The Evolution of Indexing and Dimensional

Let's talk a little bit about indexing and the tremendous impact it's had on the investment business. The first index fund we know of started back in 1971 with Mac McQuown, one of our directors. And also with Myron Scholes and Fischer Black urging him on. You know, indexing is really the first major investment idea to come out of empirical research. Starting in the mid 60's there was growing evidence about the performance of professionally managed funds and how they didn't seem to do better than random selection. So that led to the creation of index funds. Back in 1971 when Mac started the first index fund, I had the good fortune of working with him on that. People had the craziest ideas that it was impossible to do, that it was un-American, all kinds of crazy ideas. But now I've had over four decades of experience, and each of these decades the simple S&P 500 index fund would have outperformed most managers, I think most often ending up at the top quartile or even top decile sometimes. The basic idea of indexing has been an overwhelming success. Both for the managers that created the funds and fortunately for the clients. Dimensional built the firm on the idea that we could do better than indexing. And that's the way to evaluate us, I think. You know, do we do better than index funds or not? If we didn't do better than index funds, we wouldn't have a business.