Dave Butler: Basketball to the Boardroom – Meet The co-CEO of Dimensional (EP.04)

Welcome to Take the Long View with Matt Hall. This is a podcast to help reframe the way you think about your money, emotions, behavior, and time. The goal? Helping you live richly. We'll talk with the best thought leaders we know to learn from their meaningful experiences. We'll bury the vegetables of world-class thinking in stories and conversation, helping you reframe your perspective so so that you too can put the odds of long-term success on your side. Dave Butler serves as co-chief executive officer and is a Dimensional director. He joined Dimensional in 1995 and brings more than 20 years of experience working with financial advisors. He leads a worldwide team of regional directors and client services professionals who apply Dimensional strategies and resources to help advisors provide investors with an outstanding client experience. Dave is on the firm's executive committee and has been involved with firm-wide strategic vision and decision-making for many years. Dave attended the University of California, Berkeley, earned his BS in marketing and finance in 1986 and an MBA in 1990. He received the CFA designation in 1998, played basketball for Cal, was drafted by the Boston Celtics, I think played basketball in Turkey and then in England also. He was inducted into the Cal Athletics Hall of Fame in 2014. 2014, and he was named to the Pac-12 Basketball Hall of Honor. Dave was also a Rhodes Scholar candidate, and I would add, I think this is like one of the best compliments you can give someone, especially if you're entrepreneurial, is after we had breakfast the last time, I said to myself, I would work for you. I mean, you are just, you are the man. People say that, but you really are the man.

No, I think you are the man. I've always, whenever I walk away from interactions with you, it's always the same, feeling, so appreciate that comment.

Yeah, well, you know what's interesting? I know I've heard you talk about your basketball background before, and I know at Dimensional there are, you know, a big group of people who are both academically successful and athletes. That's such a— feels to me like it's a rare combination, but it's aplenty here.

Yeah, yeah, I think it's not planned, but I think we've, um, you know, I think athletics teaches you a lot about teamwork and collaboration, and, and I think the other guy, another gal, the empathy towards other people. So I think there's a real benefit from sport, and I always get this question about athletics and what'd you take away from it. I think that's probably the biggest lesson was just how do you play with people, how do you be a good teammate, how do you defer to others, and how do you take the lead at times when you have to on the court or on the field or whatever you're playing.

So how tall are you?

6'9". So they've had me at different levels throughout my career. I was 6'10" one year in Europe. I was 6'6.5" at the NBA tryout camp. So there's a, you know, I think you put your finger in the air and just gotta take a guess at it.

And yet you're not the tallest person in your family.

No, yeah, my younger brother Greg, I call him my little brother, he's 7 feet. And he played, he's 2 years younger than me, he played at Stanford, so Greg and I, used to guard each other actually in college. So Cal-Stanford was sort of the, you know, the rivalry in the Bay Area. And we played each other, you know, 4 times over, or actually 8 times over 4 years and guarded each other quite often. So that was an interesting dynamic. He, a little more successful in basketball. He got drafted by the New York Knicks in the second round, played with the Knicks for 2 years, backed up Patrick Ewing. And then he, finished his career in the NBA with the LA Clippers, and then he played in Europe for 8 years after that with every country and every league imaginable.

Hmm. You played in Europe. What was your experience like? Do you have any good memories from those days?

Yeah, you mentioned my basketball career. So I, the year I came out was in 1987. There was an NBA player strike that year. So I got drafted, and normally players would be able to go to the rookie camp and see if they had a chance to make the main roster. But they, because of the strike, they had no camp. Camp that year. So I was a 22-year-old kid, I was in the best shape of my life, ready to go make the Boston Celtics, and there was a strike the day before camp started. They called and said there will be no camp. And so the view was there wouldn't be a season that year. So I had— I was sitting at home and sitting on my mom's couch, and a team from Istanbul, Turkey had called me and said that they wanted me to come over and try out. And being a 22-year-old kid with nothing to do, and I think they offered me a few thousand dollars to come over and try out for them. And I figured, okay, free flight and a few thousand dollars, I would— might as well go play basketball for a week in Istanbul. So I did, and I was in, as I mentioned, really good shape and had a great tryout. And they offered me, you know, double what I would have made in the NBA my rookie year. So I thought, I'll go over there, get my game together, become even a better player, and I'll come back the following year and make the Celtics. That was the plan.

Wow. So then from your— so in your basketball career, you don't make it to the NBA. You get hurt, right? Is that what happens?

Yeah, so in Turkey, I actually— fast forward to the end of the year, I end up tearing up my calf, which was my gastroc, which is the muscle that connects the calf to the Achilles. And so came back from that and never really quite got good enough from a physical perspective to get back to the level I was. So I think I've mentioned this story to you last time around was I played my last, played a year in Japan. I came back, finished up my MBA at Berkeley, and then I thought, well, I wanted to have one more year just to finish it out, make sure I didn't miss something basketball-wise. And so I took a job with a team in Birmingham, England. And I'd say about 2 months into it, I recognized that my leg was not getting any better. And my mom called and said that a gentleman from one of the big investment banks in New York had called and said that there's a job waiting for me in New York. And I would have to start on Monday. So this was Saturday morning. So I walked into the coach's office and I said, "Look, I just got my MBA at Berkeley, and being on Wall Street is kind of where you want to be if you're a finance major." And so I said, "I'm gonna hop a plane and go to New York." So I literally got on a plane Sunday morning, got into New York Sunday night. My younger brother Greg, the 7-footer, was there, picked me up at the airport, took me over to his apartment. He had 2 suits in his closet. Big enough for me as a 7-footer. And so he let me borrow that suit on Sunday night. I walked in Monday morning and started my first job in finance. So people often ask, what was the transition like to get from sports to real life? And I always tell them it took about 24 hours, actually.

Yeah, pretty quick.

Yeah.

Okay, so then what's that experience like for you? You're in New York, you're living the dream as maybe you were starting to imagine it post being injured.

Yeah.

What do you remember from those days?

Well, New York's a great city, a lot of fun. I remember as a young, you know, 20-something kid in New York. But, you know, the main takeaway I think is that I was probably 3 years into the job and just was not overly excited about what I was doing and not overly excited about what I was seeing in that world. And what I was seeing was— and you and I talked about this a while back— was I was seeing from an investment perspective. It was speculation. It was high commission. It was high transaction. It was, is there a way for me as the broker to you to get you to trade more often than you should? And I just— the experience was not a positive one for me. And so I had made the decision about 3 years into the role that I was going to get out of financial services completely and go back to California and be a high school teacher and a basketball coach. I wanted to make an impact on people, and I thought I could do that as a teacher and a coach with high school kids. And I think it was about a week before Christmas break back in 1994, I was at my desk, I was reading the Wall Street Journal, and there was an ad on the 17th page, bottom right corner, you know, 2-line ad that said, "Money manager, Santa Monica, California." And as a California kid, I liked the 3 words, Santa Monica, California, so, I sent a resume out and it turned out that it was Dimensional Fund Advisors. And I walked into the office that day, went up to the 11th floor, got off the elevator, and a guy named Dan Wheeler, who you know well, Dan, who started the financial advisor business at Dimensional, was there to greet me. And then off to the left was David Booth and a gentleman named Merton Miller, who was a Nobel Prize winner and on the board of directors at the time. And David said to Dan, he said, you know, I've got another meeting to go to. Would you mind taking Merton to lunch with you? And Dan said, sure. And so there I was on my first interview at Dimensional with a Nobel Prize winner in finance. And he was going through all the simple capital market tenets, you know, markets work and diversification is your buddy and so forth. And just was a terrific guy and just the most modest gentleman I think I've ever met. And, you know, I walked out of that meeting with Merton, I went back and talked to Dan for a bit. And I talked to David Booth. I went home that night and pulled out my old finance books and started reading the names like Fama and French and Miller and Scholes and so forth and thought, well, this is something interesting and something different and something special. And Dan made a statement to me that day that really caught my attention and really made me rethink why and how I could be in financial services. And he said that, you know, we're going to change the way investment advice is given in this country. And I thought that was a pretty big statement, changing the way investment advice was given in the country. And he went on to kind of suggest that there's this new breed of independent advisors who worked in the best interest of clients, and they acted as fiduciaries to clients and so forth. And he described this model that he thought was going to be the model that would be the main model going forward in the business over time. And it turned out that that was the case. And it just inspired me. I thought this is the first chance I thought I could be in the financial services space and do something good for clients and do it well. And I literally left that meeting with Dan and signed up the next day.

Okay, so how many years ago was that? Was that 25, 26 years?

25 years ago, yeah.

What's funny is the inspiration and just hearing you talk about that, all of it is still here. I mean, even though the size is so different, even though you were catching it, infancy, I can't think of anything you just said that's different today, which just gives me a lot of energy too. Let's go back and talk about low expectations. You fill out, you send in the resume and respond to the ad. I have to imagine, one, you've never heard of Dimensional.

Never heard of Dimensional.

I mean, who had at the time, right? They weren't seeking public awareness.

Correct, yeah.

And really only at the time marketing or selling to institutions, right?

Right, yep.

So you couldn't have gone to the interview thinking, this is my dream job. You were thinking Santa Monica, California.

That's exactly right. And I, you know, this is sort of where luck in life comes into play too. I had made a decision. I was at home for Christmas break and I was probably 45 minutes to an hour away from the job interview. And it was that morning and I thought to myself, I didn't really understand the description, the way the person that I had contacted described DementiaL, and I thought it was sort of a retail kind of a job, and I was an institutional salesperson in New York, and I'd worked for one of the big investment banks, and so on and so forth. And so I thought to myself, I think I'll probably just not go, take a pass on this and call in sick. And I made a decision right before that I said, well, I made a commitment, to be there and something from the days of your mom and your dad telling you, meet your commitments. And so I had a commitment and I said, I'm gonna go. So I went and had that interview that turned out to be the interview with Dan and with Burton Miller. And one of those great lessons in life around giving your word and making a commitment to what you say you're gonna do. And looking back at it, It could be described as luck or it could be described as, you know, these are some of these real simple principles that I think have, that are important for anybody as they live their life, you know. Making a commitment and staying to it, and that turned into quote unquote luck for me.

What a turning point. I mean, just so huge. Well, we're all, I'm glad you kept your word and you went to the NBA. I'm also really thankful, you mentioned Dan Wheeler and Dimensional in the beginning was really for institutions.

Right.

And do you want to talk for just a second about the thinking early on? There are two things I want to touch on. The thinking early on, why just talk to institutions? And then two, I'd like to talk about the first fund, the 910 Fund. And you know, my firm's— our firm's motto is Take the Long View. This podcast is called Take the Long View. I think the early days of the first fund connect to taking the long view, 'cause I think there were some rough days in the earliest days of the first strategy.

Absolutely.

So could you talk about some of the thinking early on before there was an advisor division or any sort of connection to the public, and what the thinking was there?

Yeah, I love to tell this story because it really is a story of Dimensional. It's a story of David Booth. It's the story of all these academics we were associated with. And one of the board members, Mac McQuown, was David Booth's first boss at Wells Fargo. And back in the '60s, Matt started organizing these forums for academics to present papers, to discuss research topics and so forth. And at those meetings, this kind of energy kind of started to develop around the idea of indexing or kind of passive management, if you will. In the early '70s, Rex Sinquefield, who was one of David's early co-founders here at Dimensional, he started an S&P 500 fund at American National Bank in Chicago. Mac and David started the first index fund, institutional index fund at Wells Fargo. That was the origin of the idea of indexing. Now Vanguard gets a lot of credit for starting the first retail index fund. That was 1975. But that was a couple of years after Rex at American National and David and Mac at Wells Fargo.

I'm glad you made that distinction because people always think that Vanguard created the index fund. And maybe they did for the public. But yeah, a few years earlier, the first index fund was really created by David Booth and Rex Sinquefield and others, but for commercial purposes.

Yeah, yeah, that's right. And John Bogle and David Booth knew each other, and as well as Mack McQuown. And so there was a real collaborative spirit around this idea of coming out with a portfolio that was going to be good for clients, i.e., diversified and low cost and so forth. So, you know, Rex and— well, actually David and Mack shared a lot of the the work they had done at Wells Fargo with John Bogle in preparation for that launch of the retail index fund. That was a cool collaboration amongst that group of people at that time. Then in '81 is when Dimensional was launched and the idea was to offer institutional clients access to small-cap stocks via this fund called the Dimensional 910 Fund. Representing the 9th and 10th decile, the bottom 20% of stock market capitalization stocks. So that was the start of Dimensional. And Rex and David— actually, it was David launched the fund. He tells a story about launching it from his brownstone in Brooklyn. And of course, the concept was, again, to diversify institutional clients into small-cap stocks and give them a a low-cost way to access that.

Which was truly innovative. I mean, like, we're glossing past this because it's, like, so long ago, and there's so much for us to talk to, but that was a true innovation.

Yeah.

You know, if you wanted to capture the return of the smallest stocks of the US, there wasn't a way to do that in a really clean, efficient, meaningful way.

Right. The only way you could do that was in an actively managed, you know, stock-picking type of a fund with probably high concentration and— high expenses, so forth. So this was transformational. And this is one of those moments in time when we talk about multifactor investing, we talk about smart beta, et cetera, et cetera. That was the original smart beta multifactor fund. So everything that we've seen today, 40 years later, and all the ETFs that follow multifactor investing in the funds and so forth, that was the number one. That was the first one that was really on the, in the market for institutional investors. And that was a transformational moment in the industry, I think.

And then it gets off to a rocket ship of a start? No. I think the next 8 or 9 years are terrible performance for that strategy. I mean, I think the— I don't know how long it lasted, but it was one of the worst periods to have a microcap strategy. And I don't know what the— I don't know what the total time period was, but terrible start for anyone looking for short-term performance. Of course, Dimensional has never told a short-term performance story. But the institutional client who— I'm imagining them meeting, and I'm imagining being on the investment committee of some big institution, and we say, OK, there's this new firm, small cap. We're going to get exposure to this part of the market. It's going to be great for our portfolio. Wow.

Yeah. So that comes back to another really foundational part of Dimensional's story, which is setting expectations and meeting expectations. And the setting expectation part was, you know, David Booth went to the institutional clients and said, listen, we want to give you diversification in small-cap stocks, and we're going to give you the return of small-cap stocks. Now, it happened that for the next 9 years, small-cap stocks underperformed large caps, and so that was the performance difference that you were mentioning earlier. But none of the clients left. They were able to stay with it Dimensional was able to create a business even though performance did not meet the expectation. It was a performance on Dimensional's part of implementing a portfolio that gave them that exposure to small-cap stocks. So it's really about setting the expectations properly. All these premiums have a lot of volatility to them. There's a premium expected from small-cap stocks. David and Dimensional at the time set out the expectations properly and again were able to meet it. People were appreciative of that, and the firm I think grew to like $5 or $6 billion by the end of like 1990.

Yeah, that's one of the things I love most about Dimensional is you really look for philosophical alignment. You know, not sort of, hey, I think maybe many of our listeners may not realize this, but there are a lot of companies that just make strategies and make products because they might be popular. You look for philosophical alignment, and the returns and the instruments that are used are really secondary. Would you say that's an apt way to describe it?

Yeah, I think that's fair. I think the spirit of Dimensional is really the pursuit of truth. And when you look at the academics who are associated with Dimensional, Gene Fama and Ken French and Bob Burton and these guys, they are really about trying to come to the right answer. What's the best answer for the end client. And the best answer is a progression of research and work and implementation that gets somebody and gets the individual investor to the best outcome possible. So that's the basis of it. And these guys have been at it for 30 and 40 and 50 years trying to find, you know, what is the best answer for the end client. And that was, again, going back to what attracted me to Dimensional, that was one of the biggest things. It was just the honesty and the pursuit of truth and the modesty around that, recognizing that we're looking at research and data, we're laying the foundation and they're laying the expectations down properly so that when people are getting into the portfolios, they know exactly what to expect. We're going to give you the most efficient access to small-cap stocks or to value stocks or to the market generally. And we're going to also let you know at the front end what the expectations around those premiums are over time. And so that's kind of been the story and the basis of kind of how we've worked with advisors is let's lay our story on the table, let the independent advisor who's working for the client make the decision as to whether that makes sense for them and their client or not. And once they do, then obviously we're there to help them and support them in terms of staying and as a long-term investor over time.

Let's go back in time just for one second, because I don't think, at least in any of the podcasts or any of the stuff I see, I don't think Dan Wheeler really gets his due sometimes. I know he does from you, but I don't know if he does, like, at a bigger level. He really changed the game for the public in convincing Rex and David to consider the idea of allowing advisors who have philosophical alignment to use the strategies with the retail investor.

Yes, yeah, Dan is a great story. You know, he had a background as an accountant. He was working on his PhD at Berkeley back in the day. He ended up in London working for 5 or 6 years in London, came back to Idaho and became a broker. And the story he tells is that on his 40th birthday, as a birthday present to himself, he quit the brokerage firm and decided to go become an independent advisor. And that's where the Dimensional story comes in. He was a proponent of indexing, so he was using the Vanguard 500 at the time, wanted his clients to have access to small-cap stocks. In the newspaper, he found the Dimensional 910 Fund, and he called on Dimensional and went in and had a conversation with David Booth about accessing the portfolio for his clients. And I think the first reaction was, well, we're an institutional money manager only. We can't have retail money because retail money was assumed to be hot, meaning money would come in when markets were good and money would flow back out because of the behavioral aspect of investing. And so Dan convinced David that the assets would be compatible to the institutional assets. That was the real key. He said they had an investment policy statement, that he spent a lot of time with his clients meeting by meeting and so forth, kind of keeping them focused on what they're trying to accomplish on the investment side. So David, to his credit, and this is one of the big aspects I think that David's done really well over time, is he was open to that possibility and he allowed Dan to go out and actually use that portfolio with his clients. And that was, so he became the first financial advisor accessing Dimensional funds. About a year later, he came back, Dan came back and told David that he thought there was actually a business opportunity in here because not only was Dan an independent advisor, but there was a number of new, I'll call them pioneers, that were actually going into this independent advice space. Most of them were actually custodying the assets at Charles Schwab. Dimensional could be in the, call it the quote-unquote retail space, but they could do it via financial advisors who would be able to impact the movement of cash flow and make sure that there's a compatibility to the assets in the portfolio so that wouldn't disrupt the institutional assets there. And so that was the basis of the plan. And from that point on, then Dan made the decision that he wanted to really figure out a way to do proper training and proper education so that advisors really had a chance to kick the tires on Dimensional, make sure they knew everything about Dimensional and the portfolio so that when they actually put clients into it, the expectation would be that they'd be there for quite some time, for the long term. It was really sort of a connection, I think, that was interesting at the time. I call it more of an idea than an actual business. But as you know, at that time, I look back to when I started, the firm was about $9 billion. It was about $1.5 billion from financial advisors. I used to say it was more of an idea than an actual business. And looking back now, 25 years later, we're at $475 billion from financial advisors. So it actually has become a pretty good business. But again, based upon this idea of setting expectations and meeting expectations, we've had a lot of long-term clients like yourself that I think feel confident that what we develop portfolio-wise and what the expectations are being set, that they're going to be met over time.

Oh gosh, so many things we could talk about. Number one, I'm so grateful that Dan Wheeler is a charismatic, convincing salesperson, and that David Booth and Rex were open to the idea.

Yeah.

Because that was really a pivotal decision there. And so today, the total firm, Dimensional, has what, over $600 billion?

It's about $575 billion. Okay. Yep.

Many billions.

Yep.

And offices in how many countries?

13 offices around the globe. So we just opened one in Charlotte about a month ago.

Wow, and how many employees total?

We're just over 1,400.

And what number employee were you?

I read the other day that I was number 73.

Okay. So here we are, 1,300 later.

Yep.

How has that changed? Dimensional changed? How is it different? And what are some of the— we talked about it a little bit earlier, but what are some of the key elements that you think are permanent?

Well, I think the permanent is kind of where you start. I mean, there's a purpose here. And the purpose that attracted me to Dimensional originally was doing the right thing for the client, coming up with the right client solution. And so there's a general culture here that says, what can we do better? Whether it's investments or, you know, in practice management with advisors, what can we do better to make that outcome for the client end up at the best level it possibly can? And that's been the consistent current theme at Dimensional for the 25 years I've been. And sometimes you hear those types of things, you say, yeah, yeah, maybe that could be, maybe that couldn't be. But the reality is, is that's it. And that starts from the top. So when I go back to Merton Miller, And I go back to David Booth, and I go back to Gene Fama. These guys are very, very clear about how they think, about what they think the right thing is for the investor, and what's the right thing for the culture of the firm. And that's something we've made a specific part of our business over the last 25 years is just how do you maintain the culture? How do you make sure that everybody that comes on board is lined up with that purpose? And so I think, when I think about leadership and I think about, okay, how do you impact that, it really starts with purpose. And then there's a little aspect of passion that comes with it. So when you think about guys like Dan and David Booth and Merton Miller and Gene Fama, these guys are passionate about what they think the right answer is for the client. And very, very clear thinking around that concept. And then lastly, I think, is vision. Just sort of how do you get, the vision of the firm in a place that's going to allow for us to be great stewards of the assets. And I'll give David Booth a lot of credit on that. You know, when we were a $50 billion firm, you know, the expectation was if we continue the same growth rate over the next 15 years, from 2003 to 2018, we'd be a $500 billion firm. And he put that out as a vision for the firm. And it wasn't a sales vision. It wasn't a goal, a sales goal. It was a challenge to every manager here to say, listen, if we're going to be great stewards to $500 billion in assets, let's start thinking about how we have to hire, how we have to educate, how we have to train, how we have to plan for the future, and let's start doing it now at $50 billion. And lo and behold, at the end of 2018, we were $517 billion. So he missed it by $17 billion, but pretty darn close. And, but that vision I think was really, The vision for the firm built around, again, that purpose, doing the right thing for the client, and then having passion around it. I mean, anybody that's going to last a long time, 20, 30, 40 years doing something, you've got to have a lot of passion around that object and that objective that you've set out for yourself.

Setting up offices all around the world, though, your phone and your availability could be 24/7. How do you prevent yourself from trying to stay awake all night round the clock tending to whatever's happening in some part of Dimensionals' world?

Yeah, that's the big question. And for me, I'm a father, I've got 4 kids, they range from 16 to 10. And I, you know, when I think about my role, and David Booth has been great about this, I mean, it's, We're here and we're expected to put all effort and energy into it. And you've seen us at conferences and anywhere else. We love what we do. But also the recognition of the balance. How do you find the balance so that you have a family life and you have time with your kids and you're being purposeful about who you are and what you're trying to create, not only at work but also outside of work. So for me, I guess the kind of balancer that keeps me from working 24 hours is 7 days a week is to say, you know, I also have a really big goal and objective to do as much as I can for my wife and my kids and make sure that the family union unit and the connections and the empathy amongst the kids is there. And if I'm not around for that, then it's gonna be tough to make it happen. So for me, it's the balance, kind of how do you get that balance between this, I am very passionate about, obviously, Dimensional, and then this other thing that I'm very passionate about as well, which is my family. So I never allow myself to discount one in place of the other.

Yeah, you know, a shout out to a program called Strategic Coach. Bo Cornell, another old school Dimensional person, he told me about Strategic Coach one time, and said, I think you would really like it. I signed up for it. I met some really interesting people through it. But one of the things that's still with me today that I took from the program was the way they encourage you to schedule your time with focus days, free days, and buffer days. And what they say is, in our culture, we tend to think we only— we have to work really hard to deserve vacation. And really what happens then is you force people to tolerate you in a less productive state as you work to sort of earn your free time. They try to reposition free time such that it keeps you fresh and at sort of max productivity and efficiency and probably the best version of yourself. And so your job is to schedule free days and really take time off to allow yourself to recharge and rejuvenate, not necessarily vacation as a reward.

I think that's right. I think, you know, the question as a leader, and I know you're in this position too, is how do you back yourself off to get the best out of your energy? And you have to find the way to do that. I mean, everybody's different. Some people, can go 24/7 and want to do that. But my view is, and I remember Bo Cornell talking about that, and to this day I'm not great at it, but I try to schedule and I try to find slots of time that are free time or me time or moments when I can just think or imagine or be strategic about ideas that might come to mind. So I think if you don't allow yourself to do those sorts of things, then I think you, you have the possibility to kind of run yourself in the ground and not in a positive way. So balance to me, just like diversifying your assets and diversifying across many stocks, that's really important in terms of your life and the kind of way you live it.

Yeah, let's talk about life for a second. Okay, so you have 4 kids. Do they think what their dad does is cool?

I think they're starting to think about what it is. The great thing I've seen at Dimensional over the years is the number of kids that either have ended up working for Dimensional, kids whose parents have worked here, or when I look at advisors whose kids I've known since they were 3 or 4 years old, they're now in the business, or they're now working for Dimensional, for instance. So you see a lot of that, and to me that says that If a kid, when they're 4, 5, 10, or 15, or whatever it is, if they see their parents come home and they're energetic about what they do and excited and passionate about it, they're gonna look at that and say, you know, maybe, I'm not sure what dad or mom does, but it seems like they're very happy and they're very excited about what they do. And that comes back to the purpose part. So I think the beauty of this community and what I've seen over the 25 years, I think what am I most proud of, I love seeing these advisory firms develop, grow, get better. I love seeing the client experience that results. I love to see the interaction between the advisor and the client and the trust that's been developed and just the happiness around where they are in life and their retirement. And that's the sort of stuff I think gives all of us energy. And we're obviously at Dimensional, we're a second component to that. So we're not the direct advisor with that relationship, I can tell you everybody at Dimensional, their biggest pleasure is to see the advisor who's had success, who has really happy clients, and we get to see and meet some of them at some of our investor symposiums. That's the coolest part of the business. I think that translates into the kids. My older two are just starting to see that. They're starting to understand what I do and what money management is and what an advisor is and so forth. And that's where I think it's getting fun with the kids.

Yeah, it's so interesting, 'cause if you think about where everything has to intersect for it to get to that fun place, there's all this academic research that then gets put into practice or applied by someone, and then it has to meet up with someone's real life and make a difference.

Yeah.

And seeing that whole sort of ecosystem come alive and have a real impact, you're right, that is one of the most fun and satisfying parts of this job. And I would say to you, if I could be a virtual thank you note on behalf of a lot of the other people we work with, I mean, we are, I'm extraordinarily grateful. I mean, there is no other company like you. There are people who are making strategies or products that are imitations or are similar to what Dimensional has been doing for a long time, but you really are sort of the mothership of this way of thinking, of this philosophy.

Thank you, and I think it's really about everybody plays their right position to get to a solution that's the right answer. So when I think about Dimensional, Dimensional's the experts on the capital markets, and Fama and French and those types are thinking, and Gerard O'Reilly, my co-CEO, they're thinking about what's the right research to look at, what's the right design of the portfolio, how do we implement it, in a more efficient way. So that's what we do. And we fully recognize, and this has been from day one, is that we see the advisor being the expert on the client and their client situation. So everything that they need to know about the client that relates to their retirement and their charitable aspirations and their kids and college concepts and so forth, that's what the advisor does and they're able to obviously add discipline into the factor as well, into the space. So having both of those pieces come together, that leads to that great client experience that we all envisioned, that I envisioned back 25 years ago when I was ready to leave the industry. I thought, it could be like this. Why wouldn't it, and why couldn't it, and why shouldn't it? And that's been the outcome. And that's what I think has been so satisfying. And just, again, to see the clients who work with the advisors, how how grateful they are and how happy they are with their advisor and happy with Dimensional as well. That's, you know, you gotta have that feeling and that feedback to be able to do it for 20 or 30 or 40 years.

Yeah, I always wish we could use testimonials, which we can't, but there's so many great stories we could share about the sort of the long-term impact this way of thinking has had on real people's lives. Okay, so I know you probably, this might be an annoying question, And it could be just semantics at some level. But, you know, in our world, people used to say indexing, and then they said passive, and now some of us say evidence-based, and some people say dimensional is active. What do you say?

Well, we call it dimensional investing. And I like this quote that David Booth made in an article a couple of years ago, which is, you know, we can beat the market without outguessing the market. We're not stock pickers. We think that price is the hero, as my counterpart Gerard O'Reilly says. We think price reflects information in the markets. And the market is this great information processing machine. And so, that's a starting point. And then from there, you start to look at the data and say, okay, where does the data suggest that we could invest or we could put money? Deploy assets to get the highest return? And then how do we implement in a fashion that's going to be the most efficient? So Dimensional Investing is all of that. And it's not a, I think, a description that can be kind of boiled down to one word or two words or whatever it might be. I think it's an approach to the capital markets that is different than everything else out there. And it's a very worthy approach to accessing the markets. And deploying clients' assets. So I would just say, you know, I think we are in the game. We're in the alpha game. We think we can beat the market, and we can do that without outguessing the market. I think that's a great description by David.

But if you try to get exposure to a portion of the market, you also are always talking about the little things you do around the edges to add value. Do you want to say anything about what all those sort of like secret execution pieces are that really make a difference that could be the unsung heroes of some of the Dimensional story?

I was thinking about that today, and I won't tell you about all the details because there is a lot of detail to that, but the anecdote I was thinking about is how do you describe that to— we always talk about Mrs. Butler, my mom. How do I explain how we differentiate ourselves? How do we do it differently? I was thinking about today, for some reason, analogy around golf. Everybody knows what you're supposed to do in golf. Hit the ball into the hole, and you're supposed to do it in 3 or 4 or 5 shots, whatever it might be. But as we all know, that simple answer is real different than the reality out on the golf course. Whether there's a slant in the hill or whether you want to shoot over a tree or under a tree or whatever it might be. Where I think Dimensional has really differentiated itself, and you can see this from our body of work and our long-term track record, is all of those implementation aspects to portfolio management and portfolio design, one, and then implementation, two. So that's the secret sauce, is the knowledge, it's the experience, it's all the specific aspects that differentiate us from everybody else out there. So there's, to your point earlier, there's tons of smart beta and multi-factor portfolios, and you can do it very, very simply. Just like you can describe the game of golf very, very simply. But when you get down to the subtleties of doing it and actually getting a score that's going to be below par, or in this case above the benchmark return, it's important to have the knowledge, the experience, the awareness of how to do that in a really effective way. And that's what I think Dimensional has done over the last 38 years.

When you're at a party and someone knows that you work in the investment world, but they don't know know much about Dimensional, and they say to you, oh, what do you think's going to happen in the markets? Did you see what happened today? I'm sure you have a better answer than I do, but I normally have kind of a flip answer that I want to improve on. What do you say when people say—

I'd love to hear your answer.

I don't care. It's irrelevant. Doesn't matter. Let me tell you what take the long view means. Let me give you a copy of my book. Things like that. It depends on if they have 3 hours and 36 6 minutes, which is about what it takes to read the book, or listen to the audio version, or if they want the 30-second version. But I think there's— so often people are asking a nice question, just trying to express interest in what you do, and yet that sort of what happened today, or can you tell me what's going to happen tomorrow, is part of what typically gets the individual investor into trouble. That's sort of really short-term thinking. And yet, for a lot of investors, that's just what they know when they think of the markets is like, what's the tip? What do you know that I don't know? What is known they wouldn't I don't think, but what's known that's not in the price. So what do you say?

Well, I always think of Dan's comment about, you know, he has an opinion about what's happening in the markets today. But God forbid he tries to invest based upon that opinion. So that kind of sets up this idea that, you know, there is no crystal ball. There is no look in the future and tell me what's going to happen tomorrow. The price, going back to this idea, and it's something that the idea of an information process machine, that's a concept that people, if they really think about it, and think about the millions and millions of inputs into this thing called the price, the idea that you or I or anybody else are going to actually be able to outthink that price on a regular basis is a real stretch. And so, we've tried to think years about how do we describe that and how is it this power of the market is so important in terms of investing. But the main key is that the idea that you can actually, or you need to, look into the crystal ball and make some future prediction to be successful is not the case. You can deploy your assets. You can do it in an efficient way. And you can have success, meaning you can get returns from the capital markets over time.

Well, let's wrap up by saying this. You are a superstar. I still feel the same as I said at the beginning. I'd work for you. You are amazing, rock-solid individual. I'm so glad that you went to your interview all these years ago. Yes. I bet you are too.

Yep.

And I guess, is there anything you're working on in the future that excites you or you want us to know about?

Well, I think we, you know, we continue to be a firm that obviously is in pursuit of the great ideas. So, you know, on the research and trading side, we're constantly pursuing the best solution and best answer. So I think advisors and their clients need to know that. For sure. I think we're also a firm that's really built around a culture and an approach to the capital markets, but also an approach to doing the right thing for the client. And so we've been working on something recently called Dimensional University. And that Dimensional University is a way to, as we expand, you know, the question is globally, do we, can we maintain the same culture and the same approach? And so forth that's made us successful over the last 38 years, and can we do it for another 38 years? That's the challenge. And so I think the Dimensional University is an internal effort that we're going to work on to educate and train employees around the investment approach and around the culture and history of the firm. And we think that once we get that right internally, then we want to take it external as well and help advisors learn from our folks on the research and academic side, for investments, and then also get comfortable and knowledgeable about our culture and our history. I think it's a culture and a history that I think advisors have connected to because I think they're in the same game. They're fiduciaries to their client. They want to do the right thing for their client. They want to act in their best interest. They want to sit on the same side of the table as a client, as we always say. That is really the spirit of the whole thing. That is the purpose. I think an extension of that spirit, an extension of that purpose is going to be the key to successful investment experiences and then the successful engagements that we have with advisors on a go-forward basis. So that's kind of where we are. That's what we want to do. We want to make sure this thing extends. And part of my role after being here 25 years is to make sure that thing, this thing called Dimensional and what's been created that the culture and the history and the approach and the pursuit of excellence, pursuit of truth is always there over the next 25 or 30 years as well.

I'm going to be here another 25 years, so let's do this again.

You're a young guy.

Taking the long view, man.

Yeah, man.

All right, well, great to be with you. Thanks so much. And thank you for listening. Subscribe, leave a review, join my firm's newsletter, do something. Thanks so much. Bye-bye. What would you tell others money can't buy? Please note the information shared in this podcast is not intended as advice. The intent is to share meaningful experiences. I am likely not your advisor nor wealth manager nor financial planner, and my opinions are my own and not necessarily shared by Hill Investment Group. Investing involves risk. Consult a professional before implementing an investment strategy. Thank you.