WEBVTT - Joe Ricketts Discusses Trade and Deregulation 0:00:00.080 --> 0:00:04.000 The following interview with former TD Amerit Trade CEO Joe 0:00:04.120 --> 0:00:08.160 Ricketts was conducted prior to news that Charles Schwab has 0:00:08.200 --> 0:00:13.119 agreed to buy t D a Merry Trade. This is 0:00:13.280 --> 0:00:17.600 Masters in Business with Barry Ridholts on Boomberg Radio. This 0:00:17.640 --> 0:00:20.520 week on the podcast, I have an extra special guest. 0:00:20.760 --> 0:00:24.120 His name is Joe Ricketts. He is the founder of 0:00:24.200 --> 0:00:27.639 t D Amerit Trade at one point three trillion dollar 0:00:27.760 --> 0:00:32.159 custodian uh. Ricketts is an entrepreneur who has built a 0:00:32.200 --> 0:00:35.720 business over the course of fifty years and is extremely 0:00:35.800 --> 0:00:38.879 knowledgeable about what it's like to go through all the 0:00:38.920 --> 0:00:43.320 growing pains. Ultimately, he the company goes public in ninety 0:00:43.360 --> 0:00:47.640 seven and has been wildly successful. About a decade ago, 0:00:47.880 --> 0:00:51.440 Ricketts and his family purchased the Chicago Cubs. We talked 0:00:51.440 --> 0:00:55.320 about that. We talk about politics, We talk about policy. 0:00:55.360 --> 0:00:58.080 We talked about all sorts of really really interesting things. 0:00:58.520 --> 0:01:01.840 If you are at all intis did in go down 0:01:01.880 --> 0:01:07.200 the list? Online trading, entrepreneurship, building a business, taking chances, 0:01:07.240 --> 0:01:10.240 embracing risk. I could go on and on, but rather 0:01:10.280 --> 0:01:14.000 than me, Babel, why don't I just say my conversation 0:01:14.360 --> 0:01:20.240 with Joe Ricketts this is Masters in Business with Barry 0:01:20.360 --> 0:01:24.760 Ridholts on Bloomberg Radio. My special guest this week is 0:01:24.840 --> 0:01:28.520 Joe Ricketts. He is the founder and former CEO of 0:01:28.600 --> 0:01:32.759 TD Ameritrade, one of the largest retail custodians in America, 0:01:33.200 --> 0:01:36.000 man with what is it about one point three trillion 0:01:36.120 --> 0:01:40.600 in assets under custodian ship. He bought the Chicago Cubs 0:01:40.640 --> 0:01:42.800 in two thousand and nine, and a few years later 0:01:43.400 --> 0:01:46.520 the team won their first World Series in a hundred 0:01:46.560 --> 0:01:50.520 and eight years. Joe Ricketts, Welcome to Bloomberg. Thanks very, 0:01:50.520 --> 0:01:53.440 It's fun to be here. So I was looking forward 0:01:53.480 --> 0:01:56.680 to having this conversation for a number of reasons. But 0:01:56.920 --> 0:01:59.760 let's go back to the beginning and start with your 0:01:59.760 --> 0:02:03.480 career year. You were a credit reporter at Dunnan brad Street. 0:02:04.040 --> 0:02:06.680 That seems so out of character to everything I know 0:02:06.880 --> 0:02:10.080 about you. Well, it was critically important to the decisions 0:02:10.080 --> 0:02:15.239 that governed my direction in life. Um, I really didn't 0:02:15.280 --> 0:02:16.919 know what I wanted to do for a living, and 0:02:16.960 --> 0:02:19.880 I had already started a family, so I had to 0:02:19.919 --> 0:02:23.720 come up with some direction pretty quickly. The time was 0:02:23.760 --> 0:02:26.120 going by and I you were in college when you 0:02:26.120 --> 0:02:28.519 already had your first couple of kids, and it's like, yeah, 0:02:28.520 --> 0:02:32.000 I bet it's not making some money, that's right. And uh, 0:02:32.120 --> 0:02:34.520 So I took this job with Dunner brad Street where 0:02:34.560 --> 0:02:38.040 I went out to all the small towns in southeast 0:02:38.080 --> 0:02:42.040 Nebraska and southwest Iowa to call on the business. So 0:02:42.080 --> 0:02:44.400 I drive into town and I just go one business 0:02:44.440 --> 0:02:47.079 after another with the credit report that I had from 0:02:47.080 --> 0:02:50.359 the previous year and talked to them about updating it. 0:02:51.000 --> 0:02:53.760 And I got to meet a lot of interesting people, 0:02:53.880 --> 0:02:56.200 and I got to meet a lot of people that 0:02:56.240 --> 0:03:00.280 were really making our country go. And the thing that 0:03:00.360 --> 0:03:04.079 stunned me, or really kind of light that went off 0:03:04.120 --> 0:03:06.760 when I was in college, I had a professor of 0:03:06.880 --> 0:03:10.240 social sciences tell us we were such a great country 0:03:10.320 --> 0:03:15.360 because of our natural resources. And after I got out 0:03:15.560 --> 0:03:19.480 and into the business world calling on these merchants, I 0:03:19.560 --> 0:03:22.200 understood the wealth of this country came out of the 0:03:22.280 --> 0:03:25.440 brains of these people. They took money out of their 0:03:25.440 --> 0:03:28.040 own pocket, ideas out of their own heads, and they 0:03:28.040 --> 0:03:31.160 started a business of shoe store or pharmacy or whatever, 0:03:31.880 --> 0:03:35.000 and they hired people, and they had to satisfy their customers, 0:03:35.040 --> 0:03:39.000 and so working to satisfy your customer at the same time, 0:03:39.400 --> 0:03:44.280 being able to create wealth was a wonderful idea for me. 0:03:44.360 --> 0:03:45.720 So I said, that's what I want to do. I 0:03:45.720 --> 0:03:47.560 want to have my own business. So you go from 0:03:47.640 --> 0:03:52.480 Dunham Bradstreet to Dean Winter as a stockbroker in and 0:03:52.520 --> 0:03:56.240 then the ideas start to just date in your in 0:03:56.280 --> 0:03:59.920 your head. How did Dean Winter lead to first Omaha 0:04:00.560 --> 0:04:03.880 in ninety seven years later? Well, Dean Winter was a 0:04:03.920 --> 0:04:07.240 commission job. All the brokers really in the country worked 0:04:07.280 --> 0:04:09.680 on commissions and I didn't have any capital to start 0:04:09.680 --> 0:04:13.000 my own business. So this was as close having my 0:04:13.040 --> 0:04:17.560 own business as I could get. And we just happened 0:04:17.880 --> 0:04:21.000 to become registered. I say we my the other guys 0:04:21.000 --> 0:04:23.400 in the training class at a time when a market 0:04:23.440 --> 0:04:24.960 was at the top and it went down for the 0:04:25.000 --> 0:04:27.560 next five years, which was a big surprise because it 0:04:27.600 --> 0:04:30.560 hadn't done that for a long long time. The DW. 0:04:30.760 --> 0:04:37.480 Kisses a thousand by down correct And so how did 0:04:37.480 --> 0:04:39.520 that impact you as a as a broker? It was 0:04:39.760 --> 0:04:42.599 very difficult to make a living as a broker. We 0:04:42.640 --> 0:04:45.320 had to work very hard all the time. But we 0:04:45.320 --> 0:04:48.920 were building a client book that would help us in 0:04:48.960 --> 0:04:51.720 the future. Just about the time when we thought that 0:04:51.760 --> 0:04:53.760 client book was going to help us make the type 0:04:53.760 --> 0:04:59.000 of income that we wanted. The idea of negotiated commissions 0:04:59.400 --> 0:05:03.359 came into the marketplace the big boom. So the restrictions, 0:05:03.440 --> 0:05:08.040 the regulations go away, are d deregulated, and you could 0:05:08.040 --> 0:05:11.599 pretty much charge much, much less than before. So I 0:05:11.640 --> 0:05:14.920 realized if I called my customer and talked to him 0:05:14.960 --> 0:05:17.719 about a good idea to invest in, the second conversation 0:05:17.880 --> 0:05:20.640 was how much are you going to charge? And how 0:05:20.680 --> 0:05:23.520 little do they want to pay? So we were gonna 0:05:23.360 --> 0:05:26.720 so it appeared though, as though we were going to 0:05:26.839 --> 0:05:30.640 have to have twice as much in the way of 0:05:30.680 --> 0:05:34.760 a client book and worked twice as hard just to 0:05:34.800 --> 0:05:38.279 be able to make the same living. So my friend, 0:05:38.960 --> 0:05:41.400 the guy that became a partner with me, Bob Perlman, 0:05:41.440 --> 0:05:44.520 and I talked about why don't we join him. I 0:05:44.560 --> 0:05:46.880 gotta tell you, Barry, we had no idea how to 0:05:46.880 --> 0:05:49.480 start a brokerage firm. We really, we didn't have any 0:05:49.480 --> 0:05:53.799 idea whatsoever, except there were two ideas that that floated 0:05:53.839 --> 0:05:58.760 through our minds. Number one was we thought there was 0:05:58.960 --> 0:06:02.600 a large enough more market of people that wanted to 0:06:02.680 --> 0:06:08.440 buy or sell a stock without any other conversation. They 0:06:08.480 --> 0:06:11.279 just wanted to We don't want your recommendation. We don't 0:06:11.320 --> 0:06:14.560 care what your your best of list is. Just execute 0:06:14.560 --> 0:06:18.240 the trade as cheaply as possible. That's correct. And there 0:06:18.320 --> 0:06:20.159 was a market, we didn't know how big, but we 0:06:20.200 --> 0:06:23.480 thought there was. And and the cost of of trading 0:06:24.040 --> 0:06:28.080 pre deregulation was a couple hundred bucks. A couple hundred 0:06:28.080 --> 0:06:34.240 bucks versus twenty five that's really huge, traumatic traumatic. The 0:06:34.279 --> 0:06:37.560 other idea that was important and that proved to be correct, 0:06:37.680 --> 0:06:41.320 was that after the Second World War we had the 0:06:41.360 --> 0:06:44.240 g I Bill and a lot of men and women 0:06:44.279 --> 0:06:47.279 came back from the war used the g I bi 0:06:47.320 --> 0:06:51.840 able to become engineers, pharmacists, And these people were educated 0:06:51.920 --> 0:06:54.080 well enough to be able to do their own financial 0:06:54.080 --> 0:06:56.240 planning and be able to make their own decisions, and 0:06:56.480 --> 0:06:58.359 they were making a nice enough living that there's a 0:06:58.360 --> 0:07:02.279 little investable cash on this correct. So the market turned 0:07:02.320 --> 0:07:04.880 out to be quite huge. We we just had to 0:07:04.920 --> 0:07:07.640 find a way to advertise into that market so that 0:07:07.680 --> 0:07:10.840 we could tell them succinctly what we were doing and 0:07:10.920 --> 0:07:13.120 make them want to respond to us. So how did 0:07:13.240 --> 0:07:18.160 first Omaha become eventually a merror trade and then Tedium 0:07:18.200 --> 0:07:21.840 mer Trade. We UH. It's really a long story, but 0:07:22.400 --> 0:07:26.520 we thought we would be a local business, and we 0:07:26.640 --> 0:07:31.720 found out that we could not exist as a local business. 0:07:31.800 --> 0:07:36.000 So we advertised in the Midwest edition of the Wall 0:07:36.040 --> 0:07:39.160 Street Journal. There was a favorite spot on the inside 0:07:39.160 --> 0:07:41.360 of the back page in those times where all the 0:07:41.360 --> 0:07:46.120 discount brokers advertising, so we advertised in UH that paper 0:07:46.280 --> 0:07:49.600 with an eight hundred number. Now, something that was unique 0:07:49.640 --> 0:07:55.000 to us was that Omaha was the location of Strategic 0:07:55.040 --> 0:08:01.000 Care Command. The federal government, the Air Force pay Northwestern 0:08:01.040 --> 0:08:06.520 Bill Telephone Company to put in a sophisticated communications system 0:08:06.600 --> 0:08:10.360 in case there was a hot war. Well obviously there wasn't, 0:08:10.400 --> 0:08:14.000 so this communication system was not used. So the phone 0:08:14.000 --> 0:08:18.280 company dropped their rates on what was then a brand 0:08:18.320 --> 0:08:22.760 new idea eight hundred telephone numbers where the caller did 0:08:22.800 --> 0:08:27.520 not pay for the telephone call. And so our telephone 0:08:27.600 --> 0:08:32.760 rates for UH interstate calls long distance calls were anywhere 0:08:32.800 --> 0:08:36.440 from ten to lower than if we'd been in any 0:08:36.480 --> 0:08:39.520 other location in the country, and that was one of 0:08:39.559 --> 0:08:42.640 our major costs. So that that gave us a cost 0:08:42.679 --> 0:08:46.280 benefit we didn't see when we started as first Omaha, 0:08:46.520 --> 0:08:49.480 but then we did see after we started advertising in 0:08:49.520 --> 0:08:53.200 the Midwest edition of the paper. Uh, that was so successful, 0:08:53.240 --> 0:08:55.760 we went to the national edition and we attracted customers 0:08:55.800 --> 0:08:57.800 from all over, So then we really kind of changed 0:08:57.800 --> 0:09:02.440 the name to First National. So so you're marketing to 0:09:02.520 --> 0:09:06.200 the entire world, or at least the entire country. Where 0:09:06.200 --> 0:09:10.280 you're located is irrelevant as long as it's nationwide and 0:09:10.280 --> 0:09:13.240 you're lookating in a place that made your cost structure 0:09:13.400 --> 0:09:18.120 cheaper than competitors. That was very fortuitous, that is correct, 0:09:18.640 --> 0:09:23.160 And the problem that we had to overcome was that 0:09:23.280 --> 0:09:26.440 people were not used to dealing with a broker that 0:09:26.520 --> 0:09:29.720 they couldn't see touch and field. So they're used walking 0:09:29.760 --> 0:09:32.400 into an office and meeting a person. So they had 0:09:32.440 --> 0:09:35.840 to become comfortable with the systems that they were using 0:09:36.280 --> 0:09:39.839 in order for them to um really do a lot 0:09:39.840 --> 0:09:41.960 of business with it. So they would generally start out 0:09:42.040 --> 0:09:45.280 slowly with small trades and then they become to rely 0:09:45.400 --> 0:09:47.600 on us, and that we got all our business. And 0:09:47.640 --> 0:09:50.160 you were one of the first that started to allow 0:09:50.240 --> 0:09:54.240 people to enter the touch tone keys to execute trades. 0:09:54.480 --> 0:09:56.320 It might do if you allow me to say so, 0:09:56.440 --> 0:09:59.199 very we were the first, very first were so you 0:09:59.240 --> 0:10:02.160 could I could call all up First National and punching 0:10:02.160 --> 0:10:05.280 the stock symbol and punching how many shares and the 0:10:05.320 --> 0:10:08.440 trade would go off automatically. That's correct. That that sounds 0:10:08.480 --> 0:10:14.240 pretty innovative. It was very innovative. And Uh, I went 0:10:14.240 --> 0:10:19.040 out to my customer base to form customer focus groups 0:10:19.120 --> 0:10:22.719 to ask them how they would enjoy this, and my 0:10:22.920 --> 0:10:29.480 answer was emphatically no. Really why the customer said, would 0:10:29.520 --> 0:10:34.160 I use a system based on the TOUCHTNE telephone when 0:10:34.200 --> 0:10:38.360 I can talk to a broker? And Uh, the answer 0:10:38.400 --> 0:10:41.880 is because it's cheaper. Well, they didn't want to use 0:10:41.920 --> 0:10:43.720 the surface, so I said, I have to make it 0:10:43.800 --> 0:10:48.080 cheaper to attract their attention and I and so I 0:10:48.200 --> 0:10:51.720 came out with a unique um way of charging for 0:10:51.760 --> 0:10:55.040 a customer that threepennies to share. And so that was 0:10:55.120 --> 0:10:59.040 something that got through immediately, and so people would take 0:10:59.080 --> 0:11:01.679 the five minutes it took to learn how to use 0:11:01.720 --> 0:11:06.160 the system. Then what I found out was some people 0:11:06.440 --> 0:11:10.080 placed their trades so fast it would be impossible to 0:11:10.080 --> 0:11:12.680 move your finger that fast. So I called him up 0:11:12.679 --> 0:11:14.440 and I said, what are you doing and he said, well, 0:11:14.880 --> 0:11:19.080 we are using a computer to program the touch tone 0:11:19.760 --> 0:11:23.000 system with the telephone number and with all the information 0:11:23.000 --> 0:11:25.600 of a trade. So we're sitting at home watching television 0:11:25.679 --> 0:11:28.480 and seeing the tape, and when the stock price gets 0:11:28.480 --> 0:11:30.520 close to what we want, we pressed one button. It 0:11:30.559 --> 0:11:36.680 goes zip. Oh that's unique. The people loved the power 0:11:37.040 --> 0:11:40.840 of taking care of themselves. They didn't want a broker 0:11:40.880 --> 0:11:43.880 once they used the system. They wanted the power of 0:11:43.960 --> 0:11:49.920 taking everything onto themselves. And really they be the professionals 0:11:49.960 --> 0:11:52.320 that would call the shots. And so now let's fast 0:11:52.360 --> 0:11:57.960 forward to a Merritt Trade becomes the first online brokerage. 0:11:58.360 --> 0:12:01.200 What was that like? Did you have any idea that 0:12:01.520 --> 0:12:06.199 this new fangled online thing would replace the whole telephone 0:12:06.240 --> 0:12:08.400 side of things? Because of the story that I just 0:12:08.440 --> 0:12:12.120 told you, I knew exactly the first time that we 0:12:12.320 --> 0:12:15.400 got an order, UM, one of our clerks brought us 0:12:15.480 --> 0:12:21.080 a printed email message which had by three hundred shares 0:12:21.080 --> 0:12:23.920 of a blue chip stock at the market, and they said, 0:12:24.080 --> 0:12:26.280 and of course we had their customer's account number and 0:12:26.280 --> 0:12:29.120 phone number. And the question to me was should we 0:12:29.160 --> 0:12:31.080 go ahead and place this because we didn't talk to 0:12:31.120 --> 0:12:35.160 the customer. I have the touchdown, and I said, yeah, 0:12:35.240 --> 0:12:38.600 go ahead, we'll see what happened. So we we executed 0:12:38.600 --> 0:12:41.000 that order and went back to the customer by email 0:12:41.480 --> 0:12:45.160 to report the trade. No voice communications, So it was very, 0:12:45.280 --> 0:12:48.000 very similar to the touchdown aspect of it. And I said, 0:12:48.080 --> 0:12:51.200 this is even better because they get a confirm with 0:12:51.280 --> 0:12:54.520 the price, the date, everything, they can print it out, 0:12:54.640 --> 0:12:57.760 and because it is on a PC, we can deliver 0:12:57.840 --> 0:13:01.199 more information, we can deliver our own tape, we can 0:13:01.240 --> 0:13:03.680 deliver research. And I said, this is going to be 0:13:03.760 --> 0:13:06.840 much more powerful than the touchdown telephone. Everyone was, that's 0:13:06.880 --> 0:13:09.960 quite fascinating. Let's talk a little bit about the growth 0:13:10.640 --> 0:13:15.600 of UM of t D first. This whole time, when 0:13:15.640 --> 0:13:20.240 you go from phone calls to TOUCHDOWNE to UH to 0:13:20.480 --> 0:13:24.520 online trading, you're competing with Charles Schwab, which was one 0:13:24.559 --> 0:13:28.600 of the biggest UM discount brokers at the time. What 0:13:28.679 --> 0:13:30.640 was that like. Did you end up ever having any 0:13:30.679 --> 0:13:34.040 sort of relationship with them? Well, him, Zuck Schwab as 0:13:34.080 --> 0:13:35.920 a friend of mine today, but at the time we 0:13:35.920 --> 0:13:39.240 were we were competitors. He had the advantage of having 0:13:39.840 --> 0:13:44.440 California as his customer base, and I think at the 0:13:44.480 --> 0:13:46.719 time that was the night California by itself was the 0:13:46.800 --> 0:13:50.840 ninth largest economy in the world. UH in Nebraska, we 0:13:50.880 --> 0:13:52.640 had about a million and a half people, I mean 0:13:52.679 --> 0:13:55.040 a huge, huge difference. So I had to go national, 0:13:55.160 --> 0:13:59.280 whereas he could really start a local I heard about. 0:13:59.440 --> 0:14:03.280 Although we started in ve I first heard about this 0:14:03.320 --> 0:14:08.160 West Coast discount broker called Schwab in v seven, So 0:14:08.480 --> 0:14:11.319 he started, you know, after we got started, but I 0:14:11.720 --> 0:14:14.520 really didn't know he existed. The ones I did know 0:14:14.600 --> 0:14:18.040 existed advertised on the inside page of the Wall Street Journal, 0:14:18.160 --> 0:14:19.880 and they were from New York, and then one was 0:14:19.920 --> 0:14:22.680 from Chicago. So there was only a couple of people 0:14:22.680 --> 0:14:25.240 in the business when we got started. Now a couple 0:14:25.280 --> 0:14:27.600 of years later, very a few years later, we had 0:14:27.640 --> 0:14:33.000 four competitors. Everybody thought this was simple and easy. It's not. 0:14:33.520 --> 0:14:35.800 And of course everybody found out that it's not simple 0:14:35.840 --> 0:14:38.120 and easy, and so competition effort a period of time 0:14:38.600 --> 0:14:43.200 allowed us and others to buy out our competitors. So today, 0:14:43.440 --> 0:14:46.760 you know, there's really only three or four brokerage in 0:14:46.800 --> 0:14:51.600 this Lots of consolidation and that was a lot of 0:14:51.600 --> 0:14:55.320 fun to go through that. In that consolidation phase, we 0:14:55.440 --> 0:15:00.520 ran across the company in Manhattan called Offhauser. The I 0:15:00.640 --> 0:15:02.600 really described in a lot of detail in the book 0:15:02.680 --> 0:15:06.840 that that was really attractive, and they were advertising doing 0:15:07.400 --> 0:15:11.120 trades online. Nobody had ever heard of online, nobody knew 0:15:11.160 --> 0:15:13.640 the internet, nobody knew what this was all about. This 0:15:13.680 --> 0:15:18.120 is around what year? This is uh, you know seven? Okay, 0:15:18.200 --> 0:15:20.680 so still a o L is around. But the Internet 0:15:20.880 --> 0:15:24.600 isn't the Internet yet. Yeah, that's correct. It hadn't evolved 0:15:24.600 --> 0:15:27.480 to the point where we are today. So um. We 0:15:28.160 --> 0:15:32.520 talked to them about selling, and he gave us a price, 0:15:32.560 --> 0:15:36.920 which at the time I thought was incredibly high, and 0:15:37.080 --> 0:15:40.080 but I brought myself to really say, Okay, I'll pay 0:15:40.160 --> 0:15:43.400 it just so I could understand the technology. So you 0:15:43.440 --> 0:15:48.640 acquired them, and what's what's an incredibly high price? Seven 0:15:48.640 --> 0:15:51.200 and a half million dollars sounds I bet that it 0:15:51.240 --> 0:15:54.280 turns out to be a fantastic r o y thirty 0:15:54.360 --> 0:15:59.160 years later, within two years. Incredible. We we really didn't 0:15:59.160 --> 0:16:02.040 have any understanding. But within a very short period of time, 0:16:02.840 --> 0:16:05.440 the off Houser folks realized that they had put the 0:16:05.520 --> 0:16:08.600 price too low, and I had paid a bargain basement price. 0:16:08.680 --> 0:16:11.320 But the whole industry made fun of us on the 0:16:11.400 --> 0:16:13.520 day of the trade because they said we were stupid, 0:16:13.600 --> 0:16:16.920 and that was way too high, as six months later 0:16:16.960 --> 0:16:20.440 they got it and they understood what happened. So we 0:16:20.800 --> 0:16:23.760 put the economies of scale in place to be able 0:16:23.800 --> 0:16:27.040 to increase our profits dramatically. Turned out to be a 0:16:27.080 --> 0:16:30.720 wonderful thing for us to do. We found out that 0:16:30.840 --> 0:16:34.680 the technology that off Houser had really wasn't what I 0:16:34.760 --> 0:16:38.840 understood them to have, and it was more like smoking mirrors. 0:16:38.880 --> 0:16:41.600 So the customer could use their computer at home to 0:16:41.640 --> 0:16:43.720 send the trade, but then it printed out at off 0:16:43.760 --> 0:16:46.280 Houser and they had to have a clerk tear it 0:16:46.280 --> 0:16:48.320 off and put it back in to go the exchange. 0:16:48.360 --> 0:16:50.800 It didn't so they didn't have we call those APIs today. 0:16:50.840 --> 0:16:54.480 There was no application program interface that would automate that, 0:16:54.800 --> 0:16:57.880 so we had to build all of that, which is 0:16:57.920 --> 0:17:01.240 good because we learned the hard way, made a lot 0:17:01.240 --> 0:17:03.280 of mistakes, a lot of software didn't work. Throw it away, 0:17:03.280 --> 0:17:05.280 you start all over and do it again. But by 0:17:05.320 --> 0:17:08.400 the time we got all done, a customer could sit 0:17:08.440 --> 0:17:12.320 at home, on their keypad of their own computer, place 0:17:12.400 --> 0:17:16.119 a trade and get a report within seconds. So full 0:17:16.240 --> 0:17:19.080 online trading for real full online trading, and then the 0:17:19.119 --> 0:17:22.119 exchanges and the over the counter market developed systems of 0:17:22.200 --> 0:17:28.160 receiving those orders electronically, automatically executing them and reporting back. 0:17:28.880 --> 0:17:31.960 So it turned out over a period of time and 0:17:32.640 --> 0:17:35.119 huge investments on the part of everybody in the industry 0:17:35.320 --> 0:17:37.520 to bring this type of service to the customer, which 0:17:37.560 --> 0:17:41.240 is absolutely wonderful. So you guys were cutting edge with TOUCHDOWNE, 0:17:41.240 --> 0:17:46.280 you're cutting edge with online. You very aggressively roll out 0:17:46.960 --> 0:17:50.639 um a pretty big advertising campaign. What was that like 0:17:50.760 --> 0:17:53.639 and what were the results? Well, when we started, it 0:17:53.720 --> 0:17:58.840 was really kind of anxious. It was unsettling until we 0:17:59.040 --> 0:18:01.520 until we really did it. I was going to take 0:18:01.560 --> 0:18:04.439 our advertising budget I think from million dollars a year 0:18:04.520 --> 0:18:06.720 up to a hundred million dollars and by the way, 0:18:06.760 --> 0:18:12.320 million dollars for relatively small company way back when that's 0:18:12.320 --> 0:18:14.040 a big chunk of change. It was a big chunk 0:18:14.080 --> 0:18:17.359 of change. So we attracted advertising firms that were the 0:18:17.359 --> 0:18:19.680 top advertising firms in the country. So to the size 0:18:19.680 --> 0:18:23.440 of the million dollar Yeah, that's correct, and I think 0:18:23.480 --> 0:18:26.560 there was seven or nine of them. Um and UM. 0:18:26.600 --> 0:18:28.880 I said, I've got to cut through the crowd, guys, 0:18:29.560 --> 0:18:31.960 We've got to do something new and different. And it 0:18:32.000 --> 0:18:34.639 seems to me humor is the way to go, and 0:18:34.680 --> 0:18:37.160 they said, no, that's wrong. People don't think of their 0:18:37.200 --> 0:18:41.600 money is funny. It's not light at all, and you're 0:18:41.640 --> 0:18:44.240 just not going to be successful. So they all gave 0:18:44.240 --> 0:18:47.040 me ads that were dull and boring, just like a bank, 0:18:48.160 --> 0:18:53.480 and except Ogilvy, Ogilvy. Ogilvy dared to come up with 0:18:53.560 --> 0:18:57.159 something new and different. And it was a person on 0:18:57.200 --> 0:19:01.239 the street that said they bought a particular stock, like 0:19:01.320 --> 0:19:05.360 General Motors for bucks well, General Motors selling for fifty, 0:19:05.440 --> 0:19:07.960 so that there was the play on the commission as 0:19:07.960 --> 0:19:11.600 well as on the stock. And then they giggled. They 0:19:11.600 --> 0:19:13.760 were so happy that they would be able to buy 0:19:13.800 --> 0:19:17.320 a stock at such a low price. That those ads 0:19:17.520 --> 0:19:21.600 really set us off in a different direction. But the 0:19:21.600 --> 0:19:24.920 ad that really made us was an ad with an 0:19:24.920 --> 0:19:29.000 office boy. His actor name is Michael Maron. If I 0:19:29.080 --> 0:19:35.080 remember back then, and uh, he instructs his boss on 0:19:35.119 --> 0:19:37.960 how to place the trade online. I have a very 0:19:38.080 --> 0:19:41.200 vivid recollection of that add. It stayed with me. It's 0:19:41.200 --> 0:19:44.040 twenty years ago. There was more. Oh yeah, it's iconic. 0:19:44.119 --> 0:19:47.399 And he took that ad took over the whole industry. 0:19:47.440 --> 0:19:49.920 And he made a comment in that ad, let's light 0:19:49.960 --> 0:19:55.520 this candle and that became a standard quotation in the 0:19:55.640 --> 0:19:58.280 in the securities industry. But that got us a lot 0:19:58.280 --> 0:20:02.520 of attention. So using humor to get across the idea 0:20:02.680 --> 0:20:05.879 that we had a low cost with good executions was 0:20:05.920 --> 0:20:09.160 something that really permeated the market and really made us grow. 0:20:09.359 --> 0:20:13.520 Any other ads from that era, this is pre two 0:20:13.560 --> 0:20:17.080 thousand dot com era, anything else really stand out from you? 0:20:17.280 --> 0:20:19.639 Those were the two we We did a number of 0:20:19.920 --> 0:20:22.919 other commercials that had humor in them, playing off of 0:20:23.040 --> 0:20:25.760 certain things in the culture, but those were the two 0:20:25.800 --> 0:20:27.800 that were the biggest and the best. Let's light this 0:20:27.920 --> 0:20:30.880 candle I have, I'll find it on YouTube and posted 0:20:30.840 --> 0:20:33.119 it you can you can see it on my website. 0:20:33.480 --> 0:20:37.000 The harder you dot work? Okay, we will definitely uh 0:20:37.200 --> 0:20:42.239 reference that. Um So, the company goes public in was 0:20:42.280 --> 0:20:47.399 this pre or post t D acquisition? This was pre so? So? 0:20:47.520 --> 0:20:51.680 What was the what was the process of I p oing? Like? Well, 0:20:51.680 --> 0:20:58.719 it was good and bad, okay. I My dream was 0:20:58.760 --> 0:21:03.680 to build a business that my children could take over 0:21:03.920 --> 0:21:08.040 and continue to build, assuming they were interested in online brokerage. Correct, 0:21:08.520 --> 0:21:10.639 And we had my wife and I had four kids. 0:21:10.760 --> 0:21:12.600 I thought, you know, one of them is probably gonna 0:21:12.600 --> 0:21:14.960 want to do this, So that was the dream that 0:21:15.000 --> 0:21:18.480 I had. But if we went public, that changes. You're 0:21:18.600 --> 0:21:21.360 you're no longer a private company or a public company, 0:21:21.400 --> 0:21:23.960 and you're the dynamics of who's going to run it, 0:21:24.040 --> 0:21:29.400 and all that changes. But I realized that online trading 0:21:29.760 --> 0:21:33.440 was an inflection point in the history of not only 0:21:33.480 --> 0:21:36.520 the brokerage business, but in the history of investing for 0:21:36.560 --> 0:21:39.119 all time. And if I was going to take advantage 0:21:39.119 --> 0:21:42.119 of it, I was going to have to move and 0:21:42.160 --> 0:21:44.480 I and I wasn't. Although we were making a large 0:21:44.640 --> 0:21:47.760 amount of profits, not enough for me to build the 0:21:47.800 --> 0:21:50.520 technology and advertise. So that's when I said, I have 0:21:50.600 --> 0:21:54.199 to spend a hundred million on advertising and a hundred 0:21:54.240 --> 0:21:57.719 million on technology. And those were guesses, but Verry, they 0:21:57.760 --> 0:21:59.920 turned out to be low. Let's talk about that tech 0:22:00.000 --> 0:22:03.680 analogy a bit, because you describe in the book, Um, 0:22:03.720 --> 0:22:09.240 you describe just a never ending series of challenges in 0:22:09.359 --> 0:22:14.600 snaff foods and issues. Technology was simultaneously your your friend 0:22:14.800 --> 0:22:18.639 but also, um, I want to call it your enemy. 0:22:18.920 --> 0:22:22.080 But it seemed like you were constantly having to find 0:22:22.119 --> 0:22:25.040 new ways to work with the technology where it wasn't 0:22:25.040 --> 0:22:28.400 biting you in the backside. That is correct the whole time. 0:22:28.440 --> 0:22:30.280 It took a long time for us really come to 0:22:30.320 --> 0:22:32.640 the conclusion about what we had to do. But let 0:22:32.640 --> 0:22:34.600 me describe what it was like. When we started in, 0:22:36.520 --> 0:22:39.760 we placed and we wrote an order on ticket. Our 0:22:40.280 --> 0:22:42.879 office lady called in the trade to the exchange. We 0:22:42.920 --> 0:22:45.239 got the report back on the ticket, and then she 0:22:45.280 --> 0:22:48.600 would take that copy of the order ticket and write 0:22:48.600 --> 0:22:50.919 it down in a ledger all the trades that we 0:22:50.960 --> 0:22:52.879 did that day, and then she would write it down 0:22:52.960 --> 0:22:58.119 on another piece of paper cardboard for that customer. And 0:22:58.119 --> 0:23:01.960 they were setting a ban. This is like Christmas carols, 0:23:02.040 --> 0:23:05.399 like Charles Dickens. So so one went into the You 0:23:05.440 --> 0:23:08.639 have two bins. One goes into the company ben and 0:23:08.680 --> 0:23:11.159 the other goes into the customer bins, so everybody you 0:23:11.240 --> 0:23:14.440 have duplicates, and everybody well, once our customer files ones 0:23:14.480 --> 0:23:16.280 our company files, and then we at the end of 0:23:16.280 --> 0:23:19.439 the month, we'd have to type out the confirmations and 0:23:19.480 --> 0:23:22.119 the month in statements and send out to customers and 0:23:22.160 --> 0:23:26.040 hopefully everything reconciled. That's correct. And we found out right 0:23:26.119 --> 0:23:28.200