Have. My name is george on the Program Director at the Commonwealth Club on behalf of all of us i want to welcome you. Thank you so much for coming down to tonights terrific program with Charles Schwab in conversation with adam oshinsky. We are very appreciative to have you all here how many of your members of the commonwealth atake you very much if you are not a member this is a great time to join their all kinds of terrific programs coming up a great building with a great roof deck, great programs like the one in here and theres a gentleman named billy in the back of the room. We will be happy to answer any questions you might have. Thank you. You are welcome. Please take a moment to turn off cell phones and devices that might make noise during the program. Let me tell you about a couple of upcoming programs at the Commonwealth Club. October 31 halloween at noon a awill be with us. On november 12, there is not a comment in that, just so you wont know. November 12 National Review editor rich lavalley will be our guest. November 12 in the evening in Silicon Valley legendary 49er jerry rice will be with us. November 15 friday, november 15 at noon actress mary lou hatter who many of you might remember from the tv series taxi will talk about why she has a very unique condition that allows her to remember everything in her life. Very interesting program. The Commonwealth Club also has great travel programs and we encourage you to also ask billy and our staff about those. For example, this february you can take an expedition to new zealand with abthe son of mountaineer edmund hillary. Lots of good stuff coming up. There are question cards and receipts for mr. Schwab, these will be collected during the program and brought to our distinguished moderator adam oshinsky. Please write questions early and often and make sure they are questions try to make them as legible as you can and will try to get to as many as we can. Want to remind you that side copies of mr. Schwabs book around sale outside the room. Right after the program. Without any further ado would you please give a warm welcome to Charles Schwab and adam oshinsky. [applause] boy, what a crowd. [applause] 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. [laughter] so youve been warned on that. This is one of my favorite parts of doing a Commonwealth Club event. Welcome to tonights meeting of the Commonwealth Club im adam oshinsky executive editor of fortune and your moderator for tonights program. This program is part of the Commonwealth Club ethics and accountability series underwritten by the travers Family Foundation with Additional Support from the Bernard Osher foundation from the goodlett program. Im very pleased to introduce tonights guest Charles Schwab founder former and ceo 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 financial executives with as of 2019, im not done. [laughter], nearly 3. 6 trillion worth of assets managed by the autonomous Charles Schwab abeponymous Charles Schwab and company. Mr. Schwabs memoir invested lays out his passion to change the way we invest and hard work, ingenuity, and entrepreneurship that propels his vision into one of the leading Financial Service firms in the world. From studying economics at Stanford 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 we are pleased to be able to have a conversation with 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] and got a lot of my fans out here thank you very much adam its a real pleasure. I stacked the deck a little bit. I think you might want to quit while you are ahead. Im leaving right now baby. Lets start at the beginning not the beginning of your life, which we could come back to but the beginning of your lifes work if you will. It was in 1975 you had an entrepreneurial aha moment. Would you tell everybody about it as you describe the. May want to bet you 75 and congress made the decision to make sure that commissions were all negotiable stop before they were fixed for over 200 years at certain levels the fixed rates all the way through from the prior 200 years. On that day they liberated the whole thing and democratized in many respects the ability to invest in any way you wanted to and pay any price in which broker you use. We lowered our prices substantially and others raised their prices a little bit like Merrill Lynch did. It created a huge gap for us to enter into the business with low prices and hopefully Great Service. We started with four people, originally at 75 can we started a couple years before. Because we knew the changes going to occur. Today we have about 20,000 employees that work with us. I think one of the common themes of entrepreneurialism and you write about being an entrepreneurial to identify as an entrepreneur is that the things you see and act on our what separate you from everyone else. For example, what congress did wasnt the secret, it was the opposite of the secret. Everyone in the securities industry knew about it. Can you reflect a little bit on what we now look back on as obvious and what enabled you to create your business, why you were able to act on it and others did it . We were the only firm that entered into that area of discounted commissions. There were a few others. Most of which were in new york. We happened to be in San Francisco. Its really a San Francisco story montgomery street i had four employees and i thought it was a great idea to go into this business. This is a couple years before the 75 change. I have decided that customers really wanted a better deal than 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 ceiling broker. I wanted to have a place for people to invest and the reason i got into this i would just out of Stanford Business school in 1961 and i worked as a financial analyst for the next 10 years or so. In the portfolio manager. Many brokers came to our little firm i was just a little teeny company near menlo park in menlo park. I just got to know the brokers, this is a bad business. They are based upon the wrong kind of foundation they were based upon Customer Service or customer values or all those kinds of things that you want to hope for. I decided 10 years later, 71, 72, 73 basically when we really started the company was with this view in mind. The first thing i did was i said, 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 everybody got a nice bonus, it abeveryone was really focused on Customer Service because they wanted to have them refer new customers to us and wanted to grow and prosper and thats how we were different then and we been different we kept the same model for the last 40 years. This is a profound point you make early in the book that you come back to repeatedly, you decided your company was not going to sell, you are going to market and we will talk about marketing because you also identify yourself as a marketer, you personally. Your book has a lot of really 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 as part of your story. My paternal father a grandmother was born in San Francisco in 1880s. My father was born in San Francisco in the 1950s. I was born in sacramento. So basically im grown up here and spent my whole life here in california and such. I went to school here etc. 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 wouldnt ever do in new york city. Many people didnt realize i started the company here, bill company here in San Francisco and never had all the negative things that new york brokers had been 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 so i adopted a lot of those great things in the introduction to our company make us much more efficiently everywhere. Even before the internet we were applying all the best technology. That was really beneficial. Lucky i was here in the third thing was we were able to market close 1 00 p. M. New york time so focused on new york. We had all afternoon to clean up, at the time there was so much paperwork it wasnt just technology. We had the extra time to make sure our back offices was cleaned all the way through. A couple times it wasnt but for the most part. [laughter] you describe, im going to touch on three things that were important early in your life to you. 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 any good at it you didnt like it, it didnt work. 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 jobs. A switchman on the railroad, but speaking about between the first and second year Business School so i thought, i better learn something about the Insurance Industry because i was focused on being in the Financial Service world. So i worked at a bank the year before and then wanted to see about insurance. I was a complete failure at that. I really found out that this stuff was so overpriced in terms of the sales commissions involved. They wanted a list of all my family and my friends and so forth. I never sold a single policy. [laughter] in a study to analyze what the insurance stuff is about. Finally after about six weeks i think they encouraged me to quit. [laughter] he made it clear in the book you said you were skeptical about most Insurance Products period. They were built on sales 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, they had me so abthe 20 year endowments, 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 that might grow a little bit faster than insurance product, which sucks most of the returns how it goes to the insurance company. Anyway, that was an early learning. And other 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. You are right. I loved it. Other than enjoying it, why is golf such a big deal . It turned out not i love basketball i really love basketball so it turned out i wasnt tall enough. There is nothing i can do about that. I played junior basketball in college. Not in college but in high school. All of a sudden as a sophomore junior i was just these other guys were sixfoot two inches and i was looking up to them. I decided, maybe golf is an area i should focus on even been ai thought, wow, this is iconic i wanted to copy him. Thats the reason i went for golf. Many people will know this but i suppose somewhat know that chuck is dyslexic and i want to push you on something you wrote. You said that for four years you wrote that for 40 years you thought you were stupid, slow or something. Somehow or another i could read as fast as some of my friends in school. It really upset me a whole lot. My comprehension wasnt as good as theirs. It was always i had to read things a couple times to really understand what was going on. To me it was a handicap but never talked about it. Its the kind of thing you would never speak to anybody about. Theres a lot of stigma attached to it. You didnt know. 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 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 is a great revelation to me to find out his problems were identical to mine as a kid. And explained everything but the word dyslexia in that whole science was really undeveloped when i was young and its been relatively analyzed even mris of the brain and how the brain functions slightly different in that area where you deal with words and conversion of words and the meaning. At any rate. It turns out it solved a lot of issues i had earlier. Big aha moment for me. From that point forward my wife and i decided to develop a charity thing of service for other parents who had kids with learning issues like that. Its called the parents education resource center. In san mateo. We had many families come theres just a processing problem yup to identify. Books on tape is a great way to read books. One of the things i really admired about your book is that its both very accessible to the average reader but you go deep into all the Major Business events of your career for the business reader. Its really a story San Francisco story about a Company Started with four employees in San Francisco montgomery street and grew to 20,000 over 40 years of time. All the ups and downs we were bought by the bank of america one time we were very large shareholders of bank of america. We finally brought ourselves back after quite a struggle. It was 1987. The story about all that and me going on bank of america board was really interesting. Love reading about that. We were able to buy the company back in 1987. And then start a new basically in terms of growth pattern sort of a fun story to take back 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 go all the way back and explain the First Time Technology was important and the whole company, 1979, the whole company on buying the Software System i thought would solve the beginning software problem. Getting more and more volume and paperwork and i had to solve this. Otherwise we go deep into the sink or thrive. Thank god we worked hard to that whole time period and we were able to come out at the other end with the system that was really work well. We are very early in adopting a online system, it was an internet. Internet wasnt really coming about until 1995 a96. We had all those years of using a very efficient system that i talk about a little bit. The Software Cost me 500,000 at that time in 1979. The company was worth 500,000. That was a big decision, let me tell you. [laughter] you mentioned a bfa a moment ago. It was a Young Company you are growing quickly. Why did you sell the bank of america in the first place . We thought originally they were going to lend us money, they sort of suggest that and as they gone into study our Business Model they thought, this is a pretty good business. Maybe we ought to buy that company and diversify. They sort of flashed a couple big numbers on me 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 own maybe 40 of the company which is a lot of money, that in 1981. 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 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. We were lowering prices and making Great Service for customers and thousands of customers were joining our company as clients. They didnt want to finance it any further so i have tough time raising money. So is a very attractive thing at that time my age in the development of the company. But soon over the next 3 to 4 years became clear that we were under the wrong umbrella and had to work her way out of there. Not only that but they ran into huge problems. Thats what i mean. They ran into huge problems. They lent money to greek shipping guides that went down the tubes. Argentina all kinds of loans in south america. It went on and on. They had to sell the big building, the big Tall Building downtown tampa cisco they sold a couple other subsidiaries, italian subsidiaries, i said, so us back i convinced them