00:00:02 Speaker 1: Bloomberg Audio Studios. 00:00:04 Speaker 2: Podcasts. 00:00:05 Speaker 1: Radio. 00:00:06 Speaker 3: News. 00:00:07 Speaker 1: This week on the podcast, what can I say? Legendary investor and founder of Dimensional Funds, David Booth, talks about his entire career, his philosophy, philanthropy, how he helped... build DFA to a trillion dollar fund and why people refuse to just manage what they can and stay calm in the face of volatility and market events. I thought the conversation and the book Stay Calm was fascinating. And I think you will also. David Booth, welcome back to Bloomberg. 00:00:53 Speaker 3: Well, thanks for having me. It's always a pleasure. 00:01:19 Speaker 1: And then you go to the University of Chicago for a Ph.D. That very much sounds like academia was the future. 00:01:27 Speaker 3: Well, it really was. I mean, in the sense that like a lot of kids, when you're in college or even high school, you think, boy, I'd like to be a professor because that's all you know. 00:01:37 Speaker 1: Right. And it's a great job. You're on a campus. It looks like fun. 00:01:42 Speaker 3: Yeah, back in those days, it was a good professionally. I mean, there is a thrill of teaching kids, seeing the light go on. Kind of the same thing we have in business. When you have a client finally, when they get it, it's very cool. 00:02:03 Speaker 1: So at Chicago, you pivot from a Ph.D. to an M.B.A., and eventually become some young professor, was not that much older than you, Gene Fama's assistant researcher, TA. Tell us a little bit about what led to that pivot. 00:02:19 Speaker 3: Well, I mean, the backdrop is, in that period of time, the late 60s, early 70s, that's where science really emerged, or finance emerged as a science, and has continued to evolve, you know, even today. And by that, I mean... For something to be a science, you need testable hypotheses. Don't worry, I'm not getting too heavy into this. And before 1960, they just didn't have the data to test things out. So in the early 60s, the University of Chicago developed this research quality database. 00:02:57 Speaker 1: CRISP. 00:02:58 Speaker 3: CRISP. It started in 1926. So now we have, they've updated it, so now we have over 100 years of data. 00:03:05 Speaker 1: When did Chicago first roll that out? 00:03:08 Speaker 3: About 63. While Fama, my mentor and Nobel laureate in 2013, he was in the PhD program. And Chicago, Jim Laurie and Larry Fisher developed this database. And they turned it over to Gene and said, look, do some paper. Do something with this data. And so he started. He had a head start on everybody, which is, and for the next 20 years, he was a, the most cited academic. 00:03:38 Speaker 1: Still one of the most cited academics. 00:03:41 Speaker 3: Maybe the most ever, really, in finance. 00:03:44 Speaker 1: First mover advantage, for sure. So around the time you finish your PhD, Fama's efficient market hypothesis, that thesis was starting to gain traction, at least in academia, if not yet on Wall Street, Tell us a little bit about what was so attractive about EMH. 00:04:06 Speaker 3: Well, it was incredibly exciting. First, let me just make a slight correction. I actually didn't get a Ph.D. 00:04:12 Speaker 1: Right. You were working on your Ph.D. and then got an MBA. 00:04:16 Speaker 3: Yeah. And eventually I decided the world would be better served if Gene Fama did research and I tried to apply the ideas rather than the other way around. So I walked into his office one day and said, look, I have I think I'd like to leave the program. So he calls up Mac McQuown out at Wells Fargo in San Francisco. Mac was in charge of applying qualitative methods for the bank, and one of the areas he worked on was investing. So he calls up Mac. Mac had always wanted one of his students, so he recommended me. Mac and I hit it off, and he invited me to go work for them, so I decided to leave the program. 00:04:58 Speaker 1: So the first job, did you ever get your MBA, by the way? 00:05:00 Speaker 3: I got the MBA on the way out. They gave me an MBA. 00:05:03 Speaker 1: That was nice. That was a good investment on their part. You worked for Mac at Wells Fargo in San Francisco. 00:05:10 Speaker 3: In San Francisco. 00:05:11 Speaker 1: I didn't realize you were on the West Coast for a while. 00:05:13 Speaker 3: Yeah, right. I mean, this is the early 70s, so it was still kind of Haight-Ashbury kind of thing. For sure. 00:05:22 Speaker 1: So Mac is the guy who's often credited with creating the first version of an index fund. I think if memory serves, it was for an institutional client's pension or something like that. Right. 00:05:34 Speaker 3: It was Samsonite. 00:05:35 Speaker 1: Samsonite. That's right. And, um, walk us through that. What was it like? 00:05:41 Speaker 3: It, it was, it turns out it was really pivotal, pivotal in, uh, in kind of the history of, of finance, uh, for, uh, a couple of reasons. One is in, um, doing all this research in finance, the fundamental question became, if you can't outguess the market, how are you supposed to invest? I mean, most people growing up thinking, and back in those days, everybody thought that investing was about trying to pick the next winner stock and time markets and that sort of thing. And beginning in the mid-60s, all of a sudden, with this burst of data, they could examine things like, are professional managers that try to outguess the market, are they worth the cost? You know, and they've been doing this research for years, and there's no compelling evidence that they're worth the cost. In fact, I think the most practical assumption for all your readers is, you know, the professional investors don't seem to be able to beat the market, okay? And that has a profound implication. And in fact, we can get around more of the personal story. My parents... grew up in the Great Depression, and then fought World War II and so forth, and never had much money. But they never invested in public markets because they thought of themselves as outsiders, and the insiders would make all the money and just take advantage of them. So they never invested, and they had a little tougher time in retirement than they probably should have. 00:07:18 Speaker 1: And to be fair, the history before the post-World War II era was... They weren't so wrong. 00:07:26 Speaker 3: Right, they weren't so wrong. So now that's the breakthrough. One of the implications of the new science is that the outsiders can do as well as the insiders. Maybe better once fees are considered because you can buy market portfolios very easily and very inexpensively now. And the pros don't seem to be able to beat that. 00:07:46 Speaker 1: Well, the data on the pros, it doesn't matter if you're looking at Morningstar or Spiever or Dalbar or any of the annual studies, is in any given year, less than half of professionals beat the index, and I think that's net of fees. 00:08:02 Speaker 3: In fact, yesterday, sorry, but it was, there was a front page article in Wall Street Journal, right? Only 27% last year, in the last 12 months. 00:08:11 Speaker 1: It was a particularly bad year because one sector dominated, and if you didn't have exposure to that sector, you badly lagged. And the year before, the sector didn't dominate, so... You had to pick the sector, time it right, and stay invested. 00:08:25 Speaker 3: Of course, if you do all of that, you don't need our help. 00:08:28 Speaker 1: That's exactly right. So Mac creates the first index fund. I'm really curious, or one of the first. I'm curious, was there much of a reaction or any pushback from Wall Street, or did it just kind of slip by unnoticed? 00:08:43 Speaker 3: No, there was a huge pushback. It was stuff they didn't want to hear. I mean, they've been claiming for years, oh, yeah, we can beat the market. We can do. 15% or 20% regardless of markets, you have all these claims. It turned out, unfortunately, it couldn't be backed up by the data. That's a very powerful lesson in developing arguments. I mean, if you have data and the other side doesn't, it's kind of an unfair fight. But it gets into a lot of issues we'll cover as to. Why I'm still out trying to deliver that message. It's just so hard to believe. 00:09:21 Speaker 1: So let's talk a little bit about that message. You and some of your Chicago classmates, Rex Sinkveld is one, and he had worked on an S & P 500 index fund at American National Bank. And then Larry Klotz was also a Chicago... No, he was just. 00:09:39 Speaker 3: We worked together for A.G. Becker. 00:09:41 Speaker 1: Uh-huh. And that was also in Chicago, but not the university. 00:09:46 Speaker 3: Yeah, right, right, right. 00:09:47 Speaker 1: And then Mac basically helped fund this, hey, we want to apply everything we learned at Chicago and express the insights of Fama in an investable thesis. 00:09:59 Speaker 3: Right, exactly. the interesting thing there was that there were really two avenues that were being explored simultaneously. We had one group that I worked in and we used as our primary outside consultants, Fisher. 00:10:12 Speaker 1: Black and Myron Scholes. More Nobel laureates. 00:10:16 Speaker 3: Two more, yeah. But it turns out In working on our project, they developed the Black-Scholes option pricing model for which Myron became a Nobel laureate. Fisher, unfortunately, had passed away, so he didn't get it. But the idea of our group was, can we... Okay, we accept Michael Jensen and the work of others says that the pros can't seem to beat the market. So what are you supposed to do? So by then, we'd developed quite a bit of the science. And one idea... based on the models at the time. Sounds silly now, but it was, well, if you have a portfolio that has a higher beta than the market, it should outperform. 00:10:57 Speaker 1: But does that mean you're just taking on more risk? 00:11:01 Speaker 3: You're just taking on more risk. But, you know, on risk. So that's one way to beat the market is take more risk, but still being diversified. So that was the Samsonite account. They figured out a way of creating a higher beta portfolio. Basically, they would start out with equal positions in all the stocks they bought, equal dollar amounts. And, you know, a portfolio like that should have a somewhat higher beta. Let me just refresh people's memory. The market has a beta of one. So if you fluctuate more than the market, you have a beta greater than one. And fluctuate less than the market, beta is less than one. And so if you have a, have a higher beta, you should outperform. That was the thinking. Incredibly naive. We were kind of geeky back then. So I think Samson and I was. 00:11:55 Speaker 1: I think you guys are still a little geeky. 00:11:57 Speaker 3: Yeah, still a little geeky. Well, yeah, I've learned to kind of appreciate that, actually. So that was one of the groups. The other group at Wells was the trust department. And Mac hired somebody to head up the trust investments group. and to do an S & P 500 index fund. Okay, so that was the S & P. 00:12:21 Speaker 1: Still early 70s? Yeah, still. So this is decades before BlackRock, years before Vanguard. This is very, very early. Right. 00:12:30 Speaker 3: So that's what they wanted to do. And we go, look, as a scientist, you wouldn't do an index fund. But I think it was some marketing genius came in and said, no, you want an S & P 500 index fund. Everybody can understand that. You can track the index. And here again, the pros don't seem to be able to beat that index. So why don't you at least get the index return? 00:12:53 Speaker 1: Can't get alpha if you're not at least getting beta, right? 00:12:56 Speaker 3: Yeah, right. So those are two different points. And the reason I emphasize that is that S & P 500 index fund idea took off and it changed hands. That group left and changed hands a couple of times. And now that's the cornerstone of BlackRock. 00:13:14 Speaker 1: It worked its way eventually to Barclays, and then BlackRock bought that whole business in, what are they, 14, 15 trillion? 00:13:22 Speaker 3: Yeah, right. I mean, it's phenomenal success. So I'm not arguing. 00:13:27 Speaker 1: And they basically proved the point, hey, it's really hard to beat the market. 00:13:31 Speaker 3: To beat the market, yeah. So hats off to them. Now, keep in mind, so let's go back to the other group, the one that I was working on. That really became... the basis for Dimensional. So eventually our group, we ended up irritating the trust department enough, they got rid of us. 00:13:47 Speaker 1: So this was you, Rex. 00:13:49 Speaker 3: No, Rex wasn't there at the time. 00:13:50 Speaker 1: He wasn't. So who was the initial group? 00:13:53 Speaker 3: Well, Rex was part of the initial group of Dimensional, sorry. And we brought in, to help us out, one of the first two people we talked to were Gene Fama, my mentor in the research side, and Mack McQuown. So by that time, it left Wells as well. So that's how we... Then we pulled together the other leading academics we worked with, people like Merton Miller, who was a 1990 Nobel laureate, and Myron Scholes, a 97, along with Fama. 00:14:27 Speaker 1: So out of all of this, your first fund that you launched when DFA began in Brooklyn... was a small-cap or micro-cap strategy? 00:14:36 Speaker 3: Yeah, right. We were the first people to use small-cap as a term, meaning a smaller. 00:14:42 Speaker 1: And this was based on Fama's, some of the initial factors. Small seemed to have persistent performance attributes. 00:14:50 Speaker 3: Yeah, that was documented about 10 years later. So here we are, we're in some ways flying blind. We had a compelling argument, because in 1981, if you looked at large institutional investors, they weren't holding the stocks of smaller companies in a meaningful way. So if you want to be diversified, you want large and small, not just large. 00:15:11 Speaker 1: So was that the pitch to institutions? 00:15:13 Speaker 2: Yeah. 00:15:14 Speaker 1: Small cap will diversify off the rest of your, against the rest of your holdings. Right. 00:15:19 Speaker 3: And then, and talking to Fama, he said, you know, we had, and so we got our first clients with that. So we often running with a small cap fund, we had clients and Fama goes, well, you know, we have a student here that did his PhD dissertation on just what you're looking at, I think. He goes, uh, Ralph Bonds. Ralph had done a study looking, breaking down stocks on the New York Stock Exchange into size quintiles, largest to smallest. And the smallest stock, smallest quintile, outperformed all the others by quite a bit over time. So, putting my marketing hat on, I go, I think we'll define small to be the smallest quintile of companies on New York. And Mama didn't raise a complete idiot here, you know? So that was how we got started. And there really wasn't a counter argument because people couldn't say, oh, you know, I've got that covered. They knew they didn't have a small cap covered. So what we were able to do is provide access, which is to small companies. And that's really the basis of Dimensional. Something that's really, and about 10 years later, Fahm, along with his colleague, Ken French, felt, you know, developed this multi-factor model. So we, when we, back when I was at Wells, we just had the single factor beta. So we had a couple more factors. That's kidding. 00:16:39 Speaker 1: So the Pharma French started with three, then it was five, and arguably there are just hundreds, most of which are tiny. 00:16:46 Speaker 3: Yeah. Yeah, most of which are tiny, and they kind of collapsed. 00:16:51 Speaker 1: You know, five to seven is plenty. 00:16:53 Speaker 3: Well, three is plenty, I think. We have really four, five now. But, You know, you get your big bang out of the first one in the market. 00:17:01 Speaker 1: The beta. 00:17:02 Speaker 3: The beta. And the second factor, say, value versus growth. That picks up a lot. Not as much as the first. And then you get into small. Is that small? That adds a little. Then you can add. Pretty soon there's diminishing marginal utility like everything in life. 00:17:20 Speaker 1: Quality, momentum. As you work your way down, each generates less and less. 00:17:24 Speaker 3: A bang. 00:17:25 Speaker 1: But what's so fascinating to me is Nobody had taken the approach that, hey, there is plenty of quantitative data to back this up. Here is a testable thesis, a falsifiable thesis, and we can express these ideas in a portfolio. That, to me, was what set the launch of Dimensional apart from everybody else. Am I stating that correctly? 00:17:51 Speaker 3: You got it. That's it. And it shows you how powerful an idea it was because here we are. Starting a firm, we have no track record. I'm the first portfolio manager. I'd never managed stocks or even bought stocks before. And we're operating out of my spare bedroom in downtown Brooklyn Heights, you know. So you figure, how can you pull that off? Well, you can pull it off if your idea is as profound as the idea itself is so profound and backed up with incredible research. You know, that's It's hard to refute. 00:18:28 Speaker 1: So here's the key question. Given how powerful that is, but at the time fairly novel, what do you think Wall Street just missed about indexing investing? Because clearly there's a financial opportunity. Whether or not your particular fund at the moment is selling performance and active selection, no one else looked at this and said, hey, there's a business to be had here. 00:18:56 Speaker 3: Well, back in those days, and fortunately this is changing now, but back in those days, basically nearly all financial services were distributed through commission salesmen. So Wall Street, if you have a commission broker managing your money, I don't know what you're going to do, but you're going to be trading a lot, I can assure you. And if there's anything that all this research pointed to is you don't want to trade a lot. Trading is a negative expected outcome. kind of like gambling in Vegas. But that's the cornerstone of Wall Street. So you go, what do you mean? You're telling me I shouldn't be trading a lot? You're ripping my eyes out. I mean, that can't be true. And you go, hey, look, all I can tell you is we have logic, reason, and empirical evidence on our side. You have no data. All you have is bluster on your side. you know and over the long haul we're winning but it's taken 50 years. 00:19:54 Speaker 1: You know hard to make somebody understand something when their income is depending on them not understanding it right to paraphrase right. 00:20:03 Speaker 3: And you don't have data to support it yeah he then all you're doing is bluster and Look, Wall Street firms in those days were very good at shoving product down people's throats. 00:20:13 Speaker 1: Oh, for sure. I would tell you they're still pretty good at it. 00:20:17 Speaker 3: Well, I'm softening up. Because along the way, there was developed, which is an incredible development, almost as important as the development of the science, was the development of the fee-only financial advisor, which is we started working with in the late 1980s. 00:20:36 Speaker 1: We're going to get to that question. I want to stay with farmer's insights and your ability to express that in a portfolio. The fascinating thing about DFA to me is that it's not simple market cap-based indexing. The approach that you embraced early on was, how can we express something that's a combination of what indexing would eventually become married to a systematic factor-based investing strategy. 00:21:12 Speaker 3: Right. And by the way, early on, even going back to the days at Wells, we have these two groups. You know, you ought to index. And then the scientists say, no, you can do better than indexing. You know, and that's 45 years. That's, you know, that's been our message, which, you know, as a scientist, you wouldn't index for a lot of reasons. One is. 00:21:38 Speaker 3: You're putting a constraint on yourself. I want to track an index. Constraints cost in economic terms. It's costly, and we can get into where the cost is. The other part of it is the silly way that index funds have to behave. 00:21:52 Speaker 1: Because of the announcements of additions and deletions and Y-Telegraph. 00:21:58 Speaker 3: Y-Telegraph. Standard & Poor's, if they add a new stock into their S & P 500 index today, it'll go in at at tonight's closing price. If you are an S & P 500 index fund manager, then you want to buy that stock today at tonight's closing price. 00:22:16 Speaker 1: Even though you know it's going to run up in anticipation. Right. 00:22:20 Speaker 3: And even though you know that every other S & P 500 index fund manager that's out there is also going to want that stock at tonight's... So that's where, you know, science... kind of probably all sciences are this way. There's a science and there's the art of the science. You know, you go to medical doctors. Let's say they all study the same textbooks. Well, some of them just better at execution than others. And that's what we're talking about here. You know, the simplest of all ideas is if you're trying to buy a stock at the same time everybody else is, that's probably not a good trade. You know, the intuition would tell you that. And I think our most recent studies shows that the run-up was about 4%. When it goes into the index, the index pays about 4% more than a fair price. 00:23:11 Speaker 1: And the flip side is the deletions have a tendency to outperform the S & P over something like 12 or 24 months. Same thing, people sell in advance. By the time it's actually deleted, it's appreciably cheaper, and maybe that becomes a value. 00:23:28 Speaker 3: Well, let me give you the downside of our approach when we're talking about, which is you have to have a certain amount of trust in the manager because we're not slavery. I mean, the indexing, you know exactly what, they track the gosh darn index. That's what they said, that's all they said they would do. And our idea of saying, look, we will use a little flexibility, a little bit of human judgment along the way. Not a lot, but you know, not like the old days of wild stock picking. 00:23:55 Speaker 1: Throwing darts. 00:23:56 Speaker 3: Throwing darts or whatever. But so we'll use a little bit of judgment. That's, requires you to have a little confidence in our ability to execute. So when we started, a lot of people said, look, how do we know you can execute? Because when you go out and buy or sell, you're going to be trading against professional investors that think they know, that they think they have undiscounted information, if you will. They have something special, special knowledge, and you don't. Okay, well, it turns out There's a flip side to that, which is if you think you have special insight, if you're an active manager and you think you know something special, you also realize the half-life of that is really short, minutes probably. 00:24:43 Speaker 1: Today it's probably milliseconds. 00:24:45 Speaker 3: Probably milliseconds. So if you want to get rid of a stock, you want to get rid of it right now, at least by the end of the day. And so we come along and we're kind of indifferent. We buy 10,000 stocks on any given day, you know, we We don't buy all 10,000. We buy it and we kind of focus a lot on what's trading easily that day. Even a small company stock, 20% of the time it trades a lot. 00:25:13 Speaker 1: In other words, you can use execution and volatility as a source of better pricing. 00:25:18 Speaker 3: Better pricing, yeah. And that's worked out over 45 years. The first 45 are the toughest, I realize. But it's still... You know, people slap their forehead, and that's hard to believe that this professional money manager out there trading against you, it's not that we take advantage of him. We provide liquidity, and our clients get the benefit of providing that service. 00:25:48 Speaker 1: And by providing liquidity, it means you're willing to be a buyer at times when many other people are not. Right. 00:25:54 Speaker 3: We're not going to pay retail for that stock, but if you can talk to me, can you do something for me on the price? 00:25:59 Speaker 1: Take a little something off. Really interesting. Coming up, we continue our conversation with David Booth, founder and chairman of Dimensional Funds Advisor, talking about his brand new book, Stay Calm, Learning to Embrace Uncertainty in Investing and Life. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is David Booth. He is the founder and chairman of Dimensional Funds Advisors. His new book is out probably by the time you're hearing this. Stay calm. Learning to embrace uncertainty in investing and life. So I want to sum up the book in a sentence, and then we're going to really delve into it. uncertainty isn't something to fear. It's where possibility lives. Explain that. 00:26:59 Speaker 3: Well, that is a good quote. Every now and then, you know, you write something down. 00:27:02 Speaker 1: By the way, I have a dozen fantastic quotes and I'm going to try and click through all of them from you. 00:27:07 Speaker 3: Yeah, no, it's funny. Cause I mean, you write it and then you forget you wrote it. And then you go back and look at it and go, Hey, that's not bad. That's not bad. Yeah. Yeah, no, it's, um, and not only, um, Let me talk about a breakthrough that happened to us about 10 years ago. When we started, we realized that there are a lot of parallels between investing and your life experiences. And a lot of that has to do with how you deal with uncertainty. You know, as you grow, you learn how to deal with uncertainty. And what you realize is uncertainty is what creates opportunity. So if there were no uncertainty, you know, you wouldn't have have the ability to progress. So it's not about eliminating uncertainty, it's about managing uncertainty. And that's true in life. And the reason I bring that up is because that's also true in investing. If there are no uncertainty, in other words, if all investing was riskless, then. 00:28:12 Speaker 1: I got some 10-year treasuries at 3.5% that you can hold and barely keep up with inflation. 00:28:19 Speaker 3: Well, if there's no uncertainty in investing, every investment would have the same return, the riskless return, whatever that is. So in investing as well, then it's uncertainty that creates opportunity. And once people start to realize that, we go, let's go back. How do you deal with uncertainty? Well, first off, you realize that life is not totally predictable. I mean, think back 20 years ago. Could you have predicted where you are today or where you'll be 20 years from now? 00:28:57 Speaker 1: Nobody in December 2019 was predicting a pandemic the next year in a market that would scream higher. So you could show it every annual forecast we see, and we'll talk a little bit about predictions in a minute. But the future is inherently unknowable. 00:29:14 Speaker 3: So embrace that uncertainty, though. So that's what gives us the opportunity in life and investing. 00:29:21 Speaker 1: So what do you say to people who are investors and, hey, uncertainty creates opportunity. How does the average mom-and-pop investor, how are they supposed to live through the regular 15%, 20%, 25% drawdowns? We see all the time. in equity markets? 00:29:41 Speaker 3: Well, the quick answer to that is stay calm. That's why we call it the name of the book. Let me give you an example of the fundamental problem we have with helping people come to Stay invested. Let's say bad news comes into the market. The pandemic. Or a particular stock. And then you look at the stock or the market and you see it's down 20% or whatever. You go, holy cow, I've got to get out. There's bad news and the market has things dropping. That is human nature logic. What we'd like to have people think is, look, Okay, pandemic, bad news came into the market. The market's down 20 or 30%. And people were saying, what are we supposed to do? What are we supposed to do? What do you think is going to happen? I go, hey, look, I don't know what's going to happen. And anybody that thinks they can predict what's going to happen, I'd be a little kind of suspicious about. But here's what I believe will happen. People aren't just going to sit there and take it. You know, kind of the cornerstone of all of my belief in markets and how they work is human ingenuity. That's what ends up bailing us out. You know, when bad things happen to you, you don't just sit there and take it in life. You figure out how to get back on track. And I go, so here we have the pandemic. That's a big smash in the mouth to these firms. They're not just going to sit there and take it. They'll figure out how to get back on track. They'll try something new and different. And along the way, there'll be winners and losers. And I don't know who the winners will be and the losers. 00:31:27 Speaker 1: But. 00:31:29 Speaker 3: What I do believe is we're likely that effort, that human ingenuity will get us back on track faster than most people think, which is what happened. 00:31:38 Speaker 1: We saw that during the financial crisis, which the pandemic was less than a quarter down 34 percent. And from that end of the first quarter in 2020. the S & P was up 69% for the rest of the year. 00:31:52 Speaker 3: Unbelievable. So that's what we're getting at. I mean, so what was going on, and this is what I get back to, what do you tell people to get through the tough times? Go back to first principles. Okay, we have the pandemic, and there are all kinds of forecasts, but the consensus was, I remember at the time, it's likely about a two or three year kind of phenomenon. And so, The market's down about 20% or 30%. That seems about right to me. I mean, I don't know. 00:32:22 Speaker 1: So in other words, it's already in the price, and trying to act in response to something everybody knows seems like a waste of time. 00:32:30 Speaker 3: Yeah, I learned that really in the late 90s. I was on an investment committee. I used to sit on investment committees. I don't anymore, other than our own. And the chairman of that investment committee went around the world. It was 1998. I don't know if you remember. 00:32:47 Speaker 1: Sure, long-term capital management. 00:32:48 Speaker 3: Yeah, long-term capital. 00:32:49 Speaker 1: I was on a trading desk. I remember that vividly. 00:32:51 Speaker 3: Yeah, right. You had the Russian default. You have Asia contagion. He goes around the world, the chairman of the committee, and eventually talks about all the problems around the world. He concludes, so why should we invest in stocks at all? And I said, well, you know, I think you've characterized what was going on in these different countries okay, but I think all you've done is explain why the market's down 35%, you know? And he goes, and we stayed invested. And of course, you know, we were amply rewarded. So if people could just go through first principles, and by that I mean, bad news comes into the market. They look and they say, aha, the stock is down. Now I want to get out because I'm stressed. If we can get them to change their opinion and say, look, the market's down. I mean, the price is down quite a bit. That's probably about right, given the bad news that we have. Therefore, I need to stay invested. I was thinking the other day, if I come out with a second book, maybe I'll call it Stay Invested, so we'd have Stay Calm and Stay Invested. 00:33:57 Speaker 1: I think your second book should be named What Would Gene Fama Say? 00:34:01 Speaker 3: Yeah, right. 00:34:02 Speaker 1: If market's down 30%, what would Fama say? He'd say it's in the price and just sit there and relax and stay calm. 00:34:09 Speaker 3: That's the science. 00:34:12 Speaker 1: Really interesting. So you mentioned some forecasts and predictions. Another aspect of the book is plan, don't predict. You can't foresee the future. So making decisions based on predictions is you're essentially engaging in wishful thinking. 00:34:30 Speaker 3: Well, that's right. I mean, you need to have a plan for going forward in life and investing. But don't waste time on trying to predict the unpredictable. Markets are unpredictable. That's why I the pros can't beat the market because the market's unpredictable. And yet over the long haul, it's been able, if you go back, we haven't talked about the history, but 100 years of returns, that covers the Great Depression, World War II, you know, Korean War, high inflation, great financial crisis, pandemic. Through all of that, 10% a year. I think A lot of what I do now, particularly talking to students, is talk about the miracle of the stock and bond markets. These public markets are truly miracles. 00:35:19 Speaker 1: Really, really fascinating. Here's another thesis that I think is really very, very insightful. Control what you can, manage what you can't. You can't control crashes, recessions, interest rates, or any of that century of terrible events. but you can manage yourself, your allocation, your ongoing saving. Discuss that a little bit. 00:35:44 Speaker 3: Well, that's right. I mean, in terms of dealing with it, so it's all about managing uncertainty. So control what you can and manage what you can't. Manage the uncertain part as best you can. You can't eliminate it, but you can manage it. 00:36:00 Speaker 1: But by managing it, you're talking about having a financial plan and sticking to it, continuing to dollar cost average into it. There are things within your control. That's what you should be managing. And the things outside of your control, just accept you can't control what the Fed does or what's happening in the straight or moves. 00:36:20 Speaker 3: Yeah, a lot of people, they make portfolio decisions based on their forecast of what the market's going to do. That's a waste of time. You want to pay attention to what's going on because, you know, over your lifetime, there are going to be situations when you need to change your investment policy around. But it's not based on what's going on in the market. You need to change, you know, you get a new job, you want to retire, you know, you have a family. All these things cause you to invest differently. But at every point, you want to have a long-term plan in place and manage to that. So you can't control the stock market. you can control how much risk you take, basically. There are two basic paths you go down. First is the split, how much do you have in stocks at all versus relatively riskless assets like a money market fund or a bond. So you get that right. And then the second part is then, to the extent you're investing in stocks, buy the whole market. That makes you as good as the insiders. People that think of themselves as outsiders That's another miracle of markets. Right now you have it, unlike from my parents who never had that available to them, you know, now everybody has access. The market is good for everyone. 00:37:41 Speaker 1: So let's talk a little bit about financial media, which you write extensively about in the book. Another quote of yours, modern financial media is designed to capture your attention, presenting commentary, stories, and expert forecasts that are nothing more than distracting noise. 00:38:01 Speaker 3: Yeah, that's right. I mean, today we have undoubtedly, we have a lot more data thrown at us than ever before. I don't know how we have a lot more meaningful information, but we have a lot more data, that's for sure. And so it's important these days for people to think critically. Always go back to first principles. You know, this year in particular, been a lot of anxiety. We have, you know, some wars, you know, we have all kinds of things. 00:38:28 Speaker 1: Tariffs. 00:38:30 Speaker 3: Any number of things. But I tell people, look, do you think you have more anxiety today or people have more anxiety today than during the Great Depression or during, say, World War II when it looked like we were losing at first? Those are real serious anxieties. So I'm not making light of the anxiety, but what the 100 years of data shows us is the market does really a good job of, of pricing out all that uncertainty and the risks. 00:38:59 Speaker 1: So another quote in the same section, in investing, success often comes not from doing more, but from tuning out more. So I have to share this with you because every time I write, tune out the noise, I get a ton of pushback. Hey, you can't just ignore all this. You can't tune it out. It's really difficult. And just telling people to tune out the noise is a waste of time. What's your argument back? 00:39:29 Speaker 3: Well, first off, I'm glad to see you get your share of that, just like I do. Basically, what we've outlined is you want to have sensible portfolios on the equity side by the whole market. And the market does a great job of pricing. So all the anxieties that you can express, and there are plenty of things to be concerned about. I'm not making light of them at all. But that's why the prices are doing whatever it is they're doing. And so unless you're faster than the market, unless you think you're smarter than the market, you just have to assume that whatever it is you're concerned about has already been priced in. You're too late. By the time you get a certain piece of information, the market's already reflected it. 00:40:23 Speaker 1: It's already in the price. 00:40:24 Speaker 3: It's already in the price. You're too late. 00:40:26 Speaker 1: So this quote might be one of the most profound things I read in the book. And it was, you know, you read it and you're like, wow, that's really insightful. At least that was my response. This isn't a book about how to invest. It's a book about how to think about investing. It's not about picking stocks. It's about taking stock of what really matters. Like, right? I mean, that's an example. If you go back and reread it, I'm like, I wrote that. That's really, really good. 00:40:57 Speaker 3: That's not bad. 00:40:58 Speaker 1: No, that's damn fine. 00:40:59 Speaker 2: And it's because you are implying, hey, this is about securing your family's future, but it's not just about money. 00:41:09 Speaker 1: It's about all the things that really matter. 00:41:12 Speaker 3: Well, yeah, we have a segment in there about what you... think is, what is true worth about? Worth isn't true wealth. My parents, I describe as being wealthy. They just didn't have much money. So you want to focus on what's really important to you. 00:41:33 Speaker 1: The quiet dividend of patient compounding in both life and investing. 00:41:38 Speaker 3: Yeah. I mean, one of the first things you'll learn about it, in finance is the magic of compounding. If you get that 10% return, it means your portfolio doubles every seven years. And you double it six times if you have a 42-year rise. That's six seven-year periods. And life is the same way. You are the result of the effects of the compounding of decisions that you've made in life all the way through. And maybe that's where wisdom comes from, is that compounding of the effects of decisions, you know? 00:42:21 Speaker 1: Really, really interesting. I really enjoyed the book, Stay Calm, Learn to Embrace Uncertainty in Investing and Life. Coming up, we continue our conversation with David Booth, author of Stay Calm and founder of Dimensional Fund Advisors, talking about philosophy and philanthropy. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. I'm Barry Ritholtz. You're listening to Masters in Business on Bloomberg Radio. My extra special guest today is David Booth. He is founder and chairman of Dimensional Fund Advisors and author of the new book, Stay Calm, Learn to Embrace Uncertainty in Investing and Life. So I wanted to talk a little bit about both your philosophy and how it developed and philanthropy. We'll circle back to philanthropy in a minute. But let's talk a little bit about Dimensional. You guys didn't want to participate in ETFs for a long time because you preferred to offer your products through advisors to investing customers. What was the idea of working through the advisor side of it as opposed to marketing directly to Main Street? 00:43:42 Speaker 3: Well, first off, any business, you know, the marketing is a big component to any business. Now, you have to understand we're starting out of my brownstone in my apartment. It wasn't like we had a big marketing machine. And we didn't know anything about selling to the retail public. We did know institutional investors. And so our first clients were large, typically pension funds, insurance companies, sovereign wealth funds. And that was first eight years or so, that was who we talked to. And then one day, Dan Wheeler came along. He was a financial advisor in Sacramento. 00:44:29 Speaker 1: In California, right. I know the name. 00:44:31 Speaker 2: Yeah. 00:44:31 Speaker 1: Yeah. 00:44:32 Speaker 3: And he said, I'd like to have access to your funds. And so we don't know. But at that time, it was kind of unusual for a firm like ours to get big institutions to invest in a mutual fund. But we created a mutual fund. And because they were institutional clients, our fees were very low, institutionally priced. And so it made ideal for a fee-only financial advisor a fee-only advisor being one that we don't pay them any money, they don't pay us. I mean, it's straightly arm's length. 00:45:10 Speaker 1: What year was that with Wheeler? 00:45:12 Speaker 3: About 1989. 00:45:14 Speaker 1: So that was long before advisors had taken over from stockbrokers. Right. The fiduciary side of the business was still relatively tiny. 00:45:27 Speaker 3: It was tiny, but these were highly energized financial advisors. I mean, these were typically... advisor would come from a warehouse felt really dirty about themselves and uh i'm just repeating what they told. 00:45:39 Speaker 1: Me oh no i i've heard it a million times. 00:45:41 Speaker 3: Yeah and and to see this approach which is based on science is you have all the data you could ever want backing up what we do uh and you could come up with a sensible investment approach that undoubtedly would work over the long haul uh. 00:46:01 Speaker 1: I had someone leave from a wire house, become an advisor, and I asked them why. This is early 2000s, and I'll never forget the line I was told was, they're called brokers because they made their clients broke. And I'm like, wow, talk about feeling I got to get out of this side of the street. 00:46:22 Speaker 3: Yeah, it doesn't have to be that way. But observe... The ability to beat the market is such a narrow advantage, you know, that it takes an incredible firm. I mean, we're a professional manager, and we can do things that a retail client can't do. And that has nothing to do with picking stocks, let's keep in mind, but dealing through market mechanisms, the way you trade, securities lending, you know, so on and so forth. You know, there are things we can do as a But the margins are very, very slim. The idea that somebody way down the food chain, a broker at a retail, would have some of that magic is hard to accept. 00:47:13 Speaker 1: So when you guys began working with advisors, it wasn't to design portfolios. The advisor was there essentially to keep the client from abandoning their portfolio and getting in the way of compounding? 00:47:26 Speaker 3: Yeah, absolutely. We have said that one of our advisors said it right. He said, you know, I don't have clients with investment problems. I've got investments with client problems. 00:47:38 Speaker 1: That's a great line. 00:47:39 Speaker 3: But the difference between the two is education. And we've always sold, as you know, through education where we invite people in for seminars and stuff. And the book. I mean, that's why we do the book is to help people better understand how markets work so they will be more confident that they can have a, Good investment experience. 00:48:00 Speaker 1: You guys have done a good job on the education side. I'm kind of curious if that's the reason why you stayed out of ETFs for so long. And for people who are trying to put this in context, DFA launched in 1981. In 2020 was your first ETF. And today you are the largest active ETF issuer in the country. So why leave all that money on the table for 40 years? 00:48:30 Speaker 3: Well, I don't know. It must have been a pandemic. Anyway, because early on, our advisors said they didn't need the ETF. So the beauty of a regular mutual fund is you go in at net asset value at the end of the day. That's about as clean as you can come up with. If you buy an ETF, you're buying it in the open market. And for some people, that's A little scary. 00:48:57 Speaker 1: Whatever the open market costs might be, the offset of the tax advantage has to wildly out. In a non-qualified account, ETFs are vastly superior to mutual funds most of the time for that tax reason. 00:49:14 Speaker 3: Well, to a conventional mutual fund, I agree with you. But, we've been able to. 00:49:19 Speaker 1: Use a dual class. 00:49:20 Speaker 3: Yeah, we've been able to eliminate a lot of the tax advantage of ETFs. 00:49:28 Speaker 1: By the way, that's you and Vanguard seem to be the leaders in that space for having an ETF and a mutual fund essentially track the same holdings. 00:49:39 Speaker 3: And now, coming out this summer and into the fall, we are innovating even more, which is we're taking... Right now, we have mutual funds and ETFs that do the same thing. So two pools of money doing the same thing. SEC has given us approval to merge those two. So it'll just be one pool of assets with two ways of accessing it. 00:50:04 Speaker 1: Two different wrappers, same pool of money. 00:50:06 Speaker 3: Same pool of money. So that will... eliminate, take away the argument. I mean, you don't have to worry about it anymore. 00:50:14 Speaker 1: That's really quite... Isn't that cool? 00:50:16 Speaker 3: Yeah, that's... That speaks to how science is developing. You know, it's not like we sit on our hands after we're continually trying to work through things and become more efficient. 00:50:29 Speaker 1: So let's talk about another philosophical belief from you guys that I'm fascinated by, which People have had a hard time wrapping their head around, well, is DFA an indexer? Are they an alpha sort of chaser? And the way I kind of explained it to myself was, no, when you look at traditional indexers, they're just using one factor of the many French factors. And what Dimensional has said is, hey, we're going to use three, four, five factors. So we're indexers. plus the next four factors on the list. Is that a fair philosophical breakdown? 00:51:11 Speaker 3: Yeah, that's part of what we do is exactly that. And there are some people that don't want to have a bias towards value or small cap. And for those, we have kind of plain vanilla funds, too, that aren't biased. But in both cases... It's about execution. We talked about how an index fund has to trade in a bizarre sort of way. And we don't do that. So we apply that thinking to all the funds. So that... Here again, what we're trying to do is apply the science. And by that... The way we structure portfolios, we think we can do better than index providers. And then secondarily, the way we trade relative to the way index funds trade. That's true in everything we do. But then some clients like to have a small cap bias. Some don't. So it's their money. We try to come up with whatever they think is sensible. 00:52:20 Speaker 1: So let's talk a little bit about philanthropy because I know Part of the book discusses legacy, and you've been very involved philanthropically. A decade ago, you signed the Giving Pledge. And go back two decades, you made, right around the time of the financial crisis, a gift in 08 to the University of Chicago's business school, which I think was the largest gift ever in the country or to Chicago at that time, $ 300 million. and now it's the Chicago Booth School of Business. Tell us a little bit about what motivated a gift of that size to that recipient, and what are your thoughts 20 years later? 00:53:04 Speaker 3: Well, okay, first let me just say it was kind of funny. The announcement for that was made in November of 2008, like the week after Obama got elected for the first time. And so there was a big announcement that said, at the school said, the big announcement's coming tonight. Free food, come in. And they thought it had something to do. 00:53:26 Speaker 1: With Obama being- He's a Chicago guy, right? 00:53:27 Speaker 3: Yeah, he's a Chicago guy. So that's when they announced that the school's name was name change. 00:53:34 Speaker 1: So it's- Which, by the way, wasn't a requirement of your gift. 00:53:38 Speaker 3: No. 00:53:39 Speaker 1: You argued against it. 00:53:40 Speaker 3: No, I didn't argue against it. 00:53:42 Speaker 1: I heard through several people that you pushed back initially. 00:53:45 Speaker 3: Well, I pushed back a little bit, but not a lot. What happened was I approached the dean of the business school and said, you know, it's time for payback here. You know, what the university has done for me and the faculty in not only training me in school, but then following up over the years. over the now 45 years. You know, people like, you know, we've had five Nobel laureates work very closely with us. All of them have been significant directors of our mutual fund or the company, Fama being the founder as well. It's time for me to pay back, and it's got to be a big chunk of what I have. So this is what I'm willing to do. And the dean looks at it and goes, whoosh. You know, we were thinking about naming the school, and we weren't asking for nearly this much. We'll name the school after you. I go, okay, well, whatever, you know. But it was about me wanting to feel good about me. 00:54:46 Speaker 1: Well, you feel a sense of obligation to the University of Chicago because of everything they gave you. Undergraduate and pre-PhD MBA, you were at Kansas University. And you, similar number, last year you gave them $ 300 million to the University of Kansas Athletics Group. Why focus on sports there? What's so significant about the Kansas Athletics? Because, by the way, they were, as a school, they've been doing pretty good. 00:55:19 Speaker 2: Oh, yeah, yeah. 00:55:19 Speaker 1: Athletic-wise. 00:55:20 Speaker 3: Yeah, yeah, well, no, it's, first off, Lawrence, Kansas, where the University of Kansas is, is my hometown. I went to Lawrence High School and, than University of Kansas. So, and with all the relatives, it's in my blood. And for a school, a big state school like that, what's really important is to have a great competitive athletic program. I mean, I know the arguments, some people, you know, they're not so sure about that, but. 00:55:52 Speaker 1: It doesn't hurt their marketing, their ability to recruit professors. 00:55:55 Speaker 3: It is. 00:55:56 Speaker 1: Make the town better. I mean, it just multiplies across everything, regardless of how you feel about big football in college. 00:56:05 Speaker 3: Yeah, right. But I happen to love it, and particularly love college basketball. Kansas has always been really good at basketball, and it's getting better in football. And then with NIL, throwing a little dollop of NIL coming down the pike. 00:56:21 Speaker 1: Name image likeness for get some money to the students. 00:56:25 Speaker 3: So it puts great financial pressure on the schools. And it's difficult for a state school to have a big budget for athletics when their professors are not making what they're making. So it's important for private, for alums and whatever, to step up in order to to help them be successful. 00:56:54 Speaker 1: And I'm going to assume that this isn't the end of your academic gifts. You're going to be doing other stuff in the future, and obviously the Giving Pledge is a part of that. But I have to ask about a purchase you made in 2010, which is you bought Naismith's original document of, essentially, here are the rules of basketball. This is where basketball was invented. and I think you paid over $ 4 million for that, and then you gave it to the University of Kansas Athletic Department. Explain, tell us about that. 00:57:30 Speaker 3: Well, no, it was really kind of an interesting auction. James Naismith invented basketball in 1891. If you think about it. 00:57:39 Speaker 1: Peach, peach crate. 00:57:41 Speaker 3: Yeah, the whole thing. It's the only major sport that I can think of where we know who invented it. So it was a class assignment for him, at the YMCA in Springfield, Massachusetts. So they stayed in the family, and as things happened over time, they just decided that they wanted to sell it. So I decided, here again, basketball is so important. If you live in Lawrence, Kansas, you realize that the rules of basketball those two typewritten pages need to be in Lawrence, Kansas, because Naismith, after he invented the game, goes to teach at Kansas for 40 years. He's buried in Lawrence. You know, you gotta... So I realized. 00:58:31 Speaker 1: Perfect match. 00:58:32 Speaker 3: Had to buy it. So it started out, they thought it would go for about $ 2 million. But along the way, I started... I was bidding over the phone, and there was somebody else bidding over the phone, and kept ratcheting up, and ended up paying about $ 4. 5 million. The person on the other. 00:58:49 Speaker 3: Of the phone was David Rubenstein. Get out. Oh, that's hilarious. Your Bloomberg co-host. 00:58:56 Speaker 1: Fellow host. 00:58:57 Speaker 3: That's amazing. 00:58:58 Speaker 1: Did you explain eventually to him why you bought that and why it went to Kansas? No. 00:59:05 Speaker 3: Once I paid for it, it was announced who bought it. So he sent me an email the next day saying, hey, I think I cost you some money, which is funny. So we still have a good chuckle about that. 00:59:18 Speaker 1: So last piece of philanthropy I ask to ask about before we get to our favorite questions, you're known as an avid art collector. If you go down, I don't know what river that is in Texas, but I've been on that boat. You can see some of your sculptures from the river if you're in a boat. You've endowed a conservation center at the Museum of Modern Art. And as opposed to just donating a sculpture or a painting, you're essentially helping them preserve their entire collection of in perpetuity. Tell us a little bit about that. 00:59:55 Speaker 3: Well, I mean, uh, preserving the, you know, the, your patrimony is important for any country and, and art is such a big deal. And MoMA has such a great, uh, museum. 01:00:07 Speaker 1: Spectacular. 01:00:07 Speaker 3: Spectacular. 01:00:08 Speaker 1: Of which like 3% is displayed at any time. 01:00:12 Speaker 2: Yeah. 01:00:12 Speaker 1: It's, um, um, it's an enormous, enormous collection. 01:00:17 Speaker 3: Yeah. It's complicated. So, uh, I've sat on the board there for about 10 years now, and it's just really been tremendously exciting. And then endowed the conservation lab, because that's easy to overlook, conservation. But taking care of particularly modern art, which could be some fiberglass or something, who knows what kind of stuff goes in. 01:00:41 Speaker 1: To say nothing about how paint decays, how canvas decay, paper. All that stuff is problematic over time. 01:00:51 Speaker 3: Yeah, in the old days, probably it was kind of conservation was somebody kind of having a couple sips of alcohol and dobbing some paint on a painting and trying to clean or whatever. That's changed now. It's incredibly sophisticated. You take x-rays of the painting or whatnot. It's studying the chemistry of it. So I'm I've headed up that conservation committee for quite a while now. It's very exciting to see what they've done to maintain the art. 01:01:21 Speaker 1: Really interesting. All right, I only have you for a couple of more minutes. And you and I can continue this conversation in Southern California and Huntington Beach in a few weeks. For now, let's jump to our favorite questions we ask all of our guests, starting with, Tell us about the mentors who helped shape your career, and I have a pretty good idea who they are. 01:01:44 Speaker 3: Well, no, that's right. Let's just start with the Nobel laureates, Merton Miller, Gene Fama, Myron Scholes, Bob Merton, and Doug Diamond. Kind of an impressive group of characters. 01:01:56 Speaker 1: That's a murderer's row, right? 01:01:58 Speaker 3: Murderer's row, yeah. Then I had Mack McQuown, who really started indexing. All right. 01:02:06 Speaker 1: And then really was the initial, was he the first check into DFA? 01:02:11 Speaker 3: No, he was a founder. In fact, more important than investing in the funds, he helped us raise the money, the risk capital for the firm. And then I always have to throw in my parents. I mean, it ties into what true wealth is about. They never had much money, but they were wealthy. They They'd figured out what life was about. 01:02:41 Speaker 1: Really, really interesting. Let's talk about books. In addition to yours, what are some of your favorites? What are you reading currently? 01:02:48 Speaker 3: Well, I mean, I just finished 1929, Andrew Ross Sorkin's new book. That's very interesting. 01:02:54 Speaker 1: That is on my nightstand. It's up in a few books in my queue. 01:02:59 Speaker 3: Then I, in the last couple of years, the book I've really liked a lot was Paris 1919. by Margaret Macmillan. And she takes through what became known as the Treaty of Paris. When the armistice was signed at the end of World War I, that's just when all kinds of crazy things happened because the Ottoman Empire collapsed, the Russian Empire collapsed, Austro-Hungarian Empire collapsed. So all of these So you had to create new countries all over the place, all through Central Europe and the Middle East. These were, it took about six months to develop the Treaty of Paris. The first five or so they didn't do much and then all of a sudden in the last month they just got together and great. I don't know if they could have done much better but it was pretty chaotic. 01:03:52 Speaker 1: Really interesting, I'm gonna add that to my list. Tell us, are you streaming anything? What do you do to relax, podcasts, movies? What entertains you? 01:04:02 Speaker 3: Well, I mean, your podcast, but we have a new season of Ted Lasso, which I'm really all over. 01:04:09 Speaker 1: You are. My wife and I are waiting for there to be more than three or four in the queue. It's just too frustrating to watch one a week. 01:04:16 Speaker 3: By the way, he's a KU alum as well. 01:04:18 Speaker 1: Yes, yes, I knew that. 01:04:23 Speaker 3: And we have any number of. 01:04:26 Speaker 3: What happened was when the pandemic hit and he couldn't go out much, I watched more TV in that two-year period than I ever watched before or since. 01:04:34 Speaker 1: Same, absolutely the same. I was mentioning the other day that 6.30 is the new 7.30. It used to be if you tried to make a dinner reservation around 7, 7.30, it was the toughest reservation to get. And now it seems the hard reservation is to get dinner. is 6 or 6.30. 01:04:55 Speaker 3: Yeah, right. 01:04:56 Speaker 1: And it's not just that we're aging and heading towards the early bird special. I think people want to go to dinner and then come home and watch whatever it is, Ted Lasso or Lioness or Yellowstone, whatever their thing is. It's so funny you say that. But the pandemic was absolutely the most TV I've watched in my life. Our final two questions. I think this book offers a lot of interesting advice but I want to ask you specifically for a recent college grad who is interested in a career in either investing or wealth management or anything along those lines. What sort of advice would you give them about building a career? 01:05:39 Speaker 3: Well, first off, I don't give advice, but here's some thoughts. First is thoughts that probably everybody will tell you. Figure out where do you have some skill, right? some comparative advantage or competitive advantage. And what are you passionate about? So marry those two things, passion and skill, and work really hard. Now, the part that I don't think it's emphasized enough is by the time you get out of school, you develop a set of values, your personal set of values. Pay attention to that. 01:06:19 Speaker 2: So. 01:06:22 Speaker 3: Find something you're passionate about that you have a skill in that kind of maps into your values. And pay attention to those values and don't deviate from them in pursuit of just short-term job. I mean, when you get out of school, like when I got out of school, most people, you're just lucky, find any good job. But over time, you can You kind of iterate towards what you think is really valuable. 01:06:58 Speaker 1: Good advice or good insight. I know you don't like to call it advice. Our final question, what do you know about the world of markets and investing today that might have been useful back in 1981 when you were first launching dimensional funds? 01:07:16 Speaker 3: Well, I think one of the big things there is that if I... I didn't realize how difficult it would be to persuade people about this new way of thinking about investing. I mean, because I'm sitting there, of course, I'm totally wound up with all the University of Chicago stuff. I mean, have all the science, the data, and so forth. I go, once you explain that to people, they'll flock to it. You know, I've been doing this for 55 years. I mean, people don't flock to new ideas just based on. 01:07:50 Speaker 3: On new research or new ideas, you have to soak the ground down around them, let them sink into it. So I guess if I'd known how hard it was, I don't know if I would have pursued it, but I think we're getting close. So that's what, now I'm in this phase where it's exciting to explain all this stuff to people, because they're starting to respond to it. And I really find that great. 01:08:10 Speaker 1: You're getting close. Keep at it, eventually you'll convince a few people. 01:08:14 Speaker 3: Good. 01:08:15 Speaker 1: David, thank you for being so generous with your time. This has been absolutely delightful. We have been speaking with David Booth. He is the founder and chairman of Dimensional Funds and the author of Stay Calm, Learn to Embrace Uncertainty in Investing and Life. I would be remiss if I didn't thank the crack team that helps put this conversation together each week. Alexis Noriega is my video producer. Sean Russo is my researcher. Anna Luke is my podcast producer. I'm Barry Ritholtz and before I say so long, I just want to thank Alexis for being a fantastic video producer and helping to put this podcast in the world of YouTube and videos. She is departing to take a full-time gig. That's a big promotion for her, and we wish her the best of luck going forward. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.