Listen ski. How many of you are members of the Commonwealth Club. If youre not a member, this is a great time to join. There are all kinds of terrific programs, there is buildings like with a great roof deck and a gentleman named billyat the back of the room. He will be happy to answer any questions you have about joining the club so see himon your way out. These take a moment and turn off all your cell phones. Any devices that might make noise and while youre doing that tell you about upcoming problems of the Commonwealth Club. On october 31 halloween, fair will be with us. On november 12, theres not a comment in that area just so you all know. November 12 rich lowery will be our guest. November 12 in the eveningin Silicon Valley legendary 49er jerry rice will be with us. And on november 15, actress Mary Lou Henner who many of you may remember from taxi talk about why she has a unique condition thatallows her to remember everything in her life. Very interesting program. The Commonwealth Club asbury travel programs and we encourage you to ask billyand our staff about those. His february you can take an expedition to new zealand with adventurer peter hillary, the son of Edmund Hillary lots of good stuff coming up. . s on your seat for Mister Schwab that will be brought to our moderator, write your questions early and often and make sure they are questions,try to make them as legible as you can and we will try to get to as many as we can. Signed copies of his book are on sale after the program. Without any further review you get a warm welcome to Charles Schwab and adam listen see. [applause] what a crowd. Im going to hit the gavel in a moment but before i do im going to reiterate that i do discriminate in favor of legible questions. So you been worn on that. This is one of my favorite parts ofdoing the Commonwealth Club event. I can hear you. Welcome to tonights meeting of the Commonwealth Club. Im adam listen see, executive editor of fortune and your moderator for tonights program. This program is part of the Commonwealth Club epic and accountability series, underwritten by the travelers Family Foundation with Additional Support from the Bernard Osher foundation for our good list programs. Im now very pleased to introduce that ice yes, Charles Schwab, elder, former ceo and chairman of the Charles Schwab corporation and author of the new book invested, changing forever the way americans invest. Charles schwab is one of the worlds most influential mental executives with as of 2019, im not done. Nearly 3. 6 trillion worth of assets managed by the anonymous Charles Schwab and company. He founded the Brokerage Firm in 1971 with a 100,000 loan and has since grown into a Financial Services or not. Mister schwabs memoir invested lays out his passion to change the way we invest in the hard work ingenuity and entrepreneurship that propelled his vision into one of the leading Financial Service firms in the world. From studying economics at Stanford University guiding his company through decades of Economic Transformation andfluctuations , he recounts the defining moments of his life while providing unique insights into the evolutionary dynamics of entrepreneurial companies. Today we are pleased to be able to have a conversation with Mister Schwab about the how tos Financial Management and his advice on obtaining a fulfilling career and life. Please join me inwelcoming Charles Schwab. [applause] that a lot of my hands out here, thank you. Its a real pleasure, i stacked the deck here. I was thinking you might want to quit while youre ahead. Lets start at the beginning, not the beginning of your life which we can come back to the beginning of your lifes work if you will and it was in 1975 you had an entrepreneurial moments. Tell everybody about it as you describe in the book. May 1, 1975 and the congress made a decision to make sure that commissions were all negotiable before they were fixed for over 200 years at certain levels but it was fixed rates all the way through from the prior 200 years and on that day they liberated the whole thing and democratized in many respects the ability to invest anyway you wanted to and pay any price depending on which broker you use. We lowered our prices substantially and others raised their prices a little bit like Merrill Lynch and created a huge gap for us to enter into the business with low prices and hopefully Great Service and we started with four people, not in 75, we started a couple years before because we knew this was going to occur and so today we have about 20,000 employees that work with us and try to serve our customers. I think one of the themes of entrepreneurialism and you write about being an entrepreneur. You identify as an entrepreneur is that the things you see and act on are what separate you from everyone else so for example what congress did wasnt a secret. It was the opposite of the secret, everyone in the securities industry you about it so can you reflect a little bit on why, what we now look at as obvious and what enables you to create your business, why you were able to act onit and others in. We were the only firm that entered into that area of this discounted commissions, there were a few others most ofwhich were in new york. We happened to be in San Francisco so this really is a San Francisco story from stem to stern to say the least so on montgomery street i had four employees and i thought this is a great idea to go into this business. And at the time, so we, this is a couple years before the 75 change but i have this idea that customers really wanted a better deal and being sold High Commission products, being sold stories along the way that some were true, most of them were just hyper stories and there was a way to create a commission or compensation for the discerning broker so i wanted to have a place for people to invest and the reason i got into this because i was just out of Stanford Business school in 1961 and i worked as a financial analyst for the next 10 years or so and as a Portfolio Manager only brokers came to our firm. I was just with a tiny company near menlo park at the time and i just got to know these brokers and said this is a bad business. There based upon the wrong kind of foundation, they were based upon Customer Service or Customer Value for all those kinds of things that you all want to hope for, so anyway we decided or i decided 10 years later, it was 71, 72 that when we started the company with this view in mind so the first thing i did is i dont want any salesman in our company. No salesman will ever call you. We compensated our employees by salary plus bonus based upon success of the total company and if we were really successful, everyone got a nice bonus. So everyone is focused on Customer Service they want to have them refer new customers to us and wanted to grow and prosper and thats how we were different then and weve been different, the same model for the last 40 years. And this is a profound point you make earlier in the book that you come back repeatedly. You decided your company was not going to sell. You were going to market. And we will talk about marketing cause you also identify yourself as a marketer. You personally. Your book has a lot of nice detail about you, about your early life, you are a californian through and through. Just tell everybody a little bit about where you grew up and how it was, why being a californian is part of your. Its interesting, my paternalfather , grandmother was born in San Francisco in 1880. My father born in San Francisco in 1915. I was born in sacramento so basically growing up here and i spent my whole life here in california so i went to school here etc. So im really a local guy. That was erin deputies in many respects and i think San Francisco ended up being for me, i could do things that you wouldnt ever do in new york city so many people didnt realize i started the company here, built the company in San Francisco and never had all the negative things that a new york brokers add and retain so that was very beneficial. The other part was the fact that technology and innovation was clearly happening in the Silicon Valley in San Francisco so i adopted a lot of those great things in the introduction to our company made us much more efficient and we ever were all those years, even before the internet we were applying all the best technology so that wasbeneficial. Lucky i was here and the third thing was we were able to market close at 1 00 new york time so i should focus in new york so we had all afternoon to clean up at the time because there was so much paperwork was just paperwork was technology so we had extra time to make sure our back office was clean all the way through and a couple times they work but for the most part we had a clean back office. You describe, im going to touch on three things that were important early in your life you and one is that when you got out of college you had a whole lot of jobs. You did a whole bunch of things. One of them was selling insurance and i dont know if its right to say you werent anygood at it, you didnt like it, it didnt work. Tell everybody. I had a number of jobs and i think its critical for you to encourage young people to get any kind of job and i have any kind of job. Ive been a switchman on the railroad but speaking about, i was between the first and second year in Business School and so i thought id better learn something about the Insurance Industry because i was focused on being in the financial terraces world so i worked at a bank the year before and then wanted to see about insurance. And i was a complete failure at that. I really found out that this stuff was so overpriced in terms of the sales commissions involved and they wanted to have a list of all my family and friends and so forth and i never sold a single policy. I started analyzing with the insurance stuff and i said thats not for me and after six weeks i think they encouraged me to quit. You made it clear in the book you said you were skeptical about mostinsurance products. Theyre all built upon a failed content that was, extraordinarily expensive, when you analyze how their constructed. And very quickly i decided i think it was a bad thing for most, they had me selling endowments, twentyyear endowments to anybody. That was the stupidest thing to ever do because i was always interested in investing and i thought putting your money in something that might grow faster than an insurance product which sucks most of the returns out and goes to the Insurance Company so that was an early learning. Another early passion of yours and current passion of yours is golf. I believe you got into it playing for the High School Team in santa barbara. I loved it. Other than enjoying it, what is golf such a big deal . Not i love basketball, i really loved basketball but it turned out i wasnt tall enough. Theres nothing i could do about that one and i played junior basketball in college, not in college but in high school and all of a sudden as a sophomore or junior these other guys are six foot two and three and so forth and i was looking up to them so i decided maybe golf is an area i should probably focus on because even then ogilvy was 56457 so i thought that was my iconic man so i wanted to copy him and that was the reason i went for golf. Many people will know this but i suppose some want know that chuck is dyslexic and i want to push you onsomething you wrote. You said for four years, you wrote for 40 years youthought that you were stupid. Slow or something. Somehow or other i could not read as fast as my friends in school and it upset me a whole lot and my comprehension wasnt as good as they are so i had to read things a couple of times to understand what was goingon. To me it was sort of a handicap but i never talked about it. It was the kind of thing you would never any about about how slow you might be because i took my test. But you didnt know what it was . I discovered when my youngest son had the same exact issues that i had in school, and he was seven or eight, took him down to be reviewed by a psychologist and so forth to see what his issue was about reading. And they came back and said your son has dyslexic issues and this that and the other thing. It was a great revelation to me to find out his problems were identical to mine as a kid and explained everything but the word dyslexia, that whole science was undeveloped when i was young and its been relatively analyzed even mris of the brain, how the brain functions lightly different in that area where you deal with words and conversion of words to meeting and that kind of thing so anyway, turns out it sold for me a lot of issues that i had earlier. A big moment for me. So from that point forward my wife and i decided to develop a charity thing for service for other parents who hadkids with learning issues like that. It was called a Parent Education resource enter and we did it in san mateo and we had many many families, brilliant moms and dads and this kid cant read very fast, whats wrong with him quest mark your normal in every other respect, you just have a processing problem that you have to identify so books on tape is a great way to read books. One of the things i admired about your book is that its very acceptable to the average reader but you go into all the Major Business events of your career. Its really a San Francisco story about a company with four employees in San Francisco on montgomery street and grew to 20,000 over four years of time and all the ups and downs. We were bought by the bank of america one time and one time we were very large shareholders of bank of america and our issues there so we finally bought ourselves back after quite a struggle. That was in 1987 so the story about all that and me going on the bank of america board was interesting also. Youll love reading about that and fortunately we were able to free ourselves and by the company back. In 1987 it was. And then start a new basically in terms of our growth pattern and so its sort of a fun story to think about and review. A lot of your stories are very fun and interesting. You mentioned a few minutes ago about how and why technology has always been important to schwab. Will you explain the First Time Technology was important and why you were so persistent about spending big money on it even when you didnt necessarily have bigmoney. The first transaction i talked about in the book about an entrepreneurial, thats the whole company. Since 1979, the whole company on buying a Software System i thought would solve our beginning software problem. We were getting more and more volume, more and more paperwork and i had to solve this thing, otherwise we were going to godeep in the sink or thrive. Thank god we worked hard through that whole time and were able to come out at the other end, have a system that would work well though we were very early on at adopting an Online System and the internet wasnt really coming about until 1995, 96 so we had all those years of using a very efficient system that we talk a lot about a little bit, i wont bore you with that information but anyway, the Software Cost me 500,000 that time in 1979 and the company wasworth 500,000. So that was a big decision, let me tell you. You mentioned a moment ago there was a young company, you were growing quickly. Why did you sell the Bankof America in the first place . We thought originally there were going to lend us money. They suggested that and i said to study our Business Model and they thought this is a good business, maybe we better buy that company and diversified and they flashed a couple big numbers and having come from zero money myself, 55 million was a whole lot of money for the whole of the company and i think i owned the percent which was a lot of money, let me tell you in 1981 so we finally decide to do that, to make the transaction happen because i was faced with as we grew and grew, we needed more and more money to grow. You need that in capital and i was turned down by many venture capitalists along the way and certainly wall street didnt come to my aid because we were creating competition for them and just lowering the prices, making big service for customers and thousands were joining our company as clients. So they didnt want to finance it any further so i had a tough time raising money so it was an attractive thing at that time, my age and thedevelopment of the company. But soon , over the next three or four years it became clear that we were under the wrong umbrella and had to work our way out of their. Not only that but they ran into problems. A rented huge problems, lend money to the greek shipping guys that went down the tubes and the argentina had all kinds of loans to south america. It went on and on so they had to sell the big building, big Tall Building in downtown San Francisco. They sold a couple other subsidiaries, italian subsidiaries so i said hey, i convinced him to sell us and that was another interesting story about us and they said okay, will sell you so will sell you to the highest bidder and i said terrific but you know very well that im not for sale area you can sell a company, im going to start a Similar Company right across the street and it was a real threat because i was going to do it. But i was a little bit upset with them because going back when we made the deal with them, our stock , we went in a stock for Stock Transaction and their stock was 24 a share and that was a top check in the next four years it went from 24 all the way down eventually Something Like nine so i was an unhappy guy for many reasons. That was my total worth, my wife is here in the corner, shes shy. Its a nontrivial point, they could sell Charles Schwab they couldnt sell Charles Schwab. So the name and likeness provision in therethat they couldnt, that wasnt for sale. And it was serendipitous that i used my name and face by that time in advertising, so i was getting people who identify the company withme. Though i dont know who they were going to sell it to. The namesake goes down into the streets about a block and opens up another similar competing company though we came to terms. They were really happy. They ended up with five, six times what they had paid me for an compensation in five years time so it was a good return for them. I want to come back to this in a moment but before that, you mentioned that the company was identified with you. You were in the advertising, your name was on the door. I remember correctly wasnt 100 percent your idea. Could you talk about that . That was an interesting moment in time. The guy who was our advertising executive at the time, richard cruiser, wonderful guy who , this is now 1977. We had a great article about the company in the examiner. Remember the examiner . There was a big picture of me and the picture is in thebook. Im leaning over this thing they call on reno machine. And they had a nice article about how well we were doing and growing and etc. So dick said to me why dont we use that teacher of you in the ad because before we had ads that said save 75 percent on your transaction cost like a one inch, one column by three inches and then we go with two columns and we could really afford advertising at that time that we grew and grew and i think we could afford and add about that size. So they said lets put your picture in there. Are you kidding me . What do you think my friends are going to say, you egomaniac. Was my wife going to say what the mark put your face out there, onlythose guys out of the post office, thats where they have their names. So anyway, i said how about this, will just try it once so the results were up about 10 times what they normally were in terms of the advertising thing so we convinced everybody. Itwasnt that much of an egomaniac, i was pretty bashful at the time. And we did it and it worked so we decided that was the way we were going to operate hereafter. So thats what happened. Questions starting to come in from the floor so im going to abandon my script and go to their questions. Im going to read three that are similar to each other. What advice would you give to a 16yearold starting in investment and figuring out his future path . The second question is what three pieces of advice can i take back to my High School Students and lastly, my son is graduating from college this year, what advice you give him as he gets started with investing . I guess you get questions like this from time to time. Even from my grandkids, i have 13 grandchildren so they asked how do you do well in thestock market. First i would say its all about education. Youve got to read as much as you can, even how the world functions in an economic sense and start along with it. What is a stock . Ownership in a company and we have thousands of companies in america, thats our system. We call it the capitalist system of free enterprise, a better word but i have to tell you, is for the kid to understand, capitalism comes from the word couplet, the latin word meaning head that means creation, innovation. Thats why we love capitalism because its the creation of ipods, apples to whatever it might be but it comes from the creation of the human brain. Anyway, learning about economics and how that all functions is really the important way to start and unfortunately school today dont have much in terms of Economic Education and its a real problem i think Financial Literacy is a very low level and people get in a lot of trouble with bad ideas about credit cards and borrowing and all those kinds of things area they have no clue. You need to learn about that in school so anyway it becomes education. If you want to get successful and read more about it, get passionate about it, understand why youre there and youll have a great investment life for many years to come, were all living a lot longer. Let me drill down and play devils advocate on that question and your answer and i would save my advice to a young person would be by index funds and whatever you do, dont buy individual stocks because youre probably going to do it poorly because the Academic Research proves that most people do. Im a great believer in index funds. Having started one in 1991, called the schwab 1000 and its done incredibly well over the last 27 or eight years. It compounded about 9. 9 percent compounded and its like the s p 500 except we have 1000 stocks so im a longtime believer of it and ive recommended it to many people. Index funds is a great way to start, however its a little bit boring. In fact, its very boring and i think for a youngperson to step into an index fund , you dont get the real fabric of what investing is. How about microsoft, how aboutfacebook , how about all the things you see and so guess what . Were going to solve that issue. We got a thing coming up next year for young people who want to buy one 10th of a share in something. One fraction of a thing you can take 1000 from their gift from their grandparents and divide it into 25 different stocks. And that will be an easy way for them to get engaged and involved and thats what you want to supplement to what they are really about so they get this annual report, they get interested and curious about whats happening next in the company so i love index funds. Its the greatest way for most of us to invest, low cost, all those kinds of things. I think for young kids, they get to make more mistakes early on and do it inexpensively. Wonderful segue to the next question from the room is what was the most painful lesson you learned about forming and growing abusiness. Lack of capital. We had so many, thats what venture capitalists do these days is they are, we have a great system there with it. Equity capital available for great ideas and you can see whats happened with facebook, they were supported by one great idea and supported by venture capitalists and so forth so back when i started, that wasnt really a flourishing area to speak of. So thats really a beneficial thing to have and i think great ideas , they have even now many ways you can do an advertising about. Im looking for capital, its now possible toeven put an ad in the paper and say im looking for capital, i want to pay for that ad. You have a favorite mistake you made that was just a plain failure . There are many. Too many. Youve got to read the book to see them all. Good entrepreneurs do have failures. All the way along. Theres a whole series. And we never knew for sure where we were going to end up because we had all these Technology Things to do. Personnel, very early on i couldnt hire the best people. I knew i was lacking in different capabilities. I couldnt afford the competing salaries so id have to convince a person to come on, weve got a great company. How about some Stock Options and that didnt cost me anything and he said okay, that sounds good. But we didnt get the harvard mbas for sure our the stanford mbas. I was the only one, actually. Well, i appreciate and respect you dont want to give away every detail so for the young people who know all about the fire festival, that debacle of a Music Festival theres a funny story in spoke about his investment in a Music Festival and thats all ill say about it. That was before thecompany got started. To questions of similar from the room, how can investing address the growing problem of income inequality in our country and that is signed by a schwab client and the second take on that topic is how can we lower income inequality globally through Economic Empowerment . Thats a big issue for all of us that were facing now. Frankly i think education is probably the only way to really do it. Weve got to get more young people interested in and why they should invest, why every person living until theyre 65 and 30 years ago, now its 85 or hopefully higher and so theres a huge time. Where we all take care of ourselves and develop our own paycheck and that 20 to 30 years of retiring from a company orwhoever it might work for. But thats education. Its truly critically important though kids know when they get engaged and they do something for their iras, everything that government has set up to incentivize people to save more and to invest more. I think just in the current base, if i were president of the United States i would increase the earned Income Credit things on taxes so people at the lowend would get a tax credit back. It would increase a little bit this past time when the tax bill was changed but i would have probably double at least back. Thatwould help certainly at the lowend. My understanding is most people at the lowend pay no taxes. Doesnt make any difference, they still get the check back but you have to work in order to get that back. Its called an earned tax credit. Is implied in those two questions that i just read that income inequality is not only a problem but a worsening problem and do you agree with that western mark. I think sometimes its overstated. We see Warren Buffett who is amazon founder having these enormous godawful numbers, but i think what happens to, theres not enough attributes to the contributions that they do make in terms of innovation and what theyve done to society and yes, it looks like a heck of a lot most of them are very philanthropic. You get back tons of money to Different Things along the way and then guess what, they die two and goes away for the most part. So i dont think you want to take away incentives. We have a system that really incentivizes people to work hard because we all benefit by innovations of some of these will be people have done but its not up for everything so dont take away then send it. That would be obviously socialism and wedont all want to drive the same car, we dont want to wear the same clothes. Life is about our intellectual capacities and creativity and all those things. It makes life much more interesting and socialism. Im going to read another question from the room. Is a massive population of funds in index funds leading to overvaluation and compromising the price discovery process, do you see this as a bubble in the making . I dont see that at all. Ice discovery and matters, all these people are out there doing valuations of companies and finding gaps when theyre undervalued, they stepped in and by the thousands of hedge funds, probably 10,000 hedge funds, theres all kinds of people with individual portfolios always looking for new values so yes, maybe 45 percent of investing is in exxons but i dont see those as a problem. You mentioned philanthropy a moment ago. I understand you have a great passion for philanthropy. Can you tell me how you incorporated this into your corporation and the opportunities for your clients through the corporation . Youre talking about our Charitable Funds which has been very successful. We had our 20th anniversary yesterday and i talked to the directors about how we have 15 billion and it gives out about 3 billion a year 250 thousand different charities. And we do it for our clients and its an easy way to go about giving and so forth. We do all the paperwork and that sort of stuff though thats important but for me personally, weve always felt that we were successful in life which it wasnt obvious to anybody until we were 40 or 45 years of age that we had responsibility to give back to society where we got benefits, whether its education or helping people, kids with learning issues or whether in our case we helped build a museum in town. He did that thing and lots of things, charter school. We had our own Foundation Meeting today talking about things that we particularly like. Education, Charter Schools were very instrumental in helping improve that part of the thing so it goes on and onand on. I really like the way you describe yourself as a maverick. You made your career sort of poking wall streets i just a little bit so not intentionally. I really through the lens of what would a customer like and i always thought wall street was based upon how much money could they make up of whatever it might be, not whether or not the customer likes it or not though ive reversed the whole thing around. That was a little bit of our secret sauce. I thought my read was that you take great pride in it just happened to be, we reversed everything and they didnt like that. We were thinking about our client first and they dont. You think its still the case . I have ceos of Major Companies and say chuck, id love to have a system like you where my employees have bonuses based upon the success and happiness oftheir clients. They love the commission got these guys can make a whole lot more money the way they do. The way they do their business and anyway, he would like to come our way but he cant do it. All his employees would say we quit and did come work for us. That would be okay. That would be okay to. I want to come back to this because it was interesting how you grabbed your business back before you did, if i have the age correctly you were 46 years old and you commented that you were the youngest or number. By a longshot. You can imagine this christine institution. It was probably the most premier bank in the country at the time. Just now in the mid80s before there was really interstate competitionand such. So be of a in california hada branch on every corner of every town. So on their board it was sort of a first day i walked into the board there was a room probably about the size of this room and it had a big long table and every position had a leather book there right in front of you with your name printed out, Charles Schwab so i was pretty impressed with that thing and i looked around the room and we had people that ran levi strauss or transamerica or all the big corporations at the time were on the board. Somebody was on the board and they were all mostly men, i think there was one lady but anyway, it was 27 of them and i think ill maybe owned 100 shares of the company so they didnt have a keen interest in this thing and icome in , of course my whole network had been one of the largest shareholders of b of a so then i started or a littlebit. So in many ways you have very good timing with buying your company back and not only doing that but very quickly you took the company public. I had to because i had too much borrowed money. And i wanted to certainly deleverage as they say and thank goodness i did. We call that the tsunami year of 87. It was really a fast read and it was rough and ready at that time. Because you bought the company, took it public. And then the crash happened. Within weeks. We went public and i was 14 or 15 a share and i think within a month it was at six. That was not a very favorable thing and many of our clients that want to start in the hopes that it was going to be a great thing but fortunately those who bought at six, its probably 1000 times in value so anyway it worked out okay if you hang on. The stock might have gone to six anyway or your value would have gone down anyway but you would have had a worse balance sheet. Absolutely. No question about it. It was a leveraged buyout and it was talked about, i talk about all the details and the fears andtribulations that i had. Another question from the audience, a few founders are able to transition as Companies Grow in maturity and size. What did you find most challenging about that transition . What qualities does someone need to leave through that evolution . I think there was a part of me that as i look back i didnt think about it at the time, but i knew i had this sort of handicap thing was dyslexia. I needed to surround my people with smart people who had shared acommon vision that we had about the company and what we were about. And i had the confidence that i could leave them and theyll help me in categories that i was completely incompetent in and so as 18 we were able to create some pretty good things and it mightve been a handicapped thing that has always lurked in my mind that i needed help from other smart people and i think all the way through, its an essential thing that i didnt think about at the time necessarily but i think its certainly true. The board famously fired one of the ceos, maybe the onlyceo. I had to fire him. That was 2004. We had appointed a gentleman to be the ceo at the time and he lasted about nine months. The board came to me and said its just not working out. We dont have the confidence in some of his decisions, etc. Etc. And they asked me would you come back . I was chairman. Would youbecome ceo again . I was probably 66 orSomething Like that. And thinking well, okay. Took me about four seconds to say i would do it. I knew the company needed some different leadership and i knew they were right. There was no question about it so in 2004 we had just come out of this client of this. Com boom and we were suffering. The company had been great in 1999, in 2000 and then fell on rough times in the ensuing couple ofyears so we needed a new direction. And the company wasnt providing that so i came back 2004 and did it for the next four years and i appointed Walt Bettinger and hes done a fantastic job and we were still from this moment working very closely. One of the things you callout up those. Was the companies valued had gotten, you had gotten new since these are what walter calls gotcha fees. Explain that but also you were stillchairman. Can you understand how that happened . It mustve been a source of, i dont want to put words in your mouth. You couldnt have been happy about it. I wasnt happy about a lot of those things but you appoint someone ceo, youkeep your mouth shut as such. My mouth is not always shot, let me tell you. So you could probably say i went along with it but anyway, the gotcha fees, you all know them. The bank used the charge you every monthly statement paid three dollars for the service and so forth and those were kind of things that were nuisance fees and the one thing i really even to this moment, people have paid 30 or 35 for it bounced check. We took thatout at schwab, we dont have any bounced checks, no nuisance fees, all that stuff is gone away. Thanks willdo some of that stuff , actually but everyone ispretty familiar with gotcha fees. It in the Auto Industry is the format. Or the nuisance fees of buying a car. You just eliminated probably the most famous in the history of the brokerage industry which is the brokerage commission. We were on that dissent from the earliest days so my hope was that we would eventually get there where we had enough other business area and its sort of in many respects it would be analogous to google in some ways. That search is free. But then you use other services along the way. You buy some of the products and do some of the things and dont worry about it, were not going to do what they do advertising your information to sort of set you up for these differentpurchases and so forth. But we have mutual funds and we have a bank and people borrow from us and we have a lot of different ways that people use us and so commissions we took tozero. So it makes it really very convenient and i think people , weve already seen an influx of new business coming in. People seeking out three commissions. Theyre leaving some of the old traditional firms and coming to us and were happy about. When you do that, a venture startup called robin hood took out a fullpage ad in the newspaper congratulate you for following them on having no fee brokerage and i wonder what you thought about that and if they remind you a little bit of you . Certainly there was competition. It was a wonderful thing about american business. So much competition so we have to keep on our toes all the time. So they were doing accessible growth themselves, most of which were raped in accounts and i have to say their transactions are somewhat impaired because they dont provide price improvement and thingslike that to clients. But for obtaining transaction isprobably preferred way to do it with zero commissions even though you dont get a superior transaction. With price improvement going to you, so anyway, we have the other firms and some banks who are providing, if you put 100,000 and it would give you free trade so it was in the marketplace that was happening so we thought lets do it now. So we went to zero. Is a good value. You think how a company treats its employees as a direct impact on revenue for example, the better the company treats its employees a bigger return on investment. Absolutely. Thats probably the number one resource you have is your employees in our business and i think we do really well at that. I think we have a value system at schwab that i think everyone hangs onto and if you come into schwab and you have some other values outside that, you dont last very long at schwab. Its all about Customer Service, not about sales. So anyway, its been invaluable and weve grownand i think our employees have benefited by what we do. Can you talk about as given that last question on employees , talk about how as an entrepreneur and as a leader you processed when you have to tell employees to go, when you have layoffs which you had at various stages throughout the history of the company. One example i talk about in the book was verypainful for us and it was after the 2000 as i mentioned , the. Com boom and all that stuff and we had to lay off a large number of people and it was a very painful thing for myself and my wife at the time. So we decided to put up a big fun to help people that we had to let go to go back and recharge themselves if they wanted to become a nurse or whatever they want to go back to law school or medical school or whatever. Upon to help them repot. So we felt pretty good about that and sure enough the 10 million went away in a hurry. How do you decide on your make it or break it choices . In other words, how do you think about ritz . I think about it all the time. Also, without taking risks , youre not making any progress so we have many products along the way that we thought were pretty interesting and the clients told us eventually when we came out that they were no good at what they dont want toproperly , we trash them. Sowe listen all the time to our clients. Were always probably annoying to them, surveying them about this particular thing with that kind of service area so we want to listen to what they say and try to do the things that they suggest. What do you, to use a sports analogy, some people are the data tells them what to do. Other people there. Tells them what to do over your career do you identify with one or the other as a leader . There are many things we have done along the way that people say thats such aGreat Service. Why didnt you start that last year mark they didnt know, people dont come necessarily with great ideas. Youve got to go into the marketplace and youve got to be creative enough to put the idea out there and hopefully most of them. If they dont, then obviously you trash them. But i think youve got to be, but some of the great innovations you see, there are obvious innovations that are coming up along like netflix. Its so easy for you to get a nice movie on a sunday evening orsomething. Right in the convenience of your television. You go to apple tv and all that stuff, its fantastic or whether its pull out your iphone and do that kind of thing. Itsalways these great creations. Of the greatest things that happened in many years is the internet and its just beginning, what happened and what youre able to dobecause of that capability is unbelievable. And it will get faster and as we know 5g comes along and hopefully other things will come along and will give you more privacy and you probably have today because a lot of firms that use your private information or their advertising and such but so were talking about that backstage about block janeand things like that. Someday youll be in control of your privacy , not today but monday. As someone whos, youre not a technologist. You were trained as a technologist. You, how do you make these decisions because on the one hand with the internet, you were clear this was a big technological change and Charles Schwab corporation was going to invest aggressively. Right now in your field Everyone Wants to talk about crypto currencies and schwab is not jumping on that bandwagon. Crypto currencies is sort of not something that im in favor of right now because it really, yes, they have security butthey dont have anything backing up the currency itself. You want to have full faith and credit of somebody behind it like the Us Government would be pretty important to have or a bank or something so this is sort of something that you can dream about and i own one bit coin. I got it about three years ago, i guess i got the coin from my youngest and half a coin from mysoninlaw making one coin. It was worth 16,000 that christmas and i think within six months it was worth 4000 so i lost 75 percent of my socalled gift. Not a good place to be. And i kept telling them, this is not a great place to be so ive suffered right through it and i think my son sold everything he had in terms of crypto currencies so anyway, is a sharp investor. Im a stupid investor. I still on the coin. Youll be okay. Chuck, i cant remember if its the ninth or 10th year of an economic expansion and able market. Logic or history, even common sense would suggest thats not a great place to be as an investor. What areyour thoughts on that . I happen to be, you have to be an optimist when youre like myself so i think the undercurrents of the economy is really strong and i happen to be a believer that the tax bill that went through to help our corporations in america become internationally competitive is a fantastic thing. The cash flows of companies are high and even right now, reporting the most firms are reporting improved earnings. Underpinning of the consumers seems to be in really great position of confidence. And it can go on but nonetheless, economies always markets always go up and down. Thats a fundamental with its currencies, stocks, bonds, interest rates, you name it. Markets will always go up and down so if youre a smart investor, understand that end ensure that you just hang on for the long term and you look at any chart over a longterm, i dont know if you can find yourself, it can be three years, five years, 10years. It always ends up here and eventually, ends up over here. Im talking about things that grow. Im talking about stocks. Im not necessarily talking about bold or silver, commodities of that but those things dont grow necessarily, they go up and down by a short distance of supply or demand, those kind of things but docs and things like that are the function of a thing that can grow. And were seeing it. You look at any of the great companies. I talk about, to make my point, every company ive ever been on the board of, ive been on for s p 500 companies and no management as ever come into the boardroom and said we cant grow next year. They always have a plan of backup. Somedont achieve it but all have a plan to grow. And thats what companies, thats what we do. Can you talk about the role of mentor ship . Is there someone at play that role in your life, what important lessons did you learn mark. I didnt have any Single Person was my coach as such. My father was a lawyer so he had really not much background in what i was up to in economics and then on finance. So that was i think the biggest motivation i had as a kid was our family came up, they came up through the depression years and how important my end saving was so that was a fundamental learning i gotfrom my family. Make sure you do well enough and pack something away or tomorrow. So i read a lot of biographies when i was a kid about who were the people that really did well, success in business whether its most of which i sort of drifted towards those that did finance and whether j. P. Morgan or somebody like that. I said thats what i want to do, i want to get wealthy,i dont want to be sitting around and say i cant buy that. Thats what you dowhen youre 12 years of age. You want to buy the bike, well, in my case we went out and found a used bike and i had a used bike. I was happy with a used bike. It worked well with a new swing, i didnt have a new schwinn but i had a used bike that i greased that baby up every day and it function. Can you share some words of wisdom about navigating external changes and making them work in yourfavor . I think for sure you just education, its understanding what youre talking about. Making sure you have every avenue to figure out and then take the rest to make a decision to go one way and if it doesnt work, change your mind and come out with a different way. Flexible. Lexical, flexibility and understanding how to lexical is critical. I promised you and everyone at some point we would talk about marketing and you write a lot about why marketing was important to you and not Just Marketing but also Public Relations and public speaking. Could you talk about that as a Business Leader . Those were all learnable things. They really are learnable things. And i learned about marketing for instance, i learned about pr. I learned about, i would never learn how to be a great salesman, thats one thing i could never doparticularly if it was abrett babcock. Like insurance. So i always wanted to surround myself where its something i could be enthusiastic about. A great product that i was deeply involved in an act confidence in you so we created schwab ive always been, i like to talk about the company because what we do and what we stand for and all those values that our company has and i was not, in the bri would go around in the early days of the company. We couldnt afford much advertising area very expensive. Theyre expensivetoday but we can afford today. But i went around, radio stations all over the country to try to introduce the world to the benefits of discount brokerage and it seemed to work and i got introduced, appointments with different radio stations and got a few tv stations and a few articles in the newspaper. Like we talked properly on and we got us continuously out there, out in front and then talk to groups like this about the benefits. Early on, right before 40 years ago, talking to groups about the benefits of discount brokerage, why it was important and how you could just save money but be able to make decisions free of Commission Sales guys. That was what we did. I remember saying in any interview you ever dayyou ended by saying something, either giving the800number or saying come seeus , something to that effect. Thats what a good marketer does. You also about communicating with journalists, you have some wisdom in their that this is my personal favorite passage that im going to read and im going to share this with other ceos. In 2004, five or so when you were into just beginning the turnaround of the company, my former colleague betsy morris and fortune i believe youd work on an article with about Corporate Leaders with the sex leah said i want to write aboutthe turnaround Charles Schwab and the executives advise you that was a bad idea. Its too soon. They havent proven everything yet and you right here there were any number of reasons to say no but i knew that a good story requires some tension and we had enough progressunder our belt that i thought we should take the chance. In retrospect the piece focused more on davids departure then we hope. It made it a more dramatic story i suppose but the underlying theme was clear. We were fixing schwab. We were and i cheated. Theres a picture of me in fortune, the real hard cover out there which i love, its oneof the best. Its me as a 13yearold i think, 13 years of age. Once in magazine, betsy has dyslexia should so she started this article about executives that had dyslexia in their background and so she came and interviewed me, interviewed a bunch of other characters. And unbeknownst to me she got a picture of me 13 so it was a frontpage of the Fortune Magazine 13yearold. All my god. Of course, nobody recognized me then, it was good. We used to have a big staffof photo researchers would go find that sort of thing. You part of that fixed up. I know youre joking about that because you had the presence of mind to save your people yes, they got to find some of the comedy to find some of the bad stuff. Thats their job and thats okay because that makes it believable and authentic when they tell thewhole story. Not all ceos are like that. Openly its one. Thank you. Lets end with what your story about working with having a photo of the 13yearold, you and working with other parents and children reminds me that its not just about numbers on a spreadsheet for you. You do want to make money, you said that very clearly but its about more than that so good we end with, just explain to people how you managed to not only build a business but have a good time doing it and why that matters . You think about purpose life and what you try to do, you try to maximize the best of your ability whatever it might be and im always in great admiration for those that are musicians. Or are great at being a doctor or a lawyer or whatever it might be just pursue your passions and thats what i found i had a young boy in today whos applying to college and say i like to help these kids get into the best school they can get into but thats one of the conversations we have is about pursuing your passion, whatever it might be and making business like myself and being successful financially. You also have a huge obligation to give back large parts of what we do interms of being successful. And were happy to do that for sure but i think its every kid needs to find the direction in life, the passion that i have and how they can contribute in a way that they can society and i think thats sort of a way that youwork. I feel as if i dont ask you how is your golf game today . I have to say its as good asi can remember. [applause] for we closed, please bear with me for a moment. Our thanks to Charles Schwab, founder, former ceo of the corporation whose Book New Book is invested. Changing forever the way americans invest. This program has been part of the Commonwealth Clubs ethics and accountability series underwritten by the traverse Family FoundationAdditional Support from the Bernard Osher foundation or our good list program. We would also like to remind everyone here in the room signed copies of Mister Schwabs book will be available outside his room calling the program. Im at a and now this meeting of the Commonwealth Club is adjourned. [applause] heres a look at events book tv will be covering this week, tuesday we will be at the iv bookshop where university of maryland professor richard bell look at the underground web as slave traders and human traffickers operated in the north prior to the civil war. On wednesday look for us at the sign museum in washington dc for rehabbing thought on how british operative word to spread propaganda in order to encourage american involvement in world war ii. That same evening we will Miami University in ohio former ohio in 2016 republican president ial candidate john casey will share his ideas on how citizen can promote social and political change. All of these events are open to the public. If youre in attendance picture cd on twitter, facebook or instagram area. The cspan2 online store nowhas graffiti products. See whats new for book tv and all the products. Good afternoon everyone. Im the Vice President in Foreign Policy studies at cato. You all for being here. Welcome although those of you to wanting online cato. Org and i take the time to say hello to those watching on cspan and id also like to extend thanks to our outstanding conference staff will always do a terrific job organizingour events. I enjoyed on stage by my colleagues john glazier, director of Foreign Policy studies and trevor grohl and were here with heather