Episode summary
Billionaire David Booth Lost To the Market for 9 Years. He Never Changed His Mind.
The Meb Faber Show
· · 38 min · Hosts: Meb Faber · Guests: David Booth
Summary
David Booth traces Dimensional Fund Advisors from the early days of academic finance to crossing $1 trillion in assets under management in February 2026. He says the firm grew out of the University of Chicago’s evidence that professional managers often could not beat the market after costs, and out of the “wild west” era at Wells Fargo when he helped build one of the first indexed portfolios. The central theme is that investing is about designing sensible rules, not predicting every market move.
He also revisits the long stretch when Dimensional’s small-cap work lagged badly. Booth says the firm’s first 9 years were painful because small stocks had their worst 9-year run ever, but the strategy still did what it was supposed to do. That experience shaped his view that investors should judge decisions, not outcomes, and should think ahead about when they would sell a strategy before emotions take over.
Booth argues that Fama-French research changed investing by showing multiple sources of return beyond just the market, and he says the next big shift is likely to be tax-managed strategies. On AI, he is enthusiastic about its importance but skeptical that investors can reliably pick the winners, comparing the boom to a gold rush where suppliers may do well too.
Key takeaways
- Booth says Dimensional crossed $1 trillion in AUM in February 2026, a milestone that prompted him to call Gene Fama immediately.
- He argues the first 9 years at Dimensional were brutal because small stocks had their worst 9-year underperformance on record, yet the firm still delivered what its strategy promised.
- Booth says investors should predefine their sell rules, because the urge to exit usually comes when a strategy underperforms.
- He says Fama-French was a major breakthrough because it showed returns are driven by more than the market alone, including size and value.
- Booth expects AI to create big winners and losers but says investors should not assume they can pick them in advance.
Notable quotes
“We were the first people to treat small cap as a separate asset category”
“Investing is complex and uncertain, for sure. But so is life”
“if you can convince people to judge themselves by the quality of the decision they made rather than the outcome, they'll be a lot better off”
“AI is going to be a big deal. Let's let's face it”
How the episode opens
We were the first people to treat small cap as a separate asset category. Small stocks underperformed large stocks by the most they ever had over a 9-year period. Investing is complex and uncertain, for sure.
But so is life. In February this year when we crossed a trillion dollars in assets under management, when I found out I called up Gene Fama. He was out in LA.
I go, "Hey Gene, we just crossed a trillion dollars in assets under management. He goes, "Holy
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.
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.
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 trilli- trillion dollars. He studied under another podcast alum, Gene Fama, at Chicago, helped 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.
Well, thank you. Good to be here. — 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.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- index funds
- factor investing
- small-cap premium
- ai investing
- long-term performance
Companies and tickers mentioned
- WFC
- Dimensional Fund Advisors
- Wells Fargo
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from The Meb Faber Show
-
How to Get Out of a Bubble Without Selling Too Early: Jeff deGraaf Explains -
The AI Narrative Is Hiding a Much Bigger Problem -
Vincent Deluard: Why the Stock Market Is More Fragile Than You Think -
It's a Bubble. So Why Is Citi's Dirk Willer Buying? -
36% of Your Portfolio Just Disappeared In the Last 30 Years (Andrew Ang Explains How) -
The Asset That Could Be the Market’s Biggest Mispricing
The Meb Faber Show, this episode and its artwork belong to The Idea Farm. Octagon is not affiliated with the show; this page is an independent summary.
