Have. My name is george and im the programmer at the commonwealth and we want to welcome you and thanks so much for coming down. We will have Charles Schwab in conversation with adam bleszinski. We appreciate you all being members of the Commonwealth Club. If youre not a member itse oun a great time to join. Traffic programs coming up in programs like the one here. And there is ae jonbenet billyt the back of the room who will be happy to answer any questions about joining. See him on your way out. Youre welcome. Take a moment to turn off all your cell phones. While youre doing that let me tell you about a couple of things about the program at the Commonwealth Club. On october 31, halloween at noon brett will bewe with us, novem r november 12 National Review editor rich lowry on november 12 in the evening legendary jerry rice will be with us. And onh november 15 actress may lou henner who many may remember the tv series taxi, why she has a unique addition that allows her to remember everything in her life. We have great trouble programs and encourage you to ask billy and her staff about those for example this february you could take a trip to new zealand. Lots of good stuff coming up. There question cards on your seat for mr. Schwab and these will be collected during the program and be brought to adam, right early and often and make sure they are questions and make them as legible as you can. We will get to as many of them as we can. Signed copy of mr. Schwabs book right after the program. Without any further ado give a welcome to Charles Schwab andnd atoandadam. [applause] what a crowd. Am going to tip the gavel in moment but before i do to reiterate i do discriminate in favor to question. [laughter] so you been warned onte that. Thats one of my favorite parts of doing commonwealth. I hear you. Welcome to the commonwealth and your moderator for tonights program. The program is part of thet commonwealthat club of ethics ad accountability series with Additional Support from the Bernard Osher foundation for good listening programs. I am now very pleased to introduce tonights guest Charles Schwab, founder and former ceo and chairman of Charles Schwab and an offer of the new book investment changing forever in the way americans investor he is most influential executive as a 2019, im not done. Nearly 2. 6 trillion worth of assets managed by economist Charles Schwab company, he was founded in 1971 with a 100,000 loan. Mr. Schwabs memoir invested laid out to change the way that we invent in the hard work and nudity in entrepreneurship that held his vision into one Financial Service firms in the world. From studying economics and the university to guiding his company through decades of economic transformations and fluctuations, he recounts the defining moments of his life while providing unique insight into the evolutionary dynamics of entrepreneurial companies. Today were pleased to have a conversation withh mr. Schwab about the how tos of Financial Management and his advice on obtaining a fulfilling career and life, please join me in welcoming Charles Schwab. [applause] i got a lot of fans are here. Thank you very much adam. Its a real pleasure to stack the deck. You might want to quit while youre ahead. [laughter] im leaving while my head. Lets start at, not the beginning of your life which will come down to, but your work if you will in 1975 you had an r entrepreneurial moment, can yu tell everybody about it. It was may 1 of 1975 in the congress made a decision to make sure that commissions were all negotiable before they were fixed for over 200 years at certain levels whether fixed rates, on that day, they liberated the whole thing and democratized in many respects the ability to invest anyway you wanted to pay any price depending on which broker you use, we lower our prices and others raise theres a little bit like merrillll lynch. It created a huge gap for us to enter into the business with low prices and hopefully Great Service and we start with four people, and 75 we started company that was before because we knew changes going to occur. So today we have about 20000 employees. I think one of the common theme of entrepreneurialism that you write about being an about an entrepreneur and being identified as an entrepreneur is the things that you see and act on are what separate you from everyone else. For example, what congress did was not a secret, it was the opposite of a secret, everybody knew about it. So can you reflect a little bit on what we look back on is obvious and what enabled you to create your business, why you were able to act on it and others did not. We were not the only from th entered into that area of discounted commissions paid there were a few others. Most of which were in new york. We happened to be in sanin francisco. This is really a San Francisco story. So i had four employees, and i thought this is a great idea to go into this business at the time it was a couple years before the 75 change but i had an idea that customers wanted a better deal than being sold High Commission products, being sold stories along the way the summer true, most juston hyper stories and there was a way to create a commission or compensation for the ensuing broker. So i wanted to have a place for people to invest in the reason i got into this because theres just out of school in 1961 and worked as a financial analyst for the next ten years or so and many brokers came to our little firm, i was with a little teeny company in menlo park at the time and i just got to tell him broker this is a bad business based upon the wrong foundation, they were not based on Customer Service or values or those things that you hope for so anyway, we decided or i decided ten years later and 71 and 72, 73 basically when we really startedd the company with this view in mind. So the first thing i said i dont want any salesman in our company, no salesman will ever our you, we compensated employees by salary plus bonus based upon the success of the total company. And if we were really successful everyone got a nice bonus, if we werent everyone was focused on Customer Service because they wanted them to refer new customers and wanted to grow and prosper and thats how we were differents then and we kept the same motto for the last 40 yea years. This is a profound point you make early in the book that you come back to repeatedly, where you decided your company was not going to sell, you werent going to market. And well talk about marketing because you also identify yourself as a marketer, your book has a lot of really nice detail about you and your early life, or your californian through and through. Tell everybody a little bit of where youup grew up and how beig a californian is part of your story. Its interesting, my paternal father, grandmothers morning San Francisco 1980s. My father was born in San Francisco inr the 1915th, i was grown up in San Francisco is from a holy fear. I went to schooly here. Im really a local guy. That was serendipitous in many respects i think San Francisco for me i could do things that you would never do in new york city and many people didnt realize i started to hear bill to here in San Francisco and never had all the negative things that new york brokers had and retained so that was very beneficial. The other part was technology and innovation was clearly happening in Silicon Valley and San Francisco so i adopted a lot of those great things and an introduction to our company which made us much more efficient even before the internet we weree applauding all the best of technology. That was really beneficial and lucky i was here in the third thing we were able to market closed at 1 00 oclock, ever been so focused on new york but we had all afternoon to clean up aton the time because there waso much paperwork, it was paperwork not technology. So we had time to make sure our back office was cleaned all thet way through and a couple times it wasnt but for the mosta pa. [laughter] we had a clean back office. You described, ill touch on three things that were important early to you and one, when you got out of college you hadg a whole lot of jobs, you did a whole bunch of things, one was selling insurance and i dont know if its right to say, you werent any good at it, you didnt like it, tell everybody. I had a number of jobs and i take is really critical to encouraging people to get jobs, any kind of job. I was between first and second year in Business School and so i thought i better learn about the Insurance Industry because theres focused on being on the Financial Service world. So i worked at a bank agh year before and i wanted to see about insurance. Ra and i was a complete failure at that. I really found out that this stuff was so overpriced in terms of the sales commissions and they wanted a list of all my family and friends and so forth. And i never sold a single policy. [laughter] so analyzed with dish insurance off was and i thought this is not for me and after six weeks they encourage me toora quit. [laughter] you are even clear in the book he said youre skeptical about most insurancee products. Are all built upon a sales content that was extraordinarily expensive when you analyze how they constructed an island that very quickly and decided i think it was a bad thing they had me so and it that 20 or indictment, to anybody, that was the stupidestst thing to overdo because i was always interested in investing and i thought putting your money and something would be faster than insurance product which sucks most of the returns out and goes to the insurance company, so anyway, that was earlyly learning. Another early passion of years in current passion of yours is golf, i believe you pay for the High School Team in santa barbara. Youre right, adam. Other than enjoying it, why is golf a big deal . It turned out not that ive loved basketball, i love basketball but i was not tall enough. [laughter] so there is nothing i can do about that when i played junior basketball in college noncollege but in high school but as a sophomore junior these other guys are 6foot two and six with three so i decided maybe golf, maybe an area i should focus on. Even ben is 5foot 6 inches and so i thought that was my iconic man so i wanted to copy him so thats why play golf. Many people will notice that chuck is dyslexics. In 40 years you thought you were stupid or slow. Somehow or other i could not read as fast as some of my friends in school and it really upset me holland. In my conscience wasnt as good as members. So i had to be things a couple times to really understand what was going on. To me there was a lot of segment attached to it. [laughter] but you did not know. I discovered when my youngest son had the thing exact issues that i had in school being seven or eight and i took him down to be reviewed by psychologists and so forth to see what his issue wass about reading and they came back and said your son has dyslexic issues in this that and everything in it was a great revelation to me too find out his problems were identical to mine as a kid and it explained everything but thehe word dyslea in the whole science was undeveloped when i was young and its been relatively memorized how the brain is different in that area and how you deal with words in a conversion of words and i can anything. So anyway it turns out a lot of issues that i had early on was a big aha moment for me. From that point forward my wifeo and i decided to develop a maturity thing for other parents who had kids with learning issues like that its called the Parent EducationResource Center and we had many families come, brilliant moms and dads and they have a kid who cannot read very fast which is whats wrong with him. Your normal and every other respect you just have thoughts and problems you have to identify. So books on tape is a great wayu to read books. [laughter] one of the things i admired about your book it was very sensible to thehe average reader you go deep into all the major businesses intoyo your career aa business reader. It is really a San Francisco story about a company that started with four employees in San Francisco on montgomery street and grew to 20000 over 40 years of time. All of the ups and downs, we were bought by bank of america one time and one time we were very large shareholders of bank of america and there is issues are and we finally bought herself back after quite a struggle, that was in 1987, so the story about all of that and me going on the bank of america board was really interesting also. I loved reading about that importantly we were able to for yourselves and by the company back in 1987 and start a new, in terms of growth pattern, in sort of a fun story to look back andt 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. We you go all the way back and expand the First Time Technology was important and why you were so persistent about spending big money even when you do not necessarily have big money. The first transaction i talk about in the book about an entrepreneur, thats the whole company, 1979, the whole company on buying a Software System i thought would solve the beginning software problem, we were getting more and more volume, more paperwork and i had to solved this thing otherwisee were going to go deep in the sink or thrive. Thank god we worked hard through the whole time. And we were able to come out at the other end with the system that worked well. We were very early on in adopting an online system, it was not internet, internet didnt come about until 1985 1996. So we had all the years of using a very efficient system that i talk about a little bit i wont bore you with information but anyway the Software Cost me 500,000 hollers in 1979, and the company was worth 500,000. [laughter] so that was a big decision. You mentioned be of a a moment ago, a young company, you are growing quickly, why did you sell to bank of america inhe the first place . We thought originally they would lend us money, theyus suggested that and then they studied our Business Model and they thought it was a prettyne Good Business so maybe we ought a bite and diversify. So they flashed a couple big numbers on me and having come from 0ze money myself, 55 millin was a whole lot of money as a whole as a company and i think i own 40 of the company which is a lot of money. Let me tell youlo especially 19. So we finally decide to do that, to make the transaction because i was faced, as we grew and grew we did more and more money to grow, you need that capital and i was turned down by many venture capitalists along the way and wall street did not come to my aid because recruiting competition. We were lowering the prices and making Great Service for customers and thousands of customers were joining our company as clients. Want to finance any further so i had a tough time raising money. So the b of a thing was very attractive at the time in my age. In the development 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 huge problems. Thats what i mean they ran into huge problems with the greek shipping guys and went down the tubes in argentina that all kinds of loans to south america, and went on and on. So we had to sell the bigig Tall Building in downtown San Francisco and they sold a couple other subsidiaries and i said sell to us. So i convinced them to sell us and that was another interesting story and they said okay will sell you will sell you to the highest bidder and i said thats terrific. But you know very well im not for sell. You could tell company, it was a real threat. Because i was going to do it. I was a little bit upset with them because going back when we made the deal we went stock for Stock Transaction and their stock was like 20 per dollars a share. And that was the top to an the next four years and went from 24 all the way down to Something Like nine. So i was not a happy guy forgu many reasons, that was her total net worth, my wife in the corner. [laughter] is a nontrivial point, they could sell Charles Schwab but they cannot sell Charles Schwabs [laughter] so the name and likeness and provision that i was not for sell. And i had a serendipitous that i use my name and face by that time in advertising so i was getting people who identify the companyti with me and so i dont know who theyre going to solitude and the namesake goes down the street about a block and opens up another competing company and so anyway became to terms, they were really happy they ended up with five or six times what they paid me for an compensation. So it was a good return for them. I want to come back to leaving b of a and a moment, but before that you mention that the company was identified that you were in the advertising and your name was in the door, i remember correctly that was not 100 your idea. That was not my idea. It was an interesting moment ink time. The guy who is our advertising executive at the time name richard cruiser, wonderful guy, this is now 1977, we had a great article about a company in the examiner, remember the San Francisco examiner. [lau