Episode summary
David Booth on Investing, Dimensional and Staying Calm | The David Rubenstein Show
The David Rubenstein Show
· · 24 min · Hosts: David Rubenstein · Guests: David Booth
Summary
David Booth traces Dimensional Fund Advisors from a Brooklyn brownstone in 1981 to a firm managing more than $1 trillion, arguing that the original insight was simple: diversified portfolios should include small companies as well as large ones. He says the firm was built on finance as a science, with ideas from the University of Chicago and Gene Fama’s efficient market hypothesis shaping its core belief that markets are hard to beat by stock picking.
Booth also explains why Dimensional differs from a plain index fund: it uses flexibility and a little human judgment in trading and portfolio construction rather than obsessing over zero tracking error. He says the goal was never to be the biggest manager, but to apply the research well and serve clients effectively, first institutional investors and later advisors and ETFs.
The conversation turns to Booth’s book, Stay Calm, which extends his investing philosophy to life. He argues that people should control what they can, accept uncertainty, and trust human ingenuity in downturns like 2020, when he believes businesses adapted faster than expected. He also reflects on philanthropy, including gifts to the University of Chicago and the University of Kansas, and says trust is the firm’s product.
Key takeaways
- David Booth says Dimensional was founded to give investors access to small-cap stocks as part of a diversified portfolio, not to chase market timing.
- Booth says Dimensional differs from a traditional index fund by allowing flexibility and human judgment in trading and portfolio construction.
- He argues the main investing mistake is believing you can predict markets or when to get in and out.
- Booth says the message of Stay Calm is to control what you can and accept that investing and life are both uncertain.
- He says Dimensional’s long-term edge comes from applying research well, serving clients, and keeping trust at the center of the business.
Notable quotes
“We were just trying to survive”
“finance had developed into a science in the 60s and 70s, and we wanted to figure out how to apply the science”
“we say, look, flexibility has economic value”
“control what you can control as a first”
“providing investment solutions is our business and trust is our product”
How the episode opens
How's your weekend? Nope. Nothing good happened yet.
Was your birthday this week? I don't count those. That's a bad example.
The best part about being an interview is you get to meet a lot of interesting people. Very often you have a chance to meet people you wouldn't otherwise get to meet and to see what makes them tick. I didn't really see myself as an interviewer initially.
You're very interesting to me is finding out why certain people who became leaders became leaders. How did they rise up from nowhere to somewhere? One of the most successful money managers the last 40 years was David Booth.
David Booth built Dimensional Fund Advisors into one of the world's most successful money management companies, now managing more than trillion. He is best known as some people, as the person who gave the gift to rename the University of Chicago School of Business. The Booth School of Business.
I had a chance to sit down with David recently to talk about his new book, Stay Calm, which contains his investment philosophy and his secrets of Life. But David, when you started this in 1981 out of a brownstone in Brooklyn, in your wildest imagination, did you think this was going to be trillion asset management company? Oh, I thought that was way beyond what we were thinking.
We were just trying to survive. Uh oh. The firm was built around the idea that, uh, finance had developed into a science in the 60s and 70s, and we wanted to figure out how to apply the science.
It's because these ideas, if you don't apply the ideas, they aren't very useful. So your role in the beginning was the was everything you were helping to raise the money. You came up with the idea.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- investing strategy
- diversified portfolios
- small cap exposure
- market volatility
- artificial intelligence
Companies and tickers mentioned
- Dimensional Fund Advisors
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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