Remembering John “Mac” McQuown, Whose Curiosity Drove a Life of Innovation

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John “Mac” McQuown, a founding Director of Dimensional Fund Advisors in 1981, was a financial engineer, entrepreneur, and environmentalist with an insatiable curiosity and relentless drive that led him to start more than a dozen companies in his lifetime.

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A self-described “data dog,” Mac was a pioneer in the transformation of investing from guesswork into a science guided by academic research.

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In the 1970s, he assembled a team at Wells Fargo Bank that developed one of the first index funds—the investment vehicle whose rise would later revolutionize the financial world. And after helping launch Dimensional, Mac remained on the company’s board while he pursued interests that ranged from bond-investing innovations to sustainable farming to wine making. He died on October 22, 2024, at age 90. He is survived by his wife, Leslie, his son, Morgan, and his daughter-in-law, Alexa.

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“To bring about fundamental change, you need great thinkers and researchers, but you also need implementers,” Dimensional Founder David Booth told Bloomberg Markets magazine in 2015. “People like Mac don’t win Nobel Prizes; they implement the ideas of the guys who do.” The descriptions of his life in this article are based on years of written and recorded recollections from Dimensional employees and others associated with the firm, except where otherwise noted.

From Farming to Banking

Mac was born on July 17, 1934, in Sandwich, Illinois, and spent a good part of his childhood on the family’s 1,200-acre farm. In the 1940s, with many men fighting overseas during World War II, the operation was short-handed, so young Mac became a farmhand at only 8 years old. He continued to work there through high school, which helped spark an interest in farm equipment and agricultural engineering that he would explore in college at Northwestern University and in later pursuits.

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“People like Mac don’t win Nobel Prizes; they implement the ideas of the guys who do.”

David Booth, Dimensional Founder and Chairman

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It was as a student at Northwestern that Mac took a life-changing class in finance, the field that would be at the center of many of his later accomplishments. “I discovered in that course that there was an enormous amount of complexity in the topic, and how sparse it was in analytic interpretation,” he recalled in his alumni magazine in 2018, noting the amount of guesswork involved in finance and investing. “It was very subjective, and I was surprised at that.” Mac would graduate from Northwestern in 1957 with a BS in mechanical engineering—his original academic focus—then serve as an officer in the US Navy for two years before earning an MBA from Harvard Business School in 1961.

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After Harvard, Mac began a Wall Street career at wealth manager Smith Barney. But he was again troubled by how much bias he saw in investment management. Interested in bringing academic rigor to the pursuit, he was among the first to use computers in the study and application of finance. This in turn brought him to the attention of IBM, who asked him to speak to a group of West Coast executives about the way he used their machines. At the talk he had a fortuitous meeting with Ransom Cook, then the president of Wells Fargo Bank. He asked Mac to come to San Francisco and serve as the director of Wells Fargo’s newly created management sciences department, the company’s internal think tank. Mac took the job.

“A New Way of Investing”

Among the research team’s missions was to explore ways to improve investment management, and the group focused on designing an approach that didn’t rely on speculation. Mac’s team used data to analyze the stock market, creating what was arguably the first index fund, geared for institutional investors. The fund was created in July 1971 for Samsonite, with Wells Fargo using $6 million from the company’s pension fund to create an equal-weight gauge tracking all the shares on the New York Stock Exchange.

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“The think tank Mac set up felt like a start-up, although it was long before anyone used that term,” recalled David. Mac’s 1971 hiring of David at Wells Fargo—on a recommendation from Eugene Fama, whom Mac knew through academic circles—began a collaboration and friendship that would last for more than five decades. “We were excited by the opportunity to turn academic research into a new way of investing,” David said.

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“The management sciences group at Wells Fargo, in those days, was the only such group of its kind in any institution in the world,” Mac said in a 2021 interview for the documentary Tune Out the Noise. “Whenever I wanted to hire somebody new or buy more data, we did it. And that went on night and day, seven days a week, for 10 years. I used to work 80-hour weeks and, I can tell you right now, it was exhilarating—I never got worn out.”

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"We ended up with a staff of about 35 and a dozen consultants, all academics, that I had met directly or indirectly throughout the course of that,” Mac said. “Since then, six of them have won Nobel Prizes.”

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As more clients turned away from active money managers who were failing to beat benchmarks, Wells Fargo expanded its index business. The unit Mac co-founded, Wells Fargo Investment Advisors, would go on to become Barclays Global Investors, which launched iShares and was bought by BlackRock in 2009—making it a pillar of the giant money manager. “Although little remarked upon at the time, [Wells Fargo Investment Advisors] would end up becoming the kernel of the biggest investment empire in the world several decades later,” Robin Wigglesworth wrote in Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever.

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Dimensional and Beyond

Though Mac and David only worked together for two years at Wells Fargo, Mac became a mentor to him. When David later conceived the idea of launching a small company fund, he flew to San Francisco, around Thanksgiving of 1980, to discuss the idea with his old friend. Mac agreed to be a director of the venture, and he also helped with financing.

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Dimensional Fund Advisors was founded in 1981, and as the business moved forward, Rex Sinquefield, a former classmate of David’s at the University of Chicago, joined the endeavor. Like David and Mac, Rex developed one of the earliest index funds, based on the S&P 500 Index, while at American National Bank in Chicago in the early 1970s.

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The young firm faced some early obstacles, but it was able to deliver returns reflecting the performance of small companies. That was what it had promised to institutional clients, and what set it apart from competitors. In the early 1980s, Dimensional moved its headquarters to Southern California. While David and Rex ran the firm, Mac continued to pursue other interests in finance and remained a Director at Dimensional for decades after.

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Mac believed that financial engineering could make investing more efficient and less risky.

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“Mac was in on the ground floor of the movement to bring academic rigor to finance, a pursuit that remains at the heart of Dimensional to this day,” David said in 2017, when Mac was honored for his pioneering work on index funds with the CME Group Melamed-Arditti Innovation Award. “We’ve sought to enhance the original idea of indexing without compromising the benefits of low costs and diversification. Along the way we have amassed results that stand out in the industry, and Mac has played a pivotal role.”

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Conversations with David Booth: John “Mac” McQuown (2015)

His time at Wells Fargo and Dimensional sharpened Mac’s belief that financial engineering could make investing more efficient and less risky. Using his data-driven approach, Mac went on to start innovative firms in various industries. He and some business partners recognized that credit ratings don’t always reflect a company’s likelihood of default, so they developed a way to calculate this probability with greater accuracy using stock option pricing. That led Mac to co-found, in 1989, the KMV firm, where he also served as chairman. The firm provided corporate credit analytics to global financial companies and was sold to Moody’s in 2002. Mac also went on to co-found Diversified Credit Investments, which predicted the default risk in corporate bonds and credit-default swaps. The San Francisco–based firm was sold to private-equity firm Blackstone in 2020.

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Mac continued his innovative work in financial engineering later in life by devising a new form of corporate bond using credit-default swaps. He joined the two securities together into an “exchangeable bond,” or eBond for short, leading Bloomberg Markets in 2015 to run a cover story on Mac titled “Meet the 80-Year-Old Whiz Kid Reinventing the Corporate Bond.”

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“Curious About Everything”

Throughout his long career in finance, Mac never forgot his agricultural roots as a farm boy from Illinois. In the 1990s, Mac and Leslie began purchasing land in Northern California. In looking at the property and what to grow, they decided that grapes seemed an obvious choice given the soil in the Sonoma Valley. They set out to turn the property into what became Stone Edge Farm, and as with many of the other ventures in his career, Mac found success. In addition to fine wine, the 16-acre organic farm produces olive oil and heirloom vegetables and features a restaurant.

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A dedicated environmentalist with a desire to combat climate change, Mac led his farm toward energy self-sufficiency, going so far as to develop a microgrid testing ground there in 2012. Serving on the director’s council for the Scripps Institution of Oceanography—one of the oldest and largest centers for Earth science research in the world—instilled an appreciation for the urgency of climate change as an issue, and many of his philanthropic endeavors were directed toward it.

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As with his other projects, Mac’s approach to the microgrid was to gather as many people with different talents and viewpoints as possible. (In a profile of Mac on the Empowered Energy Heroes website, he was described by Morgan as “a mastermind who brings people together to accomplish a greater goal.”) He created a “brain trust” of researchers from universities and private companies to collaborate and design the new energy system. In just a few years, the Stone Edge Farm MicroGrid evolved into a living laboratory with dozens of distributed energy resources, including the use of hydrogen to store solar power. Since 2018, Stone Edge has operated solely on energy produced at the farm.

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Mac said everything he did in his career related to his interest in complex ideas and the intersection of different fields of study. “The amalgamation of independent disciplines appeals to me, because a lot of the problems we have to solve are cross-disciplinary,” he told his alumni magazine in 2018. “They don’t fit neatly into one academic discipline.” As Eugene Fama told Bloomberg Markets about Mac in 2015: “He hasn’t changed that much since I first met him more than 50 years ago. He has a basic curiosity about everything.”