Speaker 1: The following interview with former TD Amerit Trade CEO Joe
Speaker 1: Ricketts was conducted prior to news that Charles Schwab has
Speaker 1: agreed to buy t D a Merry Trade. This is
Speaker 1: Masters in Business with Barry Ridholts on Boomberg Radio. This
Speaker 1: week on the podcast, I have an extra special guest.
Speaker 1: His name is Joe Ricketts. He is the founder of
Speaker 1: t D Amerit Trade at one point three trillion dollar
Speaker 1: custodian uh. Ricketts is an entrepreneur who has built a
Speaker 1: business over the course of fifty years and is extremely
Speaker 1: knowledgeable about what it's like to go through all the
Speaker 1: growing pains. Ultimately, he the company goes public in ninety
Speaker 1: seven and has been wildly successful. About a decade ago,
Speaker 1: Ricketts and his family purchased the Chicago Cubs. We talked
Speaker 1: about that. We talk about politics, We talk about policy.
Speaker 1: We talked about all sorts of really really interesting things.
Speaker 1: If you are at all intis did in go down
Speaker 1: the list? Online trading, entrepreneurship, building a business, taking chances,
Speaker 1: embracing risk. I could go on and on, but rather
Speaker 1: than me, Babel, why don't I just say my conversation
Speaker 1: with Joe Ricketts this is Masters in Business with Barry
Speaker 1: Ridholts on Bloomberg Radio. My special guest this week is
Speaker 1: Joe Ricketts. He is the founder and former CEO of
Speaker 1: TD Ameritrade, one of the largest retail custodians in America,
Speaker 1: man with what is it about one point three trillion
Speaker 1: in assets under custodian ship. He bought the Chicago Cubs
Speaker 1: in two thousand and nine, and a few years later
Speaker 1: the team won their first World Series in a hundred
Speaker 1: and eight years. Joe Ricketts, Welcome to Bloomberg. Thanks very,
Speaker 1: It's fun to be here. So I was looking forward
Speaker 1: to having this conversation for a number of reasons. But
Speaker 1: let's go back to the beginning and start with your
Speaker 1: career year. You were a credit reporter at Dunnan brad Street.
Speaker 1: That seems so out of character to everything I know
Speaker 1: about you. Well, it was critically important to the decisions
Speaker 1: that governed my direction in life. Um, I really didn't
Speaker 1: know what I wanted to do for a living, and
Speaker 1: I had already started a family, so I had to
Speaker 1: come up with some direction pretty quickly. The time was
Speaker 1: going by and I you were in college when you
Speaker 1: already had your first couple of kids, and it's like, yeah,
Speaker 1: I bet it's not making some money, that's right. And uh,
Speaker 1: So I took this job with Dunner brad Street where
Speaker 1: I went out to all the small towns in southeast
Speaker 1: Nebraska and southwest Iowa to call on the business. So
Speaker 1: I drive into town and I just go one business
Speaker 1: after another with the credit report that I had from
Speaker 1: the previous year and talked to them about updating it.
Speaker 1: And I got to meet a lot of interesting people,
Speaker 1: and I got to meet a lot of people that
Speaker 1: were really making our country go. And the thing that
Speaker 1: stunned me, or really kind of light that went off
Speaker 1: when I was in college, I had a professor of
Speaker 1: social sciences tell us we were such a great country
Speaker 1: because of our natural resources. And after I got out
Speaker 1: and into the business world calling on these merchants, I
Speaker 1: understood the wealth of this country came out of the
Speaker 1: brains of these people. They took money out of their
Speaker 1: own pocket, ideas out of their own heads, and they
Speaker 1: started a business of shoe store or pharmacy or whatever,
Speaker 1: and they hired people, and they had to satisfy their customers,
Speaker 1: and so working to satisfy your customer at the same time,
Speaker 1: being able to create wealth was a wonderful idea for me.
Speaker 1: So I said, that's what I want to do. I
Speaker 1: want to have my own business. So you go from
Speaker 1: Dunham Bradstreet to Dean Winter as a stockbroker in and
Speaker 1: then the ideas start to just date in your in
Speaker 1: your head. How did Dean Winter lead to first Omaha
Speaker 1: in ninety seven years later? Well, Dean Winter was a
Speaker 1: commission job. All the brokers really in the country worked
Speaker 1: on commissions and I didn't have any capital to start
Speaker 1: my own business. So this was as close having my
Speaker 1: own business as I could get. And we just happened
Speaker 1: to become registered. I say we my the other guys
Speaker 1: in the training class at a time when a market
Speaker 1: was at the top and it went down for the
Speaker 1: next five years, which was a big surprise because it
Speaker 1: hadn't done that for a long long time. The DW.
Speaker 1: Kisses a thousand by down correct And so how did
Speaker 1: that impact you as a as a broker? It was
Speaker 1: very difficult to make a living as a broker. We
Speaker 1: had to work very hard all the time. But we
Speaker 1: were building a client book that would help us in
Speaker 1: the future. Just about the time when we thought that
Speaker 1: client book was going to help us make the type
Speaker 1: of income that we wanted. The idea of negotiated commissions
Speaker 1: came into the marketplace the big boom. So the restrictions,
Speaker 1: the regulations go away, are d deregulated, and you could
Speaker 1: pretty much charge much, much less than before. So I
Speaker 1: realized if I called my customer and talked to him
Speaker 1: about a good idea to invest in, the second conversation
Speaker 1: was how much are you going to charge? And how
Speaker 1: little do they want to pay? So we were gonna
Speaker 1: so it appeared though, as though we were going to
Speaker 1: have to have twice as much in the way of
Speaker 1: a client book and worked twice as hard just to
Speaker 1: be able to make the same living. So my friend,
Speaker 1: the guy that became a partner with me, Bob Perlman,
Speaker 1: and I talked about why don't we join him. I
Speaker 1: gotta tell you, Barry, we had no idea how to
Speaker 1: start a brokerage firm. We really, we didn't have any
Speaker 1: idea whatsoever, except there were two ideas that that floated
Speaker 1: through our minds. Number one was we thought there was
Speaker 1: a large enough more market of people that wanted to
Speaker 1: buy or sell a stock without any other conversation. They
Speaker 1: just wanted to We don't want your recommendation. We don't
Speaker 1: care what your your best of list is. Just execute
Speaker 1: the trade as cheaply as possible. That's correct. And there
Speaker 1: was a market, we didn't know how big, but we
Speaker 1: thought there was. And and the cost of of trading
Speaker 1: pre deregulation was a couple hundred bucks. A couple hundred
Speaker 1: bucks versus twenty five that's really huge, traumatic traumatic. The
Speaker 1: other idea that was important and that proved to be correct,
Speaker 1: was that after the Second World War we had the
Speaker 1: g I Bill and a lot of men and women
Speaker 1: came back from the war used the g I bi
Speaker 1: able to become engineers, pharmacists, And these people were educated
Speaker 1: well enough to be able to do their own financial
Speaker 1: planning and be able to make their own decisions, and
Speaker 1: they were making a nice enough living that there's a
Speaker 1: little investable cash on this correct. So the market turned
Speaker 1: out to be quite huge. We we just had to
Speaker 1: find a way to advertise into that market so that
Speaker 1: we could tell them succinctly what we were doing and
Speaker 1: make them want to respond to us. So how did
Speaker 1: first Omaha become eventually a merror trade and then Tedium
Speaker 1: mer Trade. We UH. It's really a long story, but
Speaker 1: we thought we would be a local business, and we
Speaker 1: found out that we could not exist as a local business.
Speaker 1: So we advertised in the Midwest edition of the Wall
Speaker 1: Street Journal. There was a favorite spot on the inside
Speaker 1: of the back page in those times where all the
Speaker 1: discount brokers advertising, so we advertised in UH that paper
Speaker 1: with an eight hundred number. Now, something that was unique
Speaker 1: to us was that Omaha was the location of Strategic
Speaker 1: Care Command. The federal government, the Air Force pay Northwestern
Speaker 1: Bill Telephone Company to put in a sophisticated communications system
Speaker 1: in case there was a hot war. Well obviously there wasn't,
Speaker 1: so this communication system was not used. So the phone
Speaker 1: company dropped their rates on what was then a brand
Speaker 1: new idea eight hundred telephone numbers where the caller did
Speaker 1: not pay for the telephone call. And so our telephone
Speaker 1: rates for UH interstate calls long distance calls were anywhere
Speaker 1: from ten to lower than if we'd been in any
Speaker 1: other location in the country, and that was one of
Speaker 1: our major costs. So that that gave us a cost
Speaker 1: benefit we didn't see when we started as first Omaha,
Speaker 1: but then we did see after we started advertising in
Speaker 1: the Midwest edition of the paper. Uh, that was so successful,
Speaker 1: we went to the national edition and we attracted customers
Speaker 1: from all over, So then we really kind of changed
Speaker 1: the name to First National. So so you're marketing to
Speaker 1: the entire world, or at least the entire country. Where
Speaker 1: you're located is irrelevant as long as it's nationwide and
Speaker 1: you're lookating in a place that made your cost structure
Speaker 1: cheaper than competitors. That was very fortuitous, that is correct,
Speaker 1: And the problem that we had to overcome was that
Speaker 1: people were not used to dealing with a broker that
Speaker 1: they couldn't see touch and field. So they're used walking
Speaker 1: into an office and meeting a person. So they had
Speaker 1: to become comfortable with the systems that they were using
Speaker 1: in order for them to um really do a lot
Speaker 1: of business with it. So they would generally start out
Speaker 1: slowly with small trades and then they become to rely
Speaker 1: on us, and that we got all our business. And
Speaker 1: you were one of the first that started to allow
Speaker 1: people to enter the touch tone keys to execute trades.
Speaker 1: It might do if you allow me to say so,
Speaker 1: very we were the first, very first were so you
Speaker 1: could I could call all up First National and punching
Speaker 1: the stock symbol and punching how many shares and the
Speaker 1: trade would go off automatically. That's correct. That that sounds
Speaker 1: pretty innovative. It was very innovative. And Uh, I went
Speaker 1: out to my customer base to form customer focus groups
Speaker 1: to ask them how they would enjoy this, and my
Speaker 1: answer was emphatically no. Really why the customer said, would
Speaker 1: I use a system based on the TOUCHTNE telephone when
Speaker 1: I can talk to a broker? And Uh, the answer
Speaker 1: is because it's cheaper. Well, they didn't want to use
Speaker 1: the surface, so I said, I have to make it
Speaker 1: cheaper to attract their attention and I and so I
Speaker 1: came out with a unique um way of charging for
Speaker 1: a customer that threepennies to share. And so that was
Speaker 1: something that got through immediately, and so people would take
Speaker 1: the five minutes it took to learn how to use
Speaker 1: the system. Then what I found out was some people
Speaker 1: placed their trades so fast it would be impossible to
Speaker 1: move your finger that fast. So I called him up
Speaker 1: and I said, what are you doing and he said, well,
Speaker 1: we are using a computer to program the touch tone
Speaker 1: system with the telephone number and with all the information
Speaker 1: of a trade. So we're sitting at home watching television
Speaker 1: and seeing the tape, and when the stock price gets
Speaker 1: close to what we want, we pressed one button. It
Speaker 1: goes zip. Oh that's unique. The people loved the power
Speaker 1: of taking care of themselves. They didn't want a broker
Speaker 1: once they used the system. They wanted the power of
Speaker 1: taking everything onto themselves. And really they be the professionals
Speaker 1: that would call the shots. And so now let's fast
Speaker 1: forward to a Merritt Trade becomes the first online brokerage.
Speaker 1: What was that like? Did you have any idea that
Speaker 1: this new fangled online thing would replace the whole telephone
Speaker 1: side of things? Because of the story that I just
Speaker 1: told you, I knew exactly the first time that we
Speaker 1: got an order, UM, one of our clerks brought us
Speaker 1: a printed email message which had by three hundred shares
Speaker 1: of a blue chip stock at the market, and they said,
Speaker 1: and of course we had their customer's account number and
Speaker 1: phone number. And the question to me was should we
Speaker 1: go ahead and place this because we didn't talk to
Speaker 1: the customer. I have the touchdown, and I said, yeah,
Speaker 1: go ahead, we'll see what happened. So we we executed
Speaker 1: that order and went back to the customer by email
Speaker 1: to report the trade. No voice communications, So it was very,
Speaker 1: very similar to the touchdown aspect of it. And I said,
Speaker 1: this is even better because they get a confirm with
Speaker 1: the price, the date, everything, they can print it out,
Speaker 1: and because it is on a PC, we can deliver
Speaker 1: more information, we can deliver our own tape, we can
Speaker 1: deliver research. And I said, this is going to be
Speaker 1: much more powerful than the touchdown telephone. Everyone was, that's
Speaker 1: quite fascinating. Let's talk a little bit about the growth
Speaker 1: of UM of t D first. This whole time, when
Speaker 1: you go from phone calls to TOUCHDOWNE to UH to
Speaker 1: online trading, you're competing with Charles Schwab, which was one
Speaker 1: of the biggest UM discount brokers at the time. What
Speaker 1: was that like. Did you end up ever having any
Speaker 1: sort of relationship with them? Well, him, Zuck Schwab as
Speaker 1: a friend of mine today, but at the time we
Speaker 1: were we were competitors. He had the advantage of having
Speaker 1: California as his customer base, and I think at the
Speaker 1: time that was the night California by itself was the
Speaker 1: ninth largest economy in the world. UH in Nebraska, we
Speaker 1: had about a million and a half people, I mean
Speaker 1: a huge, huge difference. So I had to go national,
Speaker 1: whereas he could really start a local I heard about.
Speaker 1: Although we started in ve I first heard about this
Speaker 1: West Coast discount broker called Schwab in v seven, So
Speaker 1: he started, you know, after we got started, but I
Speaker 1: really didn't know he existed. The ones I did know
Speaker 1: existed advertised on the inside page of the Wall Street Journal,
Speaker 1: and they were from New York, and then one was
Speaker 1: from Chicago. So there was only a couple of people
Speaker 1: in the business when we got started. Now a couple
Speaker 1: of years later, very a few years later, we had
Speaker 1: four competitors. Everybody thought this was simple and easy. It's not.
Speaker 1: And of course everybody found out that it's not simple
Speaker 1: and easy, and so competition effort a period of time
Speaker 1: allowed us and others to buy out our competitors. So today,
Speaker 1: you know, there's really only three or four brokerage in
Speaker 1: this Lots of consolidation and that was a lot of
Speaker 1: fun to go through that. In that consolidation phase, we
Speaker 1: ran across the company in Manhattan called Offhauser. The I
Speaker 1: really described in a lot of detail in the book
Speaker 1: that that was really attractive, and they were advertising doing
Speaker 1: trades online. Nobody had ever heard of online, nobody knew
Speaker 1: the internet, nobody knew what this was all about. This
Speaker 1: is around what year? This is uh, you know seven? Okay,
Speaker 1: so still a o L is around. But the Internet
Speaker 1: isn't the Internet yet. Yeah, that's correct. It hadn't evolved
Speaker 1: to the point where we are today. So um. We
Speaker 1: talked to them about selling, and he gave us a price,
Speaker 1: which at the time I thought was incredibly high, and
Speaker 1: but I brought myself to really say, Okay, I'll pay
Speaker 1: it just so I could understand the technology. So you
Speaker 1: acquired them, and what's what's an incredibly high price? Seven
Speaker 1: and a half million dollars sounds I bet that it
Speaker 1: turns out to be a fantastic r o y thirty
Speaker 1: years later, within two years. Incredible. We we really didn't
Speaker 1: have any understanding. But within a very short period of time,
Speaker 1: the off Houser folks realized that they had put the
Speaker 1: price too low, and I had paid a bargain basement price.
Speaker 1: But the whole industry made fun of us on the
Speaker 1: day of the trade because they said we were stupid,
Speaker 1: and that was way too high, as six months later
Speaker 1: they got it and they understood what happened. So we
Speaker 1: put the economies of scale in place to be able
Speaker 1: to increase our profits dramatically. Turned out to be a
Speaker 1: wonderful thing for us to do. We found out that
Speaker 1: the technology that off Houser had really wasn't what I
Speaker 1: understood them to have, and it was more like smoking mirrors.
Speaker 1: So the customer could use their computer at home to
Speaker 1: send the trade, but then it printed out at off
Speaker 1: Houser and they had to have a clerk tear it
Speaker 1: off and put it back in to go the exchange.
Speaker 1: It didn't so they didn't have we call those APIs today.
Speaker 1: There was no application program interface that would automate that,
Speaker 1: so we had to build all of that, which is
Speaker 1: good because we learned the hard way, made a lot
Speaker 1: of mistakes, a lot of software didn't work. Throw it away,
Speaker 1: you start all over and do it again. But by
Speaker 1: the time we got all done, a customer could sit
Speaker 1: at home, on their keypad of their own computer, place
Speaker 1: a trade and get a report within seconds. So full
Speaker 1: online trading for real full online trading, and then the
Speaker 1: exchanges and the over the counter market developed systems of
Speaker 1: receiving those orders electronically, automatically executing them and reporting back.
Speaker 1: So it turned out over a period of time and
Speaker 1: huge investments on the part of everybody in the industry
Speaker 1: to bring this type of service to the customer, which
Speaker 1: is absolutely wonderful. So you guys were cutting edge with TOUCHDOWNE,
Speaker 1: you're cutting edge with online. You very aggressively roll out
Speaker 1: um a pretty big advertising campaign. What was that like
Speaker 1: and what were the results? Well, when we started, it
Speaker 1: was really kind of anxious. It was unsettling until we
Speaker 1: until we really did it. I was going to take
Speaker 1: our advertising budget I think from million dollars a year
Speaker 1: up to a hundred million dollars and by the way,
Speaker 1: million dollars for relatively small company way back when that's
Speaker 1: a big chunk of change. It was a big chunk
Speaker 1: of change. So we attracted advertising firms that were the
Speaker 1: top advertising firms in the country. So to the size
Speaker 1: of the million dollar Yeah, that's correct, and I think
Speaker 1: there was seven or nine of them. Um and UM.
Speaker 1: I said, I've got to cut through the crowd, guys,
Speaker 1: We've got to do something new and different. And it
Speaker 1: seems to me humor is the way to go, and
Speaker 1: they said, no, that's wrong. People don't think of their
Speaker 1: money is funny. It's not light at all, and you're
Speaker 1: just not going to be successful. So they all gave
Speaker 1: me ads that were dull and boring, just like a bank,
Speaker 1: and except Ogilvy, Ogilvy. Ogilvy dared to come up with
Speaker 1: something new and different. And it was a person on
Speaker 1: the street that said they bought a particular stock, like
Speaker 1: General Motors for bucks well, General Motors selling for fifty,
Speaker 1: so that there was the play on the commission as
Speaker 1: well as on the stock. And then they giggled. They
Speaker 1: were so happy that they would be able to buy
Speaker 1: a stock at such a low price. That those ads
Speaker 1: really set us off in a different direction. But the
Speaker 1: ad that really made us was an ad with an
Speaker 1: office boy. His actor name is Michael Maron. If I
Speaker 1: remember back then, and uh, he instructs his boss on
Speaker 1: how to place the trade online. I have a very
Speaker 1: vivid recollection of that add. It stayed with me. It's
Speaker 1: twenty years ago. There was more. Oh yeah, it's iconic.
Speaker 1: And he took that ad took over the whole industry.
Speaker 1: And he made a comment in that ad, let's light
Speaker 1: this candle and that became a standard quotation in the
Speaker 1: in the securities industry. But that got us a lot
Speaker 1: of attention. So using humor to get across the idea
Speaker 1: that we had a low cost with good executions was
Speaker 1: something that really permeated the market and really made us grow.
Speaker 1: Any other ads from that era, this is pre two
Speaker 1: thousand dot com era, anything else really stand out from you?
Speaker 1: Those were the two we We did a number of
Speaker 1: other commercials that had humor in them, playing off of
Speaker 1: certain things in the culture, but those were the two
Speaker 1: that were the biggest and the best. Let's light this
Speaker 1: candle I have, I'll find it on YouTube and posted
Speaker 1: it you can you can see it on my website.
Speaker 1: The harder you dot work? Okay, we will definitely uh
Speaker 1: reference that. Um So, the company goes public in was
Speaker 1: this pre or post t D acquisition? This was pre so? So?
Speaker 1: What was the what was the process of I p oing? Like? Well,
Speaker 1: it was good and bad, okay. I My dream was
Speaker 1: to build a business that my children could take over
Speaker 1: and continue to build, assuming they were interested in online brokerage. Correct,
Speaker 1: And we had my wife and I had four kids.
Speaker 1: I thought, you know, one of them is probably gonna
Speaker 1: want to do this, So that was the dream that
Speaker 1: I had. But if we went public, that changes. You're
Speaker 1: you're no longer a private company or a public company,
Speaker 1: and you're the dynamics of who's going to run it,
Speaker 1: and all that changes. But I realized that online trading
Speaker 1: was an inflection point in the history of not only
Speaker 1: the brokerage business, but in the history of investing for
Speaker 1: all time. And if I was going to take advantage
Speaker 1: of it, I was going to have to move and
Speaker 1: I and I wasn't. Although we were making a large
Speaker 1: amount of profits, not enough for me to build the
Speaker 1: technology and advertise. So that's when I said, I have
Speaker 1: to spend a hundred million on advertising and a hundred
Speaker 1: million on technology. And those were guesses, but Verry, they
Speaker 1: turned out to be low. Let's talk about that tech
Speaker 1: analogy a bit, because you describe in the book, Um,
Speaker 1: you describe just a never ending series of challenges in
Speaker 1: snaff foods and issues. Technology was simultaneously your your friend
Speaker 1: but also, um, I want to call it your enemy.
Speaker 1: But it seemed like you were constantly having to find
Speaker 1: new ways to work with the technology where it wasn't
Speaker 1: biting you in the backside. That is correct the whole time.
Speaker 1: It took a long time for us really come to
Speaker 1: the conclusion about what we had to do. But let
Speaker 1: me describe what it was like. When we started in,
Speaker 1: we placed and we wrote an order on ticket. Our
Speaker 1: office lady called in the trade to the exchange. We
Speaker 1: got the report back on the ticket, and then she
Speaker 1: would take that copy of the order ticket and write
Speaker 1: it down in a ledger all the trades that we
Speaker 1: did that day, and then she would write it down
Speaker 1: on another piece of paper cardboard for that customer. And
Speaker 1: they were setting a ban. This is like Christmas carols,
Speaker 1: like Charles Dickens. So so one went into the You
Speaker 1: have two bins. One goes into the company ben and
Speaker 1: the other goes into the customer bins, so everybody you
Speaker 1: have duplicates, and everybody well, once our customer files ones
Speaker 1: our company files, and then we at the end of
Speaker 1: the month, we'd have to type out the confirmations and
Speaker 1: the month in statements and send out to customers and
Speaker 1: hopefully everything reconciled. That's correct. And we found out right
Speaker 1: quick if we were going to do very many trades,
Speaker 1: we couldn't do that anymore. So we had to really
Speaker 1: get into the computers. The first computer system that we got,
Speaker 1: uh didn't work very well and and pretty soon our
Speaker 1: volume really didn't allow us to use it. So we
Speaker 1: had to think about getting our own computer. So I
Speaker 1: was one of those people that thought, well, we'll get
Speaker 1: our computer and we'll be okay, Well, it'll last us forever. Uh.
Speaker 1: Somebody said, well you need software, and I'd say, what's software.
Speaker 1: So once we understood what we had to do, David
Speaker 1: Kellogg was a genius that that put it all together
Speaker 1: for us. We fund out pretty soon that we outgrew
Speaker 1: that although we spent you know, a couple of million
Speaker 1: dollars huge budget for us at the time, we had
Speaker 1: to do something new and different. All the way along,
Speaker 1: we discovered there's really three pieces of technology that we
Speaker 1: had to have built in order to make the system
Speaker 1: work when we got to the middle nineteen nineties. The
Speaker 1: first was our account base and keeping records of all
Speaker 1: the trades in our customer accounts. The second was how
Speaker 1: the customer places their trade from their computer to our system.
Speaker 1: And then we had to have a piece of middleware
Speaker 1: which would take that trade, send it to the market,
Speaker 1: come back and put on our customer account. All that
Speaker 1: software had never been built before, so you guys had
Speaker 1: to design that from scratch. We had to design that
Speaker 1: from scratch, and that's before we started talking about UM account,
Speaker 1: performance reporting and billing and reconciliation. That's a giant, gilliant project.
Speaker 1: That's a giant project. And so this was there wasn't
Speaker 1: a off the shelf software. You guys were the first
Speaker 1: ones pushing this phone. There was nothing you could buy.
Speaker 1: Nobody would tell you know what he would teach you.
Speaker 1: We had to learn everything the hard way, which meant
Speaker 1: we threw a lot away. We threw away a lot
Speaker 1: of software because we built it and the guys running
Speaker 1: the software building teams really didn't understand exactly what we wanted.
Speaker 1: We tried to tell them as best we could, so
Speaker 1: they did it and we found, well that doesn't work.
Speaker 1: Here's what you have to change. So it was a
Speaker 1: trial in thereror method. But at the same time that
Speaker 1: it was awfully high in anxiety. It was exhilarating because
Speaker 1: it was, you know, just like you, you were conquering
Speaker 1: a new world, and so was a lot of fun
Speaker 1: from that point of view. But the the the anxiety
Speaker 1: came from you just really didn't know what your costs
Speaker 1: were going to be. So we finally got to the
Speaker 1: point where we knew what our costs were going to
Speaker 1: be and it was much more of a easier management job.
Speaker 1: So when did the TD acquisition take place? Well, we
Speaker 1: went public and uh, that was yes. And what we
Speaker 1: had done before and after we were public was by
Speaker 1: other small companies, by a lot of our competitors who
Speaker 1: could not afford and did not know how to put
Speaker 1: in their own clearing operation and their own data processing systems.
Speaker 1: And um Waterhouse was in Manhattan and was a big competitor,
Speaker 1: and we had talked to them about merging or buying them. Uh,
Speaker 1: those talks did not turn out to result in anything happening.
Speaker 1: But what did happen with Waterhouse is Toronto. Dominion Bank
Speaker 1: in Canada bought Waterhouse Securities and as the business continued
Speaker 1: to grow in market size with everybody having more accounts,
Speaker 1: we came to understand that size made a difference and
Speaker 1: so if we could merge or buy a competitor, the
Speaker 1: better off we were. And Waterhouse was one of those
Speaker 1: people that fit into one of our targets. Now it
Speaker 1: was a big change for us because it would now
Speaker 1: take the Ricketts family from owning more than toning less
Speaker 1: than But it was one of those things where we
Speaker 1: didn't have time to accumulate the cache flow to buy
Speaker 1: the accounts through advertising. We had to get them all
Speaker 1: at once. So we merged with the brokerage firm Waterhouse,
Speaker 1: which came with the ownership of Toronto Dominion. So now
Speaker 1: Toronto Dominion Canadian Bank became the largest shareholder of a
Speaker 1: merrit Trade, So that was really a merger, not a
Speaker 1: straight up acquisition, and they became the biggest shareholder of
Speaker 1: Correct Merrior Trade. But now you're a smaller owner, but
Speaker 1: of a much much bigger pie. That's right. So I
Speaker 1: had many more dollars but less ownership. So that's late nineties.
Speaker 1: Now you're running one of the larger online brokerage firms.
Speaker 1: What was the experience of the dot com implosion in
Speaker 1: two thousands, um our volume remained relatively steady. So with
Speaker 1: the technology that we had put in place, we had
Speaker 1: gotten to the point where our volume could come down,
Speaker 1: our revenues could come down, and we can still make
Speaker 1: a profit because you continue to reduce your costs by
Speaker 1: adding more and more technology. Correct you describe in the book,
Speaker 1: some of the really hilarious. I mean it's hilarious in hindsight.
Speaker 1: But in the book, you describe all these bugs and
Speaker 1: snaffoos and issues that keep coming up as you roll
Speaker 1: out more and more technology, and you're the guy who's saying, no, no,
Speaker 1: we need more. We have to get our costs down
Speaker 1: otherwise we're vulnerable to to other discounts from from elsewhere.
Speaker 1: It was either take the risk and try to do that,
Speaker 1: or before you ruin the company. So we took the
Speaker 1: risk and we did it and uh, knock on what
Speaker 1: it all worked and made us thrive. Uh, let's talk
Speaker 1: a little bit about this book. You own the cubs.
Speaker 1: You're successful businessman. You don't need the headache of writing
Speaker 1: a book. Why bother sit down and put all the
Speaker 1: time and effort into writing a book. There's a couple
Speaker 1: of reasons. First of all, I'm concerned that the number
Speaker 1: of new businesses getting started is too low relative to
Speaker 1: our total economy. So I wanted to encourage entrepreneurs to
Speaker 1: go ahead and start their business, and even though they
Speaker 1: didn't know all the answers which I point out in
Speaker 1: a book, and to let them know it's okay. To
Speaker 1: make a mistake. It's good to make a mistake because
Speaker 1: you learn from that mistake and you won't repeat it.
Speaker 1: When we were starting, I told my people, you know,
Speaker 1: all we have to do is be right fifty one
Speaker 1: percent of the time. But as I got more experience,
Speaker 1: I came to understand, no, you could be right only
Speaker 1: five percent of the time or some small amount, as
Speaker 1: long as you get rid of your errors quick. It's
Speaker 1: the magnitude of the mistakes, not necessarily the total number. Right.
Speaker 1: So there's a quote in the book I really like quote.
Speaker 1: Business was an act of creativity and courage. Other people
Speaker 1: didn't seem to see it this way, but to me,
Speaker 1: business was where life came alive. That's true for me. Now,
Speaker 1: that's that might be unique to an entrepreneur, but a
Speaker 1: lot of my time I spent alone just running thoughts
Speaker 1: and ideas through my head and then trying to carry
Speaker 1: him out. What if I did this, where would it go?
Speaker 1: What would happen? And I'd carry it five or six
Speaker 1: steps into the future and then find a problem and
Speaker 1: I have come back and we start all over again.
Speaker 1: That to me was very exhilarating. It's again, like the
Speaker 1: artist you put something on the paper. If you don't
Speaker 1: like that particular color or hue, you kind of change
Speaker 1: it um And then to take it to implementation was
Speaker 1: more exhilarating, and to see it work was heaven. Now,
Speaker 1: a lot of people would not feel those feelings that
Speaker 1: I just described to you, maybe just an entrepreneur, but
Speaker 1: it took me back to my childhood days when I
Speaker 1: saw my dad and all of the people that he
Speaker 1: worked with at electricians and the plumbers that had their
Speaker 1: own business. They were their own people. They were their
Speaker 1: own men that could decide whether they wanted to make
Speaker 1: their business successful or not by the way they deployed themselves.
Speaker 1: And this was a way for me to take different ideas,
Speaker 1: which was even more exciting because we were plowing a newfield,
Speaker 1: we were going into the frontier. It was a lot
Speaker 1: of fun. So early in the book, you described going
Speaker 1: with your father who was building houses at the time,
Speaker 1: and literally, these carpenters have aprons on different nails and
Speaker 1: different envelopes and they're they're building houses and you and
Speaker 1: but it was manual, it was so handsaws and and
Speaker 1: you described the moments, which I thought was really telling
Speaker 1: about what happens later in t D. You described the
Speaker 1: moment when the electrics circular saw comes out and everybody
Speaker 1: gathers around and they show a test to this, and it's, oh,
Speaker 1: my god, this is going to be an immense time saver.
Speaker 1: We'll be able to build things much much more quickly.
Speaker 1: How did that experience impact the way you saw technology
Speaker 1: affecting your business. I think the fact that my father
Speaker 1: knew and understand that it was so important to their
Speaker 1: work that it made an impression on me. How my
Speaker 1: father was reacting to this buzz saw. Now, the idea
Speaker 1: is really quite simple. It's going to save them time
Speaker 1: because I saw the carpenters using their hands and arms
Speaker 1: to saw a piece of wood. Now they could just
Speaker 1: use this electric implement and cut it right away. Uh.
Speaker 1: So it was an easy idea for me to really
Speaker 1: kind of understand. But the appreciation and the happiness of
Speaker 1: my father is the emotions that really made me stick
Speaker 1: that idea. In my mind. Didn't really never forget it.
Speaker 1: It really it really resonated. So you you describe UM
Speaker 1: quote technical challenges were my constant companion computers that would
Speaker 1: backfire with static electricity, UM equipment that constantly needed to
Speaker 1: be upgraded to keep up with the speed of of
Speaker 1: real time trading. And this is long before the quants
Speaker 1: and the algorithms took over trading. This was back in
Speaker 1: the day when your competitors were phone calls and someone
Speaker 1: walking into a brokerage office. What what made the technology
Speaker 1: such a continual challenge because it had never been done before.
Speaker 1: You really didn't know what you needed ahead of time. Yeah,
Speaker 1: you did not know the size of the computer, you
Speaker 1: did not know the size of the storing capacity, You
Speaker 1: did not know what the volume of trades were gonna
Speaker 1: be coming. So you were guessing at a lot of
Speaker 1: this stuff. And that's why a lot of it didn't work.
Speaker 1: But when we did find what it did work, we
Speaker 1: had the basis to correct it and it was easier
Speaker 1: going forward. And you write the break through was figuring
Speaker 1: out how to keep trimming costs by inducing the customers
Speaker 1: to go the least expensive way. Um, so first it
Speaker 1: was a phone call, then it was a touchstone, that
Speaker 1: was email, that it was online. Uh, in hindsight, this
Speaker 1: looks obvious, right, It's well, that's the hindsight of everything
Speaker 1: looks obvious in the rear view mirror. How groundbreaking was
Speaker 1: the idea we have to steer clients to the least
Speaker 1: expensive way to execute. Well, when when we started in,
Speaker 1: everybody thought we were fools. We we talked to the
Speaker 1: regulators who said, why would you want to do this?
Speaker 1: Brokerage firms that have been around for a hundred years
Speaker 1: or going out of business. The market is not good.
Speaker 1: What makes you think you can be better? I mean,
Speaker 1: everybody through cold water on us, and uh, you know.
Speaker 1: The simple idea was that, well, when the big firm
Speaker 1: maryor Enter decided to compete with you, they'll just stomp
Speaker 1: on you. And I said, they can't. They've got too
Speaker 1: much cost infrastructure that they can't change. Nobody understood that,
Speaker 1: so we were kind of ridiculed all the way along
Speaker 1: until we started showing the whole world that we were
Speaker 1: opening accounts so fast that we had captured the imagination
Speaker 1: of the customer to want the ease and convenience on
Speaker 1: the low cost, that we were somebody to contend with.
Speaker 1: You mentioned regulators. You've had some battles with the sec
Speaker 1: over how they supervise and regulate the brokerage firm in
Speaker 1: the execution. Tell us a bit about those experiences you
Speaker 1: wrecked in the book. Some of it's kind of amusing.
Speaker 1: I would not call it a battle so much as
Speaker 1: trying to bridge the gap of understanding. Um, you seem
Speaker 1: frustrated in the book that you understood this and you
Speaker 1: couldn't get these guys in DC to get it. I mean,
Speaker 1: they were just very old school. They were very old school,
Speaker 1: and people really didn't understand that customers wanted to do
Speaker 1: their own things. So even the regulators had this idea
Speaker 1: that the brokerage firm had to give research to the
Speaker 1: customer in order to make the customer, uh, want to
Speaker 1: make a decision, whereas the customer could buy their own
Speaker 1: information and do their own thing. So it was really
Speaker 1: kind of hard to get across now when the regulators
Speaker 1: came into because the first time in we deserved it.
Speaker 1: I'm sure they walked in and said with the idea
Speaker 1: that they were saying to themselves, these people are so stupid,
Speaker 1: we we don't they shouldn't be handling customer money. Well,
Speaker 1: by the way, if that was true, half of finance
Speaker 1: would be out of the jet. I mean, I'm i exaggerating.
Speaker 1: It's it's gone. A lot of it is. People have
Speaker 1: a real specific knowledge in one area and the rest
Speaker 1: of the world they're blind to. That's correct. So so
Speaker 1: they come in and what was that experience like, Uh,
Speaker 1: the I need to give credit to Tim McReynolds who
Speaker 1: was our attorney, and he was a young man that
Speaker 1: had a way, and in his imagination he pulled out
Speaker 1: an idea of how we should approach the Securities Next
Speaker 1: Change Commission. First of all, we didn't fight them. It
Speaker 1: wasn't a battle. We said, you are correct. We were
Speaker 1: we were recording option trades incorrectly. That was a violation
Speaker 1: of regulation which caused our netcap a chain reaction domino effect.
Speaker 1: So we said everything you say is correct. We didn't
Speaker 1: know and they said, well you should have. He said,
Speaker 1: well we know now. They said, okay, instead of shutting
Speaker 1: you down, we'll give you a penalty. So so this
Speaker 1: was really a potentially existential crisis. They would have shut
Speaker 1: you down. They could have. And their idea, I'm sure
Speaker 1: when they came in Barry, was we got to shut
Speaker 1: these people down. They don't know what they're doing. Once
Speaker 1: we proved to them that we were honest, that we're
Speaker 1: not chills, that we were doing something that the customer wanted,
Speaker 1: that the investment of public wanted and that we could
Speaker 1: change this record keeping system so simply and so easily.
Speaker 1: They said, well, we'll just give you a fine. How
Speaker 1: big a fine was that? Um, the dolls were not large.
Speaker 1: I can't remember. It was a small amount because we
Speaker 1: didn't have dollars. But they said, you have to stop advertising.
Speaker 1: You have to stop. You have to close your office
Speaker 1: and Lincoln Nebraska in Chicago, Illinois, and um, you cannot
Speaker 1: advertise for a long time until you get your books
Speaker 1: and records under control. I had to be out of
Speaker 1: the office for I think a month. I could not
Speaker 1: be around to manage things. So they were giving us
Speaker 1: penalties that we had to accept in order to stay
Speaker 1: in business and closed two offices thirty days suspension UM
Speaker 1: and spend advertising for how I mean you guys were
Speaker 1: Eventually we could not they did. They said, you cannot
Speaker 1: start advertising and that was our lifeblood until you get
Speaker 1: some your books and records on. How long did the
Speaker 1: process take to get it? That took months? That took
Speaker 1: maybe two months. Okay, that's I was afraid you canna
Speaker 1: say two years, but it didn't. But still that had
Speaker 1: to be a scary two month period. It was very scary.
Speaker 1: I think the judge that gave us those penalties, I thought,
Speaker 1: this is enough for them to close down, that just
Speaker 1: go away. Really, I think he thought, you know, if
Speaker 1: they can get through this, they deserved to stay in business.
Speaker 1: But we did get through it, and but we came
Speaker 1: out of that as friends with the regulators because they
Speaker 1: understood that we were trying to do something good for
Speaker 1: the industry, which they did not understand when they walked
Speaker 1: in our door the first time. Quite quite fascinating. My
Speaker 1: special guest today is Joe Ricketts. He is the founder
Speaker 1: and former CEO of TD Ameritrade. He is also the
Speaker 1: owner of the Chicago Cubs, although really it's more accurate
Speaker 1: to say your family trust is the owner of the Cubs.
Speaker 1: My kids on the kids on the Cubs. But that's
Speaker 1: a nice presence of the kids. You're the one who
Speaker 1: bought the It was a combination of if I'm doing
Speaker 1: this off the top of my head, nine million and
Speaker 1: oh nine, and the right in the middle of the crisis,
Speaker 1: right right, the kids put up a couple of hundred
Speaker 1: million dollars, You put up the slight majority, is that right?
Speaker 1: My kids put up about two and my wife owned
Speaker 1: them a bunch of money, I think, okay, and everybody
Speaker 1: involved obviously got their money from you. So I say,
Speaker 1: you're the guy who drove the purchase, and I'm the
Speaker 1: one who created the value that my kids could use. Okay,
Speaker 1: that's fair. So my wife and I put stock in
Speaker 1: the names of our kids in the early nineties because
Speaker 1: I can see it coming gotcha and this way that
Speaker 1: they would be responsible for the capital gain and not me.
Speaker 1: So I've been wrong when I'm saying you both the Cubs.
Speaker 1: Really you teed up the structure that allowed your kids
Speaker 1: to buy the cups. That's correct. That's quite interesting, and
Speaker 1: you talk about that in the book. And I keep
Speaker 1: getting it wrong. I keep saying, people send to me
Speaker 1: who you interviewed this week, Joe Ricket see both the
Speaker 1: Chicago Cubs. So let's talk a little bit about the
Speaker 1: we'll come back to the Cubs. Let's talk a little
Speaker 1: bit about the Opportunity Education Foundation and some of the
Speaker 1: other phil the piece you've been involved with. Tell us
Speaker 1: a little bit. What what does that foundation do? Well?
Speaker 1: I I let me take a step back. I you know,
Speaker 1: in my early fifties, I've had done nothing but work
Speaker 1: and I said, well, you know, I'm rich enough now
Speaker 1: and I can afford to travel. And travel was always
Speaker 1: one of my great attractions. I had wonderlust and I
Speaker 1: wanted to go to places like the Serengetti. I wanted
Speaker 1: to go where there was adventure in my travel. And um,
Speaker 1: I was my uh, three kids, my two sons and daughter,
Speaker 1: and I went to climb Kill Him and Jarrow with
Speaker 1: some friends and really go on a week of safari.
Speaker 1: So it was it was two weeks vacation. It was
Speaker 1: a long period of time. So you have you have
Speaker 1: four kids and three of them climb kill Himanjaro with you, correct,
Speaker 1: My my daughter, my son Peter, and my son Todd
Speaker 1: and I and we were with good friends and their
Speaker 1: family and so it was a great time. But in
Speaker 1: climbing Kill Him and jar Oh, we became close to
Speaker 1: our guys because that's not an easy thing to do.
Speaker 1: It's it's so when we came off at Kilimanjaro, we
Speaker 1: had already developed a bond. So now I'm not driving
Speaker 1: down the road in the Serengetti and we don't see
Speaker 1: any animals, and so I'm going to carry a conversation
Speaker 1: with the guy the driver. I said, what do you
Speaker 1: do when you are not on Safari? He said, well,
Speaker 1: I run this school. I started this school. Now I'm
Speaker 1: quite sure this man cannot read or write, but he's bright,
Speaker 1: so he he knows how to do the guide stuff.
Speaker 1: So I'm fascinated that that somebody that was pretty close
Speaker 1: to illiterate starts to school. Said why he said, well,
Speaker 1: I didn't think my kids were getting a good enough education.
Speaker 1: So I said, how many students do you have? He
Speaker 1: said I have twenty three. I said do they pay
Speaker 1: a tuition? He said, oh no, they can't afford it.
Speaker 1: They're poor. So well, how do you support the school?
Speaker 1: And he said, I take my check from the Safari
Speaker 1: company and I put in the bank and I used
Speaker 1: that money to support the school. Now, Burry, I know
Speaker 1: this guy has nothing. I'm impressed by American standards. This
Speaker 1: guy is a huge hero. So I said, what's the
Speaker 1: name of your school? He said, it's UHM Sat and
Speaker 1: it put his name in there. And I and I've
Speaker 1: gone to a Catholic school all my life, and so
Speaker 1: I know all the saints and I've never heard of
Speaker 1: this saint before. I said, who is that saying? He said, oh,
Speaker 1: that's my name, so he got it halfway. The government
Speaker 1: finally made him change the name, take his name off
Speaker 1: of it. He couldn't call himself a saint because he
Speaker 1: started a school. But I said, hey, can we We
Speaker 1: had talked enough about it that I was really fascinated,
Speaker 1: So can we go see your school when we go
Speaker 1: back to Russia before we get on the plane. And
Speaker 1: he said, I'd be happy to have you come. So
Speaker 1: I said, well, let's go back to camp and talk
Speaker 1: to the rest of the people on the trip, and
Speaker 1: they all wanted to go. So we went to see
Speaker 1: a school. Now, the school was a cement platform, a
Speaker 1: concrete brick walls with a tin roof. It's equatorial, so
Speaker 1: they didn't have to worry about cold, no snow, and
Speaker 1: of small rainy season. Just yeah, and and there wasn't
Speaker 1: anything in the room. There were nothing on the walls,
Speaker 1: There was no books, there was no pencils, there was
Speaker 1: no paper. There were three volunteer adults that taught the
Speaker 1: kids A B. C's and poems and things of that sort.
Speaker 1: So they were working really really hard to give their
Speaker 1: kids a little bit of an education. So um, I
Speaker 1: I said to His name was Shanky Wilson. I said, Shanky,
Speaker 1: I'll tell you what I'll do. They had electricity, no
Speaker 1: running water. With the electricity. I'll buy you a TV,
Speaker 1: and when I go back to the United States, I
Speaker 1: will send you DVDs of programs that our kids see
Speaker 1: before they go to school, like Sesame Street and Mr.
Speaker 1: Rogers and things of that sort. So we did that.
Speaker 1: Then I went back a later. Now he's got forty
Speaker 1: seven students and they're all paying it a little bit.
Speaker 1: So one had. When he had that TV and the
Speaker 1: DVD player and showed what happens in America, there was
Speaker 1: a lot more interest from the neighborhood and that really
Speaker 1: kind of grew. The next school wanted it. The next
Speaker 1: school wanted it. So we really started taking on one grade,
Speaker 1: uh every year, and I went back to America. I
Speaker 1: was familiar with making commercials. We hired a studio, I
Speaker 1: put in a teacher in students, and we filmed teachers
Speaker 1: giving educational courses math and science and things, so now
Speaker 1: they can learn how to instruct the kids off of
Speaker 1: the DVDs became very popular. But when we got to
Speaker 1: secondary education the ninth grade, this guy, Steve Jobs came
Speaker 1: along with new ideas of how you use technology. So
Speaker 1: we said we're going to use that new technology and
Speaker 1: in fact, we're gonna up assisting the schools. We're going
Speaker 1: to build the education programs into the iPad and then
Speaker 1: we can give the iPads to the schools and the
Speaker 1: students and they can learn the same way kids in
Speaker 1: the United States learned. So that's how we got started
Speaker 1: off on the education system. And how large has that
Speaker 1: scaled up to be? For primary grades were at about
Speaker 1: sevent and fifty schools with thousands of students. Fifty schools
Speaker 1: schools and that's all in Africa. Is that? Yeah, eleven
Speaker 1: eleven countries. Three of them are in Asia, India, UH
Speaker 1: Sri Lanka, and um Uh Catman, Dow and then the
Speaker 1: rest of them are in the various countries in in Africa.
Speaker 1: But the Education Department of the Government of Tanzania saw
Speaker 1: what we were doing and they loved it. So they
Speaker 1: really kind of have sponsored us to be able to
Speaker 1: expand the secondary education schools in Tanzania and so that's
Speaker 1: what we're concentrating on right now. So we have about
Speaker 1: UH forty high schools in Tanzania and we had more
Speaker 1: every year to our system of education and it is
Speaker 1: changing their life significantly. I can imagine. Now it's worked
Speaker 1: so well in Africa, I said, we had to try
Speaker 1: the United States. So I've got two schools in the
Speaker 1: United States, one in Santa Rosa, California, and the other
Speaker 1: one in Omaha, Nebraska. How did the school survive the
Speaker 1: most recent fire up in Santa Rosa. Oh not well.
Speaker 1: I mean, you know some of the kids, you know,
Speaker 1: their homes were burnt. Uh, they had to relocate, they
Speaker 1: had to be out of school for a long time.
Speaker 1: The fires never got close to our school, but they
Speaker 1: certainly did influence the people that we're concerned with our school,
Speaker 1: both fires last year and this year. So um, it
Speaker 1: is something that we just had to live with and
Speaker 1: get on with. And where's the other school? And the
Speaker 1: other other school is in Omaha, Braska in Bellevue is
Speaker 1: located on Bellevue University campus. And we we learned I
Speaker 1: structured a meach differently, so we learned different lessons. So
Speaker 1: going forward, as we open more schools in the United States,
Speaker 1: will concentrating on putting them on university campus because we
Speaker 1: bring kids out of families who have never gone to college.
Speaker 1: There nobody in their families gone to college, and I
Speaker 1: like to go to disadvantaged neighborhoods and the kids then
Speaker 1: are in high school on campus with college kids and
Speaker 1: it doesn't take them too long. This. Yeah, so it's
Speaker 1: not something foreign to him, and he seems very passionate
Speaker 1: about this. I'm very passionate about it. It's incredibly good feeling.
Speaker 1: Should change people's lives for the better. The people in
Speaker 1: Africa were giving them a chance to live in an
Speaker 1: environment where they don't have to go into the fields.
Speaker 1: In the United States, what we're opening up is an
Speaker 1: idea to students that don't get this at home. And
Speaker 1: uh so it's it's really and of course there's large
Speaker 1: parts of our cities and our country where children need
Speaker 1: to have the opportunity to be able to get ahead,
Speaker 1: to take advantage of the American dream, and then our
Speaker 1: education system. That's what we do. We take the kids
Speaker 1: that are from a poor neighborhood and say, here's what
Speaker 1: you can achieve if you get a good education, and
Speaker 1: we help them all the way through. You have four kids.
Speaker 1: I have four kids. One of your sons governor of Nebraska. Correct.
Speaker 1: Uh The other of your sons is a significant um
Speaker 1: participant in the r NC. Correct, your daughter is very
Speaker 1: well known in the Democratic Party. She's a huge supporter
Speaker 1: of gay rights and has put forward a lot of policies.
Speaker 1: And Um, I don't know if the fourth kid is
Speaker 1: all that politically active. Well, he runs the Cubs, so
Speaker 1: he's he's too busy winning World series to mess around
Speaker 1: with politics. But that's quite a spread of political thought
Speaker 1: from within the Ricketts family. And I've got to say, Barry,
Speaker 1: I don't think it's much different than most families. You
Speaker 1: get a lot of every First of all, my wife
Speaker 1: and I brought our childer up to be independent thinkers,
Speaker 1: and so I we've said to ourselves several times, we
Speaker 1: can't be unhappy if they don't agree with us. Uh So,
Speaker 1: even among the for the three boys that are conservative,
Speaker 1: they don't agree on the individual aspects of concerns. So
Speaker 1: there's a lot of disagreement regardless of which party or
Speaker 1: what ideology you may want to follow. But we all
Speaker 1: love each other, we respect each other, and we get
Speaker 1: along fine. Thanksgivings not too crazy at the Rickett's household. Correct,
Speaker 1: We we might take a jab at another person for
Speaker 1: a particular thought or idea, but we don't get into
Speaker 1: serious talks because it's not going to change anybody's mind.
Speaker 1: No reason to either preach the choir or waste your breath. Correct,
Speaker 1: we have been speaking with Joe Ricketts, founder and former
Speaker 1: CEO of t D Amritrade. His family is the owner
Speaker 1: of the Chicago Cubs. If you enjoy this conversation, be
Speaker 1: sure and come back for the podcast extras, where we
Speaker 1: keep the tape rolling and continue discussing all things UH
Speaker 1: online trading related. You can find that at iTunes, Google podcast, Stitcher, Spotify,
Speaker 1: wherever your finer podcasts are found. We love your comments,
Speaker 1: feedback and suggestions right to us at m IB podcast
Speaker 1: at Bloomberg dot net. Check out my weekly column on
Speaker 1: Bloomberg dot com slash Opinion. Follow me on Twitter at
Speaker 1: rit Holts. I'm Barry Riholts. You're listening to Masters in
Speaker 1: Business on Bloomberg Radio. Welcome to the podcast, Joe. Thank
Speaker 1: you so much for doing this. I've been looking forward
Speaker 1: to having this conversation with you. UM Full disclosure, my
Speaker 1: firm UM manages about a billion two and t D
Speaker 1: is our largest UM holder as a custodian has just
Speaker 1: under a billion dollars of our assets full. UM, so
Speaker 1: we are familiar with your company and what it does
Speaker 1: UH for for quite a while. UM, there's one or
Speaker 1: two questions I wanted to get to and then we'll
Speaker 1: do our speed rounds. I had to ask UM. I
Speaker 1: didn't get a chance to ask about the institutional business
Speaker 1: because you started out primarily as a UM retail custonian
Speaker 1: and brokerage firm. How did the how did the institutional
Speaker 1: side develop? It took years of developing the market for
Speaker 1: the individual investor, and the next segment would be to
Speaker 1: bring in institutions. These would not be the huge institutions
Speaker 1: that that we know of, but financial planners that have
Speaker 1: their own businesses and do the execution and clearing for
Speaker 1: these firms. And UH, that's just something that really didn't
Speaker 1: excite me too much. So I brought another people to
Speaker 1: go down that road. And that's about the time that
Speaker 1: I retired as UH CEO and became chairman of the
Speaker 1: board and figured, this is the time in my life
Speaker 1: when I really kind of deserved to UH do fun things.
Speaker 1: I found out the most fun thing to do is work.
Speaker 1: But anyway, after a while, I UM relentish the chairman position.
Speaker 1: So I saw a lot of my friends start their
Speaker 1: own businesses, become very successful, sell them, and one day
Speaker 1: they're busy and the next day they're not. They turned
Speaker 1: out to be very unhappy. So I kind of paste
Speaker 1: myself to do it in pieces. So I was even
Speaker 1: ready to get off the board when I did. Yes,
Speaker 1: So I I haven't been on the board for you know,
Speaker 1: almost ten years, and I've been out of management for
Speaker 1: almost twenty years. But I but I still own a
Speaker 1: large part of the stock. I think I owned seven
Speaker 1: percent of the stock that's out there. So let's jump
Speaker 1: to our speed round because I know we have to
Speaker 1: uh let you go eventually, um go as long as
Speaker 1: short as you want. With these questions, they're designed to
Speaker 1: kind of fill in some blanks about about your personality.
Speaker 1: Tell us the first car you owned, your making model.
Speaker 1: It was a student baker really. Oh yeah, it was
Speaker 1: the nineteen forties and it was a four door, the
Speaker 1: ugliest car you can I was going to say, they
Speaker 1: are not pretty cars. They are not pretty cars. But
Speaker 1: I think we paid all of eighteen dollars to buy
Speaker 1: that car. Bucks. Yeah, this was this was back in
Speaker 1: the nine Would you would you be insulted if I
Speaker 1: told you you overpaid. I don't think so. I don't
Speaker 1: think so. So what's the most important thing people don't
Speaker 1: know about Joe Ricketts that I don't know what? That
Speaker 1: might be? Kind of an open book, right, very open? Uh? So, Uh,
Speaker 1: there's really no secrets that I know of that I
Speaker 1: can say that people don't know about. Everybody knows. I
Speaker 1: have a website Bear my Soul and and the website
Speaker 1: is the Harder You Work dot Joe Ricketts dot com
Speaker 1: Joe Ricketts dot com. Oh, there's a separate work, separate
Speaker 1: side for the book Joe Ricketts dot com. Um, you
Speaker 1: mentioned your dad. Who else were early mentors to you
Speaker 1: in your career? The A lot of the people in
Speaker 1: Nebraska City seem to take an interest in me. All
Speaker 1: of my former employers, uh, the boy Scout leader, Uh,
Speaker 1: friends of the family, all of those people that I
Speaker 1: saw doing their own thing, having their own business, having
Speaker 1: their own interests. All of those people were important to
Speaker 1: me to let me know that really you determine what
Speaker 1: your life is by what you do and not what
Speaker 1: other people are going to be able to help you with.
Speaker 1: So I learned independence. That's very Midwestern bid Rock values. Well,
Speaker 1: I'd like to say they're very United States values. Um. Anyway,
Speaker 1: I think that formative time seeing all of these successful people, uh,
Speaker 1: is what really put me off in the direction that
Speaker 1: I started to go. I didn't know that I wanted
Speaker 1: to own my own business, and then I did know it,
Speaker 1: and I didn't have any money. So its a matter
Speaker 1: of evolution. So who influenced your approach to thinking about
Speaker 1: investing and trading in brokerage? I I saw an advertisement
Speaker 1: this is about sixty six of a broker and nice suit,
Speaker 1: shiny shoes making a lot of money. Brokers at that
Speaker 1: time were market was good. Brokers are making a lot
Speaker 1: of money. Sure that whole post will wear two run
Speaker 1: up was a great time. And I wanted to make
Speaker 1: a lot of money, so I was willing to work hard.
Speaker 1: So I said, I I think I want to go.
Speaker 1: I learned how to become a broker, So that's what
Speaker 1: set me off on that line. Let's talk about books.
Speaker 1: What do you like to read? What do you historical novels?
Speaker 1: American historical novels give us some names. Well, I just
Speaker 1: finished up that book by Brian kill Me called Sam
Speaker 1: Houston very interesting. There's more to Sam Houston than I
Speaker 1: ever thought. So I'm going to buy He's got three
Speaker 1: more books. And Sam Houston claimed to fame was what?
Speaker 1: But he was the avenger of the Alamo. So he's
Speaker 1: the father of Texas. He's the one that made Texas
Speaker 1: what it is. Or the city of Houston his name
Speaker 1: for him? Is that right? The city of Houston is
Speaker 1: named after him. Yeah, very fascinating story when you get
Speaker 1: into the details. You know, I remember from history the
Speaker 1: high points, but talking about those details is is a
Speaker 1: lot of fun. I enjoyed Undaunted Courage immensely. That's that's
Speaker 1: that's the story of Lewis and Clark. Okay, is that
Speaker 1: the new book? By not new? It's old. Okay, I'm
Speaker 1: thinking a different. In fact, the author passed away Undaunted
Speaker 1: Courage and that you'll have to help me out with
Speaker 1: the author. I read it a number of years ago.
Speaker 1: Let's see what the Google machine says. Undaunted Courage by
Speaker 1: Stephen Ambrose. Stephen Ambrose wrote a lot of historical novels,
Speaker 1: and he wrote a lot about the Second World War.
Speaker 1: I see that band of brothers with him. Okay, my
Speaker 1: my three boys love those Second World War stories. But
Speaker 1: I was. I'm I'm more interested in what he wrote
Speaker 1: about American's history. Uh, The Undounded Courage really kind of
Speaker 1: led me into studying a lot about the beaver trade
Speaker 1: and how the West was opened and the characters that
Speaker 1: it took um. So my my interest is uh, really
Speaker 1: historical novels. I get excited about it. Give me one
Speaker 1: more and then I'm gonna give a recommendation to you.
Speaker 1: But you probably read it already. I'm at a loss
Speaker 1: to give you one more, Okay, So I'm gonna ask
Speaker 1: have you read The Right Brothers by David McCulloch. I
Speaker 1: have not, but I love David McCullough. Can I tell
Speaker 1: you something, Yes, he wrote this book for you. This
Speaker 1: is about two brothers against everybody telling them how crazy
Speaker 1: they ought to do with thy do go out Offenial
Speaker 1: essentially event flight and it's if you like McCullough, it's
Speaker 1: just a beautiful book. I just read his program The Pioneers,
Speaker 1: which I finished up maybe about three months ago. I
Speaker 1: have the book sitting on most night table waiting for
Speaker 1: my next vacations. So I will get the one about brothers.
Speaker 1: You're gonna You're gonna plow right through this, UM, tell
Speaker 1: us about a time you failed and what you learned
Speaker 1: from the experience. One of the biggest failures financially that
Speaker 1: I've had I I came up with a system called
Speaker 1: on Money where a customer could take their brokerage account,
Speaker 1: their bank account, and their insurance coverage, put it all
Speaker 1: into one operation, one financial package, run by the software.
Speaker 1: And when I would talk to people about that, everybody
Speaker 1: said they wanted it. So I put a huge amount
Speaker 1: of money hundred million, and UM it never did take off,
Speaker 1: like a Merrill Lynch wrap account. They all the big brokerage.
Speaker 1: Today everybody uses it. But at the time I had
Speaker 1: to pull uh information from different companies and they were
Speaker 1: not too excited about letting me have their information. And
Speaker 1: I presented it too independent. Um, customers, really you need
Speaker 1: a financial planner. So there were two mistakes I made
Speaker 1: with it. But the thing that is stuck with me
Speaker 1: is I went too far. I was so convinced I
Speaker 1: was right that I pushed it two hundred million, and
Speaker 1: I should have stopped at about twenty or thirty. So
Speaker 1: I learned there. Once you know that you've got something
Speaker 1: that's not working, pull the plug that that that's always
Speaker 1: good advice. You mentioned killing and jar O. What do
Speaker 1: you do for fun when you're not working? My fun
Speaker 1: is my work. I have never found anything that was
Speaker 1: more fun for me to do than work except ride
Speaker 1: a motorcycle. And I came across that by accident. Are
Speaker 1: you still Are you still riding about? I've got a
Speaker 1: motorcycle with four ols now because my balance isn't as
Speaker 1: good as it used to be when I was younger.
Speaker 1: You're just not going fast enough. So so I'm a
Speaker 1: little jealous because I like to ride, and I won't
Speaker 1: ride around here because it's so dangerous and so much
Speaker 1: traffic where you are that's made for motorcycles. You can
Speaker 1: get on a country road two lane highway and you
Speaker 1: can see for miles and there's not another Are you
Speaker 1: a Harley guy? You a BMW guy? I'm both. I
Speaker 1: have a BMW and I have a Harley Harley. I
Speaker 1: kind of ride in town. The BMW I take on
Speaker 1: my long trip right, it's their delightful cruises there. Um,
Speaker 1: let's talk about the industry. What are you most optimistic
Speaker 1: and most pessimistic about in the world of online trading
Speaker 1: and brokerage? Well, I'm I'm really not pessimistic about the
Speaker 1: world of online brokerage. I think the accumulation of data
Speaker 1: and the accumulation of information on the individual will kind
Speaker 1: of leave financial planners to be able to custom make
Speaker 1: software programs of financial planning for the individual customer. And
Speaker 1: I think that's that's very exciting, And the software is
Speaker 1: all moving that direction pro and all the other similar
Speaker 1: software heading in that direction, so the software will be
Speaker 1: continued to be enhanced and bring more benefits to the
Speaker 1: individual consumer. Are you at all concerned about free, free trading,
Speaker 1: free et f s, free everything. I do have a
Speaker 1: little hesitation. We don't want buying a stock to become
Speaker 1: similar to, uh, placing a bet on a football game,
Speaker 1: and that's a risk. I think that's real that we
Speaker 1: have to be careful of. The reality is the difference
Speaker 1: between absolutely free and paying five dollars. There's there's no
Speaker 1: change in utility. It's psychological friction that forces people to
Speaker 1: think about So if if we can keep people's buying
Speaker 1: a stocks for free for no commissions off into a
Speaker 1: professional area so that it doesn't become a loss Vegas
Speaker 1: gambling space, we're fine, But we don't know that yet.
Speaker 1: That's got to play out. And our final two questions, Um,
Speaker 1: what sort of advice would you give to a recent
Speaker 1: college graduate beginning their career that was interested in pursuing
Speaker 1: a career in finance. The first thing I do is say,
Speaker 1: go off by yourself onto the mountain for a couple
Speaker 1: of days and just be by yourself and think about
Speaker 1: what you want to do in your heart, in your psyche.
Speaker 1: What is the thing that makes your life worthwhile. Then
Speaker 1: after you've come to that answer, see how you can
Speaker 1: fit it into a money making aspects to allow you
Speaker 1: to live the lifestyle that you want. And it may
Speaker 1: not be financed. People may say, well, I want finance
Speaker 1: because I can make good wages, but they may find out,
Speaker 1: you know, I'm gonna play the piano. They'll be happier
Speaker 1: playing the piano, even though they probably won't make as
Speaker 1: much money. Interesting, And what do you know about the
Speaker 1: world of trading and invest today that you wish you
Speaker 1: knew fifty years ago when you were first getting started.
Speaker 1: I am quite happy with finding a good company and
Speaker 1: buying it. That's the Graham and Dot idea, and not
Speaker 1: trading all the time. Um, the thing that you have
Speaker 1: to be careful with with Graham and dot is is
Speaker 1: don't become an amor don't become emotionally involved with your
Speaker 1: investment or the company that you're looking at. Uh. Sometimes
Speaker 1: you you'll find another company that you think might do better,
Speaker 1: and you you really got to say, oh, I need
Speaker 1: to sell this because you've got a limited amount of money,
Speaker 1: no matter how much you have, and put it over
Speaker 1: someplace else. So you got to really cause yourself to
Speaker 1: think deeply. Quite quite interesting, we have been speaking with
Speaker 1: Joe Ricketts. He is the founder of t D, a
Speaker 1: merrit trade and the author of a new book, The
Speaker 1: Heart of That You Work, The Luckier You Get and
Speaker 1: an entrepreneur's memoir. If you enjoy this conversation, well look
Speaker 1: Up an Inch or Down an Inch on Apple iTunes
Speaker 1: and you could see any of the nearly three hundred
Speaker 1: such conversations we've had over the past five years. We
Speaker 1: love your comments, feedback and suggestions right to us at
Speaker 1: m IB podcast at Bloomberg dot net. Since you're already
Speaker 1: looking Up an Inch or Down an Inch and Apple iTunes,
Speaker 1: please give us a review. UH. You can check out
Speaker 1: my daily column at rit Halts dot com. You can
Speaker 1: sign up there for our daily reads. Check out my
Speaker 1: weekly column on Bloomberg dot com. Follow me on Twitter
Speaker 1: at rit Halts. I would be remiss if I did
Speaker 1: not thank the crack staff that helps put these conversations
Speaker 1: together each week. Carolin O'Brien is my audio engineer. Michael
Speaker 1: Boyle is my producer. Attica val Broun is our project manager.
Speaker 1: Michael Batnick is my head of research. I'm Barry Rit Halts.
Speaker 1: You've been listening to Masters in Business on Bloomberg Radio