I am reading this book right now and goodness it is a hoot. Did you know that prior to computerization the error rates for stock trades was *high single digit percent*? Schwab fought theirs down to *only 6%* through process improvements then bought a used computer (for ~$500k).https://twitter.com/kevinakwok/status/1225912244745097216 …
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(A bit of Dangerous Professional advice: if you ever need to do that pushback to a regulatory agency, it will be delivered by your lawyer, in writing, politely. You will not usually have non-lawyers talking unsupervised to regulators to avoid pretty much exactly this happening.)
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Venture capital comes up numerous times; Schwab was spurned by it, repeatedly, but apparently benefited from ambient climate in San Francisco to build something massive. There's a line you'd swear was from a tech CEO regarding their capital intensive strategy to build branches.
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(Paraphrase) "[Discount brokerage X] was happy growing slowly and didn't want to build branches, because they were capital intensive and have a 4 year payback period. And they built a nice little business for themselves. I wasn't satisfied. I built branches. We grew much faster"
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Hindsight is 20/20 and etc disclaimer out of the way, two true statements: Schwab is the largest discount brokerage in the US by a commanding margin. You've never heard of the firm whose name I'm eliding. I do not know if it still exists.
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In a line I would like to staple to the heads of all tech company marketing departments, Schwab talks about how he, as a CEO in the 1970s with a background in direct response marketing, knew his channels, costs of customer acquisition, conversion rates, and payback periods cold.
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(It is broadly underappreciated in tech that e.g. A/B testing, including statistical confidence testing on it, predates computers.)
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This is just amazing to me in so many ways: the desired and delivered customer experience in the early days: Operator: "Thank you for calling Charles Schwab." A retail customer: "My account number is [7 digits]. 2,000 shares of IBM at limit of 57. *disconnects from call*"
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And a few hours later Schwab would call you back: Operator: "Filled 1,000 shares of IBM at 57; one left. Is this correct?"
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They did material work in call centers to specialize such that e.g. only operators with broker licenses took orders, but since they were expensive, if you called and asked for a quote ("What is IBM trading at?") you got routed to effectively (cheap, tier 1) CS.
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End of conversation
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