Transcript: Joe Ricketts

 

 

The transcript from this week’s MIB: Joe Ricketts, Founder TD Ameritrade, is below.

You can stream/download the full conversation, including the podcast extras on Apple iTunesOvercastSpotifyGoogleBloomberg, and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.

Note: This was recorded November 12, ten days before the Schwab takeover of TD merger was announced.

 

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MALE VOICE-OVER: The following interview with former TD Ameritrade CEO Joe Ricketts was conducted prior to news that Charles Schwab has agreed to buy TD Ameritrade.

This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: This week on the podcast, I have an extra special guest. His name is Joe Ricketts. He is the Founder of TD Ameritrade, a $1.3 trillion custodian. Ricketts is an entrepreneur who has built the business over the course of 50 years and is extremely knowledgeable about what it’s like to go through all the growing pains.

Ultimately, he — the company goes public in ’97 and has been wildly successful. About a decade ago, Ricketts and his family purchased the Chicago Cubs. We talked about that. We talked about politics. We talked about policy. We talked about all sorts of really, really interesting things.

If you are at all interested in, going down the list, online trading, entrepreneurship, building a business, taking chances, embracing risk, I could go on and on, but rather than me babble, why don’t I just say my conversation with Joe Ricketts.

MALE VOICE-OVER: This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

RITHOLTZ: My special guest this week is Joe Ricketts. He is the Founder and former CEO of TD Ameritrade, one of the largest retail custodians in America with, what is it about, 1.3 trillion in assets under custodianship. He bought the Chicago Cubs in 2009 and a few years later, the team won their first World Series in 108 years. Joe Ricketts, welcome to Bloomberg.

JOE RICKETTS, FOUNDER AND FORMER CEO, TD AMERITRADE: Thanks, Barry. It’s fun to be here.

RITHOLTZ: So, I was looking forward to having this conversation for a number of reasons. But let’s go back to the beginning and start with your career. You are a credit reporter at Dun & Bradstreet, that seems so out of character to everything I know about you.

RICKETTS: Well, it was critically important to decisions that governed my direction in life. I really didn’t know what I wanted to do for a living and I’d already started a family.

So, I had to come up with some direction pretty quickly. Time was going by and I have …

RITHOLTZ: You were in college when you already had your first couple of kids and it’s like …

RICKETTS: Correct.

RITHOLTZ: …, yes, I better start making some money.

RICKETTS: That’s right. And so, I took this job with Dun & Bradstreet where I went out to all the small towns in Southeast Nebraska and Southwest Iowa to call on the businesses. So, I drive into town and I just go one business after another with a credit report that I had from a previous year and talk to them about updating it.

And I got to meet a lot of interesting people and I got to meet a lot of people that were really making our country go. And the thing that stunned me or really kind of light that went off, when I was in college, I had a professor of Social Sciences tell us we were such a great country because of our natural resources.

And after I got out and into the business world calling on these merchants, I understood the wealth of this country came out of the brains of these people. They took money out of their own pocket, ideas out of their own heads and they started the business of shoe store or pharmacy or whatever, and they hired people and they had to satisfy their customers.

And so, working to satisfy your customer at the same time being able to create wealth was a wonderful idea for me. So, I said, that’s what I want to do. I want to have my own business.

RITHOLTZ: So, you go from Dun & Bradstreet to Dean Witter as a stockbroker in 1968 and then the ideas start to gestate in your head.

RICKETTS: Correct.

RITHOLTZ: How did Dean Witter lead to First Omaha in 1975 seven years later?

RICKETTS: Well, Dean Witter was a commission job. All the brokers really in the country worked on commissions and I didn’t have any capital to start my own business. So, this was as close to having my own businesses I could get.

And we just happened to become registered, I say we might the other guys in the training class, at a time when the market was at the top and it went down for the next five years, which was a big surprise because it hadn’t done that for a long, long time.

RITHOLTZ: ’66 that Dow kisses a thousand by 1974 down 57 percent.

RICKETTS: Correct.

RITHOLTZ: And so, how did that impact you as a broker?

RICKETTS: Well, it was very difficult to make a living as a broker.

RITHOLTZ: I can’t imagine.

RICKETTS: We had to work very hard all the time but we were building a client book that would help us in the future. Just about the time when we thought that client book was going to help us make the type of income that we wanted …

RITHOLTZ: Right.

RICKETTS: … the idea of negotiated commissions came into the marketplace.

RITHOLTZ: The big boom. So, the restrictions, the regulations go away.

RICKETTS: Correct.

RITHOLTZ: Brokers are deregulated and you could pretty much charge much, much less than before.

RICKETTS: So, I realized if I call my customer and talk to him about a good idea to invest and the second conversation was how much are you going to charge and …

RITHOLTZ: Right.

RICKETTS: … and how little do they want to pay. So, we were going to — so, it appeared though — as though we were going to have to have twice as much in the way of a client book and work twice as hard just to be able to make the same living.

So, my friend, the guy the became a partner with me, Bob Perry that I talked about, why don’t we join them. I got to tell you, Barry, we have no idea how to start a brokerage firm.

RITHOLTZ: Really?

RICKETTS: We didn’t have any idea whatsoever except there were two ideas that floated through our minds. Number one was we thought there was a large enough market of people that wanted to buy or sell a stock without any other conversation. They just want to place the order.

RITHOLTZ: Meaning, we don’t want your recommendation, we don’t care what your best of list is, just execute the trade as cheaply as possible.

RICKETTS: That’s correct.

RITHOLTZ: Right.

RICKETTS: And there was a market. We don’t know how big but we thought there was.

RITHOLTZ: And the cost of trading pre-deregulation was couple hundred bucks or …

RICKETTS: A couple hundred bucks versus 25. That’s really huge change.

RITHOLTZ: Ninety percent drop. Huge. Traumatic.

RICKETTS: The other idea that was important and are proved to be correct was that after the second world war, we had the G.I. Bill and a lot of men and women came back from the war used the G.I. Bill to become engineers, pharmacists and these people were educated well enough to be able to do their own financial planning and be able to make their own decisions.

RITHOLTZ: And they were making a nice enough living that there’s a little investable cash on the side.

RICKETTS: Correct. So, the market turned out to be quite huge. We just had to find a way to advertise into that market so that we could tell them succinctly what we were doing and make them want to respond to us.

RITHOLTZ: So, how did First Omaha become eventually Ameritrade and then TD Ameritrade?

RICKETTS: We — it’s really a long story but we thought we would be a local business and we found out that we could not exist as a local business. So, we advertised in the Midwest edition of the “Wall Street Journal.” There was a favorite spot on the inside of the back page in those times where all the discount brokers advertise. And so, we advertised in that paper with an 800 number. Now, something that was unique to us was that Omaha was the location of strategic air command. The federal government, the Air Force, paid Northwestern Bell Telephone Company to put in a sophisticated communication system in case there was a hot war. But obviously, there wasn’t.

So, this communication system was not used. So, the phone company dropped their rates on what was then a brand-new idea, 800 telephone numbers, where the caller did not pay for the telephone call.

RICKETTS: And so, our telephone rates for interstate calls, long-distance calls, were anywhere from 10 to 20 percent lower than if we’ve been in any other location in the country. And that was one of our major costs. So, that gave us a cost-benefit we didn’t see when we started as First Omaha but then we did see after we started advertising in the Midwest edition of the paper.

That was so successful we went to the national audition and then we attracted customers from all over. So, then we really kind of changed the name to First National.

RITHOLTZ: So, when you’re marketing to the entire world or at least the entire country, where you’re located is irrelevant as long as it’s nationwide and you’re located in a place that made your cost structure cheaper than competitors that was very fortuitous.

RICKETTS: That is correct. And the problem that we had to overcome was that people were not used to dealing with a broker that they couldn’t see, touch and feel.

RICKETTS: So, they’re used to walking into an office and meeting a person. So, they had to become comfortable with the systems that they were using in order for them to really do a lot of business with us.

So, they would generally start out slowly with small trades and then they become to rely on us and that we got all their business.

RITHOLTZ: And you are one of the first that started to allow people to enter the touchtone keys to execute trades, am I — do I have that right?

RICKETTS: Well, if you allow me to say so, Barry, we were the first.

RITHOLTZ: The very first.

RICKETTS: We were the very first.

RITHOLTZ: So, you can — I could pull up First National and punch in the stock symbol and punch in how many shares and the trade will go off automatically.

RICKETTS: That’s correct.

RITHOLTZ: That sounds pretty innovative.

RICKETTS: It was very innovative and I went out to my customer base to form focus groups to ask them how they would enjoy this and my answer was emphatically no.

RITHOLTZ: Really?

RICKETTS: Why? The customer said, when I use a system based on the touchtone telephone, when I can talk to a broker and …

RITHOLTZ: The answer is because it’s cheaper.

RICKETTS: Well, they didn’t want to use the service. So, I said I have to make it cheaper to attract their attention.

RITHOLTZ: Right.

RICKETTS: And I — and so, I came out with a unique way of charging for customer, about three pennies a share. And so, that was something that got through immediately and so people would take the five minutes it took to learn how to use the system.

Then what I found out was some people placed their trades so fast it would be impossible to move your finger that fast. So, I called them up and I said, what are you doing, and he said, well, we are using a computer to program the touchtone system with the telephone number and with all the information of a trade. So, we’re sitting at home watching television and seeing the tape and when the stock price gets close to what we want, we press one button that goes up. That’s unique.

The people loved the power of taking care of themselves. They didn’t want a broker. Once they used the system, they wanted the power of taking everything onto themselves and really, they’d be the professionals that would call the shots.

RITHOLTZ: And so, now, let’s fast-forward to 1995, Ameritrade becomes the first online brokerage. What was that like? Did you have any idea that this newfangled online thing would replace the whole telephone side of things?

RICKETTS: Because of the story that I just told you, I knew exactly the first time that we got an order. One of our clerks brought us a printed email message which had buy 300 shares of a blue-chip stock at the market and they said — and, of course, we had the customer’s account number and phone number. And the question to me was should we go ahead and place this because we didn’t talk to a customer, I didn’t have the touchtone, and I said, yes, go ahead, we’ll see what happens.

So, we executed that order and went back to the customer by email to report to trade. No voice communications.

RITHOLTZ: Right.

RICKETTS: So, it’s very, very similar to the touchtone aspect of it and I said, this is even better …

RITHOLTZ: Because they got to confirm with the price, the date, everything.

RICKETTS: They can print it out and because it is on a PC, we can deliver more information. We can deliver our own tape. We can deliver research and I said, this is going to be much more powerful than the touchtone telephone ever it was.

RITHOLTZ: That’s quite fascinating. Let’s talk a little bit about the growth of TD. First, this whole time when you go from phone calls the touchtone to online trading, you’re competing with Charles Schwab which was one of the biggest discount brokers at that time, what was that like, did you end up ever having any sort of relationship with them …

RICKETTS: Well …

RITHOLTZ: … or him?

RICKETTS: … Charles Schwab is a friend of mine today but at that time …

RITHOLTZ: Really?

RICKETTS: … we were competitors. He had the advantage of having California as his customer base.

RITHOLTZ: Huge.

RICKETTS: And I think at that time that was the — California by itself was the ninth largest economy in the world.

RITHOLTZ: Yes.

RICKETTS: In Nebraska, we had about a million and a half people. I mean, a huge difference. So, I had to go national where …

RITHOLTZ: Right.

RICKETTS: … he could really start a local. I heard about — although we started in 1975, I first heard about this West Coast discount broker called Schwab in 1977.

So, he started after we got started but I really didn’t know he existed. The ones I did know existed advertised on the inside page of the “Wall Street Journal” and they were from New York and then one was from Chicago. So, there was only a couple of people in the business when we got started.

RITHOLTZ: Right.

RICKETTS: Now, a couple of years later, Barry, a few years later, we have 400 competitors.

RITHOLTZ: Wow.

RICKETTS: Everybody thought this was simple and easy. It’s not and, of course, everybody found out that it’s not simple and easy. And so, competition over a period of time allowed us and others to buy out our competitors.

So, today, there is really only three or four brokerage firms in this area.

RITHOLTZ: Right. Lots of consolidation.

RICKETTS: Lots of consolidation and that was a lot of fun to go through that. In that consolidation phase, we ran across a company in Manhattan called Offenhauser (ph) that I really described in a lot of detail in the book that that was really attractive and they were advertising doing trades online and nobody never heard of online.

RITHOLTZ: Right.

RICKETTS: Nobody knew the Internet. Nobody knew what this was all about.

RITHOLTZ: This is around what year?

RICKETTS: This is ’93, ’94.

RITHOLTZ: OKAY. So, still AOL is around but the Internet isn’t the Internet yet.

RICKETTS: Yes. That’s correct. It hadn’t evolved to the point where we are today. So, we talked to them about selling and he gave us a price which at that time I thought was incredibly high hand and — but I brought myself to really say, OKAY, I’ll pay it just so I can understand the technology.

RITHOLTZ: So, you acquired them and what’s an incredibly high price in ’93 and ’94?

RICKETTS: It turned to be $7.5 million.

RITHOLTZ: Sounds — I bet that turned out to be a fantastic ROI 30 years later.

RICKETTS: Within two years.

RITHOLTZ: Yes.

RICKETTS: Incredible. We really didn’t have any understanding. But within a very short period of time, the Offenhauser (ph) folks realized that they had put the price too low …

RITHOLTZ: Right.

RICKETTS: … and I have paid a bargain basement price. But the whole industry made fun of us on the day of the trade because they said we were stupid and that was way too high.

RITHOLTZ: Stupid like a fox.

RICKETTS: Six months later, they got it …

RITHOLTZ: Yes.

RICKETTS: … and they understood what happened. So, we put the economies of scale in place to be able to increase our profits dramatically. It turned out to be a wonderful thing for us to do.

We found out that the technology that Offenhauser (ph) had really wasn’t what I understood them to have and it was more like smoke and mirrors. So, the customer could use their computer at home to sell the trade but then it printed out, and Offenhauser and they had to have a clerk turn it off and put it back in to go to exchange. It didn’t …

RITHOLTZ: So, they didn’t have — we call those APIs today. There was no application program …

RICKETTS: That’s right.

RITHOLTZ: … and interface that would automate that process.

RICKETTS: So, we had to build all of that, which is good because we learned the hard way, made a lot of mistakes on the software, didn’t work, throw it away, start all over and do it again. But by the time we got all then, a customer could sit at home on their keypad of their own computer.

RITHOLTZ: Right.

RICKETTS: Place a trade and get a report within seconds.

RITHOLTZ: So, full online trading for real.

RICKETTS: Full online trading and then the exchanges on the over-the-counter market developed systems of receiving those orders electronically, automatically executing them and reporting back. So, it turned out over a period of time and huge investments on the part of everybody in the industry to bring this type of service to the customer, which is absolutely wonderful.

RITHOLTZ: So, you guys were cutting edge with touchtone, you’re cutting edge with online, you very aggressively roll out a pretty big advertising campaign, what was that like and what were the results of those campaigns?

RICKETTS: When we started, it was really kind of anxious, it was unsettling until we really did it. I was going to take our advertising budget I think from $25 million a year to $100 million a year.

RITHOLTZ: And by the way, $25 million …

RICKETTS: That was huge.

RITHOLTZ: … for relatively small company way back when, that’s a big chunk of change.

RICKETTS: It was a big chunk of change. So, we attracted advertising firms that were the top advertising in the country.

RITHOLTZ: Close to the size of a hundred-million-dollar buy (ph).

RICKETTS: Yes. That’s correct. And I think there were seven or nine of them and I said, I’ve got to cut through the crowd guys. We’ve got to do something new and different and it seems to me humor is the way to go and they said, no, that’s wrong. People don’t think of their money as funny.

RITHOLTZ: Right.

RICKETTS: It’s not light at all and you’re just not going to be successful. So, they all gave me ads. They were dull and boring just like old bank.

RITHOLTZ: Right.

RICKETTS: Except Ogilvy.

RITHOLTZ: Right.

RICKETTS: Ogilvy dared to come up with something new and different and it was a person on the street that said they bought a particular stock like General Motors for 25 bucks. Well, General Motors is selling for 50. So, there was a play on the commission as well as on the price of stock.

RITHOLTZ: The price. Right.

RICKETTS: And then they giggled. They were so happy that they were be able to buy a stock at such a low price. Those ads really set us off in a different direction.

But the ad that really made us was an ad with an office boy. His actor name is Michael Morona (ph) if I remember back then.

RITHOLTZ: Right.

RICKETTS: And he instructs his boss on how to place a trade online.

RITHOLTZ: I have a very vivid recollection of that ad. It stayed with me. It’s 20 years ago, maybe more.

RICKETTS: Yes. It’s iconic. And he took — that ad took over the whole industry and he made a comment in that ad, let’s light this candle and that became …

RITHOLTZ: That’s right. Let’s light this candle.

RICKETTS: That became a standard quotation in the securities industry.

RITHOLTZ: Yes.

RICKETTS: But that got us a lot of attention. So, using humor to get across the idea that we had a low cost with good executions was something that really permeated the market and really made us grow.

RITHOLTZ: Any other ads from that era. This is pre-2000, dot come era.

RICKETTS: Yes. This is really …

RITHOLTZ: Anything else really stand out from you?

RICKETTS: Those were the two. We did a number of other commercials that had humor in them playing off of certain things and a culture but those were the two that were the biggest and the best.

RITHOLTZ: Let’s light this candle. I have — I’ll find it on YouTube and post it. It’s ..

RICKETTS: You can see it on my website, theharderyou.work.

RITHOLTZ: OKAY. We will definitely reference that. So, the company goes public in 1997. Was this pre or post-TD acquisition?

RICKETTS: This was pre, long time before.

RITHOLTZ: All right. So, what was the process of IPO-ing like?

RICKETTS: Well, it was good and bad.

RITHOLTZ: OKAY.

RICKETTS: I — I– my dream was to build a business that my children could take over and continue to build.

RITHOLTZ: Assuming they were interested in online brokerage.

RICKETTS: Correct. And I — we had — my wife and I had four kids, I thought one of them is probably going to want to do this.

RITHOLTZ: Right.

RICKETTS: So, that was the dream that I had. But if we went public, that changes.

RITHOLTZ: Sure.

RICKETTS: You’re no longer a private company. You’re a public company and the dynamics of who’s going to run that and all that changes. But I realized that online trading was an inflection point in the history of not only the brokerage business but in the history of investing for all time and if I was going to take advantage of it, I was going to have to move and I wasn’t — although we were making a large amount of profit, it’s not enough for me to build the technology and advertise.

So, that’s when I said I have to spend a hundred million on advertising and a hundred million on technology. Those were guesses. But, Barry, they turned out to be low.

RITHOLTZ: Let’s talk about that technology a bit because you described in the book, you described just a never-ending series of challenges and snafus and issues, technology was simultaneously your friend but also, I don’t want to call it your enemy but it seemed like you’re constantly having to find new ways to work with the technology where it wasn’t binding you in the backside.

RICKETTS: That is correct the whole time. It took a long time for us to really come to the conclusion about what we had to do. But let me describe what it was like when we started.

In 1975, we placed — we wrote in order on ticket, our office lady called in the trade to the exchange, we got the report back on the ticket and then she would take that copy of the order ticket and write it down in the ledger, all the trades that we did that day, and then she would write it down on another piece of paper, a cardboard, for that customer and they were set in a bin.

This was like Christmas carols like Charles Dickens.

RITHOLTZ: Right. So, when went into the — you have two bins, one goes into the company bin and the other goes into the customer bin so everybody — you have duplicates and everybody can track it.

RICKETTS: Well, one is our customer files, one is our company files and then we — at the end of the month, we have to type up the confirmations and their monthly statements and send out to customers.

RITHOLTZ: Right. And hopefully, everything reconciled.

RICKETTS: That’s correct. And we found out right quick if we were going to do very many trades. We can’t do that anymore.

RITHOLTZ: Right.

RICKETTS: So, we had to really get into the computers. The first computer system that we got didn’t work very well and pretty soon, our volume really didn’t allow us to use this. So, we had to think about getting our own computer.

RITHOLTZ: Right.

RICKETTS: So, I was one of those people that thought, well, we get our computer and we’ll be OKAY. Well, it didn’t last this forever.

Somebody said, boy, you need software, and I’d say, what’s software. So, once we understood what we had to do, Dave Kellogg was a genius that put it all together for us, we found out pretty soon that we outgrew that although we spent a couple million dollars. Huge budget for us at that time. We had to do something new and different all the way along.

We discovered there’s really three pieces of technology that we had to have built in order to make the system work when we got to the middle 1990s. The first was our account base and keeping records of all the trades in our customer accounts. The second was how the customer places their trade from their computer to our system and then we had to have a piece of middleware which would take that trade, send it to the market, come back and put it in our customer account.

RITHOLTZ: Right.

RICKETTS: All that software had never been built before.

RITHOLTZ: So, you guys had to design that from scratch.

RICKETTS: We had to design that from scratch.

RITHOLTZ: And that’s before we start talking about account performance reporting and billing and reconciliation, that’s a giant, giant project.

RICKETTS: It’s a giant project.

RITHOLTZ: And so, this was — there was no off-the-shelf software. You guys were the first ones pushing this for.

RICKETTS: There was nothing you could buy. Nobody would tell you. Nobody would teach you. We had learned everything the hard way, which meant we threw a lot away — we threw away a lot of software because we built and the guys running the software building teams really didn’t understand exactly what we wanted. We tried to tell him as best we could.

So, they did it and we found, well, that didn’t work, here’s what you have to change. So, it’s a trial and error method but at the same time that it was awfully high in anxiety, it was exhilarating, because it was — just like you’re conquering a new world. And so, there’s a lot of fun from that point of view.

But the anxiety came from, you just really didn’t know what your cost are going to be. So, we finally got to the point where we knew what our costs are going to be and it was much more of easier management job.

RITHOLTZ: So, when did the TD acquisition take place?

RICKETTS: Well, we went public and …

RITHOLTZ: That was ’97?

RICKETTS: Yes. And what we had done before and after really probably was buy other small companies, buy a lot of our competitors who could not afford and did not know how to putting their own clearing operation and their own data processing systems.

And Waterhouse was in Manhattan and was a big competitor and we had talked to them about merging or buying them. Those talks did not turn out to result in anything happening. But what did happen with Waterhouse is Toronto Dominion Bank in Canada bought Waterhouse securities and as the business continued to grow, in market size with everybody having more accounts, we came to understand that that size made a difference.

And so, if we could merge or buy a competitor, the better off we were and Waterhouse was one of those people that fit into one of our targets. Now, it was a big change for us because it would now take the Ricketts family from owning more than 50 percent to owning less than 50 percent.

But it was one of those things where we didn’t have time to accumulate the cash flow to buy the accounts through advertising. We had to get them all at once.

RITHOLTZ: Right.

RICKETTS: So, we merged with the brokerage firm Waterhouse which came with the ownership of Toronto-Dominion. So, now, Toronto-Dominion Canadian bank became the largest shareholder of Ameritrade.

RITHOLTZ: So, that was really a merger not a straight-up acquisition and they became the biggest shareholder of …

RICKETTS: Correct.

RITHOLTZ: … Ameritrade. But now, you’re a smaller owner …

RICKETTS: Right.

RITHOLTZ: … but of a much, much bigger pie.

RICKETTS: That’s right. So, I had many more dollars but less ownership.

RITHOLTZ: So, that’s late ’90s. Now, you’re running one of the larger online brokerage firms, what was the experience like of the dot com implosion in 2000?

RICKETTS: Our volume remained relatively steady. So, with the technology that we had put in place, we had gotten to the point where our volume could come down, our revenues could come down and we can still make a profit.

RITHOLTZ: Because you continued to reduce your cost by adding more and more technology.

RICKETTS: Correct.

RITHOLTZ: You described in the book some of the really — I mean, it’s hilarious in hindsight but in the book, you described all these bugs and snafus and issues that keep coming up as you roll out more and more technology and you’re the guy who’s saying, no, no, we need more, we have to get our cost down, otherwise, we’re vulnerable to other discounts from elsewhere.

RICKETTS: It was either take the risk and try to do that yourself before you ruin the company. So, we took the risk and we did it and, knock on wood, it all worked and made us thrive.

RITHOLTZ: Let’s talk a little bit about this book.

RICKETTS: Go ahead.

RITHOLTZ: You own the Cubs, you’re a successful businessman, you don’t need the headache of writing a book, why bother sit down and put all the time and effort into writing a book

RICKETTS: There’s a couple of reasons. First of all, I’m concerned that the number of new businesses getting started is too low relative to our total economy. So, I wanted to encourage entrepreneurs to go ahead and start their business and even though they didn’t know all the answers, which I pointed out in the book, and to let them know it’s OKAY to make a mistake, it’s good to make a mistake because you learn from that mistake and you won’t repeat it.

When we were starting, I told my people, all we have to do is we write 51 percent of the time. But as I got more experience, I came to understand, no, you could be writing only five percent of the time or some small amount as long as you get rid of your errors quick.

RITHOLTZ: It’s the magnitude of the mistakes, not necessarily the total number.

RICKETTS: Right.

RITHOLTZ: So, there’s a quote in the book I really like, quote, “business was an active creativity and courage. Other people didn’t seem to see it this way but to me, business was where life came alive.” Discuss that.

RICKETTS: That’s for me. That might be unique to an entrepreneur. But a lot of my time I spent alone just running thoughts and ideas through my head and then trying to carry them out, what if I did this, where would it go, what would happen and I’d carry five or six steps into the future and then find a problem and I’ve come back and restart all over again.

That to me was very exhilarating. It’s again like the artist. You put something on the paper. If you don’t like that particular color or a hue, they’re kind of change it.

And then to take it to implementation was more exhilarating and to see it work was heaven. Now, a lot of people would not feel those feelings that I just described to you. May be just an entrepreneur but it took me back to my childhood days when I saw my dad and all of the people that he worked with, the electricians and the plumbers that had their own business, they were their own people.

They were their own men that could decide whether they wanted to make their business successful or not, by the way, they deployed themselves, and this was a way for me to take different ideas which was even more exciting because we were plowing a new field. We were going into the frontier. It was a lot of fun.

RITHOLTZ: So, early in the book, you described going with your father who was building houses at that time …

RICKETTS: Right.

RITHOLTZ: … and literally, these carpenters have aprons on, different nails and different envelopes and they’re building houses and you — but it was manual, it was saw — handsaws and …

RICKETTS: Correct.

RITHOLTZ: … and you described the moments, which I thought was really telling about what happens later in TD, you described the moment when this electric circular saw comes out and everybody gathers around and they show a test of this and it’s, my God, this is going to be an immense timesaver, we’ll be able to build things much, much more quickly. How did that experience impact the way you sought technology affecting your business?

RICKETTS: I think the fact that my father knew and understand that it was so important to their work that it made an impression on me how my father was reacting to this buzz saw. Now, the idea is really quite simple. It’s going save them time because I saw the carpenters are using their hands and arms to saw a piece of wood. Now, they could just use this electric implement and cut it right away.

So, it’s an easy idea for me to really kind of understand. But the appreciation and the happiness of my father is the emotions that really made me stick that idea in my mind and really never forget it.

RITHOLTZ: It really resonated. So, you described, quote, “technical challenges were my constant companion. Computers that would backfire with static electricity, equipment that constantly needed to be upgraded to keep up with the speed of real-time trading.” And this is long before the quants and the algorithms took over trading, this is back in the day when your competitors were phone calls and someone walking into a brokerage office.

RICKETTS: Right.

RITHOLTZ: What made the technology such a continual challenge?

RICKETTS: Because it had never been done before. You really didn’t know what you needed ahead of time. You did not know the size of the computer. You did not know the size of the storing capacity. You did not know what the volume of trades were going to be coming.

So, you’re guessing at a lot of the stuff and that’s why a lot of it didn’t work. But when we did find what it did work, we had the basis to correct it and it was easier going forward.

RITHOLTZ: And you write the breakthrough, it was figuring out how to keep trimming costs by inducing the customers to go the least expensive way.

RICKETTS: Correct.

RITHOLTZ: So, first, it was a phone call then it was a touchtone then it was email then it was online. In hindsight, this looks obvious.

RICKETTS: It does.

RITHOLTZ: Right. It’s …

RICKETTS: It does.

RITHOLTZ: Well, that’s a hindsight. Everything looks obvious in the rearview mirror. How groundbreaking was the idea we have to steer clients to the least expensive way to execute?

RICKETTS: Well, when we started in 1975, everybody thought we were fools. We talked to the regulators who said, why would you want to do this. Brokerage firms that have been around for a hundred years are going out of business. The market is not good. What makes you think you can be better?

I mean, everybody threw cold water on us and the simple idea was that, well, when the big firm Merrill Lynch decides to compete with you, they’ll just stump on you …

RITHOLTZ: Right.

RICKETTS: … and I said, they can’t. They got too much cost infrastructure that they can’t change. Nobody understood that.

So, we were kind of ridicule all the way along until we started showing the whole world that we were opening accounts so fast that we had captured the imagination of the customer to want the ease and convenience of the low cost that we were somebody to contend with.

RITHOLTZ: You mentioned regulators. You’ve had some battles with the SEC over …

RICKETTS: Yes.

RITHOLTZ: … how they supervise and regulate the brokerage firm and the execution. Tell us a bit about those experiences you referenced in the book. Some of which kind of amusing.

RICKETTS: I would not call it a battle so much. I was trying to bridge the gap of understanding.

RITHOLTZ: You seem frustrated in the book that you understood this and you couldn’t get these guys in D.C. to get it. I mean, they were just very old school.

RICKETTS: They were very old school and people really didn’t understand that customers wanted to do their own thing. So, even the regulators had this idea that the brokerage firm had to give research to the customer in order to make the customer want to make a decision whereas the customer could buy their own information and do their own thing.

So, it’s really kind of hard to get it across. Now, when the regulators came into — the first time in 1975, we deserved it. I’m sure they walked in and — with the idea that they were saying to themselves, these people are so stupid. We don’t — they shouldn’t be handling customer money.

RITHOLTZ: Right. Well, by the way, if that was true, half of finances would be out of job. I mean, am I exaggerating? It’s …

RICKETTS: No.

RITHOLTZ: Come on, a lot of it is people have a real specific knowledge in one area and the rest the world, they’re blind to it.

RICKETTS: That’s correct.

RITHOLTZ: So, they come in and what was that experience like in ’75?

RICKETTS: Well, the — I need to give credit to Tim McReynolds who was our attorney and he was a young man that had a way and in his imagination, he pulled out an idea of how we should approach the Securities and Exchange Commission.

First of all, we didn’t fight them. It wasn’t a battle. We said, you are correct, we were recording option trades incorrectly. That was a violation of regulation which caused our net cap — chain reaction domino effect.

RITHOLTZ: Right.

RICKETTS: So, we said, everything you say is correct, we didn’t know, and they said, well, you should have. We said, well, we know now. They said, OKAY. Instead of shutting you down, we give you a penalty.

RITHOLTZ: So, this was really a potentially existential crisis.

RICKETTS: Yes.

RITHOLTZ: They could have shut you down.

RICKETTS: They could have and their idea I’m sure when they came in, Barry, was we got to shut these people down.

RITHOLTZ: Really?

RICKETTS: They don’t know what they’re doing. Once we proved to them that we were honest, that we’re not shelves (ph), that we were doing something that the customer wanted, that the investment public wanted, and that we could change this record-keeping system so simple and so easily …

RITHOLTZ: Right.

RICKETTS: … they said, well, we’ll just give you a fine.

RITHOLTZ: How big a fine was that?

RICKETTS: The dollars were not large. I can’t remember. It was a small amount because we didn’t have dollars.

RITHOLTZ: Right.

RICKETTS: But they said, you have to stop advertising, you have to stop — you have to close your office in Lincoln, Nebraska and Chicago, Illinois and you cannot advertise for a long time until you get your books and records under control.

I had to be out of the office for I think a month. I could not be around to manage things. So, they were giving us penalties …

RITHOLTZ: Right.

RICKETTS: … that we had to accept in order to stay in business and …

RITHOLTZ: So, close two offices, 30-day suspension and suspend advertising for how — I mean, you guys was eventually …

RICKETTS: We could not — they did — they said, you cannot start advertising and that was our lifeblood …

RITHOLTZ: Right.

RICKETTS: … until you get your books and records under control.

RITHOLTZ: And how long did that process take to get it …

RICKETTS: That took months. That took maybe two months.

RITHOLTZ: OKAY. That’s — I was afraid you’re going to say two years but …

RICKETTS: No. It didn’t take long.

RITHOLTZ: But still, that had to be a scary two-month period.

RICKETTS: It was very scary. I think the judge that gave us those penalties …

RITHOLTZ: Yes.

RICKETTS: … thought this was enough for them to close down and just go away.

RITHOLTZ: Really?

RICKETTS: I think he thought taking it through this, they deserve to stay in business. But we did get through it and — but we came out of that as friends with the regulators because they understood that we were trying to do something good for the industry, which they did not understand when they walked in our door the first time.

RITHOLTZ: Quite fascinating. My special guest today is Joe Ricketts. He is the Founder and former CEO of TD Ameritrade. He is also the owner of the Chicago Cubs although really it’s more accurate to say your family trust is the owner of the Cubs.

RICKETTS: My kids own the Cubs, not me.

RITHOLTZ: Your kids own the Cubs. But that’s a nice presence to the kids. You’re the one who bought the — it was a combination of if I’m doing this off the top of my head, 900 million in ’09 and they’re right in the middle of the crisis, right?

RICKETTS: Right.

RITHOLTZ: The kids put up a couple hundred million dollars. You put up the slight majority, is that right?

RICKETTS: My kids put up about 250 million and my wife told loaned them a bunch of money I think a couple hundred million.

RITHOLTZ: OKAY. And everybody involved obviously got their money from you. So, I say you’re the guy who drove the purchase of the Cubs.

RICKETTS: No. I’m the one who created the value that my kids could use.

RITHOLTZ: OKAY. That’s fair.

RICKETTS: So, my wife and I put stock in the names of our kids in the early ’90s because I can see it coming.

RITHOLTZ: Got you.

RICKETTS: And this way that they would be responsible for the capital gain and not me.

RITHOLTZ: So, I’ve been wrong when I’m saying you bought the Cubs.

RICKETTS: I did not buy the Cubs.

RITHOLTZ: Really, you teed up the structure that allowed your kids to buy the Cubs.

RICKETTS: That’s correct.

RITHOLTZ: That’s quite interesting. And you talked about that in the book and I keep getting it wrong. I keep saying — people said to me, who are you interviewing this week, Joe Ricketts, he bought the Chicago Cubs.

So, let’s talk a little bit about the — we’ll come back to the Cubs. Let’s talk a little bit about the Opportunity Education Foundation and some of the other philanthropies you’ve been involved with. Tell us a little bit what is that foundation do.

RICKETTS: Well, I — let me take a step back.

RITHOLTZ: Sure.

RICKETTS: In my early 50s, I had done nothing but work and I said, well, I’m rich enough now and I can afford to travel and travel. It was always one of my great attractions, I had wanderlust.

And I wanted to go to places like the Serengeti. I wanted to go there was adventure in my travel and I was — my three kids, my two sons and daughter and I went to climb Kilimanjaro with some friends and then …

RITHOLTZ: Really?

RICKETTS: … we go on a week of safari. So, it was all — it was two weeks’ vacation. It was a long period of time.

RITHOLTZ: Wait, so, you have four kids and three of them climb Kilimanjaro with you.

RICKETTS: Correct. My daughter, my son Peter and my son Todd and I and we were with good friends and their family. And so, it was a great time. But in climbing Kilimanjaro, we became close to our guides because that’s not an easy thing to do.

It’s — so, when we came off of Kilimanjaro, we had already developed a bond. So, now, I’m driving down the road in Serengeti and we don’t see any animals and so I go and carry conversation with the guide, the driver, I said, what do you do when you are not on safari? He said, well, I run a school, I started a school.

Now, I’m quite sure this man cannot read or write but he is bright so he knows how to do the guide stuff. So, I’m fascinated that somebody that is pretty close to illiterate starts a school. I said, why? He said, well, I didn’t think my kids were getting a good enough education.

RITHOLTZ: Wow.

RICKETTS: So, I said, how many students do you have? He said, I have 23. I said, do they pay a tuition? He said, no, they can’t afford it. They’re poor. So, how do you support the school? And he said, I take my check from the safari company and I put it in the bank and I use that money to support the school. Now, Barry, I know this guy has nothing.

RITHOLTZ: Right.

RICKETTS: I’m impressed. By American standards, this guy is a huge hero.

RITHOLTZ: Right.

RICKETTS: So, I said, what’s the name of your school? He said, it’s — he put his name in there. And I’ve gone to catholic school all my life and so I know all the saints and I never heard of this saint before.

I said, who is this saint? He said, well, that’s my name. So, he got it halfway. The government finally made him changed name — take his name off of it. He couldn’t call himself a saint because he started the school.

But I said, hey, can we — we had talked enough about it that I was really fascinated. So, can we go see your school when we go back to Arusha before we get on the plane, and he said, I’d be happy to have you come. So, I said, well, let’s go back to camp and talk to the rest of the people on the trip and they all wanted to go.

So, we want to see a school. Now, the school was a cement platform …

RITHOLTZ: Right.

RICKETTS: … concrete brick walls with a thin roof.

RITHOLTZ: Right.

RICKETTS: It’s equatorial. So, we — they didn’t have to worry about cold.

RITHOLTZ: Right. No snow and not — of small rainy season.

RICKETTS: Just — yes. And there wasn’t anything in the room. There were nothing on the walls. There were no books. There were no pencils. There was no paper. There were three volunteer adults …

RITHOLTZ: Right.

RICKETTS: … that taught the kids ABC and forms and things of this sort. So, they were working really, really hard to give their kids a little bit of an education. So, I said to — his name was Changi Wilson (ph), I said, Changi (ph), I tell you what I’ll do. They had electricity. No running water but they had electricity. I’ll buy you a TV and when I go back to the United States, I will send you DVDs of programs that our kids see before they go to school, like “Sesame Street” and “Mr. Rogers” and things of that sort.

So, we did that. Then I went back a year later, now he’s got 47 students.

RITHOLTZ: Right.

RICKETTS: And they’re all paying it a little bit. So, one had — when he had that TV and the DVD player and showed what happens in America, there was a lot more interest from the neighborhood. And that really kind of grew.

The next school wanted it and the next school wanted it. So, we really started taking on one grade every year and I went back to America. I was familiar with making commercials. We hired a studio. I put in a teacher and students and we filmed teachers giving educational courses, Math, and Science and things of that sort.

RITHOLTZ: So, now they can learn how to instruct the kids off of …

RICKETTS: … the DVDs.

RITHOLTZ: Yes.

RICKETTS: Became very popular. But when we got to secondary education, the ninth grade, this guy Steve Jobs, came along with new ideas of how you use technology.

RITHOLTZ: Sure.

RICKETTS: So, we said we’re going to use that new technology. And in fact, we’re going to stop assisting the schools, we’re going to build the education programs into the iPad. And then we can give the iPads to the schools and the students and they can learn the same way kids in the United States learn.

So, that’s how we got started off on the education system,

RITHOLTZ: And how large is that scaled up to be?

RICKETTS: For primary grades, we’re at about 1,750 school and thousands of students …

RITHOLTZ: Seventeen hundred fifty schools.

RICKETTS: Schools.

RITHOLTZ: And that’s all in Africa or is that …

RICKETTS: Yes. 11 countries, three of them are in Asia, India, Sri Lanka, and Kathmandu.

RITHOLTZ: Right.

RICKETTS: And then the rest of them are in the various countries in Africa.

RITHOLTZ: But the education department or the government of Tanzania saw what we were doing and they loved it. So, they kind of have sponsored us to be able to expand the secondary education schools in Tanzania. And so, that’s what we’re concentrating on right now.

So, we have about 40 high schools in Tanzania and we had more every year to our system of education and it is changing their lives significantly.

RITHOLTZ: I can imagine.

RICKETTS: Now, it’s worked so well in Africa. I said we ought to try United States. So, I’ve got two schools in the United States. One in Santa Rosa, California and the other one in Omaha, Nebraska.

RITHOLTZ: How did the school survive the most recent fire up in Santa Rosa?

RICKETTS: Not well. I mean, so …

RITHOLTZ: Not well.

RICKETTS: No. And some of the kids, their homes were burnet. They had to relocate. They had to be out of school for a long time.

The fires never got close to our school but they certainly did influence the people that were concerned with our school.

RITHOLTZ: Sure.

RICKETTS: Both fires, last year and this year. So, it is something that we just had to live with and get along with.

RITHOLTZ: And where’s the other school?

RICKETTS: The other — other school is in Omaha, Nebraska, in Bellevue. It’s located in on Bellevue University Campus. And we learned — I structured them each differently so we learn different lessons.

So, going forward, as we open more schools in the United States, we’re concentrating on putting them on university campuses because we bring kids out of families who have never gone to college. Nobody in their family’s gone to college.

And I like to go to disadvantaged neighborhoods and the kids then are in high school on campus with college kids and it doesn’t take them too long …

RITHOLTZ: They figured it out pretty quickly.

RICKETTS: I can do this. Yes.

RITHOLTZ: Yes. Absolutely.

RICKETTS: So, it’s not something foreign to them.

RITHOLTZ: You seem very passionate about this.

RICKETTS: I’m very passionate about it. It’s incredibly good feeling.

RITHOLTZ: Sure.

RICKETTS: You change people’s lives for the better. The people in Africa, we’ve given them a chance to live in an environment where they don’t have to go into the fields.

In the United States, what we’re opening up is an idea to students that don’t get this at home. And so, it’s really — and of course, there’s large parts of cities and our country where children need to have the opportunity to be able to get ahead to take advantage of the American dream.

RITHOLTZ: Right.

RICKETTS: And then our education system, that’s what we do. We take the kids that are from a poor neighborhood and say, here’s what you can achieve if you get a good education and we help them all the way through.

RITHOLTZ: Quite interesting.

RICKETTS: Very (ph) satisfying. Yes.

RITHOLTZ: You have four kids.

RICKETTS: I have four kids.

RITHOLTZ: One of your sons, governor of Nebraska.

RICKETTS: Correct

RITHOLTZ: The other of your son’s is a significant participant in the RNC.

RICKETTS: Correct.

RITHOLTZ: Your daughter is very well known in the Democratic Party. She’s a huge supporter of gay rights and has put forward a lot of policies and — I don’t know if the fourth kid is all that politically active.

RICKETTS: Well, he runs the Cubs.

RITHOLTZ: So, he’s …

RICKETTS: He’s buys.

RITHOLTZ: He’s too busy winning World Series …

RICKETTS: That’s right.

RITHOLTZ: … to mess around with politics. But that’s quite a spread of political thought from within the Ricketts family.

RICKETTS: And I’m going to say, Barry, I don’t think it’s much different than most families. You get a lot of every — first of all, my wife and I brought our children up to be independent thinkers.

And so, I — we’ve said to ourselves several times, we can’t be unhappy if they don’t agree with us. So, even among the four — the three boys that are conservative, they don’t agree on the individual aspects of …

RITHOLTZ: Sure.

RICKETTS: … so, there’s a lot of disagreement regardless of which party or what ideology you may want to follow. But we all love each other, we respect each other …

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RICKETTS: … and we get along fine.

RITHOLTZ: Thanksgiving is not too crazy at the Ricketts household?

RICKETTS: Correct. We might take a jab at another person for a particular thought or idea …

RITHOLTZ: Right.

RICKETTS: … but we don’t get into serious talks because it’s not going to change anybody’s mind.

RITHOLTZ: Right. No reason to either preach the choir or waste your breath.

RICKETTS: Correct.

RITHOLTZ: We have been speaking with Joe Ricketts, Founder and Former CEO or TD Ameritrade. His family is the owner of the Chicago Cubs.

If you enjoy this conversation, be sure and come back for the podcast extras where we keep the tape rolling and continue discussing all things online trading related. You can find that at iTunes, Google Podcast, Stitcher, Spotify, wherever your finer podcasts are found.

We’d love your comments, feedback, and suggestions. Write to us at MIBpodcast@Bloomberg.net. Check out my weekly column on Bloomberg.com/opinion. Follow me on twitter @ritholtz.

I’m Barry Ritholtz, you’re listening to Masters in Business on Bloomberg Radio.

Welcome to the podcast. Joe, thank you so much for doing this. I’ve been looking forward to having this conversation with you.

RICKETTS: Pleasure.

RITHOLTZ: Full disclosure. My firm manages about 1.2 billion and TD is our largest holder as a custodian, has just under $1 billion of our assets.

RICKETTS: Wonderful.

RITHOLTZ: So, we are familiar with your company and what it does for quite a while. There’s one or two questions I wanted to get to and then we’ll do our speed rounds.

I had to ask, I didn’t get a chance to ask about the institutional business because you started out primarily as a retail custodian and brokerage firm. How did the — how did the institutional side develop?

RICKETTS: It took years of developing the market for the individual investor. And the next segment would be to bring in institutions. These would not be the huge institutions that that we know of.

But financial planners that have their own businesses and do the execution and clearing for these firms. And that’s a something that the really didn’t excite me too much, so I brought another people to go down that road. And that’s about the time that I retired as CEO and became chairman of the board. And figured this is a time in my life when I really can deserve to do fun things found out the most fun thing to do is work.

But anyway, after a while, I relinquished the chairman position. So, I saw a lot of my friends start their own businesses, become very successful, sell them, and one day they’re busy and the next day they’re not. They turned out to be very unhappy.

RITHOLTZ: Right.

RICKETTS: So, I kind of paced myself to do it in pieces. So, I was even ready to get off the board when I did.

RITHOLTZ: That was 2011? Something like that?

RICKETTS: Yes. So, I haven’t been on the board for almost 10 years and I’ve been out of management for almost 20 years. But I still own a large part of the stock. I think I own 7 percent of the stock that’s out there.

RITHOLTZ: So, let’s jump to our speed round because I know we have to let you go eventually.

Joe, as long as long or short as you want with these questions, their design to kind of fill in some blanks about your personality. Tell us the first car you owned, year, make, and model?

RICKETTS: It was a Studebaker.

RITHOLTZ: Really?

RICKETTS: Yes. It was the 1940s and it was four-door. The ugliest car you could (buy).

RITHOLTZ: I was going to say they are not pretty cars.

RICKETTS: They are not pretty cars. But I think we paid all of $18 to buy that car.

RITHOLTZ: Eighteen bucks.

RICKETTS: Yes. This was — this was back in the 1950s.

RITHOLTZ: Would you be insulted if I told you overpaid?

RICKETTS: I don’t think so. I don’t think so.

RITHOLTZ: So, what’s the important thing people don’t know about Joe Ricketts?

RICKETTS: That, I don’t know what that might be.

RITHOLTZ: You’re kind of an open book.

RICKETTS: I’m very open. So, there’s really no secrets that I know of that I could say that people don’t know about. Everybody knows I have a website. It bare my soul.

RITHOLTZ: And the website is theharderyouwork.com (ph)?

RICKETTS: Joericketts.com.

RITHOLTZ: Joericketts.com. There’s a separate work — separate site for the buck (ph).

RICKETTS: That’s correct.

RITHOLTZ: Got you. Joericketts.com.

You mentioned your dad. Who else were early mentors to you in your career?

RICKETTS: The — a lot of the people in Nebraska City seem to take an interest in me. All of my former employers, the Boy Scout leader, friends of the family, all of those people that I saw doing their own thing, having their own real business, having their own interest, all of those people were important to me to let me know that really, you determine what your life is by what you do and not what other people are going to be able to help you with.

So, I learned independence …

RITHOLTZ: That’s very Midwestern bedrock values.

RICKETTS: Well …

RITHOLTZ: Right?

RICKETTS: … I’d like to say they are very United States values. Anyway, I think that formative time, seeing all of these successful people is what really put me off in the direction that I started to go. I didn’t know that I want to own my own business and that I did know it. I didn’t have any money. So, it was a matter of evolution.

So, who influenced your approach to thinking about investing and trading and brokerage?

RICKETTS: I saw an advertisement. This is about 1965-66 of a broker and nice suit, shiny shoes, making a lot of money. Brokers, at that time, were — market was good, brokers are making a lot of money.

RITHOLTZ: Sure. That whole post-World War II run up was a great time.

RICKETTS: Correct. And I want to make a lot of money. So, I was willing to work hard, so I said I think I want to go learn how to become a broker. So, that’s what set me off on that line.

RITHOLTZ: Let’s talk about books. What do you like to read, what do you enjoy?

RICKETTS: I like historical novels, American historical novels.

RITHOLTZ: Give us some names.

RICKETTS: Well, I just finished up that book by Brian Kilmeade called Sam Houston. Very interesting. There’s more to Sam Houston than I ever thought, so I’m going to buy — he’s got three more books I’m going to …

RITHOLTZ: And Sam Houston claim to fame was what?

RICKETTS: He was the Avenger of the Alamo. So, he’s the father of Texans. He’s the one that made Texas what it is or …

RITHOLTZ: And the city of Houston is named for him, is that right?

RICKETTS: The city of Houston is named after him. Yes. Very fascinating story when you get into details. I remember from history the high points …

RITHOLTZ: Right.

RICKETTS: But talking about those details is a lot of fun. I enjoyed “Undaunted Courage” immensely.

RITHOLTZ: “Undaunted Courage.” Who wrote that?

RICKETTS: That’s the story of Lewis and Clark.

RITHOLTZ: OKAY. Is that the new book by …

RICKETTS: It’s not new. It’s old.

RITHOLTZ: OKAY. I’m thinking a different book.

RICKETTS: In fact, the author passed away.

RITHOLTZ: “Undaunted Courage.”

RICKETTS: And that — you’ll have to help me out with the author. I read it a number of years ago.

RITHOLTZ: Let’s see what the Google machine says.

RICKETTS: “Undaunted Courage” by Stephen Ambrose.

RICKETTS: Stephen Ambrose wrote a lot of historical novels. And he wrote a lot about the second world war.

RITHOLTZ: I see that. “Band of Brothers” was him. OKAY.

RICKETTS: Correct.

RITHOLTZ: Sure. I remember that.

RICKETTS: My three boys love those second world war stories but I was — I’m more interested in what he wrote about Americans history.

The “Undaunted Courage” really kind of led me in to studying a lot about the beaver trade and how the West was open and the characters that it took. So, my interest is really historical novels. I get excited about that stuff.

RITHOLTZ: Give me one more and then I’m going to give a recommendation to you but you probably read it already.

RICKETTS: I’m at a loss to give you one more.

RITHOLTZ: OKAY. So, now I’m going to ask, have you read “The Wright Brothers” by David McCullough?

RICKETTS: I have not but I love I have not but I love David McCullough.

RITHOLTZ: Can I tell you something?

RICKETTS: Yes.

RITHOLTZ: He wrote this book for you.

RICKETTS: Get out …

RITHOLTZ: This is about two brothers against everybody telling them how crazy they are to do what they do, go out essentially event flight, and it’s — if you like McCullough, it’s just a beautiful book.

RICKETTS: I just read his program, “The Pioneers,” which I finished up maybe about three months ago.

RITHOLTZ: I have that book sitting on my night table waiting for my next vacation to read.

RICKETTS: It’s a great book. So, I will get the one about the Wright Brothers.

RITHOLTZ: You’re going to plow right through this.

Tell us about a time you failed and what you learned from the experience?

RICKETTS: One of the biggest failures, financially, that I’ve had, I came up with a system called On Money where a customer could take their brokerage account, their bank account, and their insurance coverage, put it all in to one operation, one financial package run by the software. And when I would talk to people about that, everybody said they want it. So, I put a huge amount of money, 100 million.

And that never did take off. Today …

RITHOLTZ: Like the Wrap account. They — all the big brokers …

RICKETTS: Today everybody uses it.

RITHOLTZ: Right.

RICKETTS: But at the time, I had to pull information from different companies and they were not too excited about letting me have their information and I presented it to independent customers, really in need of financial planner. So, I …

RITHOLTZ: Right.

RICKETTS: …. there were two mistakes I made with it. But thing that has stuck with me is I went too far. I was so convinced I was right …

RITHOLTZ: Right.

RICKETTS: I pushed it to 100 million and I should’ve stopped at about 20 or 30. So, I learned there. Once you know that you’ve got something that is not working, pull the plug.

RITHOLTZ: That’s always good advice. You mentioned Kilimanjaro. What you do for fun when you’re not working?

RICKETTS: My phone is my work. I have never found anything that was more fun for me to do than work except ride a motorcycle. And I came across that by accident.

RITHOLTZ: Are you still riding a bike?

RICKETTS: I’ve got a motorcycle with four wheels now because my balance isn’t as good as it used to be when I was younger.

RITHOLTZ: You’re just not going fast enough. It self balances.

RICKETTS: Right.

RITHOLTZ: So, I’m a little jealous because I like to ride and I won’t ride around here because it’s so dangerous and so much traffic. Where you are, that’s made for motorcycles.

RICKETTS: You can get on a country road, two lane a highway, and you can see for miles and there’s not another car.

RITHOLTZ: Are you a Harley guy? Are you a BMW guy?

RICKETTS: I’m a — both. I have a BMW and I have a Harley. The Harley, I can of ride in town.

RITHOLTZ: Right.

RICKETTS: The BMW, I take on my long trips.

RITHOLTZ: Right. It’s a — they’re delightful cruisers, aren’t they?

RICKETTS: They are.

RITHOLTZ: Let’s talk about the industry. What are you most optimistic and most pessimistic about in the world of online trading and brokerage?

RICKETTS: Well I’m really not pessimistic about the world of online brokerage. I think the accumulation of data and the accumulation of information on the individual will kind of lead financial planners to be able to custom make software programs of financial planning for the individual customer. And I think that’s very exciting.

RITHOLTZ: And the software is all moving to that direct. MoneyGuidePro and all the other similar software heading in that direction.

RICKETTS: So, the software will be continued to be enhanced and bring more benefits to the individual consumer.

RITHOLTZ: Are you at all concerned about free? Free trading, free ETFs, free everything?

RICKETTS: I do have a little hesitation. We don’t want buying a stock to become similar to placing a bet on a football game.

RITHOLTZ: Right.

RICKETTS: And that’s a risk I think that’s real that we have to be careful of. The reality is the difference between absolutely free and paying $5.

RITHOLTZ: Right.

RICKETTS: There’s no change in utilities …

RITHOLTZ: It’s a psychological friction that forces people to think about it.

RICKETTS: So, if we can keep people buying those stocks for free, for no commissions off into a professional area so that it doesn’t become a Las Vegas gambling space, were fine.

RITHOLTZ: Right.

RICKETTS: But we don’t know that yet. That’s going to play out.

RITHOLTZ: And our final two questions, what sort of advice would you give to a recent college graduate beginning their career that was interested in pursuing a career in finance.

RICKETTS: The first thing I do is say go off by yourself on to the mountain for a couple days and just be by yourself and think about what you want to do in your heart, in your psyche. What is the thing that makes your life worthwhile?

Then after you’ve come to that answer, see how you can fit it into a money-making aspect to allow you to live the lifestyle that you want and it that may not be finance. People may say, I want finance because I can make good wages. They may find out, I want to play the piano. They’ll be happier playing the piano even though they probably won’t make as much money.

RITHOLTZ: Interesting. And what do you know about the world of trading and investing today that you wish you knew 50 years ago when you were first getting started?

RICKETTS: I am quite happy with finding a good company and buying it. That’s a Graham and Don (ph) idea and not trading all the time. The thing that you have to be careful with Graham and Don (ph) is don’t become enamored. Don’t become emotionally involved with your investment or the company that you’re looking at.

Sometimes, you’ll find another company that you think might do better and you really got to say I need to sell this because you got limited amount of money no matter how much you have. And put it over someplace else. So, you got to really cause yourself to think deeply.

RITHOLTZ: Quite interesting.

We have been speaking with Joe Ricketts. He is the founder of TD Ameritrade and the author of a new boOk, “The Harder You Work, The Luckier You Get,” and entrepreneur’s memoir.

If you enjoy this conversation, well, look up an inch or down an inch on Apple iTunes and you could see any of the nearly 300 such conversation we’ve had over the past five years. We love your comments, feedback, and suggestions. Write to us at MIBpodcast@Bloomberg.net. Since you’re already looking up an inch or down an inch on Apple iTunes, please give us a review.

You can check out my daily column at ritholtz.com. You can sign up there for our daily reads. Check out my weekly column on Bloomberg.com. Follow me on Twitter @ritholtz.

I would be remiss if I did not thank the crack staff that helps put these conversations together each week. Karoline O’Brien is my audio engineer, Michael Boyle is my producer, Atika Valbrun is our project manager, Michael Batnick is my head of research. I’m Barry Ritholtz. You’ve been listening to Masters in business on Bloomberg radio.

 

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