I really enjoyed it. It is a gripping story and well told. So my first question why did you decide to write this now . Was there something more you wanted to say, what motivated you . It was written to the young entrepreneurs know how hard it can be and how hard rewording it can be so that it offers an encouragement to think if i want to start my own business, i should do it. The other thing i wanted to do that before i got too old to remember because looking at this from when it dictated at the Stock Exchange and then going through all the technology was really an Inflection Point in the Financial Service industry and i wanted to tell the story from the inside so people would see the human aspect to it. Host so, the title the harder the work the luckier you get, is that tongueincheek or did you believe that . Guest sam is the one that put the phrase together but then as i was talking to the people at simon schuster, and of course it isnt about time and time again. It sounded like it should be a good title. Host there was an amazing amount of hard work that you went through. Somebody that has written a lot about the financial industry that worked on wall street for close to 20 years the story that you tow about building ameritrade and how hard it was was truly gripping a. I never got the impression. Of course i didnt live through it. How did you do with . Guest one of the things that made it tough we started with almost nothing and in fact back in the 70s we had to send out a Financial Statement every six months to our customers and one of the customers called me and said i thought i have to tell you that you left 30s office Door Networks and i have to tell him no, those are the figures that you are seeing. So, we could only grow by the capital that we left in the business. We also had to be careful about running a business in the regulations so it was a constant struggle with balancing. How much money can i put in advertising and how much do i need to make sure the increase in the business isnt going to exceed the capital and how much can i put into hiring new employees and binding equipment for them. That is what allowed us to grow. Even being in business after almost 20 years when i saw the opportunity for the internet and for advertising, i said we dont have enough cash, we dont have enough money and we are not going to make it with these generated funds. We will probably have to go public. That is at the time that i regrettably said if we are going to stay in this industry and be one of the winners, we are going to have to have more capital. Host obviously that is a momentous decision in any companys lifespan. You spoke about the momentum big bang when the commission blamed away and what that meant for your business. In my own writing and research in wall street, really one of the most important moments in history is when the firms started going public and when they went from publicprivate partnerships obviously its made access to capital a lot easier, but how do you feel . It sounds like you had some regrets about going public but you had to do it for the Capital Access and the same thing they said about goldman sachs. Was something lost when you went public, and how important do you think that this idea of Companies Going public is to the way that it changed the culture of wall streets . For us, for me it was a very difficult position because it was for my family to offer that after i could retire and was gone and i knew if we went public it was going to be difficult to maintain the atmosphere but at the same time i also knew we needed access to take advantage of the opportunities ahead of us and that turned out to be right. I figured we needed 100 million for the advertising of the figures turned out to be a low so it was the right amount to get us into in lack of a better term the Upper Echelon of people that were going to be able to stay in business. At one time we had over 400 competitors, but most of the people were laid out before the 1990s. Iits very similar story to the Automobile Industry or kind of any i knew if we wanted to stay small we were not going to be and i wouldnt have anything to leave to my children. At the time that we went public and i got all the listings on capital people felt close as i described in the book about working at ameritrade everybody seemed to enjoy it. When you go public you kind of become a different company. For lack of a better term you become more professional. You lose that touch that you feel when you were a private company. I have a different attitude towards the Investment Bankers. I dont think they should have ever gone public. I think that they had better control and management of what they were doing as Investment Bankers when they stay private. So i see dealing with the public as two different businesses that need to be thought of separate separately. We did while. We are getting into so many other businesses so Morgan Stanley had a big brokerage. They were in so many different businesses maybe it was inevitable and Capital Requirements were not that much different than the retail brokers. Did you feel that the underwriters did a good job with that in the process or did that leave something to be desired . I was amazed. We have been in business for 20 years and we couldnt get anybodys interest. Until we got to first boston then they didnt understand the business and they were not enthusiastic they did it because the money but there wasnt any special enthusiasm for the stock and after we had been public for a while and demonstrated to the market the kind of growth we could have come and find me up and they said why dont you tell us and i said i tried to you just wouldnt listen and buy into it. Weve been growing at a phenomenal rate and nobody in the industry thought that we would be anything other than a startup business. That was all a surprise and shock. Is that because you were in oklahoma and not new york or San Francisco . Guest i think even if we were in one of those Money Centers would have been thought of it would have been looked at the same way because the securities industry didnt want to think they were competitors. They also had Warren Buffett. I dont know if the Warren Buffett phenomenon would work. Maybe i would see them once a year or so shes in a completely different world than i am. He didnt speak to the council, Salomon Brothers or anything. That is certainly correct. Host you said in the book how there was a different outlook with your family, your parents, you had different interests. Was that hard for you growing up, did have somebody in the House Building business that your father was in order the couple of things kids growing up were interested in sex guest it was not hard. In fact, i had an ideal growing of period. In nebraska in the 40s and 50s and 60s was an absolutely wonderful place for people to grow up and my best friend. We still get together and look at that and say we really had the most wonderful way and we didnt realize it. Now with respect to my father and then when my grandfather died my father bought the assets from the estate and my father would have liked for me to be in business with him and in fact he encouraged me to go to Engineering School but i had no intention. I tried but you have to have talent with your hands and if you dont have the talent, i dont. You have to understand where you should be all things and that sort and i didnt have that. The second part was i couldnt wait to get out of Nebraska City even though there was a wonderful place to grow up when i became a young man i was ready to go out for new adventures. So, although my father would have enjoyed me coming into business with him, he knew that i was never going to do that and even counseled me. I dont want to disappoint you, and i am pleased that you are not still disappointed. Some of the other aspects about playing sports, no i never did feel any shortcoming i tried to play sports but i was all thumbs. It didnt work. I try to catch the ball and it would hit me in the face. As i indicated in the book i felt like a grownup. I was a little boy that had a paper run and i would take my few dollars in the bank and go to the teller and hand them my few dollars and that grownup, the teller would take the information and write it out and that made me feel grown up. That was a feeling i got that nothing else was replaced. So to make a few dollars to put in your bank account is probably the most important thing of my life. As a young man. They never encouraged me to play sports, so of course my parents were raised in the discussion. A lot of times you have a different attitude on what you should do with your work and with your dollars. The host you talked about the great freedom and responsibility. That feels like such an american concept to me and and admire double concept. Guest i always did feel responsible to my family, to my mother especially. I didnt want to disappoint her and do things that she would consider to feel embarrassed. We did feel we had a certain place in the community and we needed to work to maintain that. So, although i had no idea of what was happening to me at the time as i look back now, i can see that i always knew that i should be responsible and i knew i had the freedom to go anywhere and do anything. Ten q. So the viewers the story from generations back . That seemed to be a seminal moment. Guest it was a great blessing to learn. My grandfather was a successful partner in nebraska in a small farming town and being a successful person in the community meant the roads you plow horse trader, the hogs that you raised got fatter and of course the other thing is the church in that small town offered the first pew to the family that gave the most and the second most and things of that sort. My grandfathers family always had the front. They would buy a new car every couple of years. My grandfathers mother had married a banker, and this is before regulations or anything of the sort. You got your money and risk and put the Interest Rate but your thoughts with be something to give you the adequate reward to risk that they were taking. But he then had access to capital. So my grandmother wanted to leave each of her children of farm. After the first world war, farming was a very successful business. It took a dip with an extra supply in the market in the market grew as the economies around the world grew and had the demand for the Agricultural Products produced and so during the 1920s, times were good. My grandfather had a farm on which they had a mortgage and as soon as they had some equity in the farm they borrowed for the next cave. They had equity again and so they built and inverse paranoia that and everything would have continued the same in would have been just wonderful. But we went into the depression. One of the things my grandfather did do, his dream was to be a cattle operation to him and his son so the dream was to have on the side of the barn a sign that said clarence andsign but before they ever got very old, he bought this bull. It had a disease. I cant remember, tuberculosis or food and mouth disease. But it was a very prized bull and when he brought it home he had a party and invited all the neighbors in to see and there was a number of tables taken from the house and put out in the yard and then everybody got some food for the tables were full of food and people would play games that they could make up. One of the games i was told was the men would bet on how many they could lay on the back before one of them started to fall out. So, my grandfather was in his heyday. This was the peak of his career because he was able to show off and think about the benefits that he could have in using the bull to make his herd gets better and bigger as far as the type of meat they would produce. Then the states took control and it was before the current science new how to handle it so the whole herd had to be destroyed and of course he didnt have the money to make a payment on the loan and everybody lost their farm. It was also before the days of social welfare so they moved to Nebraska City to go to work in the packing house. He had a nervous breakdown so he never did work after he lost the farm, and my memories of him are sitting in a rocking chair just looking out the window. His sons are old enough to go to work and his daughters went to work so the whole family went to work to support their family. There is this man that had a very Strong Social position while he was a good farmer to move into a house in Nebraska City they rented the least expensive they could find. It was very much a come down and it was a hard time for the family. They never did recover. It had a big influence on my mother and she told me the story many times. Host did you take a lesson from that story . Guest i have to say to myself dvd to fail. Be ready to lose all of your dreams and start over. And in fact ive got a website and one of the entrepreneurs in that website that i enter said entrepreneurs are different. We fail and when we do, we get back on the horse. So, as an entrepreneur, youve got to understand eight out of ten new businesses fail and the risk is quite high but if that happens if you are really a mantra nor can you get back up and try it again. Host another important moment if i get this right is the whole story of the buzz saw in your fathers business and witwith that taught youwould tae importance of innovation and technology. Guest it is an important part of the story and i started out and pointed out how important it was because after we were successful with technology around the turn of the century, everybody thought i understood technology and the understanding of technology is that about me to be successful. That image is where my mind we went. My mind went right back to that afternoon we were so pleased about how much construction they could give that. Host is this the idea if you dont know how the car engine works, you just have to know what it can do for you . Guest thats correct. Same thing. Host it seems technology was always a hurdle that you are trying to get over and you thought you had a decision that would be obsolete by the time you implemented it and a lot of money was spent and a lot of people struggled through trying to figure out the technology and it was as simple as the innovation of having people be able to dial a phone number to make fair trade as opposed to doing it sort of automatically. If kind of let you down and you were behind the eight ball all over again. When we had a trade made, we recorded in the book and put it on the ledger that went into an alphabet system so its just right out of Charles Dickens it didnt take us long to learn we could not continue to do everything by hand and expect the business to grow and of course we all wanted the business to grow and we saw that opportunity. So we have to have some sort of an automation come in to help us out. They gave us a tell a time machine which is a big typewriter the clerk would type in all of the activity for the day. The trade was made, the money received, things of that sort. And the machine then had a tape and we would then set the telephone and a holder and it was fixed up to the holder so that it would give information to the computer in philadelphia so we were in omaha and if you add some static on the line, the information was incorrect. So, the company in philadelphia would receive the information that we sent, process it and print it out in chicago. All of that was to happen overnight. Very seldom did it happen overnight. There was a snowstorm or something preventative. They would pick up the mistakes and get it corrected so it is much more efficient but there was also a lot of opportunities for us to have mistakes and in some ways it was very inefficient because we were ready to do the business of the day which is to answer the telephone and not have to spend our time trying to go back through the business we did two days ago in the current years. Ive got to tell you i am very happy that we had it. It was a good stepping stone that we realized we needed to have our own system. These things came into being and of the world wathe world was coy different at that time than it is today. If anybody thought that they were going to build they would have said you were crazy and basically i have never taken this huge risk the fact that you could even get this done was amazing. So when i started thinking about all these things i was amazed. It was done in the ways that demonstrated he could do other things other people couldnt. They were going to ask a question . We would be in the technology where we are now where he essentially called on via the internet website interface people feel good about it and they are confident. Have you ever imagined . When we started to have that the objective was beyond our imagination. Nobody had the concept that you could do that. Years later when we could execute and report execution within six seconds it was truly remarkable for our point of view. So everybody had to build the systems so that they would pull through from the customers keyboard to the exchange and back that was something to me that was remarkable that we didnt dream it or have any concept that that would have been. So, i if thats what did it r you . Guest i wasnt excited about where my career was going and since i had been a reporter i knew i wanted my own business but i didnt have any capital or any way to get any capital. So, being a commissioned salesman was the next best thing to happen. And at the time that i went through the story seeing the cover of the magazine was a full market and they were making a lot of money and so thinking that i could have the opportunity to put in my pocket by own compensation relative to the commissions job and do it in a way that is related to the securities market, the investment market was a most attractive i could get. So i went to omaha to apply for jobs and i didnt have a degree and all the managers that is we dont even look at somebody without a bachelors degree. So that is when my wife and i sat down to map out how much we need to take care of the family and could go to work to make that money and go back to school. And then went back to college to get my bachelors degree. So the idea that i could be one of these people that flourish as a stockbroker was incredibly attractive. But it just so happened than there was five years in the market. Host how do you go from being a broker to thinking that you could start your own lowcost brokerage and make it work . Guest by associate, my partner, my mentor is the one that somebody is going to break ranks and try to offer prices at a lower price because he was experienced in the grocery business and competition. So the Brokerage Community didnt think that it would change so they thought even though the government had instructed the negotiating commissions people wouldnt really reduce their prices and bob perlman is the one that said to me somebody well and got would start a trend. A white dont think we be one of the people customers want to do business with and not have to defend ourselves to our customers for the High Commission of the ovaries would have. So that is how it all got started. Actually we were as dumb as could be. We had no way to do it. We had a lot of hope and thought that really sounds great. But as the story unfolded as i told in the bucket wa book it ws piecemeal, a little bit here and a little bit there. But we were so what is the word naive or stupid enough that we just kept plowing along. It turned out when you think that there is a market for somebody that just wants to make the trade they just want to let you know here is what i want to buy and sell and i dont need any research or service to find out that its eager than you think. The other thing that was kind of important is right after the second world war, the government had the g. I. Bill and a lot of people came back from the conduct of the war to go to college on the g. I. Bill to become engineers, architects, accountants, doctors. With the education they felt comfortable in making their own decisions about what companies they want to buy stock in so there were two things going on at the same time that really made our markets deeper and broader than we ever thought it would be. So its another one of those things the harder you work, the luckier you get. We never knew that was there until we got started. Host i it is an incredible story of perseverance. Guest several times my back was against the wall and i thought well i might lose it all that i can go get a job, but am i going to be happy . I took the risk and failed and just had to recover from it in some way. Having your back against the wall does help because you dont have a choice but to keep going. Host there is also a certain bittersweet quality about the relationships that you formed like you mentioned bob perlman early on and you had to make tough decisions of people that came into the business or left the business. You make a lot of tough decisions and try to make it a Family Business at times. Your wife worked there who by the way you wanted as you said hopefully you had your brother working there and you hope to have your children working there, but it sounded like often you have to make tough decisions. What was that like for you and how did you feel about that . Guest its terrible but its one of the things you have to go through at times. I would like to talk about tim mcreynolds. He was right out of law school when we had our first difficulties with the securities and exchange commissions. Because he had a lot of confidence in it himself and he had a unique way of trying to solve the problem he saved us from going out of business. He had the ability to save the business and keep us running. A few years later, he changed the whole industry by thinking differently, by thinking reverently about all of the rules and regulations. So, he went to the sec to ask them if we could form an association and justice share commissions and the sec gave a no action letter. If you do it this way we will take no action. That changed the whole industry said hed only been in business as an attorney for a couple of years and he changed the whole securities industry. A little bit later, he said to me with my partners allow me to stay a partner. I was doing some obnoxious things relative to my partners thought and judgment and they kind of wanted to have me under the thumb or leave. He was very important. He was very near and dear to my soul about as close as you could couple possibly have. There was a bill for 75,000 that was a huge amount of money then i could actually comprehe comprehend. But i said to him we cannot afford to pay you because we dont have the money. But i would like to do is give you half of it in stock and the other over period of time as we can. Of course he had no choice but to agree. So he had this stock and now he knows that the stock is increasing in value because we are keeping the earnings and putting them back into the business and growing the business. But every once in a while he would have something grabbed his attention and he would call me and want to sell his stock. Whenever i bought this stock because we were the only market, i would reduce the advertising which to me is like a hole in your heart but in the blood flow. So after he did a couple of times, i said i cant do this anymore. Im going to buy all of your stocks right now and get it done and over with and send you a check. So, we parted ways. We were not really mad at each other, but we lost the friendship and so he and i were always been later on in life. Maybe at arms length. Those were hard times. Those were hard things. When i had bob perlman, my mentor, that was hard. So i just really have to say to myself dont let your emotions get in the way of good judgment. Try to think clearly, logically and follow the ideas that come out of that effort and dont let your emotions become involved. But ive got to use it isnt easy. Its difficult. Both of these men i hated to go away from them with a arms length relationship. Host have you found that that is a sort of standard occurrence in the history of successful businesses of people who come and go and they could be tough decisions made along the way if you share this with other entrepreneurs like yourself and theyve had similar experiences . To answer the question, yes. Most of the time when i read stories of successful people they had associations it was difficult for them to keep as the business grew because they would want to go Different Directions and so the friendship and the camaraderie when you started the business was in there but maybe five or ten years later so i found it not to be something that is abnormal to us, may be normal for the business Getting Started with more than one person. But its something that you have to handle successfully or you will not survive. So you were clearly driven to succeed. I assume that you succeeded beyond our wildest dreams. Has that changed your life . You have imagined it happening this way. I know that you didnt want to merge with the bank that eventually that did happen. I know you wanted to leave the business for your children and grandchildren, but that didnt happen. So you accomplished many of your goals but not all is this the story of america in the 20th and early 21st century . How are you feeling about your experience, your narrative . Guest it certainly is true i accumulated more money than i ever dreamed or thought i would have. But at the same time, i was old enough when that happened i am not going to change. So my wife and i still have the same values that we had when we didnt have any money. It allows us to do things we wouldnt have been able to do. For example, our children wanted to buy the Baseball Team the chicago cubs but we wouldnt have been able to do that and its made a wonderful business for my children to run the Baseball Team. Host there are two paragraphs in the buck but obviously that is quite a momentous thing. Guest heres the thing, but my kids did it. They pushed the idea on me. I said why would i want to, i have no interest. And basically they said well, we dont want you to have interest, we want it for ourselves. So my wife taught the kids a lot about baseball. And we got the television station carrying the chicago cubs to the omaha area so my kids at home in the afternoon would watch it and i did not know that. So my kids went off to chicago but i had no knowledge of it. So it was one of those things that was serendipitous and one of those things you can say the luckier i get. I have no interest in it but my kids did and they went after it in a very earnest way and they did win a World Championship as i think you know the first time for the cubs. So, theyve been very successful with the Baseball Team and the remodeling in the ballpark and the businesses around it so its been a wonderful thing and we wouldnt have been able to do that if we hadnt had the fortune that came with being successful as the brokerage business. Host are they heroes in chicago and taking to get yourself a championship just like one or two or three or four for us ask guest first of all my wife and i have four children. They were the ones that it was suggested by my son, tom and my son had the most interest and has an entrepreneurial, so the four kids among themselves put him in charge. He was the one to make of the important decisions. They are well regarded. I want to touch on you had a brother that died of aids and a daughter that is gay, you come from a catholic background and grew up in the midwest obvious obviously. They were very forthright about it in the book and its honorable how you discuss it all. What has that experience been like for you and your children growing up the way you did ask guest i think you can imagine growing up in a town of about 6,000 in the Agricultural Community you dont have much exposure i never had an idea that my brother was gay until he called me and told me that he had aids that he was only a year younger than i was and so i loved him. It didnt make any difference to me whether he had aids or had been homosexual. My daughter was in her early 20s, she was a young woman when she came to my wife and i to tell us she was gay. Nobody would wish this upon themselves and i was born this way so through my tears i was able to tell her to never take second place and always hold your head high. Both of those things, it is probably the strongest emotion in a persons life and certainly the strongest connector to other people. Family is the basic unit of society and. My wife and i both came from very strong families. Those decisions were automatic on my part. I know that in a lot of other families they are not considered that way and its a shame and its part of why i talked about it in this book. But i think that its important to let people know the fact that they are gay doesnt have any influence on any aspect of their business. So, i really kind of wanted to tell the stories in the book. Thank you for discussing that. I wanted to ask about advertising because it is such a big part of your business and you put a lot of money into it and you clearly took pride in the benefits of driving customer volumes through your advertising. What do you think about the advertising of tv today . I would like to tell others the ad that yo add that you havg has been on for too long. They must have a reason for continuing it. Guest it is ubiquitous. I dont know quite why i remember it. Do you have a view of the cap that is about 70 billion but as the dynamic now and why is it a higher valuation than ameritrade although it is well beyond thatd anything you ever could have imagined . She is a friend but at the time we were competing all through the turnofthecentury he was a competitor i had to worry about but he was fortunate enough to have started in california. Its the ninth largest economy in the world if it had been its own country. Now in nebraska we had 1. 5 million people. Most of them didnt buy the stocks and bond so he had to market that was right at his front door and i had when i had to go searching to find people that would be interested in buying and selling stocks or bonds so i think that he started in about 1975. So until about 1977 he also wrote a butothe coke i think pad in the same month and. There was the opportunity of being closer to the market that is larger than the market that i was in and he wanted to grow as fast as he could in the branches. So, i think that hes done a wonderful job all through the gears of managing his business and allow him to get to the larger market just because of where we started and what we hay had to deal with when we were a new company. He had a bigger base to grow from just because of the population and the kind of population that he had. Postcode and he also by a private Wealth Management business . Guest iv guest ive got to tell you every entrepreneur is going to have to make mistakes because you are doing things that have never been done before. So, anybody can look at him and on any particular interest they can say that was a bad thing and they are probably right. So, you have to take your hat off and give a lot of credit to Charles Schwab for doing some of these things that didnt work but by the same token i have to say to myself i deserve credit for being brave eve. Even though i failed and that is normal when you have a growing business. Guest the view on the market these days is at an alltime high sort of month after month im sure people would like to know your views of where you think this market is going. Guest iem 78yearsold and still working 50 or 60 hours a week. I did retire about 20 years ago and i figured i deserved to take use of the money that i had accumulated and that kept me happy for about six months. After that i was no longer happy. I had to be in business and be a part of the Creative Process that makes the economy work. So ive got to tell you i have never worked in such a Strong Economy as it exists today. I think it is really quite wonderful for the country. Its a little bit awkward for me because im not in the brokerage business. I am in other businesses and when i try to buy them there is a lot of money floating around in the competition that kind of makes the price is ridiculous. So you kind of have to pass. But the government is really giving the country the attitude of the times are good. The president led the charge on reducing taxes and reducing regulations and i think that those are two important things. And if i could, i would like to get off my soapbox and say again there are still too many government regulations on the part of the federal, state and local levels that stop people from starting their own business and that is what the economy grow. Guest on the other hand you say that you support regulations in the industry the same as having a seat belt in the car. Guest that would be going too far. I dont think that we i feel like i shouldnt have to be told what to do that than the other argument is if i get in a car wreck without a seatbelt and i end up on the charity list for helping me to death while, i was negligent so i can see both but my feelings are not leave me alone i will make my own mistakes and go my own way and do my own thing. That is my emotion. Realistically though, there has to be some regulation. I like the word Free Enterprise more than i like the word capitalism. Capitalism is a great thing but gives the image that its unbounded and all and thought hed stalled which it is and should be. But Free Enterprise may give the same image but it brings in the temperance that comes with regulation. So we do need an overseer to make sure the balance between the consumer and the people that are offering the products and services are offering them in an honest and good way so we do need regulations into the questioand thequestion is how f. My personal feeling is both on the part of the cities and municipalities, state and weve gone too far. We tried to protect the public too much to the point where we are stopping people from starting their own businesses and when people start their own businesses, thats where weve created the new jobs that are necessary to make the economy get along well. So i think we have gone a little bit too far. Host on that optimistic note i want to thank you for being part of this program today and to tell everybody this is an amazing story of entrepreneurship, persistence, the American Dream within a very readablwritten in avery readabl. Congratulations to you and your co writer. We give kudos. It is a great read and i recommend it. Guest i appreciate that. Thank you very kindly. This program is available as a podcast. All after words programs can be viewed on the website at booktv. Org. Welcome to the virtual author talk series and i am your host