The cofounder, chairman, and co-CEO of Dimensional Fund Advisors shares his thoughts on leadership, creativity, and why it’s a great time to get an MBA.
- October 10, 2016
In recognition of the largest gift to any business school in the world, the GSB became Chicago Booth in 2008. David Booth, ’71, serves as a lifetime member of the school’s business advisory council and on the Board of Trustees of the University of Chicago. A true path breaker, Booth this year made Forbes’s list of the 40 “Money Masters: The Most Powerful People in the Financial World,” and Institutional Investor honored him with the Manager Lifetime Achievement Award. CBM sat down with Booth in Austin, Texas, at Dimensional’s home office, for his take on leadership, impact, and the value of an MBA.
How did Eugene Fama, MBA ’63, PhD ’64, help shape your career?
I went to the University of Chicago for the PhD program. I was going to be a professor. After taking Fama’s class and then working for him, I realized I probably didn’t have what it takes to be a leading academic. I decided that my strength was in applying the concepts rather than necessarily trying to think up the next great idea.
What motivates you to support educational institutions?
Business school was a major transformative experience for me in that it took this kid from a small town in Kansas and brought me into the financial world. Looking at what can really make a difference over the long haul, I think universities are one of the rare examples of institutions that last centuries. Support for great faculty endures for generations.
The history of our firm really follows the progression of economics and finance. With the development of data and an ability to process it, it transformed finance into an academic discipline. So it lent itself to the idea of harnessing up all this knowledge and wealth of research and make them applicable to every man.
I went to the University of Chicago. I went into the PhD program. I was going to be a professor. And my second year, I worked for a Gene Fama as a research assistant. And by the end of that I realized I probably didn't have what it takes to be a leading academic. My comparative advantage was in applying the ideas rather than necessarily trying to think up the next great idea. And so, I went more on the application side. I tell people that decision was something that benefited, not only me, but it ended up benefiting the business school as well.
Over the years, I really got involved with the business school and the university, in general. I think there are really two main reasons. First was just to pay back. Going to the University of Chicago was a major transformative experience. And the second reason is, if you look at institutions and what can really make a difference over the long haul, I think the universities are one of the rare examples of institutions that lasted centuries. In terms of the gift itself, I got to the point where I decided I needed to make a longterm gift, lifetime gift, a big one. I thought about the business school and what really made it special was the faculty. So I go, "Here's a school with the best faculty, but a long ways from having the best endowment."
The alums from Booth need to stand up and be supportive, if that great faculty is going to be able to endure generations. I look at people coming out of the MBA programs today and try to think how different was it from when I got out in 1971. It's not what you learn at business school. They don't teach you what to think, they teach you how to think. And that's as true today as it was back then. But, at the end of the day, what's going to distinguish them over the long haul are things like their imagination, their flexibility, the ability to adapt. Those are things that you probably are not going to get from business school, but the tools you learn from business school will help you apply all of those things.
Describe your personal leadership style.
We try to establish broad principles and then get out of the way. One of our founding principles is to create opportunities for our people to contribute both to our success and to their own. How does that work? One example is that we really don’t do much in the way of budgets. Instead of budgeting and then reviewing how people spend relative to the budgets, we give them broad discretion and then just review their spending and see if it seems to make sense. Somebody coming out of the MBA program and looking at our leadership style would say it’s probably consistent with what he or she learned back in school.
Why is being creative and nimble important to you?
I draw a parallel between business school and sports. You go to practice and you study all the moves, and that prepares you to be in the game. Then you’re out there in the real world and suddenly you realize the other team practiced too, and they’re actually big. But you’re well prepared, and your practice has empowered you to be imaginative and creative and thoughtful and flexible—all of those things that distinguish exceptional thinkers, or great athletes. It’s that last little bit that makes all the difference. Having the confidence that comes from being well prepared enables you to try to use that creativity. That is what distinguishes people coming from Booth.
What would you say to the current generation of students?
When I graduated in 1971, we had wage and price controls, we were just getting ready to have floating exchange rates, and there were still fixed exchange rates globally. The world is quite different today. This is a terrific time to get an MBA. There’s a lot more opportunity, we know so much more, and technology is more advanced. Your smartphone is probably a million times more powerful than the biggest computer we had when I was in school. All of those factors create opportunity. But as [the late economist Joseph] Schumpeter described it, progress comes through creative destruction, so a lot of these tools and ideas that are new and different are going to be used to replace what’s come before. That puts a premium on being able to adapt.
The leadership pioneer reflects on ways that the Booth community comes together during times of crisis.The Book of Booth: Professor Harry Davis
Maneesha Mukhi, ’09, has spent the past five years working to make the visa process easier for immigrants in the United States.Giving the Green Light
The COO of London’s fast-growing GoCardless is dedicated to bringing simple payment solutions to businesses.A Workday with Erez Mathan, ’16 (EXP-21)