaker 2: of what the returns on stocks and bonds were. And
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  Speaker 2: that changed with the development of data at the University
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  Speaker 2: of Chicago.
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  Speaker 1: So he showed that overall, if you go into an
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  Speaker 1: index fund, in effect, you're going to make 9% or 10%,
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  Speaker 1: maybe 9% overall and 10% of its smaller companies, something
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  Speaker 1: like that?
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  Speaker 2: Yeah, something like that. And the point is, it's not
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  Speaker 2: only a fair return to investors, It's a fair cost
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  Speaker 2: of capital for the companies issuing stock and bonds.
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  Speaker 1: All right. So you ultimately were inspired by him. Did
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  Speaker 1: you actually get to know him?
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  Speaker 2: Yeah, I know the second year in the program, I
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  Speaker 2: was his research assistant, which is good and bad news.
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  Speaker 2: The good news is working side by side with him
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  Speaker 2: was just an incredible experience. The downside was I realized
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  Speaker 2: that wasn't what I was cut out to do. That's
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  Speaker 2: what he was cut out to do. In fact, he
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  Speaker 2: still works six or seven days a week doing research.
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  Speaker 2: It's amazing.
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  Speaker 1: You got an MBA and then you went to work
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  Speaker 1: for Wells Fargo. Yeah.
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  Speaker 2: So here I left, you know, Chicago and working, being
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  Speaker 2: in the PhD program, you'd present papers to the faculty
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  Speaker 2: and you'd sit in on their papers they were developing.
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  Speaker 2: So I got to know the faculty really very well.
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  Speaker 2: And then, um, went to Wells and they were trying
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  Speaker 2: to apply the ideas. So these ideas are brand new
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  Speaker 2: ideas are floating around. And I realized nobody's trying to
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  Speaker 2: apply them. Well, the world's best served if Gene Fama
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  Speaker 2: does the research and I figure out how to go
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  Speaker 2: apply the ideas.
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  Speaker 1: So you did that for a while, but then you
• 11:00
  Speaker 1: ultimately decided to leave to go to A.G. Becker. Yeah.
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  Speaker 2: Well, they shut down the group I was working on.
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  Speaker 2: So I wanted to join A.G.
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  Speaker 1: Becker.
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  Speaker 2: They were a large, at that time, pension consulting firm.
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  Speaker 2: And I It was a great exposure to really learn
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  Speaker 2: how the business works.
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  Speaker 1: And then what propelled you to think that you should
• 11:19
  Speaker 1: start your own firm after working for big firms? And
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  Speaker 1: did you have any money to start the firm with?
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  Speaker 2: I had something I really wanted to do, which is
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  Speaker 2: this idea for small stocks. One of my clients at
• 11:31
  Speaker 2: the time, it was AT & T. At that time,
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  Speaker 2: this was before the divestiture. They were the biggest pension
• 11:37
  Speaker 2: fund in the world. And they had $ 100 10 managers
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  Speaker 2: picking stocks, and none of them were investing in the
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  Speaker 2: stocks of smaller companies. So I said, if you want
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  Speaker 2: to help yourself out, why don't you create a small
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  Speaker 2: cap portfolio? And they did, and the idea took off.
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  Speaker 1: So you started Dimensional. You were living in Brooklyn.
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  Speaker 2: Yeah.
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  Speaker 1: And you started in a brownstone.
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  Speaker 2: Right.
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  Speaker 1: So you moved the beds out, and you just were
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  Speaker 1: working there.
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  Speaker 2: Yeah.
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  Speaker 1: Did you have anybody to capitalize the company? Were there
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  Speaker 1: any venture capitalists who said, it's a good idea? I'll
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  Speaker 1: give you some money to start.
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  Speaker 2: We had a little bit of outside money. Schroeder Capital Management,
• 12:14
  Speaker 2: a UK firm, provided a little bit of money. We
• 12:17
  Speaker 2: only raised enough just to get through all the registrations
• 12:20
  Speaker 2: and find out if we had clients. Went to call
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  Speaker 2: for telephone lines to run the... I thought I need
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  Speaker 2: six telephone lines to do the portfolio management. They wouldn't
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  Speaker 2: give me the lines because they thought I was a bookie.
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  Speaker 2: Because in those days, they weren't prepared for a startup
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  Speaker 2: firm in Brooklyn.
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  Speaker 1: So you start this company in 1981. And with how
• 12:41
  Speaker 1: many people did you start it?
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  Speaker 2: There were about four or five of us.
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  Speaker 1: Your basic concept was that if you buy smaller stocks
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  Speaker 1: in an index kind of pooled account, that you'll probably
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  Speaker 1: do better than if you just pick stocks here and there.
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  Speaker 1: Is that it?
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  Speaker 2: Well, it was even simpler than that. You ought to
• 12:56
  Speaker 2: have large and small. You shouldn't just have all your
• 12:59
  Speaker 2: money in large. And you don't have access to small.
• 13:02
  Speaker 2: But this was a portfolio concept. individually, small stocks are
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  Speaker 2: pretty risky. They can go to zero. But as a group,
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  Speaker 2: it's pretty compelling.
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  Speaker 1: All right. So you did that. And after how many
• 13:13
  Speaker 1: years before you realized, hey, this is a real business,
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  Speaker 1: were you worried you would go out of business after
• 13:17
  Speaker 1: a year or two?
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  Speaker 2: I was worried about that. Yeah. We had great feedback.
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  Speaker 2: People loved what we were doing. But being a startup
• 13:24
  Speaker 2: firm with no track record, people just gave us small
• 13:26
  Speaker 2: amounts of money to invest.
• 13:28
  Speaker 1: What did your Kansas parents say about this?
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  Speaker 2: I overheard my dad once telling people that I was
• 13:34
  Speaker 2: in high finance. They were shocked that I would leave
• 13:37
  Speaker 2: a good job to do a startup.
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  Speaker 1: So the firm is taking off and you start in 81.
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  Speaker 1: And so by the end of the 80s, is it
• 13:44
  Speaker 1: clear it's going to work?
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  Speaker 2: The whole concern was, can we last long enough to
• 13:48
  Speaker 2: be profitable? Because of the money dribbling in, it wasn't
• 13:53
  Speaker 2: very fast.
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  Speaker 1: So today, let's talk about Dimensional today. Dimensional has how
• 13:58
  Speaker 1: much money does it manage now?
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  Speaker 2: A little over a trillion dollars.
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  Speaker 1: A trillion dollars. And how many employees do you have?
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  Speaker 2: About 1,700 worldwide.
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  Speaker 1: Is your customer base individuals or is it institutions?
• 14:08
  Speaker 2: When we started, it was only large institutions, firms like
• 14:11
  Speaker 2: IBM and Boeing and sovereign wealth funds. Along about 1989,
• 14:15
  Speaker 2: I believe it was, we had a financial advisor approach us.
• 14:20
  Speaker 2: He wanted access to our funds. We were unusual in
• 14:23
  Speaker 2: that even though we were an institutional money manager, We
• 14:27
  Speaker 2: co-mingled people into mutual funds. We had institutionally priced portfolios
• 14:31
  Speaker 2: for low-cost funds. Advisors started approaching us, getting access to
• 14:36
  Speaker 2: our funds. We found that was really terrific.
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  Speaker 1: Let's suppose I like the concept of an index and
• 14:44
  Speaker 1: not just picking stocks. If I buy an S &
• 14:46
  Speaker 1: P 500 index, a so-called Vanguard S & P 500 index,
• 14:51
  Speaker 1: Would I do better with a dimensional fund because of
• 14:55
  Speaker 1: the way you're doing it than a standard S &
• 14:57
  Speaker 1: P 500 index?
• 14:58
  Speaker 2: Well, we hope that's the case. And there's, like all ideas,
• 15:02
  Speaker 2: there are periods of time when it looks really great
• 15:05
  Speaker 2: and other periods of time when not so good. Our
• 15:07
  Speaker 2: first nine years, actually, we started at a period of
• 15:10
  Speaker 2: time when performance wasn't so good relative to the S & P. Fortunately,
• 15:15
  Speaker 2: the last 35 years have been terrific.
• 15:17
  Speaker 1: So can anybody call up and say, I want to
• 15:19
  Speaker 1: be an investor in your fund?
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  Speaker 2: Well, yeah, we have these ETFs now that are publicly available,
• 15:24
  Speaker 2: and we had started applying this research, and there were
• 15:28
  Speaker 2: other ideas, particularly coming from Fama and French. Our capability
• 15:32
  Speaker 2: now is basically handling the whole stock market. We have
• 15:34
  Speaker 2: large company portfolios, small.
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  Speaker 1: You're the current chairman, but at some point, do you
• 15:40
  Speaker 1: think the firm will ever go public or be sold,
• 15:43
  Speaker 1: or are you just going to keep it where you
• 15:45
  Speaker 1: have it now?
• 15:46
  Speaker 2: Well, I don't know. What I do believe is if
• 15:48
  Speaker 2: we keep our focus on doing what's really right for
• 15:51
  Speaker 2: clients and for our employees, we'll probably be okay over
• 15:54
  Speaker 2: the long haul.
• 15:55
  Speaker 1: You're worried about the future in terms of what will
• 15:58
  Speaker 1: come on, who's going to run it, or it's not
• 15:59
  Speaker 1: your day-to-day worry?
• 16:00
  Speaker 2: I think it's already been solved. We have our two co-CEOs.
• 16:04
  Speaker 2: They're young, 50s and 60s. In fact, I think about
• 16:07
  Speaker 2: this all the time now. I think the firm's running
• 16:08
  Speaker 2: much better now than it would have had I stayed
• 16:11
  Speaker 2: on being the CEO.
• 16:12
  Speaker 1: Now, your father was always worried that the world would
• 16:15
  Speaker 1: fall apart. So he always kept some money in his
• 16:17
  Speaker 1: safe deposit box. Right. When he passed away, you went
• 16:20
  Speaker 1: into a safe deposit box. And what did you find?
• 16:22
  Speaker 2: Found $ 15, 000, a huge fraction of their net worth. And
• 16:27
  Speaker 2: I realized right away, I mean, here's a couple that
• 16:32
  Speaker 2: grew up during the Great Depression, fought World War II,
• 16:35
  Speaker 2: you know, went through all these different cycles. That was
• 16:38
  Speaker 2: their safety net, you know, and... That's what enabled them
• 16:42
  Speaker 2: to stay calm. They knew that they had that 15,000.
• 16:45
  Speaker 1: Now, you parents did live to see your success. I mean,
• 16:48
  Speaker 1: they may not have understood exactly what you did, but
• 16:50
  Speaker 1: they realized you had been very successful, I assume.
• 16:52
  Speaker 2: Yeah, I was glad to see that. They got to
• 16:55
  Speaker 2: see a glimpse of it anyway. But part of the story,
• 16:59
  Speaker 2: I went back and looked at that 15,000 and said,
• 17:01
  Speaker 2: what if.
• 17:03
  Speaker 2: Dad had put it in the stock market when he
• 17:04
  Speaker 2: got back from the war in the end of 45.
• 17:07
  Speaker 2: Now we're 40 years later. What would it be worth?
• 17:10
  Speaker 2: $ 15, 000 if he got the market return would be worth
• 17:13
  Speaker 2: a million dollars.
• 17:14
  Speaker 1: Let me ask you about a couple of things in
• 17:16
  Speaker 1: your book. You'd always wanted to have a car. And
• 17:18
  Speaker 1: then one day you come home and there was a
• 17:20
  Speaker 1: nice red car, I think, in the driveway. And you
• 17:23
  Speaker 1: went in and you thanked your father for buying you
• 17:26
  Speaker 1: this car. But it turned out he hadn't intended to
• 17:28
  Speaker 1: give it to you. It was actually bought for your mother.
• 17:30
  Speaker 2: That's a great story about it. what kind of people
• 17:33
  Speaker 2: my parents were. They were wealthy people. They just didn't
• 17:35
  Speaker 2: have much money. When I got accepted in the PhD
• 17:38
  Speaker 2: program at Chicago, my dad said, I'll go out and
• 17:40
  Speaker 2: find you a car. So I come in one day
• 17:42
  Speaker 2: and there's this car in the driveway and I go in.
• 17:47
  Speaker 2: I knew what a sacrifice it would be. And that
• 17:49
  Speaker 2: was it. And then about 25 years later, as my
• 17:51
  Speaker 2: dad had a terminal case of cancer, he goes, do
• 17:55
  Speaker 2: you remember your first car? I said, of course I
• 17:56
  Speaker 2: remember my first car. He goes, well, you know, your
• 17:58
  Speaker 2: mom always wanted a red convertible and I bought her one.
• 18:02
  Speaker 2: Then you came in, you thought it was for you.
• 18:04
  Speaker 2: And you were so excited. Your mom just said, oh,
• 18:07
  Speaker 2: let's just give it to him.
• 18:08
  Speaker 1: Wall Street is famous for copying good ideas that other
• 18:11
  Speaker 1: people have. So you had a good idea. Are people
• 18:14
  Speaker 1: trying to copy what you do?
• 18:15
  Speaker 2: Yeah, all the time. And that's the lesson I learned.
• 18:21
  Speaker 2: Any investment approach you come up with will have periods
• 18:26
  Speaker 2: of time when it's really good and a period of
• 18:28
  Speaker 2: time when it looks awful. And during those periods when
• 18:31
  Speaker 2: it looks awful, That's when you really find out how
• 18:33
  Speaker 2: much you really believe.
• 18:34
  Speaker 1: Now, in every interview conducted by anybody today about the
• 18:38
  Speaker 1: business world, there's one question that everybody always asks. How
• 18:42
  Speaker 1: is artificial intelligence changing your business?
• 18:45
  Speaker 2: Well, it's changing it the way it's changing every business
• 18:48
  Speaker 2: in the sense that it's making us much more efficient.
• 18:50
  Speaker 2: A lot of tools are to disposal we didn't have before. Now,
• 18:53
  Speaker 2: sometimes the question comes about, do you think it'll help
• 18:57
  Speaker 2: people pick stocks? And, you know, it's the same old story,
• 19:01
  Speaker 2: you know. Your AI algorithm has to be better and
• 19:04
  Speaker 2: faster than everybody else's AI algorithm, which that seems a
• 19:09
  Speaker 2: bit unlikely. The whole premise of gene pharma is that
• 19:15
  Speaker 2: stocks already reflect all available information, and no AI algorithm
• 19:20
  Speaker 2: can do any better than that.
• 19:21
  Speaker 1: The next chapter for Dimensional, where do you see its
• 19:24
  Speaker 1: future next 10 years?
• 19:25
  Speaker 2: We're still on this growth curve, implementing new ideas. New
• 19:30
  Speaker 2: ideas continue to come along. Most recently, it's been ETFs
• 19:34
  Speaker 2: and ETF share classes. So the next generation, I think,
• 19:39
  Speaker 2: will be developing more and more quantitative methods to help
• 19:43
  Speaker 2: people in their planning, so forth. It's really important that
• 19:47
  Speaker 2: individual investors get good financial advice. I think that's be
• 19:51
  Speaker 2: more and better tools to help people get that advice.
• 19:54
  Speaker 1: When people become successful in the money management world, they
• 19:57
  Speaker 1: make a fair amount of money and they then often
• 19:59
  Speaker 1: become involved with philanthropy. You made a gift to the
• 20:02
  Speaker 1: University of Chicago in honor of the professors there who
• 20:06
  Speaker 1: had helped you with this concept. and they renamed the
• 20:09
  Speaker 1: school after you. Now, I thought you had told me
• 20:11
  Speaker 1: once that now when you go anywhere in the world,
• 20:13
  Speaker 1: people may know Dimensional, or they may not, but they
• 20:16
  Speaker 1: certainly know Booth. Yeah.
• 20:18
  Speaker 2: That is kind of funny. I went to talk to
• 20:20
  Speaker 2: the dean. I said, look, it's unbelievable how much my
• 20:22
  Speaker 2: experience at Chicago helped me and helped me be where
• 20:26
  Speaker 2: I am today. And so I want to make a
• 20:29
  Speaker 2: gift that's a big part of what I have, not
• 20:32
  Speaker 2: just contributing to the annual fund or something. And they go,
• 20:37
  Speaker 2: you know, we've been thinking about naming the school and
• 20:40
  Speaker 2: we weren't asking for as much as you're willing to give.
• 20:43
  Speaker 2: So we'll name the school after you.
• 20:45
  Speaker 1: So today, I think when you go around the world,
• 20:47
  Speaker 1: when people meet you, do they say, oh, you're the
• 20:50
  Speaker 1: founder of Dimensional or you're the head of Booth School
• 20:54
  Speaker 1: of Business at University of Chicago?
• 20:56
  Speaker 2: Oh, it's more likely to say the Booth School. I'm
• 20:59
  Speaker 2: really proud to be connected with University of Chicago, which
• 21:02
  Speaker 2: is more than just the business school, but it's This whole,
• 21:06
  Speaker 2: the way they operate the school and the idea of
• 21:08
  Speaker 2: no safe places is still, I think, the best place
• 21:11
  Speaker 2: for intellectual thought.
• 21:13
  Speaker 1: So you've been involved in a number of philanthropies. Let
• 21:15
  Speaker 1: me mention one other one. The University of Kansas.
• 21:18
  Speaker 2: Yes.
• 21:19
  Speaker 1: You were a Kansas fan and you gave them some
• 21:22
  Speaker 1: money to fix up their football stadium and they named
• 21:24
  Speaker 1: it after you.
• 21:24
  Speaker 2: Right, right.
• 21:26
  Speaker 1: And so what does it feel to go to a
• 21:28
  Speaker 1: stadium when the stadium is named after you?
• 21:30
  Speaker 2: No, it's really a thrill. You know, I realized early on,
• 21:34
  Speaker 2: even though I'd been successful, I mean, I don't have
• 21:36
  Speaker 2: enough money to cure cancer, but I've been able to
• 21:41
  Speaker 2: have an impact, I think, in two different universities, Chicago
• 21:45
  Speaker 2: and the business school and the University of Kansas with
• 21:48
  Speaker 2: their athletic program.
• 21:49
  Speaker 1: And when you go to the University of Kansas football
• 21:51
  Speaker 1: or basketball games, you get a standing ovation when you
• 21:53
  Speaker 1: walk in.
• 21:54
  Speaker 2: I do get a lot of acclaim. And when I
• 21:57
  Speaker 2: do that, I most often really think back to my parents.
• 22:00
  Speaker 2: What would it have been like had they been able
• 22:03
  Speaker 2: to see this?
• 22:04
  Speaker 1: The biggest challenge that people have who make a lot
• 22:06
  Speaker 1: of money, or not the biggest, but Ed, is how
• 22:08
  Speaker 1: do you not spoil your children when you have so
• 22:09
  Speaker 1: much money? What have you done to keep your kids'
• 22:13
  Speaker 1: feet on the ground?
• 22:14
  Speaker 2: We set up trust for them early on, but I
• 22:16
  Speaker 2: never told them they had those until they turned 21
• 22:19
  Speaker 2: and I had to tell them. This is what I'm
• 22:21
  Speaker 2: giving you. If you want to do for your kids
• 22:23
  Speaker 2: what I've done for you, then you'll guard this money carefully.
• 22:28
  Speaker 2: And instead of being profligate the way they spent, they
• 22:31
  Speaker 2: ended up being too frugal. So eventually, I had to
• 22:34
  Speaker 2: pull them aside. Look, you can spend some money. It's OK.
• 22:39
  Speaker 2: You ought to buy a nice house, for example.
• 22:41
  Speaker 1: So when you look back on your career, what are
• 22:44
  Speaker 1: you most proud of?
• 22:45
  Speaker 2: Been able to accomplish a lot, doing things the right way.
• 22:48
  Speaker 2: Never had to compromise, which is why We're still a
• 22:51
  Speaker 2: lot smaller than some of the giants. I mean, our
• 22:54
  Speaker 2: goal was never to be the biggest money management firm.
• 22:56
  Speaker 2: It's in some sense is to be the coolest. I mean,
• 22:59
  Speaker 2: what we think is the best. I'm proud to be
• 23:02
  Speaker 2: able to be associated with all these great minds and
• 23:05
  Speaker 2: that they wanted to stay connected to us.
• 23:07
  Speaker 1: As you look back on what Dimensional has become, what
• 23:10
  Speaker 1: would you want most people who are going to watch
• 23:12
  Speaker 1: this interview to know about Dimensional that they might not
• 23:15
  Speaker 1: otherwise already know?
• 23:18
  Speaker 2: Feel really trust in the firm. I mean, I think
• 23:20
  Speaker 2: I tell our employees that providing investment solutions is our
• 23:25
  Speaker 2: business and trust is our product. So that's what I
• 23:29
  Speaker 2: hope people would think. I think that's a firm we
• 23:32
  Speaker 2: can trust.
• 23:34
  Speaker 1: Thanks for listening. To hear more of my interviews, you
• 23:37
  Speaker 1: can subscribe and download my podcast on Spotify, Apple, or
• 23:41
  Speaker 1: wherever you listen.