Merton Miller

We've added a lot of stuff to that common sense, given you more tools, but at its core, it's common sense.

You know how old corporate finance is as a discipline? It can be traced back to a paper written in 1958 by two professors at the University of Chicago then, Merton Miller and Franco Modigliani.

1958.

You say, what happened before 58? Corporate finance was this glorified accounting.

The science we had in our hip pocket with, we had all these academics, they were helping us out.

Gene Fama, Merton Miller, Myron Scholes, all of whom got Nobel prizes.

And so the people, we had a lot of credibility because of the people we were associated with.

But that isn't sufficient.

And it was more than just Fama.

It was... you know the finance faculty there were really amazing and being able to work with them present papers to them and then you know see their research as it was coming out it was incredibly stimulating and this was back before any of them had gotten nobel prize in in economics and you know a number of them went on to become nobel laureates In fact, other people I worked with way back then, I mean, three of them got Nobel Prizes, and then our mutual fund board has those in addition to the Merton Miller and Myron Scholes, and they've added Bob Merton and Doug Diamond over time, so...

In total, we've worked with five Nobel laureates.

And these are all young, bright people doing great research at the time.

And, you know, if you could read the research, you could see it was explosive and incredibly important, which is eventually what I figured out was something that turned out to be good for me and good for the business school.

I realized I probably was better off Trying to apply the ideas and letting people like Fama and Merton Miller and Myron Scholes develop the great ideas.

And so that's how history unfolded.

And these are still good friends.

And we brought in, to help us out, one of the first two people we talked to were Gene Fama, my mentor in the research side, and Mac McQuown, who by that time had left Wells as well.

So that's how we—then we pulled together the other leading academics we worked with, you know, people like Merton Miller, who was, you know, a 1990 Nobel laureate, Myron Scholes, a 97, along with Fama.

So out of all of this, your first fund that you launched when DFA began in Brooklyn was a small cap or a micro cap

strategy? Yeah, right.

There's some pyrrhic victories in there [laughs] on the, on research.

You know, I remember standing up there first time or two presenting a paper to people like Gene Fama and Merton Miller and Myron Scholes or whatever.

And of course, they had a lot of, let's call it constructive feedback-

[laughs]

So I go, "I think I'm better off working for Gene Fama." When I came back the second year, I worked for Gene.

[chuckles] So those people set it up, and Larry Fisher, he did some good research as well.

Lowry also brought in, while he was an assistant dean, brought in, recruited Merton Miller, and Merton Miller was really Gene Fama's mentor.

And so in some ways, Lowry had a huge impact on the University of Chicago.

And my group got, eventually got shut down, and then we regrouped, uh, in '81 to start, uh, Dimensional, and with a lot of the same characters.

You know, Myron Scholes, uh, unfortunately Fischer had passed away by then, and Merton Miller, Gene Fama, even Mac McQuown, who was my boss at Wells, all huddle together and try to figure out how to form a firm, sensible way to manage money.

So you guys launch this endeavor.

It's sort of like the Justice League of the finance and investing world.