This terrific program with Charles Schwab, we are appreciative to have you here. How many are members of the club . Thank you very much. If you are not a member this is a great time to join. There are terrific programs coming up, great programs like the one here and a gentleman named billy at the back of the room, happy to answer any questions about joining the club. See him on your way out. Please take a moment, turn off your cell phones, any devices that might make noise, let me tell you about some upcoming programs. October 31st, halloween at noon, bret baer will be with us. On november 12th, there is not a comment on that. On november 12th, National Review editor rich lowry will be our guest. November 12th in the evening Silicon Valley, jerry rice will be with us. November 15th, friday, november 15th, Mary Lou Henner who you may remember from the tv series taxi will talk about why she has the unique condition that allows her to remember everything in her life. Also great travel programs. We encourage you to ask our staff about those. This february you can take an expedition to new zealands with Peter Hillary with the redmond hillary. There are question cards for mister schwab that will be collected during the program and brought to animation ski which please write your questions early and often and make sure they are questions, we will get to as many of them as we can. Signed copies of mister schwabs book are available outside the room. Charles schwab and adam lotions key. [applause] what a crowd. I will hit the gavel in a moment but i will reiterate i had to discriminate in favor of legible questions. You have been warned on that. I can hear you. Welcome to tonights meeting of the Commonwealth Club. Im the executive editor of fortune and your moderator for tonights program. It is part of the Commonwealth Clubs ethics and accountability series underwritten by the travers Family Foundation with Additional Support for the bernardo sure foundation for good lit programs. Im pleased to introduce tonights guest Charles Schwab, founder, former ceo and chairman of the Charles Schwab corporations author of the new book invested changing forever the way americans invest. Charles schwab is one of the most influential executives as of 2019, i am not done, nearly 3. 6 trillion worth of assets managed by Charles Schwab and company, he founded the Brokerage Firm in 1971 with a 100,000 loan and has grown into a Financial Service juggernaut. The passion to change the way we invest and the hard work, ingenuity and entrepreneurship that propelled his vision into one of the leading Financial Service firms in the world. And economic transformations and fluctuations, he recounts the defining moments of his life and providing insight into entrepreneurial companies. We are pleased to converse with mister 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. Got a lot of my fans out here. I stacked the deck a little bit. I was thinking you might want to quit while you are ahead. Lets start at the beginning, not the beginning of your life which we can come back to but the beginning of your lifes work in 1975, you had an entrepreneurial moment, would you tell everybody about it as you described in the book . May 1, 1975, congress made a decision to make sure commissions were all negotiable. At certain levels, fixed rates prior to 200 years and on that day they liberated the whole thing and democratized the ability to invest any way you want to and pay any price, we lower our prices substantially and others raise prices a little bit like Merrill Lynch did creating a huge gap for us to enter into the business with low prices and hopefully Great Service and start with four people, so we have 20,000 employees serving customers. One of the common themes of entrepreneurialism and you write about being an entrepreneur, you identify as an entrepreneur, the things you see and act on are what separate you from everyone else so what congress did wasnt a secret. It was an opposite of a secret. Everyone in the securities industry knew about it. Can you reflect a little bit on why what we looked on as obvious and what enabled you to create a business why you were able to act on it and others didnt . Entered into that area of discounted commissions most of which were in new york. We were in San Francisco, from stem to stern, montgomery street i had four employees and i thought it was a great idea to go into this business at the time so this was a couple years before the 75 change but i decided customers wanted a better deal than being sold High Commission products being sold stories along the way that some are true, most were hyperstories and there is a way to create compensation for the broker and i wanted a place for people to invest and had a Sanford Business School and of financial analysts and portfolio manager. This is a bad business based on the wrong foundation, not based on Customer Service and all kinds of things you want to hope for so we decided, 71, 72, 73, so first thing i did was i dont want any salesman in our company, no salesman will ever call you. We compensated our employees with bonus based on the sentencing of the total company and if we were successful everyone got a nice bonus so everyone is focused on Customer Service because they want to have them refer customers to us and grow and prosper and we have been different, kept the same model the last 40 years. This is a profound deck is that you come back to repeatedly where you decided your company was not going to sell, you were going to market. 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 grown up here,e, spent my whole life here in california and went to school here, so im really a local guy. But that was serendipitous in many respects. San francisco ended up being for me, i could do things that you would never do in new york city. Many people didnt realize i started the company or compel the company 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 the fact that technology and innovation was clearly happening in Silicon Valley and San Francisco, et, et cetera. I adopted a lot of t those great things in the introduction to our company, make us much more efficient, even before the internet we were applying all the best technology. That was really beneficial. Lucky i was here. The third thing was we were able to market close at 1 00 new time. The sole focus in york so with all afternoon to clean up the time because so much paperwork was just paperwork wasnt technology. We had the extra time to make sure our back office was clean all the way through. A couple times they work but for the most part we were able to have a clean back office. You describe, im going to touch on three things that were important early in your life to 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 you were not, at another try to say you were not any good at it. You didnt like it. It didnt work. Well, i had a number of jobs and i think its really critical for you to encourage young people to get jobs, any kind of job, and i had any kind of chuck, switchman on the railroad. But speakingn about, between first and second year in business school, and so i thought i better learn something about the Insurance Industry because i was focused on being in the Financial Service world s saw wanted to work in the bank the year before and that i wanted to see about insurance. I was a complete failure at that. I really found out this stuff was so overpriced in terms of the sales commissions involved, they wanted a list of all my family and all my friends and so forth. I never sold a single policy. [laughing] i started, this is not from me and i finally after about six weeks i think theyd encouragede to quit. [laughing] you said in the book youre skeptical but most insurance products, period. They were all built upon a sales can content that was extraordinarily expensive when you analyze how they are constructed, and i learned that very quickly and decided i think it was a bad thing for most, actually they had me sell endowments, 20 endowments, oh, my gosh, to anybody. That was the stupidest thing to ever do because i was always interested in investing. I thought putting your money in something micro a little bit faster than insurance product which sucks most of the returns outcome goes to the Insurance Company took so anyway, that was an early learning. Another early passion of yours and current passion of yours is golf. W got into it playing for the High School Team in santa barbara. Youre right, adam. I loved it. Y why is, other than enjoying it, why is golf such a big deal . It turned out not i love basketball. It turned out i wasnt old enough. Nothing i could do about that one. I played junior basketball in college, not in college but in high school, and all of a sudden as a sophomore, junior i was just, these of the guys were 62 and i was looking up to them. I decided maybe golf was an area i should probably focus on because even i thought, that was my iconic man i wanted to copy him and that was the reason why i went for golf. Many people will know this but i suppose some will not know that chuck is dyslexic and want to push yous on something you wrote. You said that for four years he wrote that for 40 years you thought you were stupid, slow or something. Somehow or another i could not read as fast as some of my friends in school. It really upset me a whole lot. My comprehension wasnt as good as thet bears, and so it was always, i had to rethink a couple of times to really understand what was going on. It was just, it was always come to me it was sort of a handicap but i never talked about it. Its the kind of thing would never speak to anybody about hol slow you might be in reading because theres a lot of stigma attached to it. But you didnt know what i discovered when my youngest son had the same exact issues that i had in school, 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, at 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, that explained everything but the word dyslexia and a whole sites was really undeveloped when i was young and its been relatively analyzed even mris of the brain, how the brain functions slightly different in that area where you do with words and conversion of words and meaning and that kind of thing. Any rate, turns out it solves e about issues i had earlier on, a big aha moment for me. So from that point forward my wife and i decided to develop a charity thing, or service for other parents who have kids with learning issues like that. Parentsled the Education Resource Center down in san mateo. We had many, many families come, brilliant moms and dads, got this kidre who cant read very fast can whats, wrong with hi . You are normal in every other respect. You just have a processing problem that you have to identify and so books and tapes is a great way to read books. [laughing] one of the things 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 rem