Invested: Changing Forever the Way Americans Invest

by Charles Schwab

What are you good at, what do you love doing, what can you talk about without even thinking about it and without tiring of it? I ask them. That’s where you should put your energy. There is tremendous power in that because it drives you forward through the ups and downs—and there will always be plenty of both. That passion and knowledge also signal to others that you are genuine, with personal ambitions, true expertise, a direction in life—the real deal. People are attracted to that, and you will need the support of others.

The world of business, like the rest of life, is full of wonderful temptations, and making a choice about where you are going to devote your energy is often as much about dismissing things as it is about choosing something. A singular sense of purpose gives you focus and clarity.

Today, I remain more convinced than ever that investing is the individual’s path to financial freedom. It is how people can participate in a growing economy, beyond just earning a paycheck.

On my list of good fortune, starting my company in the San Francisco Bay Area is high up there. It was a place where taking risks was part of the culture, and where “not invented here” didn’t apply.

To this day I believe there are great parallels between golf and investing. Both require preparation, patience, practice, and a long-term commitment. Both require strategy. You need to think several steps ahead. What’s the lay of the land? How do you control your emotions? Both are full of highs and lows.

The only reason I got into Stanford, I’m convinced, is because I was a pretty good golfer.

I had a fake ID, and I spent too much time using it at a place called Rossatti’s in Portola Valley.

The summer between my two years in business school I worked in the management training program at First Western Bank. It was my first experience with banking. Years later at Schwab we jokingly dubbed the banking business model the “3-6-3” approach. Bankers pay you 3% on your savings, lend it back to you at 6%, and are on the golf course by 3:00.

We were growth investors. Our targets were companies growing at least 30% a year, on the premise that 30% annual growth over 10 years, compounded, would deliver you over 10 times your original investment.

With investing, there are no guarantees, and the higher your aspiration for performance is, the higher the risk.

My big aha! was when I realized I didn’t have to sell at all. All I had to do was market the discount brokerage service and then provide the best possible customer service. That simple realization was behind a thousand decisions I made in the years to come—decisions

I knew that if I was going to succeed, it would be as a marketer, not a salesman.

Successful entrepreneurs are idea people, to be sure, but more than that they are men and women who feel compelled to act. Otherwise, it’s all talk.

I think one of the toughest things entrepreneurs have to do is go to friends and family, hat in hand, asking for money. It takes a lot of gumption. But, boy, are you ever motivated then to succeed. You’ll work your butt off, if only to not let them down.

The biggest obstacle we had to overcome was a perceived lack of credibility. Most of our customers knew us only as a telephone number.

I spent time with Bert Decker, a San Francisco public speaking consultant. One thing he told me that I never forgot: “Audiences don’t remember information, they remember the man.” And that no one knows the content or the order of your presentation, so don’t worry about forgetting something.

I can tell you that no marketing plan, no promotional push, nothing we ever tried in order to drum up new business has ever come close to the impact of simply opening a new branch in a new city. We opened somewhere and, boom, our business exploded there by a factor of 15.

Although I was initially awed by the board, I was beginning to have my doubts. It was too big. Part of me was thrilled to be a member of such an august assembly of managerial wisdom, but the entrepreneur in me recognized that there was a corresponding cost in efficiency and effectiveness.

But luck is never enough alone. Insight, reasonable expectations, and experience all contribute and turn luck into opportunity. And most important, being prepared to take advantage of luck when it comes your way; making your own luck whenever you can.

Hiring consultants was a bit of a tactical departure for us. I had avoided them so far, because I normally don’t trust ideas divorced from execution, and consultants don’t execute. It’s too easy to make grand conclusions when you don’t have to put them into action. Often the best answer is right there in front of you, if you know your business.

Steve Jobs famously said customers don’t know what they want; you have to show it to them. Any entrepreneur who is out there coming up with new ideas will say something similar. Innovation springs from that internal voice saying this is a great idea, the next big thing. People will love it. Market research and testing can play a role, but they’re no substitute for good gut instincts and simply building something you yourself would love to have.

The financial advisers became, in effect, a national sales force for Schwab, reaching thousands of clients we could not, bringing us millions in new assets.

THE INVENTION OF ONESOURCE, the development of our independent financial adviser network, and the introduction of the no-fee IRA, all of which complemented one another, transformed our business model in the early 1990s and proved vital to our continued prosperity.

You think you are dependent on one person or one team and then the unexpected surprises you.

There is simply no better way to deliver financial services than via the internet. Today, that has extended to mobile, putting your entire financial life in your pocket wherever you are. So the internet was a natural for our industry.

YOU CAN’T CUT A company to greatness.

I defined what Schwab stands for in three simple terms: value, performance, and service.

Value was giving you more for your money. Performance meant helping you be a better investor and reaching your goals, whether that was through our advice, great tools for independent investors, or the convenience of easier investing. And service was the experts and professionals who focused on you.

To be a successful investor, you have to be optimistic.

The secret sauce was building a company from a very simple and basic belief: that you view your decisions through the lens of your clients’ needs and goals. What would they think; what would make their lives better, easier, more productive; what would they believe is the right thing to do? If you do that, then everything else will follow.

Business is all about people and you need to find those who share your vision and values, who will bring their own passion and strengths to the task.

Business is a creative process. You move forward into the unknowable future, try new things, make discoveries along the way, and repeat. It’s all about learning and growth. It is why I love it and the free market of ideas that enables it and makes so many great new things possible. I like to say business is organic, like life itself, ever changing. It is the human spirit of curiosity and creativity brought to life, and why I am ever optimistic about the future.