Dave Butler Discusses Finance and Basketball

billion dollars UM. Dave has really a fascinating background UM, not only academically but in the professional sports world UH, and the arc of his career over the past let's call it thirty years, very much tracks the development of many of the dominant trends that have taken place today in finance. So whether it's independent advice, or indexing or multi factor investing, he has been a part of UM,

let's just cool it, the movement. Dimensional Funds UH is very much a culture driven, philosophically driven firm that he's been a large part of for a long time. Not only does he work with his co CEO, GERARDA. Riley, but he also works closely with Chairman David booth Um, directing UH Dimensional Funds into the latest iteration of of

where finance is going UH. If you are at all interested in independent advisory, asset management, factor based investing, UH, sustainable based investing, I think you will find this conversation to be absolutely fascinating. So, with no further ado, my conversation with Dave Butler. My special guest this week is David Butler. He is the co CEO and head of Global Financial Advisor Services for Dimensional Fund Advice Serves, which

manages over six hundred billion dollars. Dave got his BS from Berkeley and his NBA same place before he decided to play around with round ball a little bit. Uh. Dave Butler, welcome to Bloomberg. Thank you. So let's let's talk a little bit about pre finance career. You played basketball in college and you were drafted by the Celtics. That's right. Yeah, So I was drafted by the Celtics back in seven and uh. The year I got drafted, oddly enough, they had a strike. An NBA player strikes.

So normally, as a player, you get a chance to go try out and they can tell you whether you have a shot to make it or not. Unfortunately, didn't have a tryout that particular summer, so I made a decision to go over to Turkey and and play my first year in Turkey. Um, I had a I was actually a young kid just sitting around the house in the summer, and uh, you know, I know, I'll go to the Middle East of my Calton said, hey, s tam Bowl wants you to come over and try out.

And I had been in great shape. I was getting ready for the Celtic camp. I went over to Turkey and they offered me twice what I would have made as a rookie in the NBA. And I thought to myself, I wasn't sure when the NBA strike would end, so I thought, well, I'll go over to Turkey, I'll work on my game, I'll get better, I'll make my first year's worth of money, and then I'll come back and I'll make the NBA the next year and make the Celtics.

And but fate intervened, didn't it. Fate intervened, And I think it was about halfway through my season in Istanbul. I end up tearing a It was called a gas rock, which is your gap your calf muscle, so the muscle that connects your calf to your lower leg. And I sat out for probably about a week. Um, when you're the American player on a on a European team like in Istanbul, there's one American per team. Is that by rule or in instant in Turkey that was the rule.

Is that a minimum or a maximum minimum uh and a maximum, it's the only number you can have. So there's one player, one American per team. And the expectation, of course, if you're that one player, is that you need to lead the team in scoring, and the lead team and rebound. You gotta you've got to be the main person. So when I got back to the States after my injury, my doctor said, you know, that was probably a two to three month uh, sit out type

of nillary. And I was out for about a week. Uh, they take me up, and I kind of faked my way through the rest of the season. And that was the downside is I did a little bit of permanent damage to my calf and never really quite got back to where I I thought I could actually make the NBA. Yeah, normally at that age you're fairly immortal and recover pretty quickly. This had to be Was this a practice injury or an actual game injury? It was a actually a practice injury.

So it's kind of one of those up and back drills and and I stopped and get ready to take off, and I heard this big snap and heard it. Yeah, other other people in the gym heard it too, And I thought my achilles because you always here, I've watched basketball games and you hear that pop. Someone from the Knicks trying to remember who it was. Um tour there there, Um was it? Maybe it was the A. C. L heard it pop on television. It's a afying sound, which

exactly what it is. You know, right when it happens, you know you're you're you're done. So uh, you know that was it. That was That was the moment when you know, my leg kind of just you know, was limited my my potential. So I always thought I was I was a good enough player. I played enough positions

and I and I did enough things. Well. I didn't ever do anything super super well, but I was good enough to I think at my peak, in my highest level, I could I could be the kind of guy that could collaborate and be on a team and you know I could. I could tip and I could rebound, and I could do that sort of dirty man kind of work on the basketball court that coach appreciated. Charles Oakley, Dennis Rodman roll Yeah about six nine, oh, so you could a little bit more maybe a little bit more outside.

You know, I would had to score in Europe. I had to be able to shoot from the outside, and three point line had had just come into the existence at that time, so the three point line wasn't part of the game like it is now. Uh So I didn't really shoot threes, but I but I could, you know, have a good mid range score. I could rebound, I could dunk, and I could I could jump pretty well. People used to, um, you know, think of me as a kind of a high flyer, kind of inside type

of person. So that was always a big part of my game. And your brother played professionally as well. Yes, my brother Greg is a bigger guy. He's about a seven footer. So this is what I call my little brother. But he's seven footer. He played at Stanford. I played at cal and uh so, he and I actually played against each other in college versus Stanford, so as UCLA

versus USC in the Bay area kind of thing. But we actually guarded each other, so we we were on the court playing against one another, which I imagine I imagine you did that growing up anyway. Not not unfamiliar with banging body. Yeah, we we played all day long. We had a we had a uh you know, like every other kid. We had on a driveway, front yard, we had a we had a basket up on the on the garage. We played. I had an old brother. My I do have an older brother, Mike that he's

about six four or six five. So he's the run to the letter. He used the run to the litter. But you know, growing up, people used to laugh because they look at the three of us, and growing up we're all about a year and a half to two years apart, but we're all the same size growing up, so that people thought we were triplets. Possibly there's no size difference, but he was. He was a tougher guy.

He was more physical. Uh So I used to play against him quite a bit and played him in the front yard all day long, and um we used to go at it pretty well. Um So, so you had to be thinking beyond a career in sports, because not only do you go undergraduate at Berkeley, but you get your m b a. Was it business or finance? What what were you interested in when you were in school? Yeah, well, my my dad was an accountant and he was always a business finance guy. And he's six six three, a

decent size. Um, but he was always very focused on academics. So he, you know, regardless of all the athletic accomplishments or acknowledgements to he never really paid much attention to that. He always talked about school and books and and all what's going on in what are you doing in class and so forth. So, um, So I was sort of geared in that direction anyway. And I think when I finally made my college decision, it came down to cal Stanford,

and Harvard. Those are my final three choices. So obviously there was some academic aspect to to those three names that uh clearly weren't basketball shops necessarily a really great academic You got into Stanford, you got into Harvard, but you chose Berkeley because of the basketball. Uh. You know, I had a The story goes, I went on a weekend visit to each one of those. I went, I'm

a California kids, southern California. I went to Harvard. It was happened to be ten degrees and snowing, and I just sort of scratched my head and I just couldn't contemplate being out there in that in that weather. And I thought I was gonna be back in California anyway. So I came down to cal Stanford and UH. I went up to Stanford and for the weekend, and when I went to two movies and sat around a dorm

was super boring at the time for me. I went to cal and uh first night there, I went to toga party at a fraternity house that I thought was great. I went to a football game the next morning with you know, great son and and a lot of fun people around. We went to San Francisco that night, and I came back and I told my mom Dad, I I think, I think this is where I want to be. It's gonna be a great place to play basketball and

enjoy myself as a student. That's very funny. You have a unique vantage point because not only were you an athlete in college and professionally, but you work in finance. And the question that I have to ask is, how is it that there are so many horror stories about athletes frittering away all their money. They have it stolen from them, They haven't managers who don't really do what's best for them. They are fairly reckless. What why is this?

You know, it's funny. David Booth, the founder of Dimensional and I talked about this all the time because we're both big basketball fans. I think it's um you know, success comes really early to athletes, very young, young, very immature, and oftentimes you, you and I will include myself, you feel invincible so athletically, you're bigger, you're stronger, you're faster, you can you know, the idea of being thirty or forty or fifty years old, it doesn't even seem plausible,

you know, at the time. So the idea of actually thinking into the future and then saving or trying to be conservative about how you spend and so forth, it's just not something that comes to mind at that time. And Uh, I think that's part of the issue is I just don't think the maturity level is there to be able to differentiate how and why you would actually make a plan from a financial perspective, you know, into

your future. There was there was a huge Sports Illustrated article, I know, maybe ten years ago or and the numbers about the NFL are horrifying, and the NBA and Major League Baseball not all that much better. Uh has that changed at all? Or athletes becoming a little smarter about their money or is it still the same sets of

temptations and impulses. Well, I've been I've been doing this for twenty five years now, dimensional and I've had the same discussion I did twenty five years ago as I did today, because people asked me that as an old athlete, you know, how do you change the energy and the momentum around athletes in their future in terms of finance, And it's um it just I think it comes back to there's a there's an ego aspect. Uh, there's a mentality that you know that this this is never gonna end.

But to your point, you know, when you look at the NFL, I think the average career is three years and the NBA is something on the order of two to three years. And when you think about how long you know this these careers after the athletic career is gonna last, it's it dwarfs anything athletically. But to get that message across to a young kid, I think it's

really tough. My my personal perspective on it, and I've talked to David Booth about this as well as I think the n c A UH with college athletes ought to put some sort of a trust fund together, you know, with the money they're making off the n c A tournament and so forth, put a trust fund together that's

not touchable, not available till till age um. And at once a kid has had the chance to go through the professional process, maybe they get injured like I did, and they start looking around and they think, you know, this athletic thing is not going to happen. Uh. Then that's the moment when I think, and I, you know, a trust that would allow them to go back to school, go back to get a grad degree, etcetera, etcetera, would

be would be really really valuable. At one or twenty, it just is not going to happen, because again, they're invincible and they can't imagine that they're not the one that's going to go play professional sports. I can tell you every every player on my Cal basketball team, all twelve guys, I thought for sure that they were the one that was going to go play in the NBA. And it's it's frankly because all of them were all State and All American and all this and all that. Um,

So there's a lot of ego into it. There's a lot of parental ego. I see that now with my kids. The parents I think are so enamored with sport and with the notoriety if you will, that comes from athletic success, that they get involved and they get energized by the whole thing, and I think that I think that's problematic as well. So I, you know, with my kids, I try to just say, look, you know, it's all about school,

just like my dad is all about academics. If you happen to be a good basketball player, I happen to be a good volleyball player, great, God bless you. That might help you get into a better school. But it's never gonna be about that. It's going to be all about academics. You seem horrifically rational and reasonable. We mentioned the length of careers. You've been doing this for twenty five years. Tell us how you transition from sports into finance.

How did you end up on Wall Street? Well, you're you're a New York guy, so I think you'll get a kick out of this this story. So I I had gone, um, I'll step back. I had started my m b A as a as a basketball player in college. So I happen to have a knee injury my junior year of college. UH. And what that allowed me to do was it allowed me to start taking grad classes my last year while I had eligibility. So I started my m b A. I had gone off and I

wanted to find out if I could play professionally. So I had gone to Istanbul to Turkey. The following year, I had gone to Japan. UM. But there's a window, I think of five years to finish up your MBA once you had started it. So I decided I would go back because my caff injury, had go back and finish up my NBA at Berkeley UM. And so I did that, and uh, you know, like every athlete, I still had the bug. I thought I could still do a little something. So I end up going for my

last year. I went to UH to England to Birmingham in the UK, and I was about I went for about two months and I realized that my leg was still as bad as it's ever been. I knew my career was done. I had mentally pretty much checked out. UM. I had actually interviewed with Mary lynch Um back in my time at the doing my NBA at Berkeley, and at the time they said, well, we don't have a spot for you right now, but we love to keep in touch. We think we have a spot for you.

Uh So, long story short. Two months into it, I'm sitting in Birmingham, England, and my mom calls and said, a gentleman from mary Lynch just called and wanted to talk to you. So I got on the phone with him and he said, we've got a spot for you on the desk here in New York. We love to have you join. When can you start? And this was Saturday afternoon a month I see you Monday, So I basically I got. I called my brother who has had been with the Knicks, uh seven ft tall. I said, hey, Greg,

I'm gonna fly in Sunday. I said, I got to borrow a suit because I don't have one. So I borrowed a suit from my brother Greg. I showed up in the office on Monday morning and that was my quote unquote transition out of athletics and into into my career. So a lot shorter than most people. How long did you work in New York for what was here? I'd say about seven years total, so about I think three and a half years with Maryland and I came back with Dementiel for another four years or so in New

York and New York. We actually had an office in Stanford, Connecticut. And then when did you move to? Was the h Q and Austin back then or no, it was in Santa Monica, California. Yeah, oh really? And then now it's I believe it's Austin. And isn't there a new office opening up on the East coast. We're opening up in Charlotte in February of next year, two nights. And is that going to be the new headquarters. We'll have basically two large headquarters. So so Austin will hold people, Charlotte

will hold about six or seven hundred. And we still have an office in Santa Santa Monica in California. We have about a hundred fifty people there. What was your initial role at d f A and how did this eventually become co CEO. Well, I was just a long story short as I was at uh, you know, here in New York, and I had um decided that I was going to get out of financial services. I didn't

want to necessarily be in the industry. The from what I kind of I saw and I felt and I I just said I was gonna go be a teacher and a coach in California. UM, so I mentally decided I was gonna move back to California. I was sitting on the desk one day, I was reading the Wall Street Journal and I saw an ad that's aid money manager, Santa Monica, California. And I thought, you know, why not, I'll just send a resume out just in case, UM, you have one more option. And UH turned out that

that Santa Monica California firm was Dimensional Fund Advisors. And so I was on a Christmas break back in four I flew out to California. I went to their offices to do an interview and I met a gentleman named Dan Wheeler. And Dan was the first UH financial advisor to use Dimensional Funds in his practice. He was an independent advisor working through Schwab at the time, and he

was running the practice the business foward Dimensional UH. And Dan sent me down basically, and I had what I what we we you know, UH we call a hab moment um. He he just sat me down and said, here's how the capital markets work, here's how we think, here's what an independent advisor is here's how they act as a fiducier to the client. You know, that combination is one that we think is the right answer for the end client and one that hasn't been delivered to clients.

Uh in in financial services space. And I remember I walked out of that office and I thought to myself, you know, I could, I could, I could be part of this. This is something that's really interesting and exciting to me. Uh and I Uh, I went up and had lunch that day. Martin Miller was a Nobel Prize winner. You know, Dan David Booth had another appointment to go to, so he asked Dan to take Burton Miller to lunch

with him. And Dan said, sure, but I got this this new guy here, Dave Butler that, uh, we'll have to go with us. And David said that's fine. And so I sat there at lunch with Nobel Prize winner in finance, Martin Miller, and he he talked about all those really simplistic, you know, financial concepts like you know, he used to say, diversification as your buddy, you know, cost matter, you know, markets, work, prices are fishing, etcetera, etcetera.

And I just had this kind of epiphany of of what I thought the capital markets could deliver and should be, and then how that coupled with the independent advice story from Dan and I thought, man, this is a place where I think I could I could spend some time fascinating. The firm manages over six hundred billion dollars. And we were talking about how you joined the firm and really sort has a very different type of firm from the bigger bulge bracket UH firms that you had been used

to in New York. How did that lead to your arc of your career at Dimensional Funds? What did you start doing and where did it take you? Well? I started out as a what we call regional director, So that's a person that works with advisors, um, you know, out in the field. But you know, I think that I think the key point for me is as I

mentioned earlier. We you know, on Monday morning, I walked into Demential's offices and had this interview and UH and Dan Wheeler was was terrific and he said, you know, why don't you come back the following Monday and start And you know, we didn't talk about any compensation, We

didn't talk about what my title would be. We didn't talk about any detail other than the the idea that this concept, this mission, this energy that he was putting towards, this approach around clients was what he felt good about. And basically over the following week, as I read and thought more about it, I felt really good about as well. So I really joined at what I would call, you know,

kind of a mission rather than a job. Um, and it was a passion for all of us, and we thought that we could change the way financial services were delivered in the country. And that was sort of our mantra and our energy in the early days and and um, you know, people ask me, you know, why would you start with without any detail around what were you going to do? And I said, well, it was it was that moment in my life in my career where I wanted to do something that I felt really good about

and really passionate about. And I didn't really worry about the monetary aspect or anything like that. Yogi Berra said, when you come to a fork in the road, take it, and it did. So we'll really helped create an fascinating aspect of the way Dimensional Funds operates. And I want to spend some time on that instead of going straight to retail. The decision was made, and he really pushed this from the outside in, Hey, why don't you have the advisors be your advocates and deal directly with them?

And literally waged a door to door campaign starting in I guess California? Right? Is that? Is that really where

he was operating? How did this go from an idea to effectively the business model of dimension Well, you know his and again all of it goes towards Dan's creativity and imagination, but his view, he was a broker for many, many years, and he felt that the industry in essence was conflicted in the sense of product would be developed and delivered by UH the industry, and then it would push be pushed to commission salesman, and those commission salesman

would sell that product to clients. And he thought the better, asked, better way to do that was to flip that around and change that in the sense that UH as he

became an independent advisor, he worked for the clients. He worked in their best interests, He worked on their behalf UH and he um changed the model to say, hey that this client, you know, would basically sit at the top of the stack and then this advisor, this independent advisor would be working for that client, and then the advisor would make decisions as to what was the best solution investment solution for the client. Um in again in their behalf and in their best interest. So it was

a change in the model. This independent advice model was something that was very, very different that nobody had ever seen really in the financial services space where we were really used to having product developed and being pushed as a sold commission type products. So, um, that was a big change. Dan had that idea. Uh. He also liked the idea of indexing. Uh. We liked this idea of low costs diversification, you know, tax efficiency, if he will.

And he was using a an SMP five hundred fund in his practice, and he had come across dimensional small cap fund which was called the microcap fund UM the original fund Food put out the original fund. It was called the nine ten fund at the time when I started, but it was nine ten as in the ninth and tenth deciles, so the bottom of stocks, if he will.

So that was the portfolio that he was interested. And he came to David Booth into two rexing Field and he said, you know, I'd like to use these portfolios with my clients and to their credit, you know. David and Rex said, well, you know, this is that's retail money. Our expectation on retail money is it it's hot, meaning that if Martin out markets were good, they'd come in, and markets were bad, we go back out. We can't

have that kind of cash flow in the portfolio. So because it's disruptive and expensive and trading closestructive expensive, we're in the smallest part of the market. We can't have that kind of trading. We have institutional clients in those portfolios as well. So Dan came back and said, now, listen, we we've got a different, uh type of a model here. We're gonna go educate these advisors. We're gonna make sure

that their long term buy and hold advisors. We're gonna go through a methodical process to get them engaged and understand how we work and why we work, and that money will be compatible to the money that's already in the portfolio institutional portfolio. So that will make will make retail look like it's institution exactly exactly, and so that it worked out fabulously. Well, so, uh, you know when I started, you know, we were about a billion and

a half from financial advisors. Today, I think we're three D sixty five billion from financial advisors, well over half. It's been a significant part of the business. And UM. The the upside too is when you look at what has actually transpired is that the the quote unquote retail assets, the individual assets have have performed and acted and been

very compatible to the institutional assets in the funds. So there there hasn't been a retail aspect to the kind of the in and out of the markets based on market performance. There's been a nice consistent cash flow. In two thousand and eight, two thousand nine in particular, when markets were you know, tanking and there's a lot of

fear and emotion in the market. UM. I think there was five hundred billion dollars that went out of the market UM over a couple of year period out of equity mutual funds UH and in from dimensionals case, we actually had positive net flows during that time period, positive over that time period and over each quarter during that

time period. And that was because of the advisor's role and the discipline that they provided to the client to make sure that that client you know, understood why they're asked as we're invested the way they were, and they were able to keep the emotions in tact so that people had a chance, um at the long term returns that we always talk about of ten percent for the equity markets. If you're not in the market full time, you're gonna have a hard time getting those long term

rates of return. So the model was really different. Um, it was brand new at that time. The idea of a independent advisor wasn't was more an idea than actual reality. And um, what we see now is we've seen a real transition towards this model in a significant way. Quite quite interesting. What is it that you have and the firm has educated clients about that allowed them to think

about investing for the long term. And I know this is hindsight, but I have to point out if you were a buyer during the financial crisis, well markets have since tripled. If you were a seller, probably didn't help your returns. Yeah, I think the concept of meeting expectations is important here. So when I think about why we had the kind of inflows that we had and the performance that that transpired of that time is I think the advisors did a terrific job of educating their clients.

And when I say educating, I'm talking about what is it that we expect from the capital markets. So long term, if you look back to equities of return ten percent um, but there's a lot of time periods where that ten percent isn't realized and there might be markets that are down for so at the front, what the independent advisor does is they actually, you know, do train and they educate the client as to the potential outcomes that they

might expect over time. So when it does happen, uh, they're not happy about it, but they're not upset the point where they actually pull their money and decided to do something else. So there's a there's a real important aspect here that I don't think there's ever been addressed in a significant way, and that is trying to get people to be more comfortable with the expectations longer term around the capital markets and the expectations on returns. Wait,

are you suggesting markets go up and down? Is that the implication that happens, Yes, So that that is shocking. That is not what my broker, Hug used to tell me back in the day. So let's let's talk a little bit about You mentioned Martin Miller earlier, and um, obviously gene Farma is a big part of the firm. Uh, you work with a number of Nobel laureates and and

other people of equal intellectual heft. Ken French at Dartmouth is another person who has certainly moved the needle when it comes to how we think about where returns come from. What do these various people, Um, what are the roles at the firm and how do they affect portfolio construction? Well, they're all fully engaged. So when you talk about all those names, and it's so it's Martin Miller's farm, it's Ken French, and um, it's Myron Schulz is on our board.

So we've got you know, three or four prizewinners that that actually are participating in the firm in some respect. So, Um, the great thing about it is is, um, they all are are actively engaged in the business in some aspect, particularly with Ken French and gene Fama there you know, on the investment committee and they participate in all investment discussions around the firm. So, uh, do is that a

little bit intimidating? You want to do something and a Nobel laureate looks human goes No, that's a terrible idea. How does that impact what the process is like? Uh? Is it more nuanced than that? No, it's it's very It's what I what I come back to is is and we talk a lot about this at the firm. We talk about models and models are not reality and models are are used to get a sensible view about

way about a way the way things work. Um. So what demension has always been about, and I think this is why we have such a long term relationship with our own clients is you know, we're not going to come out with anything that's that's that's fancy or different just to to do it for marketing reasons. We we have this this group of people that look at the capital markets, they're empiricists, they look at data all day long. What they want to come out is they want to

come out with something that's that's sensible, that's reasonable, that's repeatable. Uh, there's a there's an aspect to it that. Um from my perspective for for advisors and then for their clients is that there's an expectation that we are going to deliver something that is going to be implemented in a in a very very robust way. UM. And that's I think a big differentiated for Dimensional. So let's let's talk about some of the other popular investing trends, some of

which Dimensional has embraced. Others you've decided to issue. UM. Smart beta is a marketing term. There's an ongoing debate between rob or not of Research Affiliates and Cliff Fastness of a q R. Cliff basically says smart beta is just FAMA French factor investing in a different marketing wrapper.

How do you guys look at smart beta? Yeah, smart beta is a is a catch all phrase for you know, for multi factor investing in certain ways that you know, the way I look at it, And I'm definitely not in the academic circles like the Famas and Frenches and so forth, but uh, you know, I look at demensials existence in one We started with the first small cap portfolio UM and that was a that was probably the

first multi factor portfolio that was out there. Uh ninety two, FAM in French, you know, uh introduced the three factor model UM and and that was when the value of portfolios were launched back So what I would say is, I think demential has always been you know, through our connections with academics externally and even through our internal academic teams, we've always been on the cutting edge of of multi

factor investing UM. But most importantly in David Booth will point this out, is that you know, we've been able not only to recognize that the data in the research that is out there, but we've been able to implement UH in a very very effective way. So when you look at our returns and our quote unquote body of work over thirty six years was the launch of the micro app, we've not only been able to capture the multi factor rate of return, but we've been actually been

able to add some value from an implementation perspective. So UM, it's a it's a combination of I think those two parts. One is is great portfolio management UH and great implementation, but there's also the great research aspect as well. So there's a lot of research out there in the public domain. The question is can you implement on that on that

research in a in a very effective efficient way. So we know the challenges with small cap because of the liquidly issue when you have to really keep an eye on outflows, otherwise it's very disruptive. Let's talk about one of the other original FAMA French factors, which is value. This has been a rough decade for value investing. We know it tends to be cyclical, but how do we deal with the fact that value has been under performing growth for most of the period following the financial crisis.

During the at least the growth and expansionary period, growth has done really well. I think there's always going to be these big trends, if you will, or kind of these uh these movements and markets that reflect well or poorly on a specific area of the market asset class. So UM, having been around this for twenty five years now, you look back at every uh you know factor, if you will, there's always gonna be moments in in periods of time where they don't actually outperform or have the

premium that that we discussed earlier. UM. You know, equities under perform T bills for sixteen years from nineteen sixty six to two, Value underperform growth all through the nineties, you know, until the tech bust uh in in in March of two thousands. I recall hearing you know this warm Buffett guy, this value investor, he's lost his touch. I want to say late early, Yeah, Buffets washed up.

He'll never make any money again. So you you go through these periods where a particular style or factor is out of style. How do you counsel advisors and clients to hey, this is a normal part of market cycles. We have to stay. That's that's just it. It's counseling. It's it's it's education beforehand, and then it's counseling during and then it's you know, kind of a recognition after the fact. So you know, you look back at that period that you were just mentioning when Warren Buffett was

out of favor, of value was out of favor. I think it was in like three months value actually turned around so quickly, or actually growth throp through the floor. Value came roaring back, and then some Yeah, the ten year numbers on value versus growth. Value was ahead of growth as of you know, did a two thousands, So you had nine or nine and a a half years or nine and three quarters years where growth was just pounding value and then within a three month period, value over

that whole tenure period actually had a better performancing. So I think, you know, there's a lot of stories like that that people can need to recognizing and see. And I think we spent quite a bit of time him, you know, counseling and advisors counsel their clients to say, look, we've built an investment plan, investment policy, We've allocated the

assets in this way. We've we've were confident that you're in a position that you can withstand uh, you know, ups and downs in the markets, or ups and downs in particular parts of the market. Uh. And if you can stay with that long term, you're gonna be we gonna be highly and welly and well rewarded over that time. So what is it that keeps a co CEO up at night? What do you what do you think about? And what are some of the concerns that you have

looking at everything going forward? Well, I think at a dimensional level. I think for me, it's just our growth. You know. So we've grown from fifty billion back in two thousand three to six hundred billion today. That's quite a growth rate, quite a growth rate. And if you if you look at that growth rate and whether we'll match that growth rate the next fifteen years or not.

Um you know, from a size perspective. You know, one of the challenges that David Booth laid out to the firm in two thousand three was, look, if we stay on the same growth path that we've had been on up to two thousand three, we're gonna be a five hundred billion dollar firm by the end of two thousand eighteen. And here we are. Here, we are at six center billion, And that's a fantastic forecast. Yeah, And it wasn't uh, it wasn't a here's the projection, and here's where we

want to be. It wasn't that. It was more of, look, we're stewards of client assets. Where stewards of this business. We need to make sure that we have the ability, the infrastructure and so forth to service those assets in the right way and do it in a in a in a client centric way. And so it was a challenge all the managers to make sure our infrastructure was built out in a way that we would be able to do that properly, whether it's portfolio management or research

or trading or sales or whatever it might be. So I look at that from a dimensional perspective and say, we actually have the same growth rate over the next Uh, you know fifteen years. You know, we need to be have a prepared work a team to be able to handle that kind of change in the in the size and growth of the So we're hoping that, um, you know, from an education training perspective, hoping to build out quite a few things around dimensional. Does does that growth rate

eventually have to plateau? Does the where does the law of big numbers start to say, all right, you you went up twelve x in in a dozen years. Don't expect that going forward? Yeah, there's a natural I think plateau. I'm sure at some point. I'm not sure when where that is. UM, But we do know people consume their retirements and so forth that you know, at four or five or six percent per year. So the bigger the asset base, the larger the outflow is going to naturally

be just from consumption. So UM, you know, we we recognize that. UM. I think the big issues that I think about on a on an industry basis is obviously UM wealth wealth transfer. So that we're coming up on this generational generational shift. UM. You know, advisors are thinking

about succession planning. Uh. Technology is becoming a big question, you know, how to clients and how to advisors access the capital markets and how do they how do they interact with one another when they're thinking about this client relationship, you know, going forward. So those are things that I

think Demensional wants to be involved in. We want to support the advisor and make sure that they're as competent and well positioned as they possibly can be to deliver two clients the right solution over the next twenty or thirty years. We have been speaking with Dave Butler. He is co CEO of Dimensional Funds Advisor. If you enjoy this conversation, be sure and come back for the podcast extras. Will we keep the tape rolling and continue discussing all

things factor based investing. You can find those wherever Finder podcasts are sold iTunes, Overcast, SoundCloud, and of course Bloomberg dot com. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. You can check out my daily column on Bloomberg dot com or follow me on Twitter at Rid Halts. I'm Barrier Halts. You're listening to Pastors in business called Bloomberg Radio.

Welcome to the podcast, Dave, Thank you so much for doing this, I've been I've been looking forward to this for a while. I have a ton of questions I did not get to. So before I get to my favorite questions, there are a few things I just have to ask you about. Um, what's your daylike? What do you spend most of your time on? Because I know you wear a couple of different hats and I have a hard time understanding what the day to day is

like for you. Well, I've been telling friends have asked me about this co CEO role, you know, what's it like? What do you do on a day to day basis? I always tell them, you know, I've been in the advisor business for twenty five years, so as a as an old athlete is sort of like a basketball coach who's been a coach for twenty five years now becoming the athletic director and you got to know a little bit about softball and water polo and so forth and

so on. So I'm in the stage of actually learning about a lot of aspects of the business outside of just financial advisor space. And that's been been a good learning curve. And I think the bigger point for me is that you know David Booth, you know founder, Um, you know chairman who he's he's very involved in the firm.

So he and I and GERARDA. Riley, who's the other co CEO, we spend significant amounts of time thinking about the business and about where demensional needs to fit into the business generally, and how we want to prepare ourselves to be viable partners if he will, to the advisors out there in the in the space. So let's let's talk about you know, volleyball and water polo and everything

else you were running the advisor side. Does this mean you spend time thinking about institutional and trading and accounting and taxes and like where where does your line of responsibility stop? How much are you responsible for? And and what is Gerard responsible? How does is it divide and conquer you sort of split up the fiefdom or do you each work together on on different areas? Yeah, people ask that often about co CEOs general general, a tough

gig to make work. I think I think you know, if you look at Gerard's background, so he's he's c I O. Uh, he's been a dimensional fourteen years. Uh, he's a Caltech PhD. So he's a right rocket scientist. So he's got the right pedigree, he's a he's an investment guy. He can go toe to toe with the Famas and the Frenches and talk about investment issues in a significant way. I've then, you know, grew up more on this on the sales side, the advisor side, and

so forth. So we're both involved in the entire aspect, entire broad part of the firm, but we're also probably more focused on our our individual areas. UM. The key with co CEOs is you've got to be collaborative, you've gotta be open, you've gotta be transparent, and and frankly, you know, Gerard has been just a terrific partner in terms of just, you know, how do we want to go about the business. What do we see going forward?

You know, if we continue to grow and we're a trillion dollar or two trillion dollar money management firm, what do we need to do to be ready for that kind of um stewardship around assets of that size. So it's it's been a great collaboration co CEOs or co anything could be problematic if you have people that are are political or not really engaged in being transparent and collaborative. But but Girard has been terrific with that and very

happy with how how that's worked out. When when we've seen co C e O s at Fortune Companies, it doesn't really seem to work. There's perhaps a little too much testosterone in the room to make it work. You guys seem to have found a good rhythm together. I think that's right. We and we both grew up in the firm. So I've been here twenty four years, he's been here fourteen years. We know each other, We've known

each other well for for all that time. Uh, And I don't think there's this I think maybe where Kocyov go uh go south occasionally, as if if you've got two people coming from different backgrounds or even different firms, and they get squished together, and then there becomes sort of a political question about who's going to be the lead, who's gonna do the next guy or gal um and we just don't have that at dimensional. And then that's saying I give David Booth a lot of credit around culture.

I'm a big culture guy, being being an old athlete and being on a bunch of good teams and a bunch of bad teams. Um, you know, for me. It strikes me that, you know, culture is the paramount issue around around success. I'm glad. I'm glad you brought that up so we could talk about sports, But it's really just a giant metaphor for business. Our bad teams. Do bad teams have bad culture because they lack talent? Or

does bad culture lead to talented teams becoming bad? I think it's a it's a combination of both, but I think it Culture starts with leadership. Culture starts with expectation. Uh. Culture starts with a view that the leadership says, we are going to be a team, and we're gonna be a collaborative team, and we're gonna have success doing that. So it's I think it's vision. I think it's um.

You know, we always talk about stories. You know, you you you've listened to a particular story about a particular team or about a particular company, and those stories go a long way in terms of setting the culture around how things work or don't work. I'll give you a

quick example. You know, David Booth did a video while back, uh and just as a as a side kind of tossing, somebody asked him about his childhood and how he what his first job was and he and he basically told the story about his first job being a shoe salesman in a small town in Kansas, and he said, you know, uh, he said, I used to sell shoes to women, and um, you know, basically if the shoe didn't fit, I'd tell him that it didn't fit and that they should come

back another time, and um, you know so. But but it laid down it made a point, which is, you know, it's it's about the client. It's about doing the right thing for the client, doing what's best for them. And when somebody says a story like that and people hear that, it resonates culturally around the firm, and so I, you know, I think Demential is very very unique in that respect.

You know, I can't imagine being somewhere for twenty four years without feeling really good about what we're trying to accomplish. And and back to my story meeting Dan the first time, it's like, you know, I think we've been on a mission. I think the mission has been about delivering the right client experience and doing it in a good way. We've never been worried about goals or getting it to a certain size. It's always been about, hey, if we do

the right thing, do it well. Uh. The success or size, whatever it might come from, it is going to happen on its own. And it's sort of the the John Wooden analogy, which is just you know, if you you prepare yourself, you you tie your shoes, you work on certain things, and then you go into the game and

the expectations you're gonna win. But if you don't win, it's okay because you prepared yourself, You've done as best you can and you worked hard at it, and uh, and you've delivered what you what you said you were gonna deliver. And I think somewhere along our interview, I should disclose my firm UM manage his assets, and we are also a dimensional client, So I'm very familiar with both your process, your portfolios, and your culture. But I I want to make sure that that UM is out

there so people understand this um. You mentioned David Booth in public. He is a sort of quiet, reflective person. But I've I've interviewed him, I've had lunch with him. I get the sense that internally, indimensional, he's a little more of a boisterous chairman. What what's it like working with him? Oh, David's great. I've I've worked with him now for twenty four years, and he's a he's a

super insightful guy. Um. You know, he's a very modest guy. Uh. You know, even when we talk about even our body of work and the fact that Demential has had this portfolio out there for thirty six years and it's out performed the benchmark by a hundred forty basis points for thirty six years, you know, those are types of things we haven't necessarily talked about quite often enough. In my view, I think, you know, the idea of of of our

competence in our body work. I think those are things that I think could be elevated from a dimensional perspective. But David is a very modest guy. He's super insightful, very strategic. Um, he's uh. He makes you know, great business calls very very quickly. So I've been around him long enough to know when you know, David makes a comment about a particular business situation, his insights are are are are very very good, um, and they usually are

very very right. So um, he's a great voice to have. He's a he's a great person to have around. I'd also give him credit. I used some of his kind of views on management and how people react. He's he's definitely a macro manager, so he's he's willing to give people a chance. I eat Gerard and myself delegated to you guys and let you carry the ball. He'll he'll participate, He'll he's been a great chairman. He'll act, he'll participate

in big questions and big strategic issues. Um he'll keep a close eye on what what's happening and make sure that he uh sees things happening in the way he thinks they should. But he also is very good about giving somebody some space to run with an idea that he thinks is pretty positive. And and going back to

the advisor of business. You know, Dan Wheeler was the guy that came in with an idea, UH to use these funds with with advisors I either retail business and and David, to his credit, UM contemplated that concept and thought about it thoroughly around it, you know, or these assets gonna be compatible, and he made a decision to allow Dan to go do that in a in a methodical way that would be would be different than what's

been out there in the past. I give a lot of credit for Dan was essentially an independent advisor outside of Dimensional Funds, but it was pretty clear he was raising a lot of money for the company. At what point did that relationship become much more explicit, if that's the right way, Yeah, I think he he became an emloyee, I think a couple of years into it, so maybe. So, you know, Dan is an interesting guy and he um.

You know, he was a broker in his prior life, and you know, he would uh, he would say, he would use a term the never having to say you're sorry approach to investing. So he failed as a commissioned broker or a stock broker that he felt there's a lot of times when you know, he'd go and pitch a stock to a client and then the stock wouldn't do well, and he'd definitely go back and say, hey, I'm sorry, it didn't work out the way we expected.

And so his view was if you if you could move away from that, you could get a client educated on the capital markets, get them very comfortable about the expected returns in a market, um and educate them in in a proper way that you wouldn't have to have these oh I'm sorry type of conversations with your clients. So it's a very unique way to view the investment space. So you mentioned, Um, David Booth doesn't really discuss um

the company's achievements publicly all that much. The firm has a reputation as a kind of private company that doesn't do a lot of press. I mean, we don't see your names out in the media all that much, which I get the senses by design, but it leads to lots of misconceptions. What what sort of misconceptions are out there about Dimensional Funds? Well, I think we you know, I don't know if it's purposely or not, but I think we've always allowed our clients to talk for us.

So if if you or any other advisor or institutional client thinks possibly what we've we've been able to do for them and for their clients, then they're gonna speak highly of us. And that's a that's a way, that's a public presence kind of a concept as well. So we've always uh sort of limited ourselves in the public presence type of space. Uh, we're not advertisers. Um, We've talked to clients in the past, they don't necessarily want us to advertise. They don't mind having an elevated PubL

at presence. So when when you know, Bloomberg does an article on Dimensional and advisors able a third party piece and advisors able to hand that that article to a client, UM, and the client says, Okay, I get a little bit better sense of who Dimensional is. That's a positive for for that client and for advisor and for the dimensional.

So we're we're in the business of of you know, trying to do the right thing for the client, being very robust from an academic perspective, in a research perspective, working on the on the edges, if you will, from an implementation perspective, and we think, you know, our implementation and our delivery of the portfolios are as efficient as as they can get. Uh. And that's probably a part of the story that we don't we don't describe enough

UM differentiating ourselves versus competitors. So so let's talk about some of those competitors. UM, if we look at the big three in the world of indexing and ETFs, Vanguard, State Street, black Rock, they have become fierce competitors in the e t F space, which is growing very rapidly. You guys have made the decision, No, we don't want to be in the e t F space. It's it's subject to inflows and outflows, and it's very retail and

not necessarily our interest. Is that something that might be revisited in the future, or because it seems like so much of the business is moving in the direction of e t F s, how does df A think about that? Yeah, I think we're very client centric, So you know, we've had discussions about et F with with clients for for

many years. A matter of fact, I think it's probably ten years ago where David Booth and I went out and talked to clients about their their interests in need for an e t F from Dimensional and at that point in time, there wasn't that high of an interest for that, and UM, you know, but that doesn't mean

that we wouldn't review it again. If if if for whatever reason, Advisers for instance, came back and said, listen, it would be great to have an e t F for these reasons and we think you're the right firm to do that. Um, then obviously we we would we would listen to that and be approachable around that. So when when you look at our our orientation around our our verus funds, I mean we have sustainable funds and social funds. Next question in my mind that I wanted

to go to. I mentioned the smart beta trends, and you guys have have really stepped stuck with just pure factor investing. How do you look at the rise of E s G, the desire for fill in the blank environmental sustainable, social governance, what have you? How does how does dimensional look at that trend and the desire for for that, especially from from women investors and from younger millennial investors. That seems to be where a lot of

the demands is coming from. You know, that's a great, great question, and it's a great example of how we've worked with our clients in the past, and that basically a clients came to us and said, listen, when you look at those areas that you know E s G and so forth, the the uh the is out there for the advisor, weren't that great? So high expense, you know, highly concentrated, bad performance and so forth and so on. So that the question was could you demensional? Yeah, that's terrific.

Could you demensional come to us with a solution that looked very much like what your solutions are today, but with a UH you know, a focus and UH detail around around the social and sustainable and so we UM we went back to the basically lab and we came back with portfolios that we're very highly diversified. There were

low costs UH. They didn't recognize a lot of these E s G issues in terms of portfolio management UH, and we're able to come back with a portfolio that we thought from a capital market perspective made sense for the end client with the nod towards being sustainable or social or whatever the UM the issue might be. So that that's been a huge success for SO. I think we've we've now got ten year track records in those areas and those portfolios track really closely to our standard portfolios,

the core portfolios UM. So the performance has been terrific, The expectations have been met UM and for clients and for advisors who are are interested in in that aspect of investing UM, there are available options for them. So we feel really good about that and we think it's been a real success for for all sides. And going forward, I'm sure, there's gonna be more interest in that from from clients and so forth on that go forward. So what else might there be more interest in it in

going forward? E s G is clearly on the rise, but its roots go back decades. Smart data, UM perhaps not as far back. Factor investing even further back. What do you imagine the next big trend in investing is going to be? And I honestly don't know if there's an answer, but you have a different advantage point, maybe you see it a little differently. You know, there's always going to be another you know, academic paper or another area of research that that helps us refine how we

think about the capital markets. And UM, we've seen that recently with you know, profitability for instance. Uh so there's gonna be more of that, you know. For me, I think that the bigger change, and I've been really inspired by recently is I think this UM I would call the human element of advice. It's the advisor's contribution to the end client result that that that comes from this

interaction at a human level. So when I see sit with advisors now, the concept of trust has has elevated quite a bit, and and trust comes from a couple of different areas. One is is competency. So at demensionals level, you know, we've got to be able to deliver access to the capital market is the most efficient way, and I think we have We've got a thirty six year track record of of competence for the advisor. You know, the advisor provides a lot of different wealth management activities.

They know the client intimately, UH, they know about their hopes and their dreams and so forth. And so when I think about the movement of financial advice, it's gone down that path, um, you know where historically thirty five years ago when I started the business, it was about trying to sell a stock or get a commission off of stock UH, purchase or sell. UH. It's changed to

a holistic wealth management view. It's changed to start thinking about people's you know, hopes, their dreams, their children, their charitable giving, and doing that in a very systematic, uh efficient way from the capital market perspective, you know, using building blocks like demensional delivers UH to be able to execute on the client's expectations. And so I I think by executing on the client expectation, then the aspect of trust develops and it continues to build over time. And

so I see these great relationships. I've been, you know, in this for twenty five years, and we've got advisors who've worked with us for twenty five years and their clients who have worked with them for twenty five years. And when you see those types of clients come into the office and talk about their experience, their journey, the fact that they feel okay about about their investments and about their retirement and where they want to go in

the future, and another feeling, it's an amazing feeling. And so whenever I get you know, you wake up some mornings, you guess, you know, can I is another day of doing extra y you know, it just takes one conversation with a really satisfied client that makes you feel like, hey, I got it. The origin, the original reason why we started this was we wanted to make the client experience great. We wanted clients to feel good about their retirement, feel

like they were going to be okay. And when you get to see that through the advisors who are working with these clients for a long, long time time periods, it's just a it's really um a feel good kind of a thing for anybody that works in that space. So so I'm going to assume that we're not going to see a d F a crypto funds launching anytime soon. You will not. So I like the idea of holistic asset management. It's a good term and it really does

a nice job describing the full three sixty. So let's jump to our favorite questions that we ask all of our guests. Um, tell us the most important thing that we don't know about Dave Butler. Great question. Um, there's probably a lot that you don't know about Dave Butler, but I know a lot more now than Uh. Here's one because it's it's pretty relevant. So I Steve Kerr just won the NBA Championship of Golden State. I think he's got eight rings now as both the player and

players coach. He and I played together on a US national team back in the day. We got the room for a month together. Uh, And I have to say I've taken a lot of inspiration from watching him coach a team of of major talents. But you know, taking that team of major challenge and developing them and knitting it into a collaborative unit is just genius. And I don't know if people give him the kind of credit that he should get. But it's an amazing thing to watch,

you know. I read stuff about him quite often. Uh. You know, No, I take it to my team and I say, look, here's here's something that we ought to think about, and here's something we out of view and look at as well. So quick example is just on hiring. I can remember asking him when he played the University of Arizona. These teams were great, the players that I had met were great people. And I said, how does

that happen? Uh? And he says to me, he says, well, he said lud Olsen, who was a coach at the time, he says, we have a we have an approach where we bring a player in for the weekend, uh, and on Monday morning we get together as a team. And Luke asked the question, even if it's the number one player in the country, says, do you guys want to play with this guy? Really? Yeah? And if we if

we said no, then then he stopped recruiting him. So I actually took that into our team at Dementiel for some time and and we we had the same kind of approach. We had nine or ten people interview a new team member, and it never was my decision and I passed it to the team. We start with the youngest person first and we say, hey, do you want to play with this person? This is a person that's going to be on your team that you have to play with, and do you want to do it or not?

And so that's I think a great way to think about building out a team. You know, you want to you want to find ways to to elevate the collaboration and the the the enjoyment of the team that that that's really quite quite fascinating, and they are building what looks like a dynasty for the Ages franchise. Yeah, right for sure. Um tell us about your early mentors who changed the way you look at the financial business and

uh investment. Well, you mentioned the Universe Chicago connection, so I would include all of those folks that Merton Miller I got to meet Merton, you know when I first interviewed, and all of those folks have transformed the capital market experience and the investor experience in ways that are are

were unimaginable at the time. But the whole you know, the the energy and the passion and the enthusiasm for the fact that that markets work, that prices are fair, that you had to invest in a way that's diversified and low costs and tax efficient. Those concepts didn't even hit the radar screen. And thirty years ago that was sort of poop poo and laughed at. And now we

pushed forward it today and and this. You know, when you talk about independent advice, you talk multi factor investing, you talk about holistic wealth management, you know, those concepts are front and center for any client experience. So to see that transform and I know that these guys were part of that and then really elevated, it's really fun to watch. Let's let's talk about everybody's favorite question. Tell us about some of your favorite books, be they fiction, nonfiction,

finance related non finance. What do you read? I am all about the biography, autobiographies, about the journey. I love just understanding people and how they got to where they are and why they're why they act the way they act. So you know some of the books that I've read recently, Um, you know, um Red Shoe Doog, Phil Knight, Nike. I

just read Bruce Springsteens moren to Run. I have that that's in my Q and I haven't gotten great books, but it's so big, a little intimidating, it's a great, great book, and you know, but all of these things really, to me, it's about the struggle. It's about the journey. You know. People see quote unquote success from people and and what you realize. And this is what I've told

David Booth. Even with Dimensional, people look at Demensional say well, what a successful firm, and how amazing and how great. But their time periods when you know that the concept

of indexing wasn't even wasn't accepted by anybody. Um, there's a time when small cap stocks, you know, back in the nineteen eighties, when small caps underperformed for ten years, the S and P five hundred by by ten percent, that that people question whether Dimensional as a firm, you know, was was really a firm that could deliver uh, you know small cap stock returns. You know, so there's always

going to be a struggle along the way. Um, But what's inspiring to me is to watch how that struggled and translates into an action that then leads to this, you know, the success that we've seen. So it's fun. You mentioned shoe Dog, what was so surprising in that book is how many times Nike just you know, managed to miss the executioner's acts. They were on the edge repeatedly in the early days of the company. Yeah, give it.

Give us one other book, one other thing that you uh, you read and really enjoy well, you know, anything John Wooden. You know I read that stuff all day long. Give John wood in the life. You know, there's a there's a book that just John Wooden. Um, but it's you know, John Wooden. I think, you know, and I tell the kids this all the time. If if you you look at what John Wooden stands for and how he built his pyramid of success and what's involved in the pyramid

of success. You know, my view is if if you follow that in a you know, conceptual way, it's it's tough not to have success in something, and success meaning that you've given it your all and you've worked at it. And even if you don't win or win or lose, you know this the knowledge of satisfy. Actually you've worked really hard at something. I think his success success in itself really interesting. What what has you excited today? What

what do you really jazzed about? In two thousand and eighteen. Uh, well, I'd come back to the aspect of trust in the financial services space. I think I think a lot of trust was lost back in two thousand eight and two thousand nine, But I think this, I think what we've come out of that segment of time in is that I think holistic wealth management has has taken its position. I think independent advice his HISS has gained its rightful spot.

I think uh indexing i E. And then multi factor investing, which again which is Demensil has been doing for thirty six years. I think that's front and center. So it's satisfying to me to look at all these trends that um going your way that we identified, you know, thirty years ago, that we thought, you know, and again we didn't. We didn't identify them for marketing reasons or for business reasons.

We identified because we thought that was We thought independent of ICE and multi factor investing and holistic wealth management and human element of the advisor, the necessity for the advisor to get great results for the client. We thought that was the right thing for the end client. And that's what's it's played out. So tell us about a time you failed and what you learned from the experience

well failure. Uh, you know, like we all, I've I've failed many many times, and I you know that the lesson I give the kids is like, you know you're gonna fail in terms of losing or getting beat or getting knocked down or whatever it might be. And and you know, the question really is is did you prepare yourself to succeeds as as best you could? And if you did not succeed as as an I e. A loss, you know, did you get back up and dust yourself off and and do it again? So I think that's

the lesson you learned from failure. You know you mentioned did you did you prepare yourself to win? Um? Giants coach, I'm drawing a blank on his name, Tom Tom Colin. Tom Coughlin wrote a book, Earned the Right to Win, which is that exact I find a lot of sports books don't really they tend to be a little cliche, they don't really apply to business all that. Well, that book, more than any other that I've read, really talks to

exactly what you're describing. If you were prepared, if you have done the heavy lifting beforehand, well then you just go out and do what you know how to do and if the wind comes, great and if it doesn't,

go back to the drawing board and start over. Yeah. Absolutely, And I think and have the passion, you know, find something that you're passionate about, because at the end of the day, if you if you fail and you get knocked down, you know, if you're passionate about something, going to keep coming back until you until you get to that quote unquote success platform. What do you do for fun? What do you do outside of the office that you

are passionate about. Yeah, well I think my fun now my my knees and ankles and stuff from basketball, probably a little banged up. So I do catch and shoot for the catch and pass for the kids, the boys. But I play sand volleyball, so that's sort of my passion. My two daughters play sand volleyball. Now it's it's nice on the legs. I can get a good workout at my age and and feel good the next day. Note two man, I'm still playing two man. That's an exhausting

game back in my youth. Yeah, that's the challenge. Just try to keep playing two mans as many years as I can. So I'd love to get to sixty and still be playing two man. That would be that would be a good an ultimate goal for me. Um. So let me ask you a question you mentioned the kids. If a a millennial or a recent college graduate came up to you and said they were interested in a career in financial services or asset management, what sort of advice would you give them. You know, I just read

an article flying out here yesterday. I thought was was really great. It's and it was a commencement speech. It was a guy. I can't remember who it was, but it's His basic line was grab a mop as in, don't be afraid to do the hard work, don't be afraid to do the dirty work, don't be afraid to you know, quote unquote, I'm at it every day with

your best effort um because what's going to happen. And I tell the younger people, the millennials around dimensional is is look, people are gonna look at how you how you work. They're gonna look at your optimism, your enthusiasm, your energy, and you know, when when opportunity comes uh in a name pops into their head. For that opportunity, it's going to be the person who's done just that, who's worked hard who's enthusiastic, who's optimistic, who's who's smart, um,

who's collaborative? All that stuff. So you want to put yourself in a position to get quote unquote lucky by by preparing yourself and doing things really well, and hopefully somebody sees you and taps you on the shoulder and says, you know, Barry, this is the person that we want to have run this or we wanted to have this person go do that. And that's where you know, success

in a career comes from. So what is it that you know about the world of financial services today that you wish you knew five years ago when you were first starting. Well, I think I think the AHA moments for me was, you know, I got ahold this thing called the matrix book. Um. And the matrix book is as a book that basically shows the returns of the capital markets over time. And so the lessons that I

learned from that. You know, in business school, you don't look you learn about this kind of cash flow and how to how to price a stock and whether you should buy that stock or you should sell that stock short. Um. That's one aspect of finance, but the broader aspect from an investment perspective for the average person from my mom. You know, how does my mom get comfortable with that she's going to be okay in retirement? Well, she needs to know about just the simple averages, the simple averages

that come with the capital market returns. She also needs to know what you just point out early with value or size or the markets in general, is that that that return is not going to be there every year. So there's a lot of lessons around a big picture backing off and understanding what what does the stock market return, what does small cap stocks return? What a large cap stocks return? Why would you diversify internation only? Um? Why

would you have fixed income instead of equity? And all of that goes into this big puzzle that I think again, the advisor do a great job of of sitting down and providing the human element, understanding the client in a in a way that UM, a stockbroker thirty years ago wouldn't and couldn't. UM, they're having those conversations now and they're part of that person's life to be able to help them deliver on the experience. It's going to be

the right one for the client. Absolutely fascinating. Thank you so much. For being so generous with your time. We have been speaking with Dave Butler. He is co CEO of Dimensional Funds Advisors. If you enjoy this conversation, well, be sure and looked Up an Inch or Down an Inch on iTunes, Stitcher, overcast, Bloomberg dot com wherever final podcasts are sold, and you can see any of the other two hundred plus such conversations we've had. We love

your comments, feedback and suggestions. Be sure to write to us at m IB podcast at Bloomberg dot net. I would be remiss if I did not thank my crack staff that helps put together these conversations each week. Medina Parwana is my audio engineer slash producer who keeps me on time and on track with these conversations. Taylor Riggs is my booker producer. Michael Batnick is our head of research. I'm Barry Ritolts. You've been listening to Master's in Business on Bloomberg Radio.