David Booth: 45 Years to $1 Trillion at Dimensional | #646

**David Booth** (0:00)
We were the first people to treat small cap as a separate asset category. Small stocks underperform large stocks by the most they ever had over a nine-year period. Investing is complex and uncertain, for sure. But so is life. In February this year, when we crossed a trillion dollars in asset under management, when I found out, I called up Gene Fama. He was out in LA, and I go, Hey Gene, we just crossed a trillion dollars in assets under management. He goes, Holy ****.

**Meb Faber** (0:32)
Welcome to The Meb Faber Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better Investing starts here.

**SPEAKER_3** (0:45)
Meb Faber is the co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

**Meb Faber** (1:00)
Welcome back to work, everybody, into summer. But to celebrate today, we have an awesome episode. Today's guest is David Booth, founder of Dimensional Fund Advisors, which manages over a trillion dollars.
He studied under another podcast alum, Gene Fama, at Chicago, to help build one of the first index funds at Wells Fargo. He's got a new book out. Stay calm, learn to embrace uncertainty in investing and in life. David, welcome to the show.

**David Booth** (1:30)
Well, thank you. Good to be here.

**Meb Faber** (1:33)
You know, my podcast producer, Colby, was saying you never bought a stock in your life. Is that still true? That can't be true.

**David Booth** (1:38)
Oh, yeah, sure. I learned about investing right at the University of Chicago. I mean, my parents weren't investors, and so I knew nothing about investing. And then I go to the Ph.D. program, and first course, first day with Gene Fama, you know, teaching his view of the world, and right away I go, that makes sense to me. You know, by the end of it, I wondered, you know, why would anybody else think anything differently? But I have invested in my son-in-law's company, so, but I don't think that really counts. And I just bought a few shares as an Austin soccer team here, an Austin football club. But I wouldn't put that in the heavy-duty investing category.

**Meb Faber** (2:19)
It's like Jack Bogle investing in his kids' actively managed head fund. I think that's, you know, your parent, you got to, like there's no choice there. I want to talk at the beginning of your career, because you talk about this in the book, and I think it's super interesting, you know, that everyone can look back and say, well, it's obvious, dimensional, a trillion dollars must have been ordained from the beginning. But you kind of got your start in the origins, the genesis of the index fund. It's easy people today, they say, oh, I just go buy the index, I'll just go buy.
That wasn't around 50, 60 years ago. You want to talk about the early days, Wells and the Stagecoach Fund, all that good stuff?

**David Booth** (2:50)
Yeah, starting in the mid-60s, people started examining the performance of mutual funds and other professionally managed funds. And the basic conclusion was that these professional managers weren't worth the cost. Before 1960, there just wasn't data to examine really anything. You know, the CRISP data at the University of Chicago came along, and all of a sudden research exploded. There's growing sentiment that it didn't look like the pros could outguess the market. People then started saying, well, if stock picking and market timing, if that's not what you're supposed to do, what are you supposed to do? And well, that kind of outlines my career here. So and well, one day I was in the PhD program, and I finally decided I didn't want to be a professor, and I was working for Gene Fama. So I went into Fama's office, and I went out of here. And he goes, okay, well, I have this guy in Wells Fargo, Mack McQuown. He always wanted one of my students. He said, I'll give him a call.
He gave him Mack a call, and Mack McQuown. And Mack came to have dinner with me, and then hired me to go out to San Francisco.
And I started in September of 71, the same month that they started the first indexed portfolio for the Samsonite account. It was really a thrilling time. And at Wells, I mean, they really were on the cutting edge. And they had really two separate groups trying to figure out how to apply the new ideas.