Thursday, November 06, 2008

David Booth and Eugene Fama

David Booth, co-founder of Dimensional Fund Advisors, just gave $300 million to the University of Chicago Graduate School of Business. In exchange, they are renaming the school the University of Chicago Booth School of Business. That's the way it goes--a rich donor gets the school named after him. At least this donor came out of the school that will bear his name.

But given that Dimensional Fund Advisors has long based much of their business on the work of Eugene Fama, who did his research there at Chicago, it'd be nice if they named the school after him. After all, Booth will die someday and basically be forgotten even by the students who attend the school (at best, they'll recall he was "the rich guy they named the school after"). Whereas students of Chicago will probably learn Fama's work as long as there are intro finance textbooks. I guess you could say that Fama's immortality is more-or-less assured, while Booth must buy his.
(Eugene Fama)

This reminds of a travel book about Texas written by an English writer in the mid-80s. He had been hanging with a lot of Dallas socialites, and someone commented to him that in Dallas, there was more respect paid to the guy who owned a painting than to the guy who painted it.

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Blogger George Peacock said...

I am not sure I buy your take. While it's true that Gene is awesome and so much of what David has done is based on Fama's original "insights" (insights still not really accepted on Wall Street or Main Street -- yes, people use index funds but I have found that they simultaneously don't believe in prices being the best information).

But without "real world" success demonstrating the real and practical value of Fama's insights, Fam's work would remain academic forever and their really would not be immortal fame, except as the guy with an interesting laboratory idea Booth brought Pinocchio to life. Now he's a real boy.

Both Geppettos were needed.

2:40 PM  

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