If i fixed my tie. I dont consider myself a journalist. No one else would consider myself a journalist. I began to take on the life of an interviewer even though i have a life of running a private equity firm. How do you define leadership . How what is it that makes somebody tick . We are here today with chuck schwab, one of the most wellknown figures in the Business World because of his ubiquitous face and because of the Great Company he has built, which is one of the Reading Companies leading companies in the u. S. He has just written a book called invested. We will talk about it and his life. Lets talk about something you made news with recently. Your Company Announced you will not just do discount brokerage. You will give away brokerage for free. If i have an account, i can trade for free. How do you make money . Charles thanks for having me on your show. I have known you for a while. Secret of how the you make money when you are not charging . Charles a long time ago we started taking commissions and that is how we started this with lower prices long the way. 4. 95. We got down to toaid, we are so close zero. Lets just go all the way. Google is search free. They do well by offering free search. Similar in our case, we think we will do very well offering our services for free for transaction. That is the commodity part of the business. Need adviceople who on different kinds of things, banking, managing accounts, but the fundamental service, we want to provide free. David i shouldnt worry about chuck schwab not making money. Charles we give up 4 of our revenue in that decision. David you started as a discount broker where you were giving lower commissions than the standard rates. Today you have become a conglomerate. You have 3. 7 trillion in assets under management but you make money on other Financial Services, correct . Charles correct. We are a conglomerate not in the original sense. We focus on what we do for individual investors and advisors who have individual investors. David when you started doing this did you envision you would be in anything more than the discount brokerage business . Charles i did not. We had a limited view of where we were at the time. Frankly we thought the original business only had would help 15 of theor population. People who did their research and wanted a simple transaction. Many people wanted help and advice. David one thing that makes you sell bono so wellknown is ads for many years featured your face grade was that something you decided you wanted to do . Charles our Company Started with a shoestring. I had a tough time raising money because wall street certainly didnt want to help me develop competition for them. Ads wereequence, our t lly 10 when we started inny when we started. People kept coming into our company and as we grow, we had profitability. We had a nice article written in the San Francisco examiner about me us. They used a picture of me. The director of advertising said again quote why dont we use your picture sometime why dont we use your picture sometime . Will show that real probe people work here. He convinced me after some conversation to try one. It,to come we tried results went up tenfold. People thought there is a real person behind this business. I think that helped. My friends got over it. Charles when you walk down downtown inyou walk San Francisco, can you walk without people saying theres walking up and asking for advice . Charles for the most part people dont really recognize maybe i part my hair differently. David in the early days if someone called up and said again quote i want to buy 100 shares of i want to buy 100 shares ibm, someone wrote it out charles it was teletype into sent to new york. At bought 100 shares of ibm 50 a share. On, we were very early adopters of technology to make us more efficient. Fortunately i was close to silicon valley. Many of my friends were people in the valley itself. I was an early adopter. We were one of the very first ones to adopt internet in 1995. Charles one way you david one way you got customers all over the country, you had branch offices. Charles we found out early on 60 of ourr customers wanted to come into a people wereo real peoplethis know real were behind the counter. David you had better technology, you had your face, which everyone got to like, and you had branch offices. One other thing made your company grow you decided to do more than just discount brokerage. Theinitially came up with idea of people buying mutual funds through your platform. Can you explain how that works . Charles mutual funds were sold by salesman who got a Big Commission for doing it up to 9 of the money invested went to commissions. I thought funds with no commission was the best way for investors to go about investing. Crazy, why cant i offer this service to everybody . Ee went to the no lod companies. Give us a little bit of your Management Fee and we will offer you free. Clients loved it. David you had a coceo and the andeo head a heart problem had a heart problem and had to step back. You kicked yourself upstairs and made yourself chairman and someone else was running the company and it didnt work out so you came back into run the company for three years. Charles i came back in. I wasnt sure i wanted to, but i love the company so much i came back in 2008. I retired again as ceo and had walt to cover. Take over. He has done a fantastic job. I am hanging around as the compass of the company. And pushing people. Didd when you graduated, you say i am going to join a private equity firm . Charles as a said i as a kid i asked myself how to be successful and i thought a finance firm was the way to go. David one of the causes you had is something i would like to talk about. You have been fairly open about it. It is called dyslexia. It means it is difficult for you to read in a conventional way that the average person can read. You had it for much of your life and you didnt know. Can you explain it . Charles our youngest son was seven or eight. We had him diagnosed. He had the identical issues i had as a young student. He was now just seven that he had it all the way through the rest of his career. Moment for me. He got it obviously through dna. As a consequence, i got into it. My wife and i started an agency to help parents who had kids with this issue. One in seven people have some related issue around dyslexia. Some a learning difference. Andd when you are young dyslexic and there isnt a term for it yet, did you just think you were werent werent that smart . Charles early on i read a lot of comic books. They had a picture and a few words but i got all the story whether it is moby dick or tale of two cities. I was a wonderful student in the classics that i got it through comic books. Doid if someone is dyslexic they compensate by hearing better or very good at math . Charles it is a form illogical issue. Illogical it formulogical issue. Because of that defect in our brain, we are slow readers. David you are not a great student in high school but you said in your book that you got into stanford because you were a pretty good golfer. Charles i dont think it makes the academics happy that i got into stanford anyhow that the coach was looking for some talent in golf. David did you play wealth at stanford . Play golf at stanford . Charles only my freshman year and i almost flunked out. Graduated from Stanford Business school did you say i am going to goad join a hedge fund go join a hedge fund . Charles as a kid i asked myself again quote how can i becomes how can i become successful . So i moved off. I thought Financial Service was the way to go. At 14, i thought about this thing, i went to stanford economics Business School, then i worked after during and after Business School as a Portfolio Manager and i had the responsibility into the introduction to many brokers who would come and sell us our stories so i got to know the fundamentals of how wall street functioned by commissions. Some were bad incentives. David eventually you realize you will not get that wealthy writing reports so when did the brilliant idea come to you to set up a Brokerage Firm . Charles it started in the early 70s. I saw how difficult this business was. Brokerage was built upon how well businesses could make money and not how customers really wanted to do business. It became in the conversation in the fcc4, congress and all thought the Commission System was not a particularly good one, particularly a fixed rate. End beganing of the in 74. To starten you wanted the company, did you go to give me valley and say, a an investment . Charles i went to friends for a little money. I had some people who thought my business was great and that eventually led to our deal with the bfa. They liked our Business Model so much at the time they decided to try and by our company. Company. Y our they intends enticed me to sell the company to bank of america. Associated with bank of america, the largest bank at the time. David bank of america, which is the pygmy pity me of the establishment which is the epitome of the establishment b uys this small company. Become the youngest person on the board of the bank of america. Youre the largest shareholder. Sounds great. Charles it was great then but then the bank fell on some bad times. We could not continue to do our progression of services. He could not even developed our own money market funds. The bank had to get permission because they were in trouble by their operational issues and loan loss issues that we could not get the Federal Reserve to approve us to do our own money market fund. I thought it was time that we should get out of the company. David you had one advantage and buying it back you had the right to your picture. Charles they could sell the company. We finally came to terms. David who was the lawyer who told you to keep your name separate . Charles i dont remember. David you bought it back for 350 million more or less. You had to put up 250 million to 350 million to buy a back. Charles when i sold the company, i sold it for three times revenue. When i bought it back, i bought it for three times revenue. We had just grown that much. It was a fair deal when i sold it and a fair deal when they sold it to me. David one of the leaders of the leveraged buyout industry you had a lot of leverage. Iterage was higher than then is today so you had a lot of your net worth tied up. Charles all of my net worth and then some. David you tried to deleverage pretty quickly. The same year you bought it, you went public. That was pretty courageous. Did anyone tell you it was a bad idea . Charles many people. Shortly after going public, we had the crash of 87. David did that affect your business at all . Charles of course. David your net worth went down a little bit. [laughter] charles more than that. That did not bother me. We still had the company, we still had the opportunity. I knew we would eventually return to normal times. David as we look back on your career, the most important lesson you have taken away is to innovate, Pay Attention to technology, be nice to people. Charles have a team of people that work with you because you can do so many things with other brilliance around you. Now that iscompany a staggering compared to what it one was once it was. 56 billion and you are the guest single individual shareholder. You have a net worth yourself that is fairly high. What is your view on the wealth tax . Do you think i will make Society Better . Subject to criticism for not supporting such a task . Charles i think it is wrong directed in many ways. You probably dont talk about it our philanthropy. I came from nothing and had plenty of incentive to create what we have created. I wife and i have spent lots of time giving back money to different causes that we really think need improvement education, the art world, alzheimers issues, you name it, we are probably supporting it. David you have a famous face. In california, when you are famous, sometimes you say i should run for a runner, senator, governor, senator, president. Have you ever ran for anything . That this is my purpose in life, developing a company like this. Maybewas not really if i was king. I like to make things happen quickly. David the way you view your contributing to the company country, do you spend any time advising government officials daca government officials . Charles i am active in politics. I think everyone should have a piece in the outcome of this country and hopefully we will hold on free market systems for indefinite periods of time. It has provided for all of us the various benefits of creation of new things along the way. I think that is what what we are doing is at the heart and center of free enterprise. David what would you say is the biggest mistake you made that you think if you had not made it you would be even more successful . Ofrles i have made a lot mistakes and every mistake along the way i think i have learned something from that. David you have the benefit of having now five children and 13 charles 13 grandkids. David do your children or grandchildren ever ask you for stock tips . Your eldest daughter once asked you for stock tips and you told her to diversify. Index fund have a called the schwab 1000. I use that for my kids all the time. A littleespects, it is bit boring. I would rather have the kids by individual stocks. Stocks. Ndividual we are going to introduce zation of stocks. You can buy a fraction of facebook. David amazon. You areis something going to be doing. Charles for the young people. David the most important lesson you have taken away is to end of eight, Pay Attention to technology innovate, Pay Attention to technology. What is the key lesson . Charles have enough humility in business to have a team of people that you really honor who work with you because you can do so many more things with other brilliance around you. That is one of the biggest things i have taken away from business. Throw your ego aside and get with it. Youd before we close, do have any stock tips for me daca for me . Lotles i know carlisle a and you have done a fantastic job how about an index fund . Francine an icon of fashion around they world and signature of the fashion, louboutin. They have taken over Popular Culture from sex and the city to the world guest stars. Sisters, fashion was his calling. As a teenager he traveled to egypt, returning to paris with a portfolio full of