I have a great interview lined up for you today with David Booth about his new book, Stay Calm: Learn to Embrace Uncertainty in Investing and Life.

His remarkable story began with a modest upbringing in Kansas, selling newspapers at eight years old and shoes as a teenager. He went on to work on the team that launched the first index fund and helped pioneer what became known as factor investing. For more than five decades, David has helped bridge the gap between academic research and real world investing, collaborating with Nobel laureates and building Dimensional Fund Advisors into a global investment firm managing roughly $1 trillion. David didn’t just witness a revolution in investing. He helped lead it.

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Articles, Links & Resources:

StayCalmInvesting.com
Dimensional Fund Advisors
Documentary: Tune Out The Noise
Buy the book on Amazon.com (Affiliate Link)

Transcript:

478 David Booth – The Man Who Changed Investing

Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now, here is your host, Jason Parker.

Jason Parker: America, welcome back to another round of Sound Retirement Radio.

You’re listening to episode number 478. The title is The Man Who Changed Investing: My Conversation with David Booth. I have a great interview lined up with you to discuss David Booth’s new book called Stay Calm: Learn to Embrace Uncertainty in Investing and Life. But before we get into this episode, let’s start out by renewing our mind.

This verse is from Ephesians chapter 6 verse 7, “Serve wholeheartedly as if you were serving the Lord, not people.” And here’s something fun for the family. Investing is the only place where people see a 20% off sale and run out of the store. Why did the student study on the airplane? Because he wanted a higher education.

Today, I had the good fortune to interview David Booth. Let me tell you a little bit about him. His modest upbringing in Kansas, from selling newspapers at eight years old to selling shoes as a teenager, to working on the team that launched the very first index fund, to pioneering what would become known as factor investing.

David Booth didn’t just witness the financial revolution, he helped lead it. For five decades, he bridged the worlds of academic theory and practical investing, collaborating with Nobel laureates to build Dimensional Fund Advisors into a $1 trillion global firm that has really democratized evidence-based investing for millions.

Booth earned degrees in economics and business from the University of Kansas, followed by an MBA from the University of Chicago. His Chicago education proved instrumental to his success, leading to a transformative gift to the business school in 2008. The University of Chicago Booth School of Business now bears his name, and the contributions continue to support faculty and their field-defining research.

Through his visionary application of financial theory to real-world investing, Booth has established himself as one of the most influential figures in investing, an outsider who challenged Wall Street’s conventional wisdom and won. Before I get started, I, I wanna say just a few words about today’s conversation.

In today’s interview, we talked about David’s upbringing and some of the influential relationships that helped shape his path. We discussed the science of investing and many of the breakthroughs that he and his colleagues helped to bring from academic research into the real world. Throughout its history, Dimensional Fund Advisors has been associated with five Nobel Prize-winning economists, reflecting the firm’s deep commitment to evidence-based investing.

One of the themes that really stood out to me is David’s remarkable optimism about the future. He sees uncertainty not as something to fear, but as the very reason investors have the opportunity to earn higher expected returns. That perspective has profoundly influenced the way I think about investing, and it’s a philosophy that we incorporate into the investment strategies we build for families preparing for and transitioning into retirement.

If I sound a little excited during today’s interview, it’s because I am. I’ve been studying David’s work for years, and his investment philosophy has had a tremendous impact on the work we do at Parker Financial. One of the things I admire the most about Mr. Booth is that he wasn’t content to simply understand these ideas or teach them.

He acted on them. He helped build a company that brought decades of academic research into practical investment solutions for millions of investors around the world. One of the biggest lessons I took away from David’s life is that the world isn’t changed by people who simply discover great ideas. It’s changed by people who have the courage and conviction to act on them.

That idea extends far beyond investing, and it’s one of the reasons I was so excited to have this conversation. It was truly an honor and a privilege to have David Booth as a guest on Sound Retirement Radio, and I hope you enjoy this conversation as much as I enjoyed recording it. Mr. Booth also has a new book coming out, and I genuinely loved it.

It’s more than a book about investing. It’s the story of how a handful of powerful ideas changed the way that many of us think about investing, while also telling David’s own journey, from delivering newspapers as a young man to building one of the most respected investment firms in the world. It’s easily one of my favorite investment books, and I highly recommend it.

I’ll include a link in the show notes where you can order your own copy. And so without any further ado, here’s my interview with David Booth. David Booth, welcome to Sound Retirement Radio.

David Booth: Thank you. Thanks for having me.

Jason Parker: I am so excited to have you here. I was lucky enough to get a pre-release of this new book that you have coming out, Stay Calm: Learn to Embrace Uncertainty in Investing and Life.

Yeah. Tell me about the title of the book.

David Booth: Well, actually once I tell people the title, they all– they, they start relaxing right away ’cause they think they’re worried I’m gonna give them a book about how to invest. It’s not about that at all. So it’s, it’s how to think about investing and integrating kinda really what’s happened over the last 50, 60 years and how it’s changed the world and, and how it and how all the research that’s come up over the last 50, 60 years should make people feel more optimistic and feel more confident that they can meet their investment objectives, which is pretty cool.

Jason Parker: It’s very cool, and one of the things I love about your messaging, one of the things I study about the way that you teach is that sense of optimism and how you view investing, and we’re gonna get into that. But the book is built– is, is broken into three different sections. It kinda tells the origin story and the science of investing the mindset that’s required to stay calm, and then what true wealth means to you.

And so I wanna explore all of that. I was hoping that we could start out going all the way back to your childhood. There was a point there in the very beginning of the book, you said that your dad had to borrow money to pay the hospital bill. Yeah. Tell, tell me about your family and that time in Kansas as a kid.

David Booth: Well, it was a tough time for, for the families in Kansas and my family in particular. My dad had just come back from World War II, and, you know, the, he and my mom had lived through the Great Depression and then World, World War II, and then they started having a family and, And there wasn’t much money to go around, but, you know, families really, in those days, really stuck together, and he borrows money from a, from a cousin and I was able to get out of the hospital.

Jason Parker: Well, thank goodness.

David Booth: Yeah, yeah. So-

Jason Parker: I, When I was reading about that story, you, you talk about your very first job being a newspaper boy, delivering newspapers. Tell me about that.

David Booth: Well, I mean, you know, I, this was in a real small town. It was… Even though it was the county seat, so it was the biggest town for miles around, it was about 3,000 people.

You know, no stoplights, you know, that kind of town. And so they had a weekly paper, and it went, it sold for a nickel. And you didn’t have a route. You just knocked with, knocked on doors and tried to get people to buy the, the paper.

Jason Parker: Okay. Really? And then what would you do with the money?

David Booth: Well, I, I saved it.

Along, I s- I started saving pretty early on. The, I had a quarter-a-week allowance, and my sister and I, we would go to the, the movie theater on Saturday for the matinee. Cost 15 cents. Cost a nickel for the popcorn, and I saved a nickel. And then along with the, with the money I made over time.

And, you know, anytime we got money, my grandmother would always send me a birthday present of $5 and 15 cents, $5 plus… In, in those days, sales tax was 3%, so she paid me $5.50. Well, that’s nice of her. So over, over time, I saved my money, and then when I was in, I think it was seventh grade, I had enough money, I bought a sport coat.

Jason Parker: A sport coat? Okay. One of the things I found interesting was that you talked about how your family moved closer to the University of Kansas, so for, for you to be able to go to school there. Tell me about that.

David Booth: Well, the biggest cost in education in those days was cost of living. And it turns out I had a scholarship that could- big enough to pay for my tuition.

But there was a room and board, and that was beyond what my parents with three kids could they could see that they would be able to do. So their solution was pretty slick, pretty clever . Move to Lawrence where the University of Kansas is. You know, we could live at home and thereby save a, a lot of money and make it feasible to go to the University of Kansas.

Jason Parker: Yeah. But, but that’s a big deal for your family to move to closer to the university to s- E- Education was obviously important. As you think about that, was it your mom or your dad that really pushed to make that happen?

David Booth: I think it was my mom more than my dad. And you know, it was, As I tell my kids, you know, my, I never had to sacrifice for my kids as much as my parents had to sacrifice for me.

Things like that. You know, and I don’t know if you saw in the book my first car, you know, that came as a big sacrifice. You know, and, and, and it ties really into the book and, and the last part of the book we’ll get into it on, on what’s really true worth. You know, what do you really, what’s important to you?

What do you really value? I characterize my parents as being wealthy. They just didn’t have much money.

Jason Parker: Mm-hmm. What were they wealthy in?

David Booth: Family, friends, you know. I remember you know, Like at my dad’s funeral, the, one of the, a friend came up and said, “You know, here’s here’s to your dad. He, he was the finest guy I ever met.”

Jason Parker: Wow. Wow, that’s pretty cool. I wanna ask you, I, I do wanna ask you about that first car and the story behind it, because there were a couple of stories that you told in that, in your book that kinda sent shivers down my spine. So tell me about the first car that you had.

David Booth: Well, in, in college as an undergrad, I didn’t have a car, or, or high school.

But living at home I could use my parents’ car, you know. So, then I got accepted to the University of Chicago into the PhD program, and so my dad said, “Well, you know, look, we’re gonna have to get you a car. It’ll be used so you know, don’t get your hopes up too much.” But one day coming back from school, I, I saw in the driveway this red Valiant convertible.

I don’t know if you remember Valiants. It was kind of a, a compact car they called them in those days. You know, a beautiful little car. And of course I knew what a sacrifice that would be, so I went in and was effusive and thanking them and so forth. So roll forward about 30 years and, and my dad is on his…

He had a terminal case of cancer and so we started talking about a lot of things over the years and getting perspective. And one day he said Do you remember your first car? I said, “Sure, I remember my first car. I mean, it was a great little jewel.” “Eh, huh.” He said, “You know, your mom always wanted a red convertible, and I got her one, and then you came in,” and he thought it was for you, and your mom just said, “Oh, let’s just let him have it.”

And he said, “You know, she never got it. She never did get a red convertible.”

Jason Parker: Wow.

David Booth: Isn’t that great?

Jason Parker: That is that sacrifice that you’re talking about- Yeah … that I could see my wife doing the same thing actually for our kids. Yeah. I, I just love, I loved that story. What did you learn from that experience 30 years later when your dad told you that?

David Booth: Well, I mean, I, I, I learned obviously what a sacrifice they had made, and here again, true value what’s really important, true worth. I had another experience with that. Once I got into the PhD program, my second year in the program, I, I was… On the one hand, I had everything going for me. I was working for Gene Fama and doing a lot of research and up frequently staying all night, up all night down at the computer center ’cause you, you’re dealing with punch cards and you, you you had to program while when, when you could get time.

And, So I go down to my grandparent, my paternal grandparents’ house for Christmas, and there we had all the relatives, you know, the aunts, uncles, cousins jammed into this little house. You know, the house didn’t have indoor plumbing, so we had an outhouse and, you know, linoleum floors, that sort of thing.

And I’m… So I’m sitting there, standing there looking around. I go, “Hey, these people are really happy. I’m stressed out. Who’s the, who’s the oddball in this group?” You know, so what I, I started to do a lot of r- self-reflection and eventually decided, you know, I don’t think I’m really cut out to be a professor.

I mean, because doing this research I was doing, it was a grind for me. You know, I was working for Gene Fama, and for him, he loved it. I mean, he couldn’t get enough of it. So I, I gotta find something I really love, and, you know, nobody’s applying these great i- these ideas that are coming out in terms of, you know, the…

Really the ’60s into some of the ’70s was a period of time when finance emerged as a, as a science. You know, you can’t have a science unless you have testable hypotheses. And before 1960, it they didn’t have the data to test out hypotheses, and didn’t have computers big enough, and that all changed in the ’60s.

And and the, the people at the forefront, really University of Chicago was one of the places that was really at the forefront of all of this. And, and if you look at the professors that were at Chicago at the time, I mean, they had a huge influence on the whole industry, and,

Jason Parker: The whole… I know. I mean, these people that we teach about today, you were at school with many of them.

I wrote down some of the names. You, your roommate was Roger Ibbotson, Merton Miller, Myron Scholes, Kenneth French. Well, Kenneth French, I don’t know that he was there with you, but- No, he was a, he was a pup. He was a, he was a pup. He was

David Booth: young

Jason Parker: then. Gene Fama. Yeah. Mack McCown- McQuown Rex Sinquefield, Jack, Jack Bogle.

There was part of your story intertwines with his. Milton Friedman was a professor that you took a class from. I, I wanna get into all this, but one of the things that I… I wanna back up a little bit before you got to the University of Chicago, ’cause as I, as I was reading your story… And I have to tell you, this book, I think people are gonna love it.

This is… I enjoyed this book so much as I was reading, as I was reading it. I’ve got it highlighted, and I, I think it’s gonna be one of the top books in finance when this comes out next month, but-

David Booth: By the way, by the way, tha-thank you about that. I mean, tha-thanks. I mean, I, I, a couple months ago, I was telling people, “Look, it’s kinda like turning in your term paper.”

I’ve turned in the book. The publisher it’s g- it’s gonna get printed now, and I have no idea if people are gonna like it or not, you know? So, thanks for- I’m good

Jason Parker: I really enjoyed it, really enjoyed it. But one of the things you talked about before we got to the University- Oh … of Chicago was Mrs.

McReynolds and the impact that she had on you in terms of encouragement. Will you just share that story real quick? Because I think it also… I think that story and the Milton Friedman story kinda go hand-in-hand, so I wanna make sure we’re talking about both of them.

David Booth: Okay, good. Yeah, well, I had this experience in, in high school.

My senior year I was taking a cal- a cal- calculus class from Mrs. McReynolds. And my high school had arranged with the University of Kansas that at the end of the first semester they would give an exam, and if you got a high enough score, they would give, actually give you college credit for for calculus.

And so it came up, and I took the test, and I didn’t get a high enough score to get credit. And-

Jason Parker: And you had been sick, right?

David Booth: Yeah, it actually turns out in my whole life, that was the sickest week I ever had. I could… but you had to take the final that day or that was the… There was no alternative And so I didn’t get the credit, and I was devastated.

I’d always taken pride in, in math, and you know how high school kids are, you know? So I overreacted a little bit and transferred out and said I was never gonna take math again. And, you know. So I’m sitting in my new class the next semester and the first day, and trying to look inconspicuous, hoping no one will ask me, “Where were you last semester?”

And Mrs. McReynolds walks in the door. She had gone to the effort. She n- when she realized I wasn’t in the class, she went down to the office and found out where I was and came, came and found me. And she’s standing up at the front of the classroom, motioning me to talk to her outside. So I go outside with her, and, and she just says how badly she feels and that she wants me in the class.

And so I said, “Okay.”

Jason Parker: And, But that one decision, that teacher to pursue you, to come out, to recognize that you were really good. You had a bad test ’cause you w- you know, a bad day. But boy, those… One of the things I’m always reminding my kids is life is all about relationships. It’s all about, you know, these people that come into our life and the opportunity that we get to walk life with people.

But I just think, man, that was a pivotal b- pivotal moment. Pi-

David Booth: pivotal moment. I mean-

Jason Parker: Another pivotal moment that I read in your story was the Vietnam draft. Yeah. And I, I think, I think in order to understand the science that you invented, it, we have to understand how you got there. So tell us about-

before you got to the University of Chicago-

David Booth: Okay …

Jason Parker: the Vietnam War is going on and, Oh.

David Booth: Yeah, and, and the way the deal was when in, in my age group was that the you could get a student deferment for four years. You know, so after you got out of high school, you could, draft board would give you four years of student deferment.

So after four years and when I graduated in ’68 took a summer job just waiting to get drafted, and my s- my draft board, for whatre- who knows what reason, they made a mistake, and they, they sent me another student deferment. And I, I leveraged that into another year at k- at KU, and that’s when I st- started studying finance and And decided I wanted to be a pro- professor.

So it had a big, had a big impact, and that’s, that’s when I got accepted into you know, the program at Chicago and,

Jason Parker: So before the program at Chicago though, you get this… You, you, you find out, you get this good news, you’re not gonna have to go to Vietnam which was a huge deal. And you had a professor at the University of Kansas that, I mean, how did the, how did your decision to go to Chicago come about? Was it that professor at the University of Kansas that said, “I really think you should go to Chicago,” or was that your only selection? Was that the only place you had hoped to go? Or how, how did it come to be?

David Booth: Well, yeah, I mean, it, it was I didn’t know what to do.

I mean, I just– I’m on borrowed time here while I’m in, in, in, in grad school at Kansas, ’cause I know the draft board’s coming, gonna come after me, so I’m gonna get exposed here. Anyway, so, while I was thinking about my future, the, the deal was after you come, came back from the service, they had to give you…

They had to make you whole in the sense if you had a job, the company had to give you your job back, or if you were in a PhD program and got drafted, they would, they would have to leave a spot for you when you came back. So I didn’t know what I wanted to do, so I interviewed for jobs, and I was really… I really enjoyed my finance class and I had this great finance professor there.

And so I, I said I, I thought about maybe being a professor. He goes, “Well, if you’re interested in, in being a professor, you gotta go to University of Chicago.” Turns out he had gone to the University of Chicago. But he also gave me s- things to read, like Gene Fama’s PhD dissertation, which was a landmark, and, you know, you could sense the, the world was changing very rapidly.

So I, I read that and and applied to Chicago, and I think with his recommendation and I got in and and then I flunked my draft physical. Now all of a sudden… And I’d, I’d taken a job with Exxon in New York, and I’d taken a slot in the PhD program. I had to after flunking my physical, I had to decide, work, go back to school, work, go back

I was on a subway ride up to Exxon’s offices, and on the way up I just said, “Ah, it’s now or never with school.” So I went, decided to go back to school.

Jason Parker: Wow. So you get to school, and Gene Fama is the first class you take?

David Booth: Yeah, first class, first day. He outlines his view of the world, you know?

Jason Parker: And that, that really influenced you.

I mean, in many ways, it influenced your philosophy of investing, which I wanna ask you about in a second, but also created this lifetime friendship. And Gene Fama was… He’s what? Eight years older than you?

David Booth: Yeah. So I’m 79. He’s 87. He still works six days a week, maybe seven. He he still loves…

That, that research activity that was stressful for me is still music to him, you know? It’s great to watch.

Jason Parker: So I find that so interesting that you guys became friends though. You became his research assistant there at the University of Chicago, and then he befriends you, he teaches you, you’re learning these ideas, and then you come to this realization.

So that’s where we, that’s where you started talking about, you know, you- Oh … met with your grandparents, you realized they were happy. You weren’t enjoying this PhD program. You had your MBA there from the University of Chicago. And you decide that the PhD program’s not for you. And, and I- Right … and I have to tell you, the courage that it took w- is one thing, but there’s a big difference between researching and teaching versus actually implementing ideas in the real world.

God. And so when you went to Gene Fama and said, “Hey, I, I wanna, I wanna go actually make things happen,” he creates a connection for you. He introduces you to Mac Mc- McQuown- Right … and you go to work at Wells Fargo. So why in the world would your professor create that connection for you? You guys must have been really close, or how did that, how did that relationship come to be?

David Booth: You know, you know, I ask myself that, you know, “Why was he so nice to me?” I ask myself that all the years

Jason Parker: I- That one relation- Again, these small relationships- Yeah … really changed the course of your life.

David Booth: Yeah. So he said w- when I said I wanted to leave the program, he goes, “Well…” He, he talked to me about, you know, what the benefits of staying and being a professor, but I said, “No, I just don’t wanna do it.”

And he goes, “Okay. Well, I’ve had this guy out in San Francisco, Mac McQuown, who always wanted one of my students.” He said, “I’ll give him a call.” So he gave him a call, and then Mac came to Chicago. We had dinner, and then he hired me to go and work for him in, in San Francisco. Boom.

Jason Parker: And, and a lot of people m- may not know this, but Mac was part of the team, and you were on this team, that developed the very first index fund.

Before- Yeah … Jack Bogle came out with the S&P 500 index you and Mac and the team at Wells Fargo, you guys were working on the first index fund.

David Booth: Yeah, it was, See, what had happened by then was every, you know, the data had already been come in about the futility of active management in the sense of trying to outguess the market, you know, trying to pick stocks and timing mark- markets.

That all looked like a losing game. So leading academics already, they were accepting all of this. But that creates a problem, which is- If you’re not supposed to try to pick stocks and time markets, what do you, how do you ve- how do you invest? Well, that’s really been my whole career in some sense. It’s really figuring out the science, figuring out the best way to apply the science, and then the best way to execute on whatever it is you come up with.

That’s been… And that was, that was going on at Wells Fargo in 1971. And there were, there were two groups working on that. There was the group I worked with which, And we used two outside consultants Fischer Black and Myron Scholes, who, by the way, while working on this project, developed the Black-Scholes option pricing model for which you know, Myron got the Nobel Prize in, in ’97.

The, And then there, the other part there was the trust department, and there, I think some marketing genius had come along and said, “Look, what you really wanna do is do an index fund. You know, managers can’t seem to beat the market, but you can index the market and track the market.” And so that’s with the trust department.

So we have these two kind of competing groups within the… And we both ended up leaving. Actually, the trust department got sold a few times, is now the cornerstone of BlackRock, which is the largest money management firm, you know, with their iShares, and that all comes, traces back to Wells Fargo in s- ’71.

And then the other side, you know, the side I was working on, eventually leads 10 years later to the creation of Dimensional. You know, so we have, we have in ’81 then people like Myron and Gene Fama and Merton Miller and Mac McQuown and Rex Sinquefield and Roger Ibbotson come huddle together and figure out the best way to really create a money management firm, and that’s what, that’s what, and that w- that’s what created Dimensional.

Jason Parker: I wanna back up just a second because when you, you had met with your grandparents and you saw they had a happy life and you’re realizing you didn’t wanna be a doctor, but you had written this paper and you presented it to Milton Friedman. And- Yeah … Milton Friedman- Yeah … was very critical. He kind of dismissed everything you had to say, and that, that’s that contrast between Milton Friedman and that high school Mrs.

McReynolds. Because Milton Friedman in some ways, the criticism is what drove you to question whether or not you really wanted to be in the PhD program. So when I read that, I was like, “Boy, you know, it wa- it may have felt like criticism at the time, but had that not happened, Dimensional Funds may not be here today.”

Dimensional Funds has had a significant impact on so many people’s lives. So I, I just wanted to, I don’t know, get your thoughts about that, that connection there with Milton Friedman.

David Booth: Well, it turned out that was a– it, it turned out to be a great experience for me and for the business school because it, it actually literally was the next day after that presentation.

Thinking about it overnight, I realized I wasn’t cut out for the PhD program, and that’s when I went into Fama’s office the very next day. Said it’s not for me.” And,

Jason Parker: Yeah. I mean, sometimes, and I think it gets really to this core of uncertainty and embracing it. You know, sometimes something happens and it causes life to go a different direction, and that can either be devastating or it can be you know, opportunity in disguise.

My- a, a good friend of mine likes to say that fear and opportunity feel the same. It’s the same. It’s a similar emotion. But and I … And just real quickly before we get into your investment philosophy and kind of some of this work that you’ve helped to implement and the things you’ve learned and taught over the years going back to 1971, Mack and you and the team at Wells Fargo are helping to create the first index fund.

That gets you guys end up leaving Wells Fargo, and then Jack Bogle in 1975, he asks for the research from Wells Fargo. Is this, am I understanding this correct for creating the index fund, the S&P 500 index fund that he started in 1975 then?

David Booth: Well, yeah, we Wells Fargo want- had wanted to do a retail mutual fund, an S&P 500 fund.

But they were, the, the door was closed to them because of Glass-Steagall, you know, which has since been lifted. So they realized they couldn’t do a retail S&P 500 index fund. Then Mack got when the Jack Bogle was wanting to do an index fund, and so, Mack asked the CEO of the bank, “What should I do?”

And the CEO said and Mack was asking w- with all the data we had and all the research we had. The CEO of Wells said, “Give him the data.”

Jason Parker: Just give it to him. He didn’t sell

David Booth: it to him. Just give it to him. Just

Jason Parker: gave it to

David Booth: him. Give it to him, yeah. He probably, well, well, it wasn’t worth much, but he, anyway, that was, back in those days everybody helped everybody, you know?

Jason Parker: That’s so cool. And-

David Booth: Eventually …

Jason Parker: and, and then the story about how Vanguard actually ended up help- helping Dimensional with some of the bookkeeping work after you guys started.

David Booth: Right …

Jason Parker: Jack, so, and, and you had an opportunity to sit down with Jack Bogle years later before he passed away and thank him for helping Dimensional get off the ground.

But what was that? Was that a, a positive relationship that you had with Jack, or was it- Yeah … much of a relationship or?

David Booth: Well, anybody knows Jack knows it wasn’t a real tight relationship. But the he, what it was is that we decided as we were starting the firm that we wanted to do a mutual fund.

And I didn’t know anything about running mutual funds, so I went down to Vanguard and asked Jack, I said, “You know, why don’t you do all the back office stuff?” I mean, running a mutual fund’s complicated. And I said, “Why don’t you do it for a fee?” And he goes, “Oh, okay.” And so they did all the thankless stuff of running administrative stuff running a mutual fund for about four years, and then they decided they didn’t wanna do it.

But by then we were trained and knew you know, we could take over, and that’s why, you know, years later, just before he, he passed away, I was so happy I was able to say, you know, you know, “Thanks.” I said, “Jack, I don’t know what we would’ve done without you, but, you know, you just made it a whole lot easier for us, so thanks.”

It’s nice. You know, as I’m, I’m getting ready to turn 80, and that’s kind of what I’d like to do now to all my long-term friends is go around and tell them thanks.

Jason Parker: Mm.

David Booth: You know?

Jason Parker: That’s cool. You talk about your investment philosophy. So will you share the co- your core of your investment philosophy?

David Booth: Well, yeah, I mean, it’s, people, people just naturally gravitate to the idea that the way you want to invest, say, in the stock market, is analyze stocks and companies and figure out which ones are good and which ones are bad, and try to pick the good ones, and maybe get into the market, get out when you think you know, all of that.

That’s, that’s what everybody grew up with. And that’s, that’s where the, the breakthrough really came when all of a sudden researchers have data. You could research does that stuff make sense? Does anybody gain from that? I mean, and professional money managers, once you consider the cost do they better- do better than just a simple index fund?

Those were the questions that, that came up. And you know, our reading of it is you’re best off behaving as your professional money manager probably isn’t worth the cost. And so you need to find a different way of investing. And the good news is, and really in some ways is kind of my passion right now, is explaining why that’s all good news.

The, And it’s, And there are really two parts to the story. One is this behavior of stock and bond markets. We only deal in publicly traded securities, stocks, bonds, money market funds, that sort of thing. I mean, there’s a whole wide range of things you can invest in, but that’s what we focus in on.

That’s what we can really comment on. And now we have 100 years of data. Now, as a as a researcher, what you’re looking for is a good test, a good sample that can give you insights about how to go forward. And well, now we have 100 years of data. Now if you think about it, that starts before the…

It goes through the Great Depression, you know, World War II, Korean War, you know, the high inflation, low inflation, Great Recession, COVID. And through all of that, stocks have done 10% a year. I don’t, I don’t know how to tell a better story than that. You know? That’s as good– What it– That’s– So that’s part one.

Part two is you can buy the market. Very inex- There are all kinds of market portfolios you can buy very easily and very inexpensively. So there’s, there’s really no excuse for not investing in the market. I mean, you, you don’t have to worry, worry about being an outsider. You’ll do as well as the insiders.

How cool is that? So it’s really a democratization of this whole investment process, which keeps, keeps me excited about, trying to get people to understand all of that. You know, it’s it isn’t that complicated, I don’t think, but it’s just so conflicts with people’s basic intuition that’s hard for them to overcome.

Jason Parker: On page on chapter four of your book, you, you, you wrote this, and I, I highlighted it. It says, “The restless drive to improve, to solve problems, to make tomorrow better than today, that’s human ingenuity, and that’s at the core of my investment philosophy, which I describe as science-based hope.”

And it’s one of the things that I, that I think resonates so strongly with me is that when you understand what investing is and what it is not, it changes how you show up in the world. And one of the, one of the things you said is when you really get these ideas all the way down into your tippy toes, not– you just don’t understand the science, but you get it down into your tippy toes, it, it changes how you respond to uncertainty and volatility and what investing is.

So what, what do you have to say about that?

David Booth: Well, well, there are a couple of things in there. First is I, I don’t wanna leave the subject of of ingenuity, ’cause that’s at the core of all of this. But the other thing is that, and you’re getting at is, and, and a theme of the book is dealing with uncertainty.

You know, investing is uncertain and complex, and so is life. You know, so you, you’ve gotten here today. You’ve– Over the years, you’ve learned how to deal with uncertainty in your life. And if you kind of reflect and on the principles that you used to deal with uncertainty, those are a lot of the same principles that we use in dealing with in, in investing.

You know, you can’t predict the market, so forget about trying to predict. You know, you can’t predict your future either. I mean, you could’ve predicted 20 years ago where you’d be today, right? So, the key to all of this is not predicting. You know, and people u-understandably sh-shrink away from uncertainty, and yet we can convince them it’s really the uncertainty that creates the opportunity.

In life, if there were no uncertainty, you wouldn’t have been a– you wouldn’t have been able to progress. And investing, if there were no uncertainty, in other words, if there were… Investing, if everything was riskless, everything would– all investments would have the same return, the riskless rate of return.

So it’s the, If w- if we can spend enough time with people, we can– I can convince them that it’s, it’s not about eliminating uncertainty, it’s about managing uncertainty. So predict what you can or control what you can, and manage what you can’t. I mean, it’s… sounds simple, but that’s really the the premise.

Jason Parker: And there’s something I– that’s really core to this message that I wanna make sure people understand. ‘Cause you talk about, you know, over 100 years, the market has averaged 10% per year. But more than 2,000 years ago, Aristotle said that the whole is greater than the sum of its parts, and I, I really think that concept really identifies investing.

On page 99 of the book, you said that you talk about uncertainty of the market compared with the uncertainty of any individual investment in the market. Can you tell me what you mean about the individual components versus the whole- Right … of the market?

David Booth: Yeah. I mean, I think when most people, they’re, they’re worried when they talk about investing, they’re worried about a catastrophe, you know?

What, what… And if you invest in any, any one stock, you know, its value can go to zero. I feel comfortable making this prediction. The stock market’s not going to zero.

Jason Parker: That’s a good prediction. Right?

David Booth: That’s the differ- that’s the difference. You know, it’s, So if it’s about diversification. You can… There are only– There are, there are two primary ways you can avoid catastrophes.

The first one is just what I outlined. You buy the whole market rather than taking the risk of individual stocks. That’s number one. And number two, then you have to decide how much you have in the stock market versus relatively riskless assets. And for some people, they don’t want to have much in the stocks.

And for younger people, probably, they ought to have a lot in stocks. And so those are the two ways we kinda control eliminate catastrophe. And, you know, this seems like a simple enough process, but, you know, most, for most people, it’s kind of overwhelming. And And what’s funny to me, and I don’t know if it’s funny, but you know, if you have a serious medical issue, you go to a doctor.

But and everybody has a serious financial issue in the– regardless of how much money you have. And so you need professional help generally, if– as long as you can afford it. People need to work with advisors, and so that’s… We don’t sell directly to the public. We work with financial advisors, fee-only advisors.

And and these advisors can help people work through these, you know, these potentially anxiety-creating questions.

Jason Parker: Yeah. Yeah. Well, you do have the ETFs that are available now, and that’s a good option for people that want access to your strategies. A couple things I wanna say there. Number one, you probably remember that 2017 paper by Hendrik Bessembinder, who he, he said, “Do stocks really outperform T-bills?”

And what he found, I think he said the number was, like, 57% of stocks over a long period of time underperformed T-bills, and it’s only, like, a very small percentage of stocks that outperform, but it’s a small percentage of stocks that drive most of the return. And that’s where it gets back to this idea. You don’t have to be a sto- a great stock picker.

If you just buy the market, you get to benefit from both. You get to have the winners and the losers. And one of the things I’ve heard you say before is you avoid extreme outcomes. So- Right … you don’t have the extreme highs of maybe, you know, buying NVIDIA 15 years ago, but you don’t also have the extreme lows of companies going to zero.

And- Right … that is such an important idea for people to understand, just this the, the, the sum is greater than the individual parts. One of the things, and I, I want you– ’cause we talk about indexing, but Dimensional, you guys have a reputation for what I would say is beyond indexing. Right. And in, on– You, you talk about March Madness and how your family likes to wager on the basketball teams every year in terms of who’s gonna win, and you said that you logically like to pick the higher-ranked teams over the lower-ranked teams.

How does that same logic from March Madness apply to beyond investing, this idea of looking for opportunities to go beyond just buying a market cap-weighted index?

David Booth: Well, I mean, you can try to draw too close a, a parallel between those two things. You have to keep in mind, R- in mind that, you know, in the, in the big family with all the cousins and grandkids and so forth, usually it’s a, a, a 12-year-old that wins the pool, you know, or maybe a 10-year-old, you know?

So we have all the crusty old adults like me-

Jason Parker: With all

David Booth: the wisdom … who think they know something. I mean, yeah. And of course, also the worst performers are also those 10 and 12-year-olds too, so they’re on the extremes. The, But you’re getting to a point which is, you know, this– we talk about glibly about this 10% return on stocks over the long haul.

Well, you know, you have to be in the market to be assured of getting that return. You know, if you miss out on a few of the key months, you know, you’ve harmed yourself greatly. And to, to your point about a few stocks having skyrocketing, it’s so important to all of them because you wanna make sure you get those skyrocketing stocks, and they’ll pick up all the rest of them.

If you are, you know, out of those… I mean, typically, if you have a stock that just takes off like crazy, one thing you know for sure is it would have to be unexpected to the market because the market doesn’t set prices so you get a, a zillion percent return, you know? So even if it’s unexpected, you know, you– it’s not clear you would have picked it out, you know?

Jason Parker: Well, and it bring– it kind of brings up this whole topic of artificial intelligence. Like, we’ve had AI now for several years. It’s getting better and better all the time. And the question that I would have for anybody is if artificial intelligence can solve the market, like if it can only identify the winners and the biggest winners, why, why aren’t we there now?

Why isn’t why, why aren’t people only buying stocks that only go up?

David Booth: Well, you know, you know, my mentor, Gene Fama, eventually gets a Nobel Prize in 2013 for his work on efficient markets. And loosely speaking, one way to think about it and is that, you know, prices reflect all available information.

That’s the, the theory. And, you know, if that’s true, then professional money managers wouldn’t– shouldn’t be able to beat the market. So we observe professional money managers don’t seem to be able to beat the market. So the efficient market is pretty, pretty good assumption, a reasonable assumption anyway.

So if stocks really do reflect all available information, no AI model can do better than that in terms… that’s all the information. That’s all you can use. I mean, and so undoubtedly, there will be dueling AI algorithms trying to pick stocks, you know, replacing- The old timers with green shade, you know-

Jason Parker: Their pocket

David Booth: protectors

shades copy that right and all that. So, so it ought to be, AI ought to make markets even more efficient in my view.

Jason Parker: Yeah, I… Well, and that’s one of the things you pointed out too. I’ve heard you talk about the fact that, you know, indexing has increased significantly in the last 20, 30, 40 years. But the other side to that is active trading has also increased significantly.

Why do you suppose that’s the case? I mean, if, if all the evidence and all the research shows that buying all the stocks is better than buying the individual components, why, why are we still at a place where there’s so much active trading happening?

David Booth: Boy, you’ve asked a… That’s a question I ask myself all the time, and I ask other people.

How, how do you explain that? You know, there’s been an explosive growth in index funds. Now, if you really thought you could now guess the market, you’d, you’d go to a buy and hold strategy. You know? You wouldn’t… In index funds, one of their characteristics is relatively low turnover. So if half the market is now indexed, why wouldn’t about half the trading volume have disappeared?

Instead, it’s gone twice or three, many multiples. Here’s my guess. Until… I hate to Make out guesses without da– you know, concrete data, but is that people have given up on stock picking, but they haven’t given up on market timing. And index funds are a great timing vehicle. You can get in and out of a market on just, you know, trading one security.

So it’s perfect for, for timing. So I think it appeals to all the market timers, and that creates a lot of trading volume. So…

Jason Parker: One of the things that I think really sets apart the work that you guys have done at your firm is the number of Nobel laureates that have been attracted to me- to Dimensional. I think when I read in the book, there were five Nobel laureates- Yeah

that have served- Right … on the board of Dimensional. Why do you suppose people in the academic community, as they’re helping to shape the vision and the implementation of the strategies, why do you suppose they’re attracted to the work that you gu- you guys are doing? ‘Cause I don’t know of any firm that has that kind of deep academic rigor and just attracting, like, the top minds in finance.

Why do you suppose that is?

David Booth: Well, I think it has, historically, you know, go back to the, my days in, in the PhD program. You know, we would, we would meet weekly, the finance department and the PhD students to go… just to review anybody that had– was working on a paper. You would kinda– they call it finance workshop.

So, you know, you kinda meet regularly with all these same people. And I mean, these are st- superstars, right? And even though they hadn’t gotten recognition, you know, this stuff was incredibly important. And so we kinda got, got to be friends. And then, So the story is that when we decided to start the mutual fund and Jack Bogle says, “Well, okay, you’re gonna need a lawyer.

You know, here’s someone I use,” and he gave me his name. And s-so we meet with a lawyer for the fund. He says, “You know, you have to have an independent board of directors.” No kidding. So we, we were meeting in Fama’s office at the time, and Rex Sinquefield and I walked across the quadrangle to the faculty building for the business school, and we walked in.

First person we talked to was Merton Miller, who got his Nobel in 1990. A delightful human being and one of the funniest people you’ll ever come across. Said, “Merton, we need an independent director.” He goes, “Oh, yeah, I’d love to help.” ‘Cause he, he knew what… We were on the right side of the argument. We weren’t trying to-

Jason Parker: Mm-hmm

David Booth: you know, sell snake oil. We were trying to do the right thing. And so we walked out of his office, and coming the other direction on his way to lunch, was Myron Scholes. I go, “Hey, Myron, you know, kinda need your help here, you know, independent director.” Myron goes, “Well, how much are we gonna get paid?”

And I go, “Hey, Myron, we’re talking about you being an independent director. It would be unseemly for us to pay you anything, and besides, we don’t have any money. But, “… but if, if the fund gets off the ground, you’ll get director’s fees.” And, you know, “Okay.” So what’s not a– What’s amazing is not that these guys signed up, but they stayed with us forever.

I mean, M-Merton until he died. Well, Myron eventually, he was our lead independent director until he was aged out the board. And then Bob Merton took Merton Miller’s place. He, he already has his Nobel Prize in ’97. He joined us in 2000, and he’s still our resident scientist, but he started working too closely with us, so he, he couldn’t be an independent director anymore.

And then then the most recent one was Doug Diamond. You know, I guess a couple years ago now, he got his Nobel. I don’t know if I got all of them. Fama, Miller, Scholes Bob Merton and then, yeah, Doug Diamond. And Doug Diamond un- until recently was the independent director for the fund. So these– they’ve not only stayed with us, they work…

I mean, it, it hasn’t been just lip service. They’ve, they’ve been very valuable to the firm, which is why at the end, I eventually gave the university a big chunk of what I had, and they named the, the school after me.

Jason Parker: Yeah, that’s, that was very generous. I wanna talk about some of the, the way that you show up in the world beyond just finance.

But I, I think… I know you’ve talked about these topics a lot over the years in terms of your probab- your, your firm is really well known for these factors that you apply to the indexes that you create. And but people at, at Sound Retirement Radio Sound Retirement Planning, they may not know all of the research that’s been done and applied.

So will you take just a quick minute and talk about some of these f- these overlays, these characteristics of stocks that you guys help tilt towards and why you would tilt towards them?

David Booth: Well, it, it goes back to… Let’s start with some theory. And I, I, I… Before people groan I’ll get through this pretty quickly.

When I was in school as, as a kind of a prevailing risk return theory was the capital asset pricing model. And what that capital asset pricing model said was that risk is beta, which is… And beta is the relative fluctuations of a stock or portfolio. And if you had a beta of one, it meant you fluctuated kinda like the market did, up and down with the market.

And if you had a higher beta than one, you would fluctuate more, more than the market, and you ought to have a higher average return. It was an elegant theory that suffered primarily from the fact that it never described reality. You know, kind of a drawback. But at the same time, we had Bob Merton had developed this, you know, who’s our, as I mentioned, our resident scientist, in about 1971 or so, developed what’s now, I think, called a multi-factor theory and said, “You know, there can be more than one factor.”

The capital asset pricing just had one factor: the market. He said there could be multiple factors explaining differences in average return. And that language is a s- language languished as a theory for about 20 years ’cause, partly ’cause few people could understand what he was, what he was saying.

But there was then a, a huge jolt, a, a big shock in ’92 when P- Professor Fama, again, along with his colleague Ken French, developed an empirical model that tied into Bob’s theoretical model. And the empirical model was a three-factor model. So in addition to the market, there are two other factors that they said could explain differences in average returns.

One was size of company, large versus small. And the other one was kind of this growth value, high-priced stocks versus low-priced stocks. You know, low-priced stocks have higher average returns than high-priced stocks. You know, all other things being equal You know, the riskier the risk- You buy

Jason Parker: something cheap, it’s gonna go up.

It has more potential to

David Booth: go up. Yeah. Yeah. Well, the riskier the company, the lower the price it’s gonna sell for. So that’s kind of a risk story. And similarly, smaller companies, there isn’t any theory for, but most people accept they’re probably riskier. So those are, those are two additional factors. If you take the three of them together and it’s just does a bang-up job in explaining you know, rates of return and gave people optimism about using quantitative methods, and that spawned a whole industry.

Now you have, I mean, I don’t know, probably over 100 factors, maybe a couple hundred factors that people, researchers have identified that seem to explain returns. Nearly all of them boil down to those just a handful. We, we s- we added profitability for example, to, as a factor. So-

Jason Parker: And, and the pursuit is, the idea is we’re trying to pursue higher expected returns.

Right. These characteristics of these groupings of stocks have exhibited that, not just in the United States, but international emerging markets. Yeah. And, and they’re- So it’s like it- Right … it continues to show up regardless of where you are in the world. And so as a result, the idea is if we’re gonna tilt portfolios towards these different factors, the expectation would be that we’d be compensated for them.

Sometimes that shows up, sometimes it doesn’t. Right. So one of the things that people have you know, been frustrated with maybe in some instances is you can go long periods of time without those factors showing up the way that we would hope they would. So, and I, I think I heard Gene Fama say that, you know, the more something becomes known, the more people implement it, it can m- it can actually diminish some of those expected returns.

David Booth: Well, yeah, if it does though, of course you wanna be in ’cause the way it would diminish is you’re, you’d have a big r- run up in those factors. I think that’s, that’s what would lower the future. But no, I mean, it, it typically takes a scientist, you know, 30, 40 years to conclude that stocks have a higher average returns than money market funds.

Say 30 year, maybe 20 on a good, on a good s- on a good day. So– And these other factors, they all suffer the same thing. I mean, you can go long periods of time… In fact, when we started the firm, and basically all we had was U.S. small cap and we happened to start at the beginning of the worst period of relative performance for small stocks.

You know, the if you look at the seven and a half years ending in 1990 the S&P 500 compounded at 14% a year, and we compounded at 2% a year. That’s our, you know, that’s our firm. You know, we have no track record. This is our– Before other than that, this is all we have, and the results are incredibly disappointing The good news in that is it shows you the, the power of good ideas.

Our sales pitch to people was, “We think in forming an equity portfolio, you ought to have stocks of large companies and small. You shouldn’t have all your money in large.” And in 1981 when we started, big institutional portfolios basically were absent small stocks. So this was a very appealing way of getting access to small companies was our, our fund.

So the good news for us is that by the end of 1990 also, Russell and other people had small company indices, and what they showed was we delivered what we said we were going to do. We delivered what small companies did. It wasn’t that we were snookered. It was, In fact, over 45 years, our fund has outperformed benchmarks by over 100 basis points a year, you know, which is, which is hard to believe.

So-

Jason Parker: The power

David Booth: of good

Jason Parker: ideas, like you said.

David Booth: Yeah. So the last– In other words, or stated differently, the last 35 years have been terrific, but that first nine was pretty nasty.

Jason Parker: I, I wanna shift. I know we’re running out of time here. So, Elon Musk was recently interviewed on “The Economist,” and he said that he, he thinks in 10 years money won’t matter, and that he envisions radical abundance as a result of AI and humanoid robots.

What do you think about that?

David Booth: I mean, I don’t know. He, Yeah, I mean, he could be, he could be both. I mean, I, I doubt if he’s right, but the, And it overlooks one, one thing you brought up early on that we really haven’t developed, which was this idea of human ingenuity, which really gets into why have stocks done 10% a year?

And I think a part of it relies basically on human ingenuity in that, take an example. The first quarter of 2020 the beginning of the pandemic of, you know, COVID hits, market’s down 30%. People are pulling their hair out. “What do we do? What are we supposed to do? What’s gonna happen?” I go, “I don’t know what’s gonna happen.

Here’s what I believe in, though,” here again, down to my tippy-toes, “is that people wanna make their lives better. And when they go to work at firms, they wanna make their firms better. So I don’t know what’s gonna happen, but people aren’t gonna sit there and take it. They’re gonna figure out when things kinda go wrong or u-untoward, people figure out how to get back on track or make their life better for themselves.

So I don’t know what’s gonna happen, but there’ll be new firms springing up, and there’ll be new solutions. There’ll be winners and losers, and the usual thing we see in markets. And, you know, we might be surprised how quickly the mar- the economy gets back on track.” And that’s what happened. I mean, the recession, I think, was just one quarter.

I mean, it was unbelievable. That’s, that’s human ingenuity in action, and that’s… I love particularly the The US exceptionalism. Yeah, I, I don’t know what you wanna call it, but we got back on fast, faster than most countries, you know? So,

Jason Parker: I share, I share your enthusiasm for that optimism And that’s what gives me, that’s what gives me hope I am always trying to remind people the same thing.

Look, businesses are just people who are creating goods and services that make our lives better, and it’s hard to imagine a world where we’re not gonna want better lives, you know? And so why would we bet against human ingenuity? I lo- I love that message. I got it from you. Like, that’s why I’m always pounding on this drum is- Okay.

Yeah, I-

David Booth: Well, good.

Jason Parker: I, Now, I do- Me too … I do question, though. I wanna ask you a couple of more personal questions here. One is, you know, when I visited the Dimensional headquarters there in Austin, I stepped into the elevator, and the guy that I was with, Ryland, he kinda elbows me and he says, “That’s David Booth.”

And 79 years old and you’re still showing up to work. Why, why aren’t you retired?

David Booth: Well, I tell you, I am retired. I mean, are you– What In the sense that I’ve changed my job around. I, I work, I, I, I work in the morning and meet… I meet with our… We have two co-CEOs that are really running the firm now, Dave Butler and Gerard O’Reilly, and I meet with them usually mo-most mornings and then go to lunch with my partner who’s she’s also our art curator.

Have lunch with her, then I go home and work out and, Hey, look, I’m seven and a half years younger than Gene Fama, and he’s still working six days a week. Why, why wouldn’t I work? Okay. Why wouldn’t I work? I mean, if you’re- Yeah, you

Jason Parker: got it. Your friends are doing it, you might as well stick with them.

David Booth: Well, I mean, that’s, that’s right. And we still have the passion, you know? It’s… People need to understand these, these concepts you and I have talked about today. These are important concepts. And I’m not giving up, you know, un-until the last person that kind of accepts that these ideas makes, make, makes some sense, you know?

Jason Parker: Wow. You have been doing a great job of that. I– You mentioned your partner and art, and you are, have been very generous to both art museums, to the University of Chicago, the Chicago Booth School of Business named after you. But I’m really curious, ’cause my wife’s an artist, so we love art as well.

I’m curious to know why you collect art. Like, why do, why do you love it? Not what kind of art you like, but why do you actually enjoy art in the first place? Because for somebody that’s so analytical, s- a mathematician for this other side of your brain, I, I’m just curious why, why that’s important to you.

David Booth: Art. Well, first off, I think it is one of the most remarkable things I’ve, I’ve learned over time. You know, as you start to when I got out of school, you know, like most of us, we didn’t have really any money, and I remember I had a, a poster that I’d gotten at MoMA in New York and, you know, with plastic wrapped around it.

You know, that was my art in my living room, you know, for years. And but as you start to accumulate money, and then you start developing, let’s say, a portfolio of art, What you realize is, I don’t know if art’s a good investment or a bad investment but the ability to enjoy what wealth, what extra wealth you’ve been able to accumulate, to be able to enjoy it as much as I do the art.

I enjoy it every day. I never get tired of it. You know, I– if I had a big bag full of silver dollars, you know, I don’t think I’d particularly enjoy just looking at those silver dollars every day, you know? Good point.

Jason Parker: Yeah.

David Booth: So art I mean, it, it’s all the arguments that people usually make. Like, it, it enables you to think helps you to think.

You know, at, at, at the office, I think it, it tells employees we kind of carry about them, care about them a bit. And when clients come in, you know, hopefully think our office is more welcoming than if we didn’t have art up. So the, so yeah, I guess the answer to your question is I don’t know why, but I just love it, and it I can’t imagine not having it.

Jason Parker: In your book, you said you like art that makes you happy, that makes you smile, that brings you joy. Right. And-

David Booth: Right …

Jason Parker: I was thinking, because my wife’s an art teacher at the local high school here, and she does an art show every year with the kids. And e- every year, she does this competition where we’re all supposed to kind of, gauge, you know, which piece we like the most.

And I remember this one year, there was this kid that had drawn this funny picture of a frog wearing a tie, and that was my favorite piece because it, it elicited that emotion for me. You know, it just made me smile. I was like- Yeah … “This is so ridiculous, and it’s so fun,” that that’s, that’s what I, that’s what I enjoyed, but…

Can I ask you just two more questions?

David Booth: Sure.

Jason Parker: Okay. You were the first portfolio manager at Dimensional. Your role has had to change a lot of times. I mean, you guys are managing over a trillion dollars in assets now. Obviously, you’re not still guy, the guy making the portfolio trades. How has, has that been a hard ch- was that hard to go through those different transitions in, from a leadership standpoint when you were changing your role in the firm?

David Booth: No, it, it really wasn’t. Let me back up a bit. One, one of the things that I think I learned really early on was, you know, you can either– You have a choice to make. You can either be the big cheese or you get things done. You have to choose. Do you wanna be, do you wanna be the king, or do you wanna have a successful firm?

And then with that in mind, then all of a sudden, I realized that what my job was in the early years, not now, but in the early years, it was l- look try to figure out what, what is gonna have to get done And then subtract out what I think is gonna get done given the, the few people we have. And the difference between those two things is what I got to work on.

You know, I did… Initially, I did all our systems and our first trading system algorithm. I wr- wrote that, and I wrote the first prospectus along with the, with the help of the lawyers. I mean, it had all the… I tell people everybody in the firm, I’ve had your job,” you know? I, And then as we grew, I could specialize more, more and more into what I really wanted to do.

And and as I got older, and now as I’ve said, you know, what I’ve done is change- continued to change my job around so that I wanna come in every day. I mean, I… That’s my advice to people as they’re, as they’re m- as they’re aging and thinking about retirement, is retirement is, it’s fine for a lot of people.

I’ve been so lucky that I can change my job around, so I don’t wanna really not go into the, the office.

Jason Parker: Yeah.

David Booth: That’s, that’s a luxury.

Jason Parker: That’s cool. I- in the book, you talk about your dad and that opportunity you had before. So I… There’s kind of a sad s- very sad story, actually, where your dad, there was, had been an accident.

He got out of the car to try to help direct traffic, and then as- Right … a pedestrian out trying to help direct, direct traffic, he ends up getting hit and dies. Mm. And you have to go share that news with your mom who was in a nursing home facility due to Alzheimer’s or dementia and strokes that she had had.

And but before that, you had a chance to talk to your dad, and you asked him, you know, what, what were his greatest regrets. And it made me think about the way Stephen Covey asks this question, and this will be my last question for you, which he s- he says in “The 7 Habits of Highly Effective People,” he says, “You walk into a room, a church, and you walk up.

There’s a casket in the front of the room, and you sit down in the pew, and for the next hour… Or you realize that you’re in the casket. It’s you in the casket.” Oof. So, so then you’re sitting there, and for the next hour, you’re listening to people come up, and they’re remembering you and your, your, your time.

And the questions that I always come back to are: how will you be remembered, and what have you contributed? So as you think about that for you, what, how would you hope to answer that question?

David Booth: Well, I mean, I, I have an answer to the first part. K- I go back to when my dad was in the casket and this friend of ours came up and says, “He’s the finest man I ever met.”

So when I’m sitting there in that casket, I hope I have one person at least. It’d be kinda cool if somebody came up and said that about me. You know, that would be pretty neat. And what I’ve tried to contribute is, Being honest with people and trying to work on doing the right thing and Hopefully, you know, I’ve always had the feeling when my time is up, I wanna look back, be able to look back and think give or take a bit, the world probably was better for me being here than had I not been here.

So, And, you know, you have to be careful ’cause, you know, you know, I’ve been able to give lots of money away and so forth, and my parents were never able to do that. But, you know, I don’t know if I’ve contributed any more than, than my parents did. So, so I think about those kinds of things as well.

So it’s a g- great question and I’ll go home and think about it a bit more.

Jason Parker: I love it. Well, I, I so appreciate the contribution that you’ve made to my life. Like I say, I, I just feel like this opportunity to interview you for this show is so incredibly meaningful to me because the ideas that you’ve implemented, that you’ve studied, that you’ve researched, that you’ve helped get out into the world are things that we share with the people that we serve.

The book, I think, I think this book is gonna be a w- a top seller. I not just f- a top seller, but I think it’s gonna make a significant impact in people’s lives if they read it. It’s … I think it’s gonna, I think for me at least, it’s one of the top three books that I would recommend to people because it tells the origin story, it tells the science.

It … I love that you sh- that you’re … the vulnerability for you to share kind of your life throughout this. And then the final bit, the bit of wisdom at the very end about you know, what’s, what’s most important in life. So thank you for the work that you’ve done. Thank you for this interview, and boy, I just appreciate you.

Thank you.

David Booth: Okay. Well, thank you. I’ve really enjoyed it.

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Investing involves risk. Jason Parker is the president of Parker Financial, LLC, an independent fee-based wealth management firm located at 9230 Bay Shore Drive Northwest, Suite 201, Silverdale, Washington. For additional information, call 360-337-2701 or visit us online at soundretirementplanning.com.