How Can We Make This Better?
That simple question has sparked so much human ingenuity. And after more than 50 years of working in finance, I still think that question is one of the most powerful forces in investing.
Right now, as you’re reading this, millions of people at thousands of companies around the world are trying to solve problems. Improving products. Figuring out how to do things better, faster, cheaper. Most of these inventors and entrepreneurs will never make the headlines. You’ll probably never hear their names. But they’re a big part of the engine that powers the stock market and the global economy.
When I worked on one of the first index portfolios and later when I started Dimensional, I already knew from academic research that people can’t consistently pick which stocks are going to be winners. But I could invest in all of them—in the collective effort of people working to make things better.
And that bet has paid off. Over the past century, the US stock market has returned on average about 10% a year. Human beings, as a group, keep figuring things out. We saw it during the pandemic. In early 2020, the US stock market dropped 34% in just 23 days—faster than ever before.¹ Headlines were apocalyptic. And yet companies adapted overnight. Whole industries reinvented how they operated. Within a year, the market had not only recovered but also risen 78% from its lowest point. People did what people do: They got to work. The world moves forward. The path is sometimes jagged and unpredictable, but the direction is clear.
My parents understood this. When I was 13, we lived in the small town of Garnett, Kansas, population 3,000. Mom and Dad wanted their kids to go to college to increase the odds of leading a good life. They decided to pack up and move 50 miles to Lawrence, home of the University of Kansas. Mom could teach. Dad could work for The Kansas City Star. And we could live at home while attending school, reducing the most expensive piece of the college financial equation.
They left behind their support network and everything that was familiar. All on the uncertain bet that education would be a ticket to a better life. That took guts. And a deep, practical belief that if they could put their kids in a better position to learn and grow and make connections, the future would take care of itself.
They were right. That move set the stage for everything that followed in my life. From first learning about client service while selling shoes to getting into the business school at the University of Chicago, from meeting legendary economist and future Nobel laureate Gene Fama to building a company that now serves clients and investors around the world. None of it was certain. All of it was possible because my parents chose to bet on potential rather than settle for what they already knew.
That’s ingenuity, too. The small, brave decisions ordinary people make every day to try to improve their circumstances. My parents were doing the same thing those millions of employees are doing. They were asking themselves: How can we make this better?
I’m an eternal optimist, and I know that pessimists always have compelling arguments. For centuries, people have been predicting that growth will stagnate, that we’ll run out of ideas, that this time the sky really is falling. Yet through wars and pandemics, through financial crises and geopolitical conflicts, we’ve kept adapting and inventing and finding ways forward.
I don’t make predictions. But I do believe this: Betting on human ingenuity is a winning proposition. It always has been.
The market can reward us for having faith in our fellow human beings. I find that pretty encouraging.
Next time a scary headline makes you check your portfolio or tempts you to sell stocks, try asking yourself: Do I believe that people will keep working to solve problems and make things better? If the answer is yes, you may already know what to do.
Stay calm, stay invested, and let markets work for you.
David