Joe thank you for being with us today. Its one heck of a book i really enjoyed it. Its a gripping story so the first question is why do you decide to write this now . Is there something more you wanted to say at this point . So to let young entrepreneurs know how hard it can be and how rewarding it can be. Really offers and encouragement and the other thing i wanted to do before i got to hold and didnt remember everything is looking at this change that the sec dictated to get rid of fixed commissions wires and Inflection Point and i wanted to tell the story to see the human aspect. So the harder that you work is that tongueincheek . I really did believe it i believe sam goal and put that phrase together but of course its in the book time and time again the harder you work the luckier luckier you get just came out. There was an amazing amount of hard work he went through and somebody who has written a lot about the financial industry and the story that you tell about building ameritrade of how hard it was was truly gripping and i have written books about the history of Goldman Sachs and i never got the impression of course i did not live through it but as you had experience in building ameritrade. How did you do it . It was lack of capital. We started with almost nothing. In fact back in the seventies we had to send out a Financial Statement every six months to our customers and one customer called me and said i thought i had to tell you you left three zeros off of the net worth. [laughter] so we could only grow by the capital we left in the business from our profits. So we had to be careful about running the business to be within the regulations so it was is a constant struggle first of all to make sure they had an income how much money to put in advertising or to make sure the increase does not increase exceed net capital how much can i put into new employees and equipment for them to use . That was a difficult for many years. But thats what allowed us to grow as well as we did. But even being in business almost 20 years i saw the opportunity for the internet i said we dont have enough cash or money and we will not make it internally generated funds so we will have to go public. So that is the time i regrettably said if we stay in this industry to be a winner we have to have more capital that promoted us to go public. That is a momentous decision in any flight span talk about the big bang and what that meant for your business with the Rising Research and wall street one of the most important moments is when the firm started to go public and made access to capital a lot easier but it sounds like you had regrets but you had to do it the same was about Goldman Sachs so how important do you think this is the way it change the culture of wall street . For me it was a very difficult decision because i had always wanted to leave the business for my family to operate but if we went public it would be difficult to maintain the atmosphere of a Family Business. But at the same time i also knew that we needed access to that capital to take advantage of those opportunities ahead of us and that turned out to be right we need 100 million for technology 100 million for advertising both of those figures turned out to be low. We went public just at the right time into the Upper Echelon and to stay in business at one time we had over 400 competitors. But most of the people were weaned out before the late 19 nineties and a very similar story to the Automobile Industry that if we wanted to stay small we cannot survive but the time we went public i got all the blessings and could compete i knew we would not have the same atmosphere as the past. People really felt close working at ameritrade and it was a fun environment all the very stressful and people had to work hard everybody seemed to enjoy it. When you go public you become a Different Company you become more professional for when you are in a private company. May have a different attitude toward the Investment Bankers i dont think they ever shouldve gone public. I think they had better control of what they were doing as Investment Bankers when they stayed private so dealing with the public in retail buying and selling his two different businesses when we saw they shouldve kept it in a partnership keeping it private but when you deal with customers its okay we did it well by going public. I certainly agree about the balance and getting into so many other businesses Morgan Stanley had a big brokerage from dean witter. Maybe it was inevitable and the Capital Requirements are not that much different. Do you think those underwriters . We have been in business 20 years. We couldnt get anybodys interest to have a small offering until we got to first boston and then they were not enthusiastic but there wasnt any special enthusiasm. And to demonstrate the type of growth we can have to say i tried to. And we have been growing at a phenomenal rate and nobody in the securities industry that we were anything other than a startup business. Is that because you are in oklahoma . And one of the many centers probably would not have thought of that. One of the major metropolitan areas in the securities industry didnt want to think we were competitors intend to ignore us. But omaha actually has Warren Buffett so its not like they werent aware of what was going on in omaha. [laughter] that is true. And both in the securities industry and i dont know if the Warren Buffett do you know Warren Buffett . Yes we live in the same neighborhood we had a couple business meetings with each other. So wed meet at a fundraiser. But he is in a completely different world than i am. That is correct. So growing up in nebraska is so interesting to have a very different outlook with your family and parents and different interest was that hard for you with the House Building business your father was in or for that kid growing up . It was not hard. I had the ideal growing up. In the forties and fifties was a young one is a great place for people to garrotte. The most wonderful way we did not know it now with respect when my father was in business with his father when my grandfather died my father got the assets of the estate and then encourage me to go to Engineering School but i had no intention of going into business i tried as a young person but i dont have that talent with my hand. And the mechanics that are necessary to understand and i just didnt have that. The second part i couldnt wait to get out of Nebraska City although a wonderful place to grow up but i was ready for new adventures. My father would have enjoyed me coming into business with him he knew i was never going to do that. And then when he fired me he said he will not make it. And i got it working with your hands. Normally you think it would be a stressful time it was comfortable asking me to leave and i was comfortable im happier asking me to leave. And the other aspects we never did feel any shortcoming. I tried sports it did not work and to have a paper route i would go up to the teller and hand in my passbook savings account and that teller would take that information and right in the passbook that was feeling that nothing else would replace so looking to make a few dollars to put into your bank account was the most important my parents always encouraged me to work they never encourage me to play sports. Of course my parents were raised in the depression with a different attitude of what you should do. Growing up you talk about the american concept that is in my rebel that is in my rebel i feel responsible to my mother especially didnt want to disappoint her to do something that would make her feel embarrassed we always did understand from my mother we had a certain place in the community and we needed to work to maintain that place so although i had no idea what was happening to me at the time i can see i always knew that i should be responsible and i had the freedom to go anywhere and do anything. Tell the story of the family bowl. That was a seminal moment. It was for that generation and a great lesson to learn i was told that story as a young boy. My grandfather was a successful farmer in manly nebraska a small farming town a successful person the roads plowed were straighter the hogs were fatter and of course the other thing and the second most in my grandfathers family and brought a new car every couple of years. My grandfathers mother is like owning a hardware store. And with adequate reward. My grandmother wanted to leave each of her grandchildren. Right after the war with extra supply them with those Agricultural Products United States produced times were good so my grandfather had a farm which they had a mortgage as soon as they had equity they borrowed against that for the next kid when they had equity again they built for the next kid they built the enormous pyramid of debt if it sustained it wouldve been wonderful but then we went to the depression. One of the things my grandfather did do is that his dream was to leave the cattle operation to his son that before they got very old now the bull had a disease whether tuberculosis or less and mouth but apprised bull when he brought it home he had a party in the farmyard to see the new bowl and then everybody brought some food and people would play games they could make up one of the games my aunt told me they would bet how many eggs they could lay on the back of the bull before they would fall off. My grandfather was in his heyday of his career because he could usher off the bull and to get bigger and better but when he got the decision from the stat states animal had this disease then the state took control it was before current science new how to handle it. So this whole herd had to be destroyed then he didnt have the money to make a payment on the loan that is like pulling the fulcrum out of the universe pyramid and everybody lost their farm also before any social welfare. And then to go to Nebraska City in the packing house but he had a nervous breakdown and never could work after he lost the farm my memories of him or in a rocking chair looking out the window. Her his sons were old enough to go work in the packing house and you have a Strong Social position and then to move into a house in Nebraska City. So it was hard times for the family and he never did recover. It was a big influence on my mother and she told me that many times. I always had to say to myself be ready to fail be ready to lose all of your dreams and start over i have a website in one of the entrepreneurs on that website says entrepreneurs are different. We fail. So you have got to understand eight out of ten new businesses fail and your risk is quite high but if that happens then you get back up and try again. Another important moment is the buzz saw in the use of that and the importance of innovation and technology. It is an important part of the story i will point that out because when we were successful at the turnofthecentury everybody thought i understood technology and with that understanding allowed me to be successful the reality is i didnt i just understood what it could do like buzz saw and that image is where my mind went right after i got the idea these people dont know. So how did i take advantage of it . My mind went right back to that afternoon in the yard when my dad first used the buzz saw that how much more instruction could be given out. See dont have to know how a car engine works but just what it can do for you. Correct. The same thing. It seems again from reading the book that technology was always a hurdle you are trying to get over and you thought you had a solution but it would be obsolete by the time you implemented it and a lot of time was spent in people try to figure out the technology and it was as simple as having people die a love phone number and do it automatically. It seems like every time you thought you had the edge of the technology it would let you down crack. That is correct whats amazing to think where we started we made this technology 1975 so when we got a trade made then we put it on ledger sheet so as i said in the book everything was done by hand we learned we could not read on could not expect the business to grow and we saw that opportunity so we have to have automation the company was by the name of Computer Research and it was a teletype machine where the clerk would type in all the the money for the day the checks going out and that sort of thing. That machine had a tape like a ticket tape and then set the telephone in the holder it word is hooked up with that information to philadelphia. All of this goes to philadelphia. If there was static on the line the information was incorrect. So the company in philadelphia would receive the information and printed out in chicago all of our statements would be printed up in chicago. In chicago they would put them in a box and send them to omaha. All of that would happen overnight very seldom did it. Something happen like a snowstorm so we usually got it a day after that we had to pick up the mistakes and get it corrected. It was a much more efficient way but a lot of opportunities to make mistakes and in some ways it was very inefficient because we were ready to write the tickets and not spend our time to go back through business we did two days ago to correct to the errors. It wasnt too long after we had that business im very happy we had it. It was a good steppingstone but we needed our own system. But id never heard the word software. People said you have to have a computer and software what is software . In 1975 its hard for people to realize it wasnt that long ago that these things came into being and the world was completely different than it is today. In the book i talked about dave kellogg that is the genius that put our software together but if anybody thought you would build the brokerage system from scratch they would say you are crazy if i would have never known dave kellogg i would take a huge risk so that was amazing oh my goodness we did that i forget how much risk we took so without him we could not do it but did it really out of a challenge to himself to do the impossible in ways that demonstrated he could do things that other people couldnt. To you ever have imagined we could be with the technology where we are now with the website interface and do your own trading right there on mine to make people feel good about it. When we started in 1975 to be an objective note even had the concept to do that that was beyond our imagination we took him by telephone and gave them to a clerk to call in and call back. Years later to report that execution back to the customer within six seconds was truly remarkable almost like a miracle from our point of view. Everybody had to build their systems so the order would flow through from the customers keyboard to the exchange of back and have us be aware of all the information. That we had no concept of that in 1975. Why get into this brokerage business was that it . The mckesson i wasnt too happy with my job and where my career was going so i really knew i wanted my own business so i had no way to get any capital so being a commissioned salesman was the next best thing to having your own business. And double market so thinking that we could have the opportunity to put compensation and do it in a way that is related to the Securities Investment market was the most attractive i could get. When i understood what happened i had to go there. So i went to omaha to apply for a job i did not have a College Degree they said we dont even look at somebody without a bachelors so my wife and i sat down how much money we would need to take care of the family and how i could go back to school. Then went back to college to get my bachelors. So the idea one of the people that flourish to make a lot of money as a stockbroker was incredibly attractive. But it just so happens i got registered at the top of the market in the late sixties and then there was five years of a bear market. So how do you go from being a broker to thinking you could start your own lowcost brokerage and make it work . As i talked about my mentor and associate and partner really said somebody will break ranks and try to offer prices at a lower price. He was experienced with competition and the grocery business. The Brokerage Community did not want to change. They didnt think it would change so they thought even though the government had instructed the negotiated commissions that people would not reduce their prices and bob said to me somebody will. So i believe that and i understand it so if we think we have to compete for our business on the commission then lets be one of the people they want to do business with and not defend ourselves from the high commissions. So thats how i got started. We had no idea we just had a lot of help and it sounded great but as a story unfolded it was piecemeal but i dont know if we were naive or stupid just to follow the dream we just kept following along. When you think there is a market for somebody that just wants to make the trade heres what i want to buy. Heres what i want to sell i dont need any research or service to find out the market is bigger than you think is wonderful the other thing thats important right after the Second World War the government had the g. I. Bill people came back from the conflict to go to college on the g. I. Bill to become engineers and accountants and doctors and architects. And with that education they felt comfortable making their own decisions about what companies they want to buy stoc stock. So two things were going on at the same time that made the market deeper and broader than we ever thought it would be. The harder you work the luckier you get we didnt know about that market until we got starte started. It is an incredible story of perseverance. And i was poor. [laughter] but am i going to do . Several times my back was against the wall i thought i might lose it all here but i can go get a job i will be happy i took the risk i feel on a failed and i just have to recover. Having your back against the wall does help you dont have any choice but to keep going. Also bittersweet quality about the relationships that you formed you mentioned bob perlman early on and how you have to make tough decisions as people came into the business and left the business you had to make tough decisions you tried to make it a Family Business at a time and your wife worked like a tank and you said hopefully your brother was working there you hope to have your children working there but it sounded often you had to make tough decisions and part ways of these people who had been your partners and in some cases never spoke again. What was that like for you and how do you feel about that . Its terrible that something you have to go through sometimes. I like to talk about Tim Mcreynolds for a second right out of law school when we had our first difficulties with the sec. Because he had a lot of confidence in himself and a unique way to solve this problem he saved us from going out of business. This was an attorney only in business as an attorney for a couple of months you had the ability to save our business and keep us running. A few years later he change the whole industry by thinking differently irreverently about the rules and regulations so he went to the sec to ask them if we could form an association with a commercial bank and share commissions. They gave us a no action if you do it exactly this way we will take no action so again he was only in business a couple years and he change the whole securities industry. Little bit later he saved me. I had a fight with my partners to allow me to stay a partner in the Brokerage Firm because i was doing some obnoxious things to my partners thoughts and judgments they wanted to have me leave. So tim was very important he was near and dear to my soul the closest friend you could possibly have. When he really helped us with our legal work in 1975 and 76 with the sec we had a bill to him for 75000 that is a huge amount of money more than i could comprehend but i said to him we cannot afford to pay you because we dont have the money what i would like to do is give you half in stock and the other half we will pay you over a period of time as we can he had no choice but to agree thats only way to get paid he knows the stock is increasing in value because were keeping all earnings and growing the business but every once in a while something would grab his attention and needed the cash he call me and want to sell his stock i bought his stock i had to reduce our advertising thats like cutting a hole in your heart letting the blood fallout after doing that a couple times i said i cant do this anymore. I will buy all of your stock right now get it done and over with and send you a check. So we parted ways we werent really mad but we lost that touch of that friendship. So we were always at arms length thats hard my mentor was hard i just had to say to myself dont love your emotions dont let your emotions get in the way of good judgment think clear and logical and follow the ideas that come up and dont let your emotions lead but its very difficult i hated to go away from them at the armslength relationship. Have you found that is the standard current in business and industry successful businesses that those that come and go and that could be tough decisions needing to be made along the way . Have you shared this with other entrepreneurs like yourself to discover they have similar experiences . Yes. Most of the time when i read stories of successful peopl people, generally they have associations that was difficult for them to keep as the business grew because they wanted to go Different Directions so the friendship and camaraderie when you started the business is not there five or ten years later its not abnormal to us may be normal for a new business Getting Started with more than one person but something you have to handle successfully or you will not survive. C were clearly driven to success i assume you succeeded beyond your wildest dreams. Undoubtedly. Has it changed your life . Did you imagine it happening this way . I know he didnt want to merge with the bank but that did happen. I know you wanted to leave the business for your children and grandchildren but that didnt happen. You accomplish many goals but not all of them is this the story of america . How are you feeling about your experience here. It is drive accumulated more money than i ever dreamed or thought i would have. But at the same time i was old enough that im not going to change. I still have the same values when we didnt have any money. Allows us to do things we would not have been able to do for example we could not sponsor chicago cubs its a wonderful business for my children the Baseball Team. It is a momentous thing but they put the idea on me i said wow what i want to buy a ball team . I have no interest. Basically they said we dont want you to have interest we want it for ourselves. We are interested. So we got the television station into the omaha area so my kids to come home and watch and i did not know that so my kids went up to chicago loving the chicago cubs but i didnt know much it was serendipitous its one of those things the harder i work the luckier i get i had no interest but my kids did and they went after in a very earnest way and then they won the World Championship for the first time in 100 years. So they had been very successful with the Baseball Team and the remodeling of the ballpark and the businesses around it its a wonderful thing for us and we cannot have done that if we didnt have the fortune that came with being successful as a brokerage business. Did the Ricketts Family to take my gm from boston to get yourself a championship. [laughter] first of all my wife and i have four children they decided to buy the cards it was suggested by my son tom he has an entrepreneurial band so the four kids among themselves put tom in charge he made all the decisions so in chicago when we won the world series i think tom could have been elected to anything saying he should have been president of the United States or mayor or anything. Everybodys excited for what has happened and my three other kids that are still in chicago are well regarded. I want to touch on a little more personal a brother who was gay and died of aids his daughter was gay and coming from your family background growing up in the midwest you are very forthright about it in the book and an honorable way you discuss it but has that experience been like for you and your children growing up the way that you did . Growing up in a town of 6000 and an Agricultural Community you dont have much exposure to the idea of a homosexual. That does that come into the wellbeing per i never had an idea my brother was gay until he called me and told me he had aids as i described in the book. I loved him. It didnt make any difference to me if he had aids or homosexual. So we took care of him until he passed away. Next my granddaughter was in her twenties she said i didnt choose this nobody wishes that they be gay i was born this way into my tears i could tell her never take second place be as good as you can whatever you want to be. Both of those with my brother and daughter come out of love love is the strongest emotion and a persons life and certainly the strongest connector for go family is the basic unit of society if Society Works families have to work my wife and i came from very Strong Families very different types but very strong so family came first so that was automatic on my part i know a lot of other families are not considered that way and thats a shame and thats why i talked about in the book i couldve left both of those things out but i think its important to let people know there is a good percentage of people that are out there and gay that shouldnt have any influence on any other aspect of business i wanted to tell the stories in the book. Thank you for discussing that. I went to talk about advertising you put a lot of money into it you take pride in the benefits of driving customer volumes through advertising what about tv advertising today . I am still a large shareholder and i enjoyed the fact they still have Good Management i would like to tell this to management today the ad you are running today has been on too long. Its old and boring. I wouldve liked it two years but not now. [laughter] its a little long into the measure where they are going but it is ubiquitous and it is memorable i dont know why i remember it or what it gets me to do. Do you have a view with the market cap and e trade is seven or 8 billion . What is the dynamic now . Why such a higher valuation. Chuck schwab is a friend but we were competing through the turn of the century he was a competitor i had to worry about i mentioned the company several times in my book that he was fortunate enough to start in california i think at that time had the ninth largest economy in the world if it was its own country. Tao in nebraska we had one one. 5 Million People most did not buy or sell stocks or bonds we had a market i had to go searching and he had a market at his front door. Although he started 1975 i didnt hear about schwab until 1977 and you can see although he had the opportunity to be closer to a market so chuck schwab has done a wonderful job to allow him to get to a larger market cap than ameritrade from where we started and what we had to do to grow he had a bigger base to grow from because of the population and the type of population he had. Somewhere along the line but i have to tell you every entrepreneur has to make mistakes because youre doing things that have never been done before you can look at chuck schwab or joe ricketts and say that was a bad thing and they are probably right. You have to take your hat off and give a lot of credit to chuck schwab to do the things that didnt work by the same token i have to say i deserve credit to be brave even though i failed. Thats normal with the growing business. With month after month im sure people like to know where you think the market is going. Im 78 and im still working 60 hours a week i did retire from ameritrade as ceo 20 years ago i figured i deserve to do the things that i want and that kept me happy about six months i have to be in business and be a part of the Creative Process that makes economies work so went back to work and im very happy i have never worked in such a Strong Economy as exist today it is wonderful for the country its a little bit awkward for me because i bought not in the brokerage business theres a lot of competition so they have given the president led the charge on reducing taxes and regulations as are two important things if i could i would like to get on my soapbox again that there are still too many government regulations on the part of the federal state and local levels. That stops people from starting businesses and letting our economy grow that makes the country so good. But then you also said poor regulation like having a seatbelt in the car. A seatbelt in the car would be going too far. I feel like i shouldnt be told what i have to do but 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 get well i was negligent and not wearing a seatbelt. But my feeling is leave me alone i will make my own mistakes and do my own way and do my own thing but realistically i know 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 it gives the image its raw and dog eat dog and cutthroat which it should be but Free Enterprise gives in the temperance with regulation. We do need regulation and an overseer of the securities industry to make sure those that offer products and services are honest in a good way we do need some but how far do you go . My personal feelings cities and municipalities and states we try to protect the public too much to the point we are stopping people from starting their own businesses and when they start thats where we create the new jobs to make our economy get along. On that very optimistic note. Thank you joe ricketts for being part of this program today and to tell everybody this is an amazing story of entrepreneurship and the American Dream written in a very readable way. Congratulations to you and your cowriter. Its a great read and i recommend it. I appreciate that. Thinks very kindly. Book tv continues now on cspan2. Television for serious readers. And Glenn Simpson as cofounder of a Research Firm thats been in the news frequently in the last couple of years. Hes also the coauthor of a new book, crime and progress inside the sealed dossier and the gps investigation following donald trump. Mr. Simpson, how did this come
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