David Booth, MBA’71
The connections David Booth, MBA’71, made with the University of Chicago still endure nearly a half century after he graduated.
In 2008, at what was then called the Graduate School of Business, David Booth talked about his decision to make a gift of $300 million to the school—today, the gift’s value well exceeds the initial amount. It was the largest gift in University history and at that time the largest gift ever given to a business school. Trustees voted to rename the school the University of Chicago Booth School of Business in recognition of the gift.
“We want to continue to be the best business school in the world—but I’ve felt that way for 35 years,” Booth said then. “Chicago is unique. It’s hard to describe, but for people that get Chicago, they know what you’re talking about. My goal is to help Chicago keep that uniqueness.”
Booth grew up in Kansas and earned his bachelor’s in economics and master’s degree in business at the University of Kansas. He was planning to get a PhD there and then teach at KU. But along the way, his finance professor in Lawrence, Frank Reilly, PhD’68, introduced him to the efficient-markets theory of University of Chicago professors (and later Nobelists) Merton Miller and Eugene Fama, MBA’63, PhD’64, the Robert R. McCormick Distinguished Service Professor of Finance.
Efficient-markets theory posits that stock prices incorporate all available information about future values, and that stock-price movements are random and unpredictable, so investors are best off tracking, rather than trying to beat, market indexes. “It was so different from the existing literature,” Booth recalls. “The idea that stock movements follow a ‘random walk’ was, and remains, discomforting for people.”
After Reilly told him that Chicago was “the only place to go,” Booth moved to Hyde Park.
And there, Booth—whom Fama recalls as “the smartest kid in the class”—realized he didn’t want to become a scholar. “One of the first things they teach you in business school is comparative advantage,” Booth said in a 2013 interview at the University of Texas at Austin. “My comparative advantage was not in thinking up the next great idea. My comparative advantage was implementing the idea.”
When Booth decided he was better suited for a career in business, Fama called his friend John A. “Mac” McQuown at Wells Fargo, who hired Booth to help compile the bank’s first index fund—one of the earliest in existence.
In 1981 Booth started Dimensional Fund Advisors with Rex Sinquefield, MBA’72, another former Fama student. Dimensional became the first financial company to base its primary business on Fama’s ideas and prides itself on its philosophy of applying insights from financial science. “You think of stock returns and bond returns as having dimensionality to them,” Booth said in Austin, “and this dimensionality is identified largely by academic research.”
The efficient-markets hypothesis helped earn Fama the 2013 Nobel Memorial Prize in Economic Sciences—an honor he shared with the University of Chicago’s Lars Peter Hansen and Yale’s Robert Shiller. But when Booth first became interested in the theory, it had received relatively little notice, especially from the financial industry. Initially “Wall Street wanted to ignore me,” Fama says. Booth and Sinquefield, though, were paying attention, and today Dimensional Fund Advisors is one of the largest institutional fund managers in the United States, responsible for $596 billion in assets.
“The relationship between David Booth and Eugene Fama—and the idea that captivated them both—is another example of how groundbreaking theory, rigorous examination, and application of principles come together often at the University of Chicago,” said University president Robert J. Zimmer.
Booth made a $10 million gift in 1999 to support the fundraising campaign for the Charles M. Harper Center, which houses Chicago Booth’s full-time MBA and PhD programs, as well as its research centers and institutes. The Harper Center opened in 2004, and four years later the building hosted the announcement of Booth’s landmark gift. At the time he made the gift, Booth said the motivation was in part “very personal.” “I’ve had such a terrific adult life,” he told Chicago Booth Magazine, “and the University of Chicago has been a big part of why I’ve been able to live the way I have.”
Booth’s gift was a gesture of gratitude for what the school had given him. “Universities are one of the rare examples of institutions that last centuries. Support for great faculty endures for generations.”
When the gift was announced, Booth said the school had done great things in the past, and he wanted to give it the means to do great things in the future. The school has lived up to that challenge. Booth’s Richard Thaler, the Charles R. Walgreen Distinguished Service Professor of Behavioral Science and Economics, joined Fama as a Nobel laureate in 2017. In 2018 Chicago Booth was named the No. 1 business school in the nation by U.S. News & World Report.
Booth’s ties to the University remain strong. In addition to serving on the University’s Board of Trustees, he is a life member of the Council on Chicago Booth and a member of the Board of Overseers of the University’s Becker Friedman Institute for Economics.
As a signer of the Giving Pledge, promising to dedicate the majority of his wealth to philanthropy, Booth is an avid supporter of the arts, as well as environmental and educational initiatives in California and Texas. He has also supported Georgetown University, of which his daughter, Erin Booth, is a 2012 graduate.
Both Erin and Booth’s son, Chandler, live in London. Recognition, they say, has never been their father’s motive for philanthropy.
“He’s always been very generous,” Erin says, “even when he talks about his values from growing up—the way his parents were, the way the community interacted with each other in Kansas.”
“You’re not specifying what the generosity is for,” she continues. “It’s just, that’s what you think you should do.”
Another abiding passion of Booth’s is sports. A lifelong fan who grew up less than a mile from the University of Kansas’s basketball arena, he attended both football and basketball games. His support for his undergraduate alma mater led it to name the football stadium for him. In a quirkier part of his legacy, he helped Kansas secure the original rules of basketball, written by James Naismith in 1891. Naismith created and coached the first basketball team at Kansas, and through Booth’s efforts—he outbid Duke alumnus and fellow UChicago trustee David Rubenstein, JD’73, in a Sotheby’s auction—the typewritten document outlining the 13 rules is now on display in the school’s athletic field house.
In fact, Booth draws a parallel between winning athletic programs like the Jayhawks basketball team and successful businesspeople. It’s all in the practice and preparation that he says “empowered you to be imaginative and creative and thoughtful and flexible—all those things that distinguish exceptional thinkers, or great athletes.”
“Having the confidence that comes from being well prepared enables you to try to use that creativity,” he continues. “That is what distinguishes people coming from Booth.”