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