Coming from a blue-collar family in small-town Kansas, David Booth at first thought he was destined to become a college professor. But early in his MBA studies at the University of Chicago, the young scholar realized while visiting relatives at home that a working class upbringing was pulling him towards entrepreneurship.

"It's like, what's wrong with this picture?" he recalls in a profile by University of Chicago Magazine.¹ "Well, what's wrong is, it's just not me, being a scholar. Eventually I realized I'm more cut out for business."

Booth went on to become a founder and executive chairman of Dimensional Fund Advisors. But he's kept active in academic circles, most notably helping to fund professorships and construct educational facilities at his alma mater.

In fact, as a global financial crisis spread throughout financial markets in 2008, Booth donated $300 million to the school. In honor of his contributions, the program was named the University of Chicago Booth School of Business.

In late 2018, Booth was awarded with the prestigious University of Chicago Medal. The medal recognizes academic and business professionals for their distinguished service to the university.

"I credit the rigorous training I received at the graduate business school for my part in the success of building Dimensional," Booth said after receiving the medal.² "Chicago's focus on groundbreaking research and theory has had a tremendous impact on real-world finance and has helped to change the way the world invests for the better."

His time in Chicago included serving as a research assistant for Nobel laureate Eugene Fama. Booth has credited his firm's theoretical foundation to the advances of professor Fama. In fact, Booth spent part of his early professional career on a team at Wells Fargo that developed in 1973 the first index fund.

(An interesting side note: Since it was created for institutional-level investment use, most of the limelight for introducing such an innovation fell on Vanguard's John Bogle, whose firm some three years later launched a fund tracking the S&P 500 index that individual retail investors could buy.)  

Index Fund Advisors counts itself as a big fan of Booth's work at Dimensional. Our Founder and President, Mark Hebner, has closely followed Booth's humble beginnings from starting DFA in a Brooklyn brownstone. "The first trading room was his spare bedroom and a Quotron machine sat in the middle of his sauna," Hebner relates.

A key to Dimensional's growth over the years has been Booth's ability to seize on key developments in delivering historic data as a foundational component to investors — or, as it's often referred to, uncovering "the dimensions of stock market returns."

This includes work by academic luminaries such as Fama, Kenneth French and Roger Ibbotson, among others. In particular, Booth credits the Center for Research in Security Prices (CRSP) at the University of Chicago as significantly boosting his company's evolution in research.

One of our favorite reads every year is the DFA Matrix Book, which is another of Booth's earliest projects. First published in 1982, this compendium of returns going back as far as 1926 creates triangular matrices containing thousands of values across different asset classes. It enables our portfolio managers to systematically break down and analyze historical annualized average rates of returns from a holistic point of view that they just can't get from glancing at a computer screen or smartphone.

But an intense search for the best and most accurate market data available at any given time is just one aspect of why Booth's contributions to modern day finance loom so large. The resulting investment strategy that drives mutual funds designed and operated by Dimensional is uniquely embedded with its founder's touch.

In short, the award given to Booth by the University of Chicago served as yet another milestone highlighting his accomplishments over a long and distinguished career. At IFA, we've dedicated a section of our site to video interviews with the esteemed investment scholar-turned-businessman.

This collection of discussions featuring Hebner interviewing Booth are broken into a 17-part series to cover everything from Booth's take on advances in modern portfolio theory and decades of development in data analytics to best practices in portfolio management.

Footnotes:

1.) University of Chicago Magazine, "Return on Principles," January-February edition of 2009. 

2.) University of Chicago, press release "University of Chicago Honors Dimensional Founder David Booth," Nov. 8, 2018. 

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