Distinguished Speaker Series: David Booth, Dimensional Fund Advisors

In September of 1969, an MBA student took a course that would result in positively affecting the lives of countless people, a couple of universities, and how much of the investment industry would learn to view the world.

It started with two individuals, the University of Chicago professor Eugene Fama and student David Booth. The seed of one idea blossomed into a fifty-year friendship, a history of applying academic research to practical investing and formation of a multi-national investment firm of over 1,400 employees managing $586 billion.

Along the way, after David (student) had learned finance from Gene (professor), the circle was completed as Professor Fama likes to say he learned business from Booth.

It is the only time the professor had been asked to join a student’s business. It was a natural in this case, as the firm, Dimensional Fund Advisors (“DFA” or “Dimensional”) shared the same beliefs having been spawned by ideas Booth picked up in Professor Fama’s course.

Along the way, it should be mentioned that the intersecting worlds of academics, athletics and the arts have also benefited. The University of Chicago named its Booth School of Business in the MBA student’s honor. The University of Kansas named its David Booth Kansas Memorial Stadium in honor of its former undergraduate student (note, Booth has also funded the Booth Family Hall of Athletics in Allen Fieldhouse at KU while donating James Naismith’s original 13 rules of basketball). The Museum of Modern Art has benefited in naming the David Booth Conservation Center and Department in the same man’s honor. Another benefactor has been Georgetown University which named its Booth Family Center for Special Collections within its Lauinger Library. 

It is this story that was told through the voice of the student in the forum of the August Distinguished Speaker Series luncheon on August 14th at the Standard Club. David Booth himself provided the history of Dimensional’s roots, how its one philosophy initiated 50 years earlier, how the firm takes academic ideas and implements them into real world solutions for clients, as well as DFA’s 38-year track record of delivering outperformance versus their benchmarks.

The discussion began with a short video touting the highlights from Mr. Booth’s career which is synonymous with the formation of Dimensional. His friendship with Professor Fama is central to the story. The impact DFA had on the investing universe is also notable, with accomplishments including being pioneers in treating small cap stocks as an asset class and finding a niche between active and passive investing. Dimensional has been styled as “the original factor investors”.

The bulk of the program consisted of an interview/fireside chat with current chair of the CFA Society Chicago’s Board of Directors, Tom Digenan, CFA.

Once again, a chronicle of Mr. Booth’s 50 years in the industry was recounted: how he has inspired people, his mentors (again – Fama was both mentor and a mentee), use of academics, the very large weight put on implementation, and the tension between models and reality in conducting research. 

The importance of TRUST could not be emphasized enough. Especially as it pertained to client relations and the ability to successfully navigate the ups and downs of markets.

Questions were asked about Booth’s thoughts about the significant reduction in the number of publicly traded stocks, his bias toward either active or passive, how DFA utilizes fundamental research, how his firm’s definition of value may have changed over time, and about any change in their thinking now that a new phenomenon of negative interest rates has emerged. His answers to all questions revolved around a single core philosophy that markets are efficient and over long haul there are some simple things an investor can do that will provide a very good experience long term without trying to outguess the market.

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