Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg Radio.
Speaker 1: This week on the podcast, I have an extra special guest.
Speaker 1: His name is Dave Butler, and he is the co
Speaker 1: CEO of Dimensional Fund Advisors, which manages about six hundred
Speaker 1: billion dollars UM. Dave has really a fascinating background UM,
Speaker 1: not only academically but in the professional sports world UH,
Speaker 1: and the arc of his career over the past let's
Speaker 1: call it thirty years, very much tracks the development of
Speaker 1: many of the dominant trends that have taken place today
Speaker 1: in finance. So whether it's independent advice, or indexing or
Speaker 1: multi factor investing, he has been a part of UM,
Speaker 1: let's just cool it, the movement. Dimensional Funds UH is
Speaker 1: very much a culture driven, philosophically driven firm that he's
Speaker 1: been a large part of for a long time. Not
Speaker 1: only does he work with his co CEO, GERARDA. Riley,
Speaker 1: but he also works closely with Chairman David booth Um,
Speaker 1: directing UH Dimensional Funds into the latest iteration of of
Speaker 1: where finance is going UH. If you are at all
Speaker 1: interested in independent advisory, asset management, factor based investing, UH,
Speaker 1: sustainable based investing, I think you will find this conversation
Speaker 1: to be absolutely fascinating. So, with no further ado, my
Speaker 1: conversation with Dave Butler. My special guest this week is
Speaker 1: David Butler. He is the co CEO and head of
Speaker 1: Global Financial Advisor Services for Dimensional Fund Advice Serves, which
Speaker 1: manages over six hundred billion dollars. Dave got his BS
Speaker 1: from Berkeley and his NBA same place before he decided
Speaker 1: to play around with round ball a little bit. Uh.
Speaker 1: Dave Butler, welcome to Bloomberg. Thank you. So let's let's
Speaker 1: talk a little bit about pre finance career. You played
Speaker 1: basketball in college and you were drafted by the Celtics.
Speaker 1: That's right. Yeah, So I was drafted by the Celtics
Speaker 1: back in seven and uh. The year I got drafted,
Speaker 1: oddly enough, they had a strike. An NBA player strikes.
Speaker 1: So normally, as a player, you get a chance to
Speaker 1: go try out and they can tell you whether you
Speaker 1: have a shot to make it or not. Unfortunately, didn't
Speaker 1: have a tryout that particular summer, so I made a
Speaker 1: decision to go over to Turkey and and play my
Speaker 1: first year in Turkey. Um, I had a I was
Speaker 1: actually a young kid just sitting around the house in
Speaker 1: the summer, and uh, you know, I know, I'll go
Speaker 1: to the Middle East of my Calton said, hey, s
Speaker 1: tam Bowl wants you to come over and try out.
Speaker 1: And I had been in great shape. I was getting
Speaker 1: ready for the Celtic camp. I went over to Turkey
Speaker 1: and they offered me twice what I would have made
Speaker 1: as a rookie in the NBA. And I thought to myself,
Speaker 1: I wasn't sure when the NBA strike would end, so
Speaker 1: I thought, well, I'll go over to Turkey, I'll work
Speaker 1: on my game, I'll get better, I'll make my first
Speaker 1: year's worth of money, and then I'll come back and
Speaker 1: I'll make the NBA the next year and make the Celtics.
Speaker 1: And but fate intervened, didn't it. Fate intervened, And I
Speaker 1: think it was about halfway through my season in Istanbul.
Speaker 1: I end up tearing a It was called a gas rock,
Speaker 1: which is your gap your calf muscle, so the muscle
Speaker 1: that connects your calf to your lower leg. And I
Speaker 1: sat out for probably about a week. Um, when you're
Speaker 1: the American player on a on a European team like
Speaker 1: in Istanbul, there's one American per team. Is that by
Speaker 1: rule or in instant in Turkey that was the rule.
Speaker 1: Is that a minimum or a maximum minimum uh and
Speaker 1: a maximum, it's the only number you can have. So
Speaker 1: there's one player, one American per team. And the expectation,
Speaker 1: of course, if you're that one player, is that you
Speaker 1: need to lead the team in scoring, and the lead
Speaker 1: team and rebound. You gotta you've got to be the
Speaker 1: main person. So when I got back to the States
Speaker 1: after my injury, my doctor said, you know, that was
Speaker 1: probably a two to three month uh, sit out type
Speaker 1: of nillary. And I was out for about a week. Uh,
Speaker 1: they take me up, and I kind of faked my
Speaker 1: way through the rest of the season. And that was
Speaker 1: the downside is I did a little bit of permanent
Speaker 1: damage to my calf and never really quite got back
Speaker 1: to where I I thought I could actually make the NBA. Yeah,
Speaker 1: normally at that age you're fairly immortal and recover pretty quickly.
Speaker 1: This had to be Was this a practice injury or
Speaker 1: an actual game injury? It was a actually a practice injury.
Speaker 1: So it's kind of one of those up and back
Speaker 1: drills and and I stopped and get ready to take off,
Speaker 1: and I heard this big snap and heard it. Yeah,
Speaker 1: other other people in the gym heard it too, And
Speaker 1: I thought my achilles because you always here, I've watched
Speaker 1: basketball games and you hear that pop. Someone from the
Speaker 1: Knicks trying to remember who it was. Um tour there there,
Speaker 1: Um was it? Maybe it was the A. C. L
Speaker 1: heard it pop on television. It's a afying sound, which
Speaker 1: exactly what it is. You know, right when it happens,
Speaker 1: you know you're you're you're done. So uh, you know
Speaker 1: that was it. That was That was the moment when
Speaker 1: you know, my leg kind of just you know, was
Speaker 1: limited my my potential. So I always thought I was
Speaker 1: I was a good enough player. I played enough positions
Speaker 1: and I and I did enough things. Well. I didn't
Speaker 1: ever do anything super super well, but I was good
Speaker 1: enough to I think at my peak, in my highest level,
Speaker 1: I could I could be the kind of guy that
Speaker 1: could collaborate and be on a team and you know
Speaker 1: I could. I could tip and I could rebound, and
Speaker 1: I could do that sort of dirty man kind of
Speaker 1: work on the basketball court that coach appreciated. Charles Oakley,
Speaker 1: Dennis Rodman roll Yeah about six nine, oh, so you
Speaker 1: could a little bit more maybe a little bit more outside.
Speaker 1: You know, I would had to score in Europe. I
Speaker 1: had to be able to shoot from the outside, and
Speaker 1: three point line had had just come into the existence
Speaker 1: at that time, so the three point line wasn't part
Speaker 1: of the game like it is now. Uh So I
Speaker 1: didn't really shoot threes, but I but I could, you know,
Speaker 1: have a good mid range score. I could rebound, I
Speaker 1: could dunk, and I could I could jump pretty well.
Speaker 1: People used to, um, you know, think of me as
Speaker 1: a kind of a high flyer, kind of inside type
Speaker 1: of person. So that was always a big part of
Speaker 1: my game. And your brother played professionally as well. Yes,
Speaker 1: my brother Greg is a bigger guy. He's about a
Speaker 1: seven footer. So this is what I call my little brother.
Speaker 1: But he's seven footer. He played at Stanford. I played
Speaker 1: at cal and uh so, he and I actually played
Speaker 1: against each other in college versus Stanford, so as UCLA
Speaker 1: versus USC in the Bay area kind of thing. But
Speaker 1: we actually guarded each other, so we we were on
Speaker 1: the court playing against one another, which I imagine I
Speaker 1: imagine you did that growing up anyway. Not not unfamiliar
Speaker 1: with banging body. Yeah, we we played all day long.
Speaker 1: We had a we had a uh you know, like
Speaker 1: every other kid. We had on a driveway, front yard,
Speaker 1: we had a we had a basket up on the
Speaker 1: on the garage. We played. I had an old brother.
Speaker 1: My I do have an older brother, Mike that he's
Speaker 1: about six four or six five. So he's the run
Speaker 1: to the letter. He used the run to the litter.
Speaker 1: But you know, growing up, people used to laugh because
Speaker 1: they look at the three of us, and growing up
Speaker 1: we're all about a year and a half to two
Speaker 1: years apart, but we're all the same size growing up,
Speaker 1: so that people thought we were triplets. Possibly there's no
Speaker 1: size difference, but he was. He was a tougher guy.
Speaker 1: He was more physical. Uh So I used to play
Speaker 1: against him quite a bit and played him in the
Speaker 1: front yard all day long, and um we used to
Speaker 1: go at it pretty well. Um So, so you had
Speaker 1: to be thinking beyond a career in sports, because not
Speaker 1: only do you go undergraduate at Berkeley, but you get
Speaker 1: your m b a. Was it business or finance? What
Speaker 1: what were you interested in when you were in school? Yeah, well,
Speaker 1: my my dad was an accountant and he was always
Speaker 1: a business finance guy. And he's six six three, a
Speaker 1: decent size. Um, but he was always very focused on academics.
Speaker 1: So he, you know, regardless of all the athletic accomplishments
Speaker 1: or acknowledgements to he never really paid much attention to that.
Speaker 1: He always talked about school and books and and all
Speaker 1: what's going on in what are you doing in class
Speaker 1: and so forth. So, um, So I was sort of
Speaker 1: geared in that direction anyway. And I think when I
Speaker 1: finally made my college decision, it came down to cal Stanford,
Speaker 1: and Harvard. Those are my final three choices. So obviously
Speaker 1: there was some academic aspect to to those three names
Speaker 1: that uh clearly weren't basketball shops necessarily a really great
Speaker 1: academic You got into Stanford, you got into Harvard, but
Speaker 1: you chose Berkeley because of the basketball. Uh. You know,
Speaker 1: I had a The story goes, I went on a
Speaker 1: weekend visit to each one of those. I went, I'm
Speaker 1: a California kids, southern California. I went to Harvard. It
Speaker 1: was happened to be ten degrees and snowing, and I
Speaker 1: just sort of scratched my head and I just couldn't
Speaker 1: contemplate being out there in that in that weather. And
Speaker 1: I thought I was gonna be back in California anyway.
Speaker 1: So I came down to cal Stanford and UH. I
Speaker 1: went up to Stanford and for the weekend, and when
Speaker 1: I went to two movies and sat around a dorm
Speaker 1: was super boring at the time for me. I went
Speaker 1: to cal and uh first night there, I went to
Speaker 1: toga party at a fraternity house that I thought was great.
Speaker 1: I went to a football game the next morning with
Speaker 1: you know, great son and and a lot of fun
Speaker 1: people around. We went to San Francisco that night, and
Speaker 1: I came back and I told my mom Dad, I
Speaker 1: I think, I think this is where I want to be.
Speaker 1: It's gonna be a great place to play basketball and
Speaker 1: enjoy myself as a student. That's very funny. You have
Speaker 1: a unique vantage point because not only were you an
Speaker 1: athlete in college and professionally, but you work in finance.
Speaker 1: And the question that I have to ask is, how
Speaker 1: is it that there are so many horror stories about
Speaker 1: athletes frittering away all their money. They have it stolen
Speaker 1: from them, They haven't managers who don't really do what's
Speaker 1: best for them. They are fairly reckless. What why is this?
Speaker 1: You know, it's funny. David Booth, the founder of Dimensional
Speaker 1: and I talked about this all the time because we're
Speaker 1: both big basketball fans. I think it's um you know,
Speaker 1: success comes really early to athletes, very young, young, very immature,
Speaker 1: and oftentimes you, you and I will include myself, you
Speaker 1: feel invincible so athletically, you're bigger, you're stronger, you're faster,
Speaker 1: you can you know, the idea of being thirty or
Speaker 1: forty or fifty years old, it doesn't even seem plausible,
Speaker 1: you know, at the time. So the idea of actually
Speaker 1: thinking into the future and then saving or trying to
Speaker 1: be conservative about how you spend and so forth, it's
Speaker 1: just not something that comes to mind at that time.
Speaker 1: And Uh, I think that's part of the issue is
Speaker 1: I just don't think the maturity level is there to
Speaker 1: be able to differentiate how and why you would actually
Speaker 1: make a plan from a financial perspective, you know, into
Speaker 1: your future. There was there was a huge Sports Illustrated article,
Speaker 1: I know, maybe ten years ago or and the numbers
Speaker 1: about the NFL are horrifying, and the NBA and Major
Speaker 1: League Baseball not all that much better. Uh has that
Speaker 1: changed at all? Or athletes becoming a little smarter about
Speaker 1: their money or is it still the same sets of
Speaker 1: temptations and impulses. Well, I've been I've been doing this
Speaker 1: for twenty five years now, dimensional and I've had the
Speaker 1: same discussion I did twenty five years ago as I
Speaker 1: did today, because people asked me that as an old athlete,
Speaker 1: you know, how do you change the energy and the
Speaker 1: momentum around athletes in their future in terms of finance,
Speaker 1: And it's um it just I think it comes back
Speaker 1: to there's a there's an ego aspect. Uh, there's a
Speaker 1: mentality that you know that this this is never gonna end.
Speaker 1: But to your point, you know, when you look at
Speaker 1: the NFL, I think the average career is three years
Speaker 1: and the NBA is something on the order of two
Speaker 1: to three years. And when you think about how long
Speaker 1: you know this these careers after the athletic career is
Speaker 1: gonna last, it's it dwarfs anything athletically. But to get
Speaker 1: that message across to a young kid, I think it's
Speaker 1: really tough. My my personal perspective on it, and I've
Speaker 1: talked to David Booth about this as well as I
Speaker 1: think the n c A UH with college athletes ought
Speaker 1: to put some sort of a trust fund together, you know,
Speaker 1: with the money they're making off the n c A
Speaker 1: tournament and so forth, put a trust fund together that's
Speaker 1: not touchable, not available till till age um. And at
Speaker 1: once a kid has had the chance to go through
Speaker 1: the professional process, maybe they get injured like I did,
Speaker 1: and they start looking around and they think, you know,
Speaker 1: this athletic thing is not going to happen. Uh. Then
Speaker 1: that's the moment when I think, and I, you know,
Speaker 1: a trust that would allow them to go back to school,
Speaker 1: go back to get a grad degree, etcetera, etcetera, would
Speaker 1: be would be really really valuable. At one or twenty,
Speaker 1: it just is not going to happen, because again, they're
Speaker 1: invincible and they can't imagine that they're not the one
Speaker 1: that's going to go play professional sports. I can tell
Speaker 1: you every every player on my Cal basketball team, all
Speaker 1: twelve guys, I thought for sure that they were the
Speaker 1: one that was going to go play in the NBA.
Speaker 1: And it's it's frankly because all of them were all
Speaker 1: State and All American and all this and all that. Um,
Speaker 1: So there's a lot of ego into it. There's a
Speaker 1: lot of parental ego. I see that now with my kids.
Speaker 1: The parents I think are so enamored with sport and
Speaker 1: with the notoriety if you will, that comes from athletic success,
Speaker 1: that they get involved and they get energized by the
Speaker 1: whole thing, and I think that I think that's problematic
Speaker 1: as well. So I, you know, with my kids, I
Speaker 1: try to just say, look, you know, it's all about school,
Speaker 1: just like my dad is all about academics. If you
Speaker 1: happen to be a good basketball player, I happen to
Speaker 1: be a good volleyball player, great, God bless you. That
Speaker 1: might help you get into a better school. But it's
Speaker 1: never gonna be about that. It's going to be all
Speaker 1: about academics. You seem horrifically rational and reasonable. We mentioned
Speaker 1: the length of careers. You've been doing this for twenty
Speaker 1: five years. Tell us how you transition from sports into finance.
Speaker 1: How did you end up on Wall Street? Well, you're
Speaker 1: you're a New York guy, so I think you'll get
Speaker 1: a kick out of this this story. So I I
Speaker 1: had gone, um, I'll step back. I had started my
Speaker 1: m b A as a as a basketball player in college.
Speaker 1: So I happen to have a knee injury my junior
Speaker 1: year of college. UH. And what that allowed me to
Speaker 1: do was it allowed me to start taking grad classes
Speaker 1: my last year while I had eligibility. So I started
Speaker 1: my m b A. I had gone off and I
Speaker 1: wanted to find out if I could play professionally. So
Speaker 1: I had gone to Istanbul to Turkey. The following year,
Speaker 1: I had gone to Japan. UM. But there's a window,
Speaker 1: I think of five years to finish up your MBA
Speaker 1: once you had started it. So I decided I would
Speaker 1: go back because my caff injury, had go back and
Speaker 1: finish up my NBA at Berkeley UM. And so I
Speaker 1: did that, and uh, you know, like every athlete, I
Speaker 1: still had the bug. I thought I could still do
Speaker 1: a little something. So I end up going for my
Speaker 1: last year. I went to UH to England to Birmingham
Speaker 1: in the UK, and I was about I went for
Speaker 1: about two months and I realized that my leg was
Speaker 1: still as bad as it's ever been. I knew my
Speaker 1: career was done. I had mentally pretty much checked out. UM.
Speaker 1: I had actually interviewed with Mary lynch Um back in
Speaker 1: my time at the doing my NBA at Berkeley, and
Speaker 1: at the time they said, well, we don't have a
Speaker 1: spot for you right now, but we love to keep
Speaker 1: in touch. We think we have a spot for you.
Speaker 1: Uh So, long story short. Two months into it, I'm
Speaker 1: sitting in Birmingham, England, and my mom calls and said,
Speaker 1: a gentleman from mary Lynch just called and wanted to
Speaker 1: talk to you. So I got on the phone with
Speaker 1: him and he said, we've got a spot for you
Speaker 1: on the desk here in New York. We love to
Speaker 1: have you join. When can you start? And this was
Speaker 1: Saturday afternoon a month I see you Monday, So I
Speaker 1: basically I got. I called my brother who has had
Speaker 1: been with the Knicks, uh seven ft tall. I said, hey, Greg,
Speaker 1: I'm gonna fly in Sunday. I said, I got to
Speaker 1: borrow a suit because I don't have one. So I
Speaker 1: borrowed a suit from my brother Greg. I showed up
Speaker 1: in the office on Monday morning and that was my
Speaker 1: quote unquote transition out of athletics and into into my career.
Speaker 1: So a lot shorter than most people. How long did
Speaker 1: you work in New York for what was here? I'd
Speaker 1: say about seven years total, so about I think three
Speaker 1: and a half years with Maryland and I came back
Speaker 1: with Dementiel for another four years or so in New
Speaker 1: York and New York. We actually had an office in Stanford, Connecticut.
Speaker 1: And then when did you move to? Was the h
Speaker 1: Q and Austin back then or no, it was in
Speaker 1: Santa Monica, California. Yeah, oh really? And then now it's
Speaker 1: I believe it's Austin. And isn't there a new office
Speaker 1: opening up on the East coast. We're opening up in
Speaker 1: Charlotte in February of next year, two nights. And is
Speaker 1: that going to be the new headquarters. We'll have basically
Speaker 1: two large headquarters. So so Austin will hold people, Charlotte
Speaker 1: will hold about six or seven hundred. And we still
Speaker 1: have an office in Santa Santa Monica in California. We
Speaker 1: have about a hundred fifty people there. What was your
Speaker 1: initial role at d f A and how did this
Speaker 1: eventually become co CEO. Well, I was just a long
Speaker 1: story short as I was at uh, you know, here
Speaker 1: in New York, and I had um decided that I
Speaker 1: was going to get out of financial services. I didn't
Speaker 1: want to necessarily be in the industry. The from what
Speaker 1: I kind of I saw and I felt and I
Speaker 1: I just said I was gonna go be a teacher
Speaker 1: and a coach in California. UM, so I mentally decided
Speaker 1: I was gonna move back to California. I was sitting
Speaker 1: on the desk one day, I was reading the Wall
Speaker 1: Street Journal and I saw an ad that's aid money manager,
Speaker 1: Santa Monica, California. And I thought, you know, why not,
Speaker 1: I'll just send a resume out just in case, UM,
Speaker 1: you have one more option. And UH turned out that
Speaker 1: that Santa Monica California firm was Dimensional Fund Advisors. And
Speaker 1: so I was on a Christmas break back in four
Speaker 1: I flew out to California. I went to their offices
Speaker 1: to do an interview and I met a gentleman named
Speaker 1: Dan Wheeler. And Dan was the first UH financial advisor
Speaker 1: to use Dimensional Funds in his practice. He was an
Speaker 1: independent advisor working through Schwab at the time, and he
Speaker 1: was running the practice the business foward Dimensional UH. And
Speaker 1: Dan sent me down basically, and I had what I
Speaker 1: what we we you know, UH we call a hab
Speaker 1: moment um. He he just sat me down and said,
Speaker 1: here's how the capital markets work, here's how we think,
Speaker 1: here's what an independent advisor is here's how they act
Speaker 1: as a fiducier to the client. You know, that combination
Speaker 1: is one that we think is the right answer for
Speaker 1: the end client and one that hasn't been delivered to clients.
Speaker 1: Uh in in financial services space. And I remember I
Speaker 1: walked out of that office and I thought to myself,
Speaker 1: you know, I could, I could, I could be part
Speaker 1: of this. This is something that's really interesting and exciting
Speaker 1: to me. Uh and I Uh, I went up and
Speaker 1: had lunch that day. Martin Miller was a Nobel Prize winner.
Speaker 1: You know, Dan David Booth had another appointment to go to,
Speaker 1: so he asked Dan to take Burton Miller to lunch
Speaker 1: with him. And Dan said, sure, but I got this
Speaker 1: this new guy here, Dave Butler that, uh, we'll have
Speaker 1: to go with us. And David said that's fine. And
Speaker 1: so I sat there at lunch with Nobel Prize winner
Speaker 1: in finance, Martin Miller, and he he talked about all
Speaker 1: those really simplistic, you know, financial concepts like you know,
Speaker 1: he used to say, diversification as your buddy, you know,
Speaker 1: cost matter, you know, markets, work, prices are fishing, etcetera, etcetera.
Speaker 1: And I just had this kind of epiphany of of
Speaker 1: what I thought the capital markets could deliver and should be,
Speaker 1: and then how that coupled with the independent advice story
Speaker 1: from Dan and I thought, man, this is a place
Speaker 1: where I think I could I could spend some time fascinating.
Speaker 1: The firm manages over six hundred billion dollars. And we
Speaker 1: were talking about how you joined the firm and really
Speaker 1: sort has a very different type of firm from the
Speaker 1: bigger bulge bracket UH firms that you had been used
Speaker 1: to in New York. How did that lead to your
Speaker 1: arc of your career at Dimensional Funds? What did you
Speaker 1: start doing and where did it take you? Well? I
Speaker 1: started out as a what we call regional director, So
Speaker 1: that's a person that works with advisors, um, you know,
Speaker 1: out in the field. But you know, I think that
Speaker 1: I think the key point for me is as I
Speaker 1: mentioned earlier. We you know, on Monday morning, I walked
Speaker 1: into Demential's offices and had this interview and UH and
Speaker 1: Dan Wheeler was was terrific and he said, you know,
Speaker 1: why don't you come back the following Monday and start
Speaker 1: And you know, we didn't talk about any compensation, We
Speaker 1: didn't talk about what my title would be. We didn't
Speaker 1: talk about any detail other than the the idea that
Speaker 1: this concept, this mission, this energy that he was putting towards,
Speaker 1: this approach around clients was what he felt good about.
Speaker 1: And basically over the following week, as I read and
Speaker 1: thought more about it, I felt really good about as well.
Speaker 1: So I really joined at what I would call, you know,
Speaker 1: kind of a mission rather than a job. Um, and
Speaker 1: it was a passion for all of us, and we
Speaker 1: thought that we could change the way financial services were
Speaker 1: delivered in the country. And that was sort of our
Speaker 1: mantra and our energy in the early days and and um,
Speaker 1: you know, people ask me, you know, why would you
Speaker 1: start with without any detail around what were you going
Speaker 1: to do? And I said, well, it was it was
Speaker 1: that moment in my life in my career where I
Speaker 1: wanted to do something that I felt really good about
Speaker 1: and really passionate about. And I didn't really worry about
Speaker 1: the monetary aspect or anything like that. Yogi Berra said,
Speaker 1: when you come to a fork in the road, take it,
Speaker 1: and it did. So we'll really helped create an fascinating
Speaker 1: aspect of the way Dimensional Funds operates. And I want
Speaker 1: to spend some time on that instead of going straight
Speaker 1: to retail. The decision was made, and he really pushed
Speaker 1: this from the outside in, Hey, why don't you have
Speaker 1: the advisors be your advocates and deal directly with them?
Speaker 1: And literally waged a door to door campaign starting in
Speaker 1: I guess California? Right? Is that? Is that really where
Speaker 1: he was operating? How did this go from an idea
Speaker 1: to effectively the business model of dimension Well, you know
Speaker 1: his and again all of it goes towards Dan's creativity
Speaker 1: and imagination, but his view, he was a broker for many,
Speaker 1: many years, and he felt that the industry in essence
Speaker 1: was conflicted in the sense of product would be developed
Speaker 1: and delivered by UH the industry, and then it would
Speaker 1: push be pushed to commission salesman, and those commission salesman
Speaker 1: would sell that product to clients. And he thought the better, asked,
Speaker 1: better way to do that was to flip that around
Speaker 1: and change that in the sense that UH as he
Speaker 1: became an independent advisor, he worked for the clients. He
Speaker 1: worked in their best interests, He worked on their behalf
Speaker 1: UH and he um changed the model to say, hey
Speaker 1: that this client, you know, would basically sit at the
Speaker 1: top of the stack and then this advisor, this independent
Speaker 1: advisor would be working for that client, and then the
Speaker 1: advisor would make decisions as to what was the best
Speaker 1: solution investment solution for the client. Um in again in
Speaker 1: their behalf and in their best interest. So it was
Speaker 1: a change in the model. This independent advice model was
Speaker 1: something that was very, very different that nobody had ever
Speaker 1: seen really in the financial services space where we were
Speaker 1: really used to having product developed and being pushed as
Speaker 1: a sold commission type products. So, um, that was a
Speaker 1: big change. Dan had that idea. Uh. He also liked
Speaker 1: the idea of indexing. Uh. We liked this idea of
Speaker 1: low costs diversification, you know, tax efficiency, if he will.
Speaker 1: And he was using a an SMP five hundred fund
Speaker 1: in his practice, and he had come across dimensional small
Speaker 1: cap fund which was called the microcap fund UM the
Speaker 1: original fund Food put out the original fund. It was
Speaker 1: called the nine ten fund at the time when I started,
Speaker 1: but it was nine ten as in the ninth and
Speaker 1: tenth deciles, so the bottom of stocks, if he will.
Speaker 1: So that was the portfolio that he was interested. And
Speaker 1: he came to David Booth into two rexing Field and
Speaker 1: he said, you know, I'd like to use these portfolios
Speaker 1: with my clients and to their credit, you know. David
Speaker 1: and Rex said, well, you know, this is that's retail money.
Speaker 1: Our expectation on retail money is it it's hot, meaning
Speaker 1: that if Martin out markets were good, they'd come in,
Speaker 1: and markets were bad, we go back out. We can't
Speaker 1: have that kind of cash flow in the portfolio. So
Speaker 1: because it's disruptive and expensive and trading closestructive expensive, we're
Speaker 1: in the smallest part of the market. We can't have
Speaker 1: that kind of trading. We have institutional clients in those
Speaker 1: portfolios as well. So Dan came back and said, now, listen,
Speaker 1: we we've got a different, uh type of a model here.
Speaker 1: We're gonna go educate these advisors. We're gonna make sure
Speaker 1: that their long term buy and hold advisors. We're gonna
Speaker 1: go through a methodical process to get them engaged and
Speaker 1: understand how we work and why we work, and that
Speaker 1: money will be compatible to the money that's already in
Speaker 1: the portfolio institutional portfolio. So that will make will make
Speaker 1: retail look like it's institution exactly exactly, and so that
Speaker 1: it worked out fabulously. Well, so, uh, you know when
Speaker 1: I started, you know, we were about a billion and
Speaker 1: a half from financial advisors. Today, I think we're three
Speaker 1: D sixty five billion from financial advisors, well over half.
Speaker 1: It's been a significant part of the business. And UM.
Speaker 1: The the upside too is when you look at what
Speaker 1: has actually transpired is that the the quote unquote retail assets,
Speaker 1: the individual assets have have performed and acted and been
Speaker 1: very compatible to the institutional assets in the funds. So
Speaker 1: there there hasn't been a retail aspect to the kind
Speaker 1: of the in and out of the markets based on
Speaker 1: market performance. There's been a nice consistent cash flow. In
Speaker 1: two thousand and eight, two thousand nine in particular, when
Speaker 1: markets were you know, tanking and there's a lot of
Speaker 1: fear and emotion in the market. UM. I think there
Speaker 1: was five hundred billion dollars that went out of the
Speaker 1: market UM over a couple of year period out of
Speaker 1: equity mutual funds UH and in from dimensionals case, we
Speaker 1: actually had positive net flows during that time period, positive
Speaker 1: over that time period and over each quarter during that
Speaker 1: time period. And that was because of the advisor's role
Speaker 1: and the discipline that they provided to the client to
Speaker 1: make sure that that client you know, understood why they're
Speaker 1: asked as we're invested the way they were, and they
Speaker 1: were able to keep the emotions in tact so that
Speaker 1: people had a chance, um at the long term returns
Speaker 1: that we always talk about of ten percent for the
Speaker 1: equity markets. If you're not in the market full time,
Speaker 1: you're gonna have a hard time getting those long term
Speaker 1: rates of return. So the model was really different. Um,
Speaker 1: it was brand new at that time. The idea of
Speaker 1: a independent advisor wasn't was more an idea than actual reality.
Speaker 1: And um, what we see now is we've seen a
Speaker 1: real transition towards this model in a significant way. Quite
Speaker 1: quite interesting. What is it that you have and the
Speaker 1: firm has educated clients about that allowed them to think
Speaker 1: about investing for the long term. And I know this
Speaker 1: is hindsight, but I have to point out if you
Speaker 1: were a buyer during the financial crisis, well markets have
Speaker 1: since tripled. If you were a seller, probably didn't help
Speaker 1: your returns. Yeah, I think the concept of meeting expectations
Speaker 1: is important here. So when I think about why we
Speaker 1: had the kind of inflows that we had and the
Speaker 1: performance that that transpired of that time is I think
Speaker 1: the advisors did a terrific job of educating their clients.
Speaker 1: And when I say educating, I'm talking about what is
Speaker 1: it that we expect from the capital markets. So long term,
Speaker 1: if you look back to equities of return ten percent um,
Speaker 1: but there's a lot of time periods where that ten
Speaker 1: percent isn't realized and there might be markets that are
Speaker 1: down for so at the front, what the independent advisor
Speaker 1: does is they actually, you know, do train and they
Speaker 1: educate the client as to the potential outcomes that they
Speaker 1: might expect over time. So when it does happen, uh,
Speaker 1: they're not happy about it, but they're not upset the
Speaker 1: point where they actually pull their money and decided to
Speaker 1: do something else. So there's a there's a real important
Speaker 1: aspect here that I don't think there's ever been addressed
Speaker 1: in a significant way, and that is trying to get
Speaker 1: people to be more comfortable with the expectations longer term
Speaker 1: around the capital markets and the expectations on returns. Wait,
Speaker 1: are you suggesting markets go up and down? Is that
Speaker 1: the implication that happens, Yes, So that that is shocking.
Speaker 1: That is not what my broker, Hug used to tell
Speaker 1: me back in the day. So let's let's talk a
Speaker 1: little bit about You mentioned Martin Miller earlier, and um,
Speaker 1: obviously gene Farma is a big part of the firm. Uh,
Speaker 1: you work with a number of Nobel laureates and and
Speaker 1: other people of equal intellectual heft. Ken French at Dartmouth
Speaker 1: is another person who has certainly moved the needle when
Speaker 1: it comes to how we think about where returns come from.
Speaker 1: What do these various people, Um, what are the roles
Speaker 1: at the firm and how do they affect portfolio construction? Well,
Speaker 1: they're all fully engaged. So when you talk about all
Speaker 1: those names, and it's so it's Martin Miller's farm, it's
Speaker 1: Ken French, and um, it's Myron Schulz is on our board.
Speaker 1: So we've got you know, three or four prizewinners that
Speaker 1: that actually are participating in the firm in some respect. So, Um,
Speaker 1: the great thing about it is is, um, they all
Speaker 1: are are actively engaged in the business in some aspect,
Speaker 1: particularly with Ken French and gene Fama there you know,
Speaker 1: on the investment committee and they participate in all investment
Speaker 1: discussions around the firm. So, uh, do is that a
Speaker 1: little bit intimidating? You want to do something and a
Speaker 1: Nobel laureate looks human goes No, that's a terrible idea.
Speaker 1: How does that impact what the process is like? Uh?
Speaker 1: Is it more nuanced than that? No, it's it's very
Speaker 1: It's what I what I come back to is is
Speaker 1: and we talk a lot about this at the firm.
Speaker 1: We talk about models and models are not reality and
Speaker 1: models are are used to get a sensible view about
Speaker 1: way about a way the way things work. Um. So
Speaker 1: what demension has always been about, and I think this
Speaker 1: is why we have such a long term relationship with
Speaker 1: our own clients is you know, we're not going to
Speaker 1: come out with anything that's that's that's fancy or different
Speaker 1: just to to do it for marketing reasons. We we
Speaker 1: have this this group of people that look at the
Speaker 1: capital markets, they're empiricists, they look at data all day long.
Speaker 1: What they want to come out is they want to
Speaker 1: come out with something that's that's sensible, that's reasonable, that's repeatable. Uh,
Speaker 1: there's a there's an aspect to it that. Um from
Speaker 1: my perspective for for advisors and then for their clients
Speaker 1: is that there's an expectation that we are going to
Speaker 1: deliver something that is going to be implemented in a
Speaker 1: in a very very robust way. UM. And that's I
Speaker 1: think a big differentiated for Dimensional. So let's let's talk
Speaker 1: about some of the other popular investing trends, some of
Speaker 1: which Dimensional has embraced. Others you've decided to issue. UM.
Speaker 1: Smart beta is a marketing term. There's an ongoing debate
Speaker 1: between rob or not of Research Affiliates and Cliff Fastness
Speaker 1: of a q R. Cliff basically says smart beta is
Speaker 1: just FAMA French factor investing in a different marketing wrapper.
Speaker 1: How do you guys look at smart beta? Yeah, smart
Speaker 1: beta is a is a catch all phrase for you know,
Speaker 1: for multi factor investing in certain ways that you know,
Speaker 1: the way I look at it, And I'm definitely not
Speaker 1: in the academic circles like the Famas and Frenches and
Speaker 1: so forth, but uh, you know, I look at demensials
Speaker 1: existence in one We started with the first small cap
Speaker 1: portfolio UM and that was a that was probably the
Speaker 1: first multi factor portfolio that was out there. Uh ninety two,
Speaker 1: FAM in French, you know, uh introduced the three factor
Speaker 1: model UM and and that was when the value of
Speaker 1: portfolios were launched back So what I would say is,
Speaker 1: I think demential has always been you know, through our
Speaker 1: connections with academics externally and even through our internal academic teams,
Speaker 1: we've always been on the cutting edge of of multi
Speaker 1: factor investing UM. But most importantly in David Booth will
Speaker 1: point this out, is that you know, we've been able
Speaker 1: not only to recognize that the data in the research
Speaker 1: that is out there, but we've been able to implement
Speaker 1: UH in a very very effective way. So when you
Speaker 1: look at our returns and our quote unquote body of
Speaker 1: work over thirty six years was the launch of the
Speaker 1: micro app, we've not only been able to capture the
Speaker 1: multi factor rate of return, but we've been actually been
Speaker 1: able to add some value from an implementation perspective. So UM,
Speaker 1: it's a it's a combination of I think those two parts.
Speaker 1: One is is great portfolio management UH and great implementation,
Speaker 1: but there's also the great research aspect as well. So
Speaker 1: there's a lot of research out there in the public domain.
Speaker 1: The question is can you implement on that on that
Speaker 1: research in a in a very effective efficient way. So
Speaker 1: we know the challenges with small cap because of the
Speaker 1: liquidly issue when you have to really keep an eye
Speaker 1: on outflows, otherwise it's very disruptive. Let's talk about one
Speaker 1: of the other original FAMA French factors, which is value.
Speaker 1: This has been a rough decade for value investing. We
Speaker 1: know it tends to be cyclical, but how do we
Speaker 1: deal with the fact that value has been under performing
Speaker 1: growth for most of the period following the financial crisis.
Speaker 1: During the at least the growth and expansionary period, growth
Speaker 1: has done really well. I think there's always going to
Speaker 1: be these big trends, if you will, or kind of
Speaker 1: these uh these movements and markets that reflect well or
Speaker 1: poorly on a specific area of the market asset class.
Speaker 1: So UM, having been around this for twenty five years now,
Speaker 1: you look back at every uh you know factor, if
Speaker 1: you will, there's always gonna be moments in in periods
Speaker 1: of time where they don't actually outperform or have the
Speaker 1: premium that that we discussed earlier. UM. You know, equities
Speaker 1: under perform T bills for sixteen years from nineteen sixty
Speaker 1: six to two, Value underperform growth all through the nineties,
Speaker 1: you know, until the tech bust uh in in in
Speaker 1: March of two thousands. I recall hearing you know this
Speaker 1: warm Buffett guy, this value investor, he's lost his touch.
Speaker 1: I want to say late early, Yeah, Buffets washed up.
Speaker 1: He'll never make any money again. So you you go
Speaker 1: through these periods where a particular style or factor is
Speaker 1: out of style. How do you counsel advisors and clients
Speaker 1: to hey, this is a normal part of market cycles.
Speaker 1: We have to stay. That's that's just it. It's counseling.
Speaker 1: It's it's it's education beforehand, and then it's counseling during
Speaker 1: and then it's you know, kind of a recognition after
Speaker 1: the fact. So you know, you look back at that
Speaker 1: period that you were just mentioning when Warren Buffett was
Speaker 1: out of favor, of value was out of favor. I
Speaker 1: think it was in like three months value actually turned
Speaker 1: around so quickly, or actually growth throp through the floor.
Speaker 1: Value came roaring back, and then some Yeah, the ten
Speaker 1: year numbers on value versus growth. Value was ahead of
Speaker 1: growth as of you know, did a two thousands, So
Speaker 1: you had nine or nine and a a half years or
Speaker 1: nine and three quarters years where growth was just pounding
Speaker 1: value and then within a three month period, value over
Speaker 1: that whole tenure period actually had a better performancing. So
Speaker 1: I think, you know, there's a lot of stories like
Speaker 1: that that people can need to recognizing and see. And
Speaker 1: I think we spent quite a bit of time him,
Speaker 1: you know, counseling and advisors counsel their clients to say, look,
Speaker 1: we've built an investment plan, investment policy, We've allocated the
Speaker 1: assets in this way. We've we've were confident that you're
Speaker 1: in a position that you can withstand uh, you know,
Speaker 1: ups and downs in the markets, or ups and downs
Speaker 1: in particular parts of the market. Uh. And if you
Speaker 1: can stay with that long term, you're gonna be we
Speaker 1: gonna be highly and welly and well rewarded over that time.
Speaker 1: So what is it that keeps a co CEO up
Speaker 1: at night? What do you what do you think about?
Speaker 1: And what are some of the concerns that you have
Speaker 1: looking at everything going forward? Well, I think at a
Speaker 1: dimensional level. I think for me, it's just our growth.
Speaker 1: You know. So we've grown from fifty billion back in
Speaker 1: two thousand three to six hundred billion today. That's quite
Speaker 1: a growth rate, quite a growth rate. And if you
Speaker 1: if you look at that growth rate and whether we'll
Speaker 1: match that growth rate the next fifteen years or not.
Speaker 1: Um you know, from a size perspective. You know, one
Speaker 1: of the challenges that David Booth laid out to the
Speaker 1: firm in two thousand three was, look, if we stay
Speaker 1: on the same growth path that we've had been on
Speaker 1: up to two thousand three, we're gonna be a five
Speaker 1: hundred billion dollar firm by the end of two thousand eighteen.
Speaker 1: And here we are. Here, we are at six center billion,
Speaker 1: And that's a fantastic forecast. Yeah, And it wasn't uh,
Speaker 1: it wasn't a here's the projection, and here's where we
Speaker 1: want to be. It wasn't that. It was more of, look,
Speaker 1: we're stewards of client assets. Where stewards of this business.
Speaker 1: We need to make sure that we have the ability,
Speaker 1: the infrastructure and so forth to service those assets in
Speaker 1: the right way and do it in a in a
Speaker 1: in a client centric way. And so it was a
Speaker 1: challenge all the managers to make sure our infrastructure was
Speaker 1: built out in a way that we would be able
Speaker 1: to do that properly, whether it's portfolio management or research
Speaker 1: or trading or sales or whatever it might be. So
Speaker 1: I look at that from a dimensional perspective and say,
Speaker 1: we actually have the same growth rate over the next Uh,
Speaker 1: you know fifteen years. You know, we need to be
Speaker 1: have a prepared work a team to be able to
Speaker 1: handle that kind of change in the in the size
Speaker 1: and growth of the So we're hoping that, um, you know,
Speaker 1: from an education training perspective, hoping to build out quite
Speaker 1: a few things around dimensional. Does does that growth rate
Speaker 1: eventually have to plateau? Does the where does the law
Speaker 1: of big numbers start to say, all right, you you
Speaker 1: went up twelve x in in a dozen years. Don't
Speaker 1: expect that going forward? Yeah, there's a natural I think plateau.
Speaker 1: I'm sure at some point. I'm not sure when where
Speaker 1: that is. UM, But we do know people consume their
Speaker 1: retirements and so forth that you know, at four or
Speaker 1: five or six percent per year. So the bigger the
Speaker 1: asset base, the larger the outflow is going to naturally
Speaker 1: be just from consumption. So UM, you know, we we
Speaker 1: recognize that. UM. I think the big issues that I
Speaker 1: think about on a on an industry basis is obviously
Speaker 1: UM wealth wealth transfer. So that we're coming up on
Speaker 1: this generational generational shift. UM. You know, advisors are thinking
Speaker 1: about succession planning. Uh. Technology is becoming a big question,
Speaker 1: you know, how to clients and how to advisors access
Speaker 1: the capital markets and how do they how do they
Speaker 1: interact with one another when they're thinking about this client relationship,
Speaker 1: you know, going forward. So those are things that I
Speaker 1: think Demensional wants to be involved in. We want to
Speaker 1: support the advisor and make sure that they're as competent
Speaker 1: and well positioned as they possibly can be to deliver
Speaker 1: two clients the right solution over the next twenty or
Speaker 1: thirty years. We have been speaking with Dave Butler. He
Speaker 1: is co CEO of Dimensional Funds Advisor. If you enjoy
Speaker 1: this conversation, be sure and come back for the podcast extras.
Speaker 1: Will we keep the tape rolling and continue discussing all
Speaker 1: things factor based investing. You can find those wherever Finder
Speaker 1: podcasts are sold iTunes, Overcast, SoundCloud, and of course Bloomberg
Speaker 1: dot com. We love your comments, feedback and suggestions right
Speaker 1: to us at m IB podcast at Bloomberg dot net.
Speaker 1: You can check out my daily column on Bloomberg dot
Speaker 1: com or follow me on Twitter at Rid Halts. I'm
Speaker 1: Barrier Halts. You're listening to Pastors in business called Bloomberg Radio.
Speaker 1: Welcome to the podcast, Dave, Thank you so much for
Speaker 1: doing this, I've been I've been looking forward to this
Speaker 1: for a while. I have a ton of questions I
Speaker 1: did not get to. So before I get to my
Speaker 1: favorite questions, there are a few things I just have
Speaker 1: to ask you about. Um, what's your daylike? What do
Speaker 1: you spend most of your time on? Because I know
Speaker 1: you wear a couple of different hats and I have
Speaker 1: a hard time understanding what the day to day is
Speaker 1: like for you. Well, I've been telling friends have asked
Speaker 1: me about this co CEO role, you know, what's it like?
Speaker 1: What do you do on a day to day basis?
Speaker 1: I always tell them, you know, I've been in the
Speaker 1: advisor business for twenty five years, so as a as
Speaker 1: an old athlete is sort of like a basketball coach
Speaker 1: who's been a coach for twenty five years now becoming
Speaker 1: the athletic director and you got to know a little
Speaker 1: bit about softball and water polo and so forth and
Speaker 1: so on. So I'm in the stage of actually learning
Speaker 1: about a lot of aspects of the business outside of
Speaker 1: just financial advisor space. And that's been been a good
Speaker 1: learning curve. And I think the bigger point for me
Speaker 1: is that you know David Booth, you know founder, Um,
Speaker 1: you know chairman who he's he's very involved in the firm.
Speaker 1: So he and I and GERARDA. Riley, who's the other
Speaker 1: co CEO, we spend significant amounts of time thinking about
Speaker 1: the business and about where demensional needs to fit into
Speaker 1: the business generally, and how we want to prepare ourselves
Speaker 1: to be viable partners if he will, to the advisors
Speaker 1: out there in the in the space. So let's let's
Speaker 1: talk about you know, volleyball and water polo and everything
Speaker 1: else you were running the advisor side. Does this mean
Speaker 1: you spend time thinking about institutional and trading and accounting
Speaker 1: and taxes and like where where does your line of
Speaker 1: responsibility stop? How much are you responsible for? And and
Speaker 1: what is Gerard responsible? How does is it divide and
Speaker 1: conquer you sort of split up the fiefdom or do
Speaker 1: you each work together on on different areas? Yeah, people
Speaker 1: ask that often about co CEOs general general, a tough
Speaker 1: gig to make work. I think I think you know,
Speaker 1: if you look at Gerard's background, so he's he's c
Speaker 1: I O. Uh, he's been a dimensional fourteen years. Uh,
Speaker 1: he's a Caltech PhD. So he's a right rocket scientist.
Speaker 1: So he's got the right pedigree, he's a he's an
Speaker 1: investment guy. He can go toe to toe with the
Speaker 1: Famas and the Frenches and talk about investment issues in
Speaker 1: a significant way. I've then, you know, grew up more
Speaker 1: on this on the sales side, the advisor side, and
Speaker 1: so forth. So we're both involved in the entire aspect,
Speaker 1: entire broad part of the firm, but we're also probably
Speaker 1: more focused on our our individual areas. UM. The key
Speaker 1: with co CEOs is you've got to be collaborative, you've
Speaker 1: gotta be open, you've gotta be transparent, and and frankly,
Speaker 1: you know, Gerard has been just a terrific partner in
Speaker 1: terms of just, you know, how do we want to
Speaker 1: go about the business. What do we see going forward?
Speaker 1: You know, if we continue to grow and we're a
Speaker 1: trillion dollar or two trillion dollar money management firm, what
Speaker 1: do we need to do to be ready for that
Speaker 1: kind of um stewardship around assets of that size. So
Speaker 1: it's it's been a great collaboration co CEOs or co
Speaker 1: anything could be problematic if you have people that are
Speaker 1: are political or not really engaged in being transparent and collaborative.
Speaker 1: But but Girard has been terrific with that and very
Speaker 1: happy with how how that's worked out. When when we've
Speaker 1: seen co C e O s at Fortune Companies, it
Speaker 1: doesn't really seem to work. There's perhaps a little too
Speaker 1: much testosterone in the room to make it work. You
Speaker 1: guys seem to have found a good rhythm together. I
Speaker 1: think that's right. We and we both grew up in
Speaker 1: the firm. So I've been here twenty four years, he's
Speaker 1: been here fourteen years. We know each other, We've known
Speaker 1: each other well for for all that time. Uh, And
Speaker 1: I don't think there's this I think maybe where Kocyov
Speaker 1: go uh go south occasionally, as if if you've got
Speaker 1: two people coming from different backgrounds or even different firms,
Speaker 1: and they get squished together, and then there becomes sort
Speaker 1: of a political question about who's going to be the lead,
Speaker 1: who's gonna do the next guy or gal um and
Speaker 1: we just don't have that at dimensional. And then that's
Speaker 1: saying I give David Booth a lot of credit around culture.
Speaker 1: I'm a big culture guy, being being an old athlete
Speaker 1: and being on a bunch of good teams and a
Speaker 1: bunch of bad teams. Um, you know, for me. It
Speaker 1: strikes me that, you know, culture is the paramount issue
Speaker 1: around around success. I'm glad. I'm glad you brought that
Speaker 1: up so we could talk about sports, But it's really
Speaker 1: just a giant metaphor for business. Our bad teams. Do
Speaker 1: bad teams have bad culture because they lack talent? Or
Speaker 1: does bad culture lead to talented teams becoming bad? I
Speaker 1: think it's a it's a combination of both, but I
Speaker 1: think it Culture starts with leadership. Culture starts with expectation. Uh.
Speaker 1: Culture starts with a view that the leadership says, we
Speaker 1: are going to be a team, and we're gonna be
Speaker 1: a collaborative team, and we're gonna have success doing that.
Speaker 1: So it's I think it's vision. I think it's um.
Speaker 1: You know, we always talk about stories. You know, you
Speaker 1: you you've listened to a particular story about a particular
Speaker 1: team or about a particular company, and those stories go
Speaker 1: a long way in terms of setting the culture around
Speaker 1: how things work or don't work. I'll give you a
Speaker 1: quick example. You know, David Booth did a video while back,
Speaker 1: uh and just as a as a side kind of tossing,
Speaker 1: somebody asked him about his childhood and how he what
Speaker 1: his first job was and he and he basically told
Speaker 1: the story about his first job being a shoe salesman
Speaker 1: in a small town in Kansas, and he said, you know, uh,
Speaker 1: he said, I used to sell shoes to women, and um,
Speaker 1: you know, basically if the shoe didn't fit, I'd tell
Speaker 1: him that it didn't fit and that they should come
Speaker 1: back another time, and um, you know so. But but
Speaker 1: it laid down it made a point, which is, you know,
Speaker 1: it's it's about the client. It's about doing the right
Speaker 1: thing for the client, doing what's best for them. And
Speaker 1: when somebody says a story like that and people hear that,
Speaker 1: it resonates culturally around the firm, and so I, you know,
Speaker 1: I think Demential is very very unique in that respect.
Speaker 1: You know, I can't imagine being somewhere for twenty four
Speaker 1: years without feeling really good about what we're trying to accomplish.
Speaker 1: And and back to my story meeting Dan the first time,
Speaker 1: it's like, you know, I think we've been on a mission.
Speaker 1: I think the mission has been about delivering the right
Speaker 1: client experience and doing it in a good way. We've
Speaker 1: never been worried about goals or getting it to a
Speaker 1: certain size. It's always been about, hey, if we do
Speaker 1: the right thing, do it well. Uh. The success or size,
Speaker 1: whatever it might come from, it is going to happen
Speaker 1: on its own. And it's sort of the the John
Speaker 1: Wooden analogy, which is just you know, if you you
Speaker 1: prepare yourself, you you tie your shoes, you work on
Speaker 1: certain things, and then you go into the game and
Speaker 1: the expectations you're gonna win. But if you don't win,
Speaker 1: it's okay because you prepared yourself, You've done as best
Speaker 1: you can and you worked hard at it, and uh,
Speaker 1: and you've delivered what you what you said you were
Speaker 1: gonna deliver. And I think somewhere along our interview, I
Speaker 1: should disclose my firm UM manage his assets, and we
Speaker 1: are also a dimensional client, So I'm very familiar with
Speaker 1: both your process, your portfolios, and your culture. But I
Speaker 1: I want to make sure that that UM is out
Speaker 1: there so people understand this um. You mentioned David Booth
Speaker 1: in public. He is a sort of quiet, reflective person.
Speaker 1: But I've I've interviewed him, I've had lunch with him.
Speaker 1: I get the sense that internally, indimensional, he's a little
Speaker 1: more of a boisterous chairman. What what's it like working
Speaker 1: with him? Oh, David's great. I've I've worked with him
Speaker 1: now for twenty four years, and he's a he's a
Speaker 1: super insightful guy. Um. You know, he's a very modest guy. Uh.
Speaker 1: You know, even when we talk about even our body
Speaker 1: of work and the fact that Demential has had this
Speaker 1: portfolio out there for thirty six years and it's out
Speaker 1: performed the benchmark by a hundred forty basis points for
Speaker 1: thirty six years, you know, those are types of things
Speaker 1: we haven't necessarily talked about quite often enough. In my view,
Speaker 1: I think, you know, the idea of of of our
Speaker 1: competence in our body work. I think those are things
Speaker 1: that I think could be elevated from a dimensional perspective.
Speaker 1: But David is a very modest guy. He's super insightful,
Speaker 1: very strategic. Um, he's uh. He makes you know, great
Speaker 1: business calls very very quickly. So I've been around him
Speaker 1: long enough to know when you know, David makes a
Speaker 1: comment about a particular business situation, his insights are are
Speaker 1: are are very very good, um, and they usually are
Speaker 1: very very right. So um, he's a great voice to have.
Speaker 1: He's a he's a great person to have around. I'd
Speaker 1: also give him credit. I used some of his kind
Speaker 1: of views on management and how people react. He's he's
Speaker 1: definitely a macro manager, so he's he's willing to give
Speaker 1: people a chance. I eat Gerard and myself delegated to
Speaker 1: you guys and let you carry the ball. He'll he'll participate,
Speaker 1: He'll he's been a great chairman. He'll act, he'll participate
Speaker 1: in big questions and big strategic issues. Um he'll keep
Speaker 1: a close eye on what what's happening and make sure
Speaker 1: that he uh sees things happening in the way he
Speaker 1: thinks they should. But he also is very good about
Speaker 1: giving somebody some space to run with an idea that
Speaker 1: he thinks is pretty positive. And and going back to
Speaker 1: the advisor of business. You know, Dan Wheeler was the
Speaker 1: guy that came in with an idea, UH to use
Speaker 1: these funds with with advisors I either retail business and
Speaker 1: and David, to his credit, UM contemplated that concept and
Speaker 1: thought about it thoroughly around it, you know, or these
Speaker 1: assets gonna be compatible, and he made a decision to
Speaker 1: allow Dan to go do that in a in a
Speaker 1: methodical way that would be would be different than what's
Speaker 1: been out there in the past. I give a lot
Speaker 1: of credit for Dan was essentially an independent advisor outside
Speaker 1: of Dimensional Funds, but it was pretty clear he was
Speaker 1: raising a lot of money for the company. At what
Speaker 1: point did that relationship become much more explicit, if that's
Speaker 1: the right way, Yeah, I think he he became an emloyee,
Speaker 1: I think a couple of years into it, so maybe. So,
Speaker 1: you know, Dan is an interesting guy and he um.
Speaker 1: You know, he was a broker in his prior life,
Speaker 1: and you know, he would uh, he would say, he
Speaker 1: would use a term the never having to say you're
Speaker 1: sorry approach to investing. So he failed as a commissioned
Speaker 1: broker or a stock broker that he felt there's a
Speaker 1: lot of times when you know, he'd go and pitch
Speaker 1: a stock to a client and then the stock wouldn't
Speaker 1: do well, and he'd definitely go back and say, hey,
Speaker 1: I'm sorry, it didn't work out the way we expected.
Speaker 1: And so his view was if you if you could
Speaker 1: move away from that, you could get a client educated
Speaker 1: on the capital markets, get them very comfortable about the
Speaker 1: expected returns in a market, um and educate them in
Speaker 1: in a proper way that you wouldn't have to have
Speaker 1: these oh I'm sorry type of conversations with your clients.
Speaker 1: So it's a very unique way to view the investment space.
Speaker 1: So you mentioned, Um, David Booth doesn't really discuss um
Speaker 1: the company's achievements publicly all that much. The firm has
Speaker 1: a reputation as a kind of private company that doesn't
Speaker 1: do a lot of press. I mean, we don't see
Speaker 1: your names out in the media all that much, which
Speaker 1: I get the senses by design, but it leads to
Speaker 1: lots of misconceptions. What what sort of misconceptions are out
Speaker 1: there about Dimensional Funds? Well, I think we you know,
Speaker 1: I don't know if it's purposely or not, but I
Speaker 1: think we've always allowed our clients to talk for us.
Speaker 1: So if if you or any other advisor or institutional
Speaker 1: client thinks possibly what we've we've been able to do
Speaker 1: for them and for their clients, then they're gonna speak
Speaker 1: highly of us. And that's a that's a way, that's
Speaker 1: a public presence kind of a concept as well. So
Speaker 1: we've always uh sort of limited ourselves in the public
Speaker 1: presence type of space. Uh, we're not advertisers. Um, We've
Speaker 1: talked to clients in the past, they don't necessarily want
Speaker 1: us to advertise. They don't mind having an elevated PubL
Speaker 1: at presence. So when when you know, Bloomberg does an
Speaker 1: article on Dimensional and advisors able a third party piece
Speaker 1: and advisors able to hand that that article to a client, UM,
Speaker 1: and the client says, Okay, I get a little bit
Speaker 1: better sense of who Dimensional is. That's a positive for
Speaker 1: for that client and for advisor and for the dimensional.
Speaker 1: So we're we're in the business of of you know,
Speaker 1: trying to do the right thing for the client, being
Speaker 1: very robust from an academic perspective, in a research perspective,
Speaker 1: working on the on the edges, if you will, from
Speaker 1: an implementation perspective, and we think, you know, our implementation
Speaker 1: and our delivery of the portfolios are as efficient as
Speaker 1: as they can get. Uh. And that's probably a part
Speaker 1: of the story that we don't we don't describe enough
Speaker 1: UM differentiating ourselves versus competitors. So so let's talk about
Speaker 1: some of those competitors. UM, if we look at the
Speaker 1: big three in the world of indexing and ETFs, Vanguard,
Speaker 1: State Street, black Rock, they have become fierce competitors in
Speaker 1: the e t F space, which is growing very rapidly.
Speaker 1: You guys have made the decision, No, we don't want
Speaker 1: to be in the e t F space. It's it's
Speaker 1: subject to inflows and outflows, and it's very retail and
Speaker 1: not necessarily our interest. Is that something that might be
Speaker 1: revisited in the future, or because it seems like so
Speaker 1: much of the business is moving in the direction of
Speaker 1: e t F s, how does df A think about that? Yeah,
Speaker 1: I think we're very client centric, So you know, we've
Speaker 1: had discussions about et F with with clients for for
Speaker 1: many years. A matter of fact, I think it's probably
Speaker 1: ten years ago where David Booth and I went out
Speaker 1: and talked to clients about their their interests in need
Speaker 1: for an e t F from Dimensional and at that
Speaker 1: point in time, there wasn't that high of an interest
Speaker 1: for that, and UM, you know, but that doesn't mean
Speaker 1: that we wouldn't review it again. If if if for
Speaker 1: whatever reason, Advisers for instance, came back and said, listen,
Speaker 1: it would be great to have an e t F
Speaker 1: for these reasons and we think you're the right firm
Speaker 1: to do that. Um, then obviously we we would we
Speaker 1: would listen to that and be approachable around that. So
Speaker 1: when when you look at our our orientation around our
Speaker 1: our verus funds, I mean we have sustainable funds and
Speaker 1: social funds. Next question in my mind that I wanted
Speaker 1: to go to. I mentioned the smart beta trends, and
Speaker 1: you guys have have really stepped stuck with just pure
Speaker 1: factor investing. How do you look at the rise of
Speaker 1: E s G, the desire for fill in the blank
Speaker 1: environmental sustainable, social governance, what have you? How does how
Speaker 1: does dimensional look at that trend and the desire for
Speaker 1: for that, especially from from women investors and from younger
Speaker 1: millennial investors. That seems to be where a lot of
Speaker 1: the demands is coming from. You know, that's a great,
Speaker 1: great question, and it's a great example of how we've
Speaker 1: worked with our clients in the past, and that basically
Speaker 1: a clients came to us and said, listen, when you
Speaker 1: look at those areas that you know E s G
Speaker 1: and so forth, the the uh the is out there
Speaker 1: for the advisor, weren't that great? So high expense, you know,
Speaker 1: highly concentrated, bad performance and so forth and so on.
Speaker 1: So that the question was could you demensional? Yeah, that's terrific.
Speaker 1: Could you demensional come to us with a solution that
Speaker 1: looked very much like what your solutions are today, but
Speaker 1: with a UH you know, a focus and UH detail
Speaker 1: around around the social and sustainable and so we UM
Speaker 1: we went back to the basically lab and we came
Speaker 1: back with portfolios that we're very highly diversified. There were
Speaker 1: low costs UH. They didn't recognize a lot of these
Speaker 1: E s G issues in terms of portfolio management UH,
Speaker 1: and we're able to come back with a portfolio that
Speaker 1: we thought from a capital market perspective made sense for
Speaker 1: the end client with the nod towards being sustainable or
Speaker 1: social or whatever the UM the issue might be. So
Speaker 1: that that's been a huge success for SO. I think
Speaker 1: we've we've now got ten year track records in those
Speaker 1: areas and those portfolios track really closely to our standard portfolios,
Speaker 1: the core portfolios UM. So the performance has been terrific,
Speaker 1: The expectations have been met UM and for clients and
Speaker 1: for advisors who are are interested in in that aspect
Speaker 1: of investing UM, there are available options for them. So
Speaker 1: we feel really good about that and we think it's
Speaker 1: been a real success for for all sides. And going forward,
Speaker 1: I'm sure, there's gonna be more interest in that from
Speaker 1: from clients and so forth on that go forward. So
Speaker 1: what else might there be more interest in it in
Speaker 1: going forward? E s G is clearly on the rise,
Speaker 1: but its roots go back decades. Smart data, UM perhaps
Speaker 1: not as far back. Factor investing even further back. What
Speaker 1: do you imagine the next big trend in investing is
Speaker 1: going to be? And I honestly don't know if there's
Speaker 1: an answer, but you have a different advantage point, maybe
Speaker 1: you see it a little differently. You know, there's always
Speaker 1: going to be another you know, academic paper or another
Speaker 1: area of research that that helps us refine how we
Speaker 1: think about the capital markets. And UM, we've seen that
Speaker 1: recently with you know, profitability for instance. Uh so there's
Speaker 1: gonna be more of that, you know. For me, I
Speaker 1: think that the bigger change, and I've been really inspired
Speaker 1: by recently is I think this UM I would call
Speaker 1: the human element of advice. It's the advisor's contribution to
Speaker 1: the end client result that that that comes from this
Speaker 1: interaction at a human level. So when I see sit
Speaker 1: with advisors now, the concept of trust has has elevated
Speaker 1: quite a bit, and and trust comes from a couple
Speaker 1: of different areas. One is is competency. So at demensionals level,
Speaker 1: you know, we've got to be able to deliver access
Speaker 1: to the capital market is the most efficient way, and
Speaker 1: I think we have We've got a thirty six year
Speaker 1: track record of of competence for the advisor. You know,
Speaker 1: the advisor provides a lot of different wealth management activities.
Speaker 1: They know the client intimately, UH, they know about their
Speaker 1: hopes and their dreams and so forth. And so when
Speaker 1: I think about the movement of financial advice, it's gone
Speaker 1: down that path, um, you know where historically thirty five
Speaker 1: years ago when I started the business, it was about
Speaker 1: trying to sell a stock or get a commission off
Speaker 1: of stock UH, purchase or sell. UH. It's changed to
Speaker 1: a holistic wealth management view. It's changed to start thinking
Speaker 1: about people's you know, hopes, their dreams, their children, their
Speaker 1: charitable giving, and doing that in a very systematic, uh
Speaker 1: efficient way from the capital market perspective, you know, using
Speaker 1: building blocks like demensional delivers UH to be able to
Speaker 1: execute on the client's expectations. And so I I think
Speaker 1: by executing on the client expectation, then the aspect of
Speaker 1: trust develops and it continues to build over time. And
Speaker 1: so I see these great relationships. I've been, you know,
Speaker 1: in this for twenty five years, and we've got advisors
Speaker 1: who've worked with us for twenty five years and their
Speaker 1: clients who have worked with them for twenty five years.
Speaker 1: And when you see those types of clients come into
Speaker 1: the office and talk about their experience, their journey, the
Speaker 1: fact that they feel okay about about their investments and
Speaker 1: about their retirement and where they want to go in
Speaker 1: the future, and another feeling, it's an amazing feeling. And
Speaker 1: so whenever I get you know, you wake up some mornings,
Speaker 1: you guess, you know, can I is another day of
Speaker 1: doing extra y you know, it just takes one conversation
Speaker 1: with a really satisfied client that makes you feel like, hey,
Speaker 1: I got it. The origin, the original reason why we
Speaker 1: started this was we wanted to make the client experience great.
Speaker 1: We wanted clients to feel good about their retirement, feel
Speaker 1: like they were going to be okay. And when you
Speaker 1: get to see that through the advisors who are working
Speaker 1: with these clients for a long, long time time periods,
Speaker 1: it's just a it's really um a feel good kind
Speaker 1: of a thing for anybody that works in that space.
Speaker 1: So so I'm going to assume that we're not going
Speaker 1: to see a d F a crypto funds launching anytime soon.
Speaker 1: You will not. So I like the idea of holistic
Speaker 1: asset management. It's a good term and it really does
Speaker 1: a nice job describing the full three sixty. So let's
Speaker 1: jump to our favorite questions that we ask all of
Speaker 1: our guests. Um, tell us the most important thing that
Speaker 1: we don't know about Dave Butler. Great question. Um, there's
Speaker 1: probably a lot that you don't know about Dave Butler,
Speaker 1: but I know a lot more now than Uh. Here's
Speaker 1: one because it's it's pretty relevant. So I Steve Kerr
Speaker 1: just won the NBA Championship of Golden State. I think
Speaker 1: he's got eight rings now as both the player and
Speaker 1: players coach. He and I played together on a US
Speaker 1: national team back in the day. We got the room
Speaker 1: for a month together. Uh, And I have to say
Speaker 1: I've taken a lot of inspiration from watching him coach
Speaker 1: a team of of major talents. But you know, taking
Speaker 1: that team of major challenge and developing them and knitting
Speaker 1: it into a collaborative unit is just genius. And I
Speaker 1: don't know if people give him the kind of credit
Speaker 1: that he should get. But it's an amazing thing to watch,
Speaker 1: you know. I read stuff about him quite often. Uh.
Speaker 1: You know, No, I take it to my team and
Speaker 1: I say, look, here's here's something that we ought to
Speaker 1: think about, and here's something we out of view and
Speaker 1: look at as well. So quick example is just on hiring.
Speaker 1: I can remember asking him when he played the University
Speaker 1: of Arizona. These teams were great, the players that I
Speaker 1: had met were great people. And I said, how does
Speaker 1: that happen? Uh? And he says to me, he says, well,
Speaker 1: he said lud Olsen, who was a coach at the time,
Speaker 1: he says, we have a we have an approach where
Speaker 1: we bring a player in for the weekend, uh, and
Speaker 1: on Monday morning we get together as a team. And
Speaker 1: Luke asked the question, even if it's the number one
Speaker 1: player in the country, says, do you guys want to
Speaker 1: play with this guy? Really? Yeah? And if we if
Speaker 1: we said no, then then he stopped recruiting him. So
Speaker 1: I actually took that into our team at Dementiel for
Speaker 1: some time and and we we had the same kind
Speaker 1: of approach. We had nine or ten people interview a
Speaker 1: new team member, and it never was my decision and
Speaker 1: I passed it to the team. We start with the
Speaker 1: youngest person first and we say, hey, do you want
Speaker 1: to play with this person? This is a person that's
Speaker 1: going to be on your team that you have to
Speaker 1: play with, and do you want to do it or not?
Speaker 1: And so that's I think a great way to think
Speaker 1: about building out a team. You know, you want to
Speaker 1: you want to find ways to to elevate the collaboration
Speaker 1: and the the the enjoyment of the team that that
Speaker 1: that's really quite quite fascinating, and they are building what
Speaker 1: looks like a dynasty for the Ages franchise. Yeah, right
Speaker 1: for sure. Um tell us about your early mentors who
Speaker 1: changed the way you look at the financial business and
Speaker 1: uh investment. Well, you mentioned the Universe Chicago connection, so
Speaker 1: I would include all of those folks that Merton Miller
Speaker 1: I got to meet Merton, you know when I first interviewed,
Speaker 1: and all of those folks have transformed the capital market
Speaker 1: experience and the investor experience in ways that are are
Speaker 1: were unimaginable at the time. But the whole you know,
Speaker 1: the the energy and the passion and the enthusiasm for
Speaker 1: the fact that that markets work, that prices are fair,
Speaker 1: that you had to invest in a way that's diversified
Speaker 1: and low costs and tax efficient. Those concepts didn't even
Speaker 1: hit the radar screen. And thirty years ago that was
Speaker 1: sort of poop poo and laughed at. And now we
Speaker 1: pushed forward it today and and this. You know, when
Speaker 1: you talk about independent advice, you talk multi factor investing,
Speaker 1: you talk about holistic wealth management, you know, those concepts
Speaker 1: are front and center for any client experience. So to
Speaker 1: see that transform and I know that these guys were
Speaker 1: part of that and then really elevated, it's really fun
Speaker 1: to watch. Let's let's talk about everybody's favorite question. Tell
Speaker 1: us about some of your favorite books, be they fiction, nonfiction,
Speaker 1: finance related non finance. What do you read? I am
Speaker 1: all about the biography, autobiographies, about the journey. I love
Speaker 1: just understanding people and how they got to where they
Speaker 1: are and why they're why they act the way they act.
Speaker 1: So you know some of the books that I've read recently, Um,
Speaker 1: you know, um Red Shoe Doog, Phil Knight, Nike. I
Speaker 1: just read Bruce Springsteens moren to Run. I have that
Speaker 1: that's in my Q and I haven't gotten great books,
Speaker 1: but it's so big, a little intimidating, it's a great,
Speaker 1: great book, and you know, but all of these things really,
Speaker 1: to me, it's about the struggle. It's about the journey.
Speaker 1: You know. People see quote unquote success from people and
Speaker 1: and what you realize. And this is what I've told
Speaker 1: David Booth. Even with Dimensional, people look at Demensional say well,
Speaker 1: what a successful firm, and how amazing and how great.
Speaker 1: But their time periods when you know that the concept
Speaker 1: of indexing wasn't even wasn't accepted by anybody. Um, there's
Speaker 1: a time when small cap stocks, you know, back in
Speaker 1: the nineteen eighties, when small caps underperformed for ten years,
Speaker 1: the S and P five hundred by by ten percent,
Speaker 1: that that people question whether Dimensional as a firm, you know,
Speaker 1: was was really a firm that could deliver uh, you
Speaker 1: know small cap stock returns. You know, so there's always
Speaker 1: going to be a struggle along the way. Um, But
Speaker 1: what's inspiring to me is to watch how that struggled
Speaker 1: and translates into an action that then leads to this,
Speaker 1: you know, the success that we've seen. So it's fun.
Speaker 1: You mentioned shoe Dog, what was so surprising in that
Speaker 1: book is how many times Nike just you know, managed
Speaker 1: to miss the executioner's acts. They were on the edge
Speaker 1: repeatedly in the early days of the company. Yeah, give it.
Speaker 1: Give us one other book, one other thing that you uh,
Speaker 1: you read and really enjoy well, you know, anything John Wooden.
Speaker 1: You know I read that stuff all day long. Give
Speaker 1: John wood in the life. You know, there's a there's
Speaker 1: a book that just John Wooden. Um, but it's you know,
Speaker 1: John Wooden. I think, you know, and I tell the
Speaker 1: kids this all the time. If if you you look
Speaker 1: at what John Wooden stands for and how he built
Speaker 1: his pyramid of success and what's involved in the pyramid
Speaker 1: of success. You know, my view is if if you
Speaker 1: follow that in a you know, conceptual way, it's it's
Speaker 1: tough not to have success in something, and success meaning
Speaker 1: that you've given it your all and you've worked at it.
Speaker 1: And even if you don't win or win or lose,
Speaker 1: you know this the knowledge of satisfy. Actually you've worked
Speaker 1: really hard at something. I think his success success in
Speaker 1: itself really interesting. What what has you excited today? What
Speaker 1: what do you really jazzed about? In two thousand and eighteen. Uh, well,
Speaker 1: I'd come back to the aspect of trust in the
Speaker 1: financial services space. I think I think a lot of
Speaker 1: trust was lost back in two thousand eight and two
Speaker 1: thousand nine, But I think this, I think what we've
Speaker 1: come out of that segment of time in is that
Speaker 1: I think holistic wealth management has has taken its position.
Speaker 1: I think independent advice his HISS has gained its rightful spot.
Speaker 1: I think uh indexing i E. And then multi factor investing,
Speaker 1: which again which is Demensil has been doing for thirty
Speaker 1: six years. I think that's front and center. So it's
Speaker 1: satisfying to me to look at all these trends that
Speaker 1: um going your way that we identified, you know, thirty
Speaker 1: years ago, that we thought, you know, and again we didn't.
Speaker 1: We didn't identify them for marketing reasons or for business reasons.
Speaker 1: We identified because we thought that was We thought independent
Speaker 1: of ICE and multi factor investing and holistic wealth management
Speaker 1: and human element of the advisor, the necessity for the
Speaker 1: advisor to get great results for the client. We thought
Speaker 1: that was the right thing for the end client. And
Speaker 1: that's what's it's played out. So tell us about a
Speaker 1: time you failed and what you learned from the experience
Speaker 1: well failure. Uh, you know, like we all, I've I've
Speaker 1: failed many many times, and I you know that the
Speaker 1: lesson I give the kids is like, you know you're
Speaker 1: gonna fail in terms of losing or getting beat or
Speaker 1: getting knocked down or whatever it might be. And and
Speaker 1: you know, the question really is is did you prepare
Speaker 1: yourself to succeeds as as best you could? And if
Speaker 1: you did not succeed as as an I e. A loss,
Speaker 1: you know, did you get back up and dust yourself
Speaker 1: off and and do it again? So I think that's
Speaker 1: the lesson you learned from failure. You know you mentioned
Speaker 1: did you did you prepare yourself to win? Um? Giants coach,
Speaker 1: I'm drawing a blank on his name, Tom Tom Colin.
Speaker 1: Tom Coughlin wrote a book, Earned the Right to Win,
Speaker 1: which is that exact I find a lot of sports
Speaker 1: books don't really they tend to be a little cliche,
Speaker 1: they don't really apply to business all that. Well, that book,
Speaker 1: more than any other that I've read, really talks to
Speaker 1: exactly what you're describing. If you were prepared, if you
Speaker 1: have done the heavy lifting beforehand, well then you just
Speaker 1: go out and do what you know how to do
Speaker 1: and if the wind comes, great and if it doesn't,
Speaker 1: go back to the drawing board and start over. Yeah. Absolutely,
Speaker 1: And I think and have the passion, you know, find
Speaker 1: something that you're passionate about, because at the end of
Speaker 1: the day, if you if you fail and you get
Speaker 1: knocked down, you know, if you're passionate about something, going
Speaker 1: to keep coming back until you until you get to
Speaker 1: that quote unquote success platform. What do you do for fun?
Speaker 1: What do you do outside of the office that you
Speaker 1: are passionate about. Yeah, well I think my fun now
Speaker 1: my my knees and ankles and stuff from basketball, probably
Speaker 1: a little banged up. So I do catch and shoot
Speaker 1: for the catch and pass for the kids, the boys.
Speaker 1: But I play sand volleyball, so that's sort of my passion.
Speaker 1: My two daughters play sand volleyball. Now it's it's nice
Speaker 1: on the legs. I can get a good workout at
Speaker 1: my age and and feel good the next day. Note
Speaker 1: two man, I'm still playing two man. That's an exhausting
Speaker 1: game back in my youth. Yeah, that's the challenge. Just
Speaker 1: try to keep playing two mans as many years as
Speaker 1: I can. So I'd love to get to sixty and
Speaker 1: still be playing two man. That would be that would
Speaker 1: be a good an ultimate goal for me. Um. So
Speaker 1: let me ask you a question you mentioned the kids.
Speaker 1: If a a millennial or a recent college graduate came
Speaker 1: up to you and said they were interested in a
Speaker 1: career in financial services or asset management, what sort of
Speaker 1: advice would you give them. You know, I just read
Speaker 1: an article flying out here yesterday. I thought was was
Speaker 1: really great. It's and it was a commencement speech. It
Speaker 1: was a guy. I can't remember who it was, but
Speaker 1: it's His basic line was grab a mop as in,
Speaker 1: don't be afraid to do the hard work, don't be
Speaker 1: afraid to do the dirty work, don't be afraid to
Speaker 1: you know, quote unquote, I'm at it every day with
Speaker 1: your best effort um because what's going to happen. And
Speaker 1: I tell the younger people, the millennials around dimensional is
Speaker 1: is look, people are gonna look at how you how
Speaker 1: you work. They're gonna look at your optimism, your enthusiasm,
Speaker 1: your energy, and you know, when when opportunity comes uh
Speaker 1: in a name pops into their head. For that opportunity,
Speaker 1: it's going to be the person who's done just that,
Speaker 1: who's worked hard who's enthusiastic, who's optimistic, who's who's smart, um,
Speaker 1: who's collaborative? All that stuff. So you want to put
Speaker 1: yourself in a position to get quote unquote lucky by
Speaker 1: by preparing yourself and doing things really well, and hopefully
Speaker 1: somebody sees you and taps you on the shoulder and says,
Speaker 1: you know, Barry, this is the person that we want
Speaker 1: to have run this or we wanted to have this
Speaker 1: person go do that. And that's where you know, success
Speaker 1: in a career comes from. So what is it that
Speaker 1: you know about the world of financial services today that
Speaker 1: you wish you knew five years ago when you were
Speaker 1: first starting. Well, I think I think the AHA moments
Speaker 1: for me was, you know, I got ahold this thing
Speaker 1: called the matrix book. Um. And the matrix book is
Speaker 1: as a book that basically shows the returns of the
Speaker 1: capital markets over time. And so the lessons that I
Speaker 1: learned from that. You know, in business school, you don't
Speaker 1: look you learn about this kind of cash flow and
Speaker 1: how to how to price a stock and whether you
Speaker 1: should buy that stock or you should sell that stock short. Um.
Speaker 1: That's one aspect of finance, but the broader aspect from
Speaker 1: an investment perspective for the average person from my mom.
Speaker 1: You know, how does my mom get comfortable with that
Speaker 1: she's going to be okay in retirement? Well, she needs
Speaker 1: to know about just the simple averages, the simple averages
Speaker 1: that come with the capital market returns. She also needs
Speaker 1: to know what you just point out early with value
Speaker 1: or size or the markets in general, is that that
Speaker 1: that return is not going to be there every year.
Speaker 1: So there's a lot of lessons around a big picture
Speaker 1: backing off and understanding what what does the stock market return,
Speaker 1: what does small cap stocks return? What a large cap
Speaker 1: stocks return? Why would you diversify internation only? Um? Why
Speaker 1: would you have fixed income instead of equity? And all
Speaker 1: of that goes into this big puzzle that I think again,
Speaker 1: the advisor do a great job of of sitting down
Speaker 1: and providing the human element, understanding the client in a
Speaker 1: in a way that UM, a stockbroker thirty years ago
Speaker 1: wouldn't and couldn't. UM, they're having those conversations now and
Speaker 1: they're part of that person's life to be able to
Speaker 1: help them deliver on the experience. It's going to be
Speaker 1: the right one for the client. Absolutely fascinating. Thank you
Speaker 1: so much. For being so generous with your time. We
Speaker 1: have been speaking with Dave Butler. He is co CEO
Speaker 1: of Dimensional Funds Advisors. If you enjoy this conversation, well,
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Speaker 1: I'm Barry Ritolts. You've been listening to Master's in Business
Speaker 1: on Bloomberg Radio.