The Conversation: The Power of Ideas
By Melissa Bernardoni (Photos by Matthew Gilson)
In 2008, David Booth, ’71, sat down with former dean Edward Snyder to talk about founding Dimensional Fund Advisors, his relationship with the faculty whose research have shaped the firm, and why he made the largest gift in the history of the school.
Edward Snyder: You’ve always had strong
philanthropic ties to our school. Why this
David Booth: Because I can. For years
it’s been a dream of mine that the firm
would grow to a size that it could support
this, and now it’s possible.
Part of the motivation is very personal.
I’ve had such a terrific adult life and the University of Chicago has been a big
part of why I’ve been able to live the way
Chicago has great students, but a lot of
schools have great students. What makes
Chicago unique is the faculty, and the
faculty have been truly amazing, especially
when you consider the school has
one of the smallest endowments among
the elite business schools. I’m motivated
by the desire to help maintain and grow
the outstanding faculty. There’s a huge
need, much bigger than my gift would
satisfy. All of us who went to Chicago Booth in
the ’60s and ’70s and benefited tremendously
can stand up and help. That’s part
of the motivation as well.
Snyder: How do you see your gift strengthening the faculty?
Booth: This is an unrestricted gift. I want to enable the dean to
do special projects that might be difficult in the ordinary course
of running a business school. But the top priority is to make sure
you, as dean, can get any faculty member you want.
Snyder: From a dean’s perspective, this is perfect. It’s flexible;
it gives the school the ability to focus on new initiatives and the
fundamental work of building and retaining faculty. It recognizes
that we have to work on the endowment. This gift will allow us to
accelerate our progress in a way that I couldn’t have imagined.
Regarding faculty, building the best faculty in the world is
central to our strategy. If we continue to do that, the students
will come. And we’ll develop alumni like you who do amazing
things. We have a lot going for us in terms of attracting faculty.
We’re the least bureaucratic of any business school I know.
Faculty are free to do what they want. In our world, hiring faculty
has gotten expensive. Real salaries have gone up, and the set
of people who can meet expectations—in terms of teaching, in
producing high quality academic research and colleagueship—is
very small. We’re going for the very best people in the world.
Booth: The business community has a strong demand for PhDs
that didn’t exist when I was in school, and that puts pressure on
business schools to compete with the corporate world.
Snyder: We compete with the business world, other business
schools, and top academic departments. Because we fit so
closely with our university, psychologists, sociologists, and
economists feel comfortable here. We find ourselves competing
against Princeton’s economics department, for example—
Princeton doesn’t have a business school. One of our top recent
hires was from Harvard—but not HBS, Harvard psych. It’s a different
kind of competition for Chicago. Your gift is a statement
of trust that we’re on the right path, because you understand
the power of our faculty.
Booth: It would be hard to find anybody that benefited more
from your faculty than I have. When we met with [University
Professor] Gary Becker, we talked about his experience at Chicago,
and before that at Columbia. What became clear to me is
the importance of having resources to compete for the faculty when you’re in an intense, competitive battle. It can make all
the difference. That’s how Chicago ended up with Gary Becker
and George Stigler and Columbia didn’t.
Snyder: And people like that have anchored and transformed the
university. Over a year ago, Gene Fama told me—unprompted—
that he thought the faculty was in better shape now than he’s ever
seen it before, not just in finance, but across the board. This gift
is moving us forward from a current position of strength.
Booth: I’d like to emphasize one point: the gift doesn’t solve the
problems. It helps create a lot of momentum, hopefully, but
what happens depends on follow-up with other alumni.
Snyder: This is important in light of our competitive situation.
Obviously it’s very good in terms of faculty, facilities, recognition,
demand for our programs, support from alumni. We just
finished the Chicago GSB Campaign, and this gift is great. But
David mentioned endowment, and we’ve made a lot of progress
there. When I arrived in fall 2001, the endowment was $200
million. In the last seven years, we reached $500 million. That’s
spectacular, and we’re grateful for all the people who helped.
We’re now in a set of seven schools worldwide with endowments
greater than $500 million.
But, as you said, even with this unprecedented gift, our endowment
is small compared to our toughest peers. Endowment
income allows you to do many things: technology, scholarships,
investment in facilities, investment in faculty. We’re in good
shape, but we’re not competing to be in the top seven. We’re
competing to be the best in the world. That’s why endowment
has to be part of the outcome of your gift. This gets us much
closer to where we need to be, which is in the top three. I hope
other people see this as a step toward that and join in.
Booth: Should we say anything about special projects? And just
to clarify for readers, the gift is structured not as one lump sum,
but as an economic interest in shares of the firm, and then the
stream of earnings from the firm. That’s why we’re talking about
a flow of money rather than one big pool.
Snyder: The gift allows me the flexibility to get things moving, or
to push further on things that are going really well. You mentioned
Gary Becker, who was one of the three founding members of the
Initiative on Chicago Price Theory with Steve Levitt and Kevin Murphy. It became the Becker Center, it has an endowment, and
they’re doing great things. Sometimes you want to take something
like the Becker Center and give it some more ammo.
Booth: The rough criterion is that I don’t want to fund normal
business activity. That’s well handled by tuition. It’s the
extraordinary items that I’d like to help with. And I agree with
you that we want to continue to be the best business school in
the world—but I’ve felt that way for 35 years. Chicago is unique.
It’s hard to describe, but for people that get Chicago, they know
what you’re talking about. My goal is to help Chicago keep that
uniqueness and stay ahead of our closest competitors.
There are two avenues in business education. It used to be
that nearly all schools used the Harvard approach, using the
case study, where you learn by studying what other people have
done. It’s a fine institution, but along comes Chicago with a different
approach—one that will always have fewer acolytes. By
sheer numbers, the Harvard approach will be the basic paradigm
for most business schools, because it’s easier to implement. The
Chicago approach has more theory
and modeling, and rigorous
analysis is not for everybody. Chicago
has cut out a unique brand
name in that area and for people
who understand it and love it,
there’s no place like it. I don’t
look at the ranking systems much
because I know Chicago is the best.
It’s the best for what I want and
comparing it to Harvard is apples
and oranges. With the proper funding, Chicago will not only
continue to be the best business school indefinitely, but do more
of what makes it so distinctive.
Snyder: When you consider gifts that have named business
schools, this is in a completely different category. In some
cases there were founding names, Wharton and Tuck. There
was Darden, which was a recognition name to say thank you to
someone who helped the school and university. The naming of
Kellogg was a “let’s change direction” event for what was then
Northwestern’s business school.
But your gift is totally different. It’s fundamentally an affirmation.
When you talk about this already being the best business
school—that you’ve known that for 35 years—it’s not a
change in direction at all. You are someone who decided—as a fundamental piece of his career development and business
strategy—to stay close to the faculty, to position himself at the
cutting edge. You said, I’m going to continue to learn and to be
the marketer, the finance thinker, and the entrepreneur leveraging