Service Over Self-interest, an Ameritrade Story

This story is going to sound a bit like a western, so my apologies for that.

You see, I used to run internet products for Ameritrade. I am the guy who brought the Company to the Internet. Maybe it was right place, right time, but, man, did I love that job. The tools that my team and I built for an initial audience of dozens grew to support millions of users by the time of this story.

True leaders measure success through the success of all of those they serve, including customers, employees, shareholders, and communities. And they live by a fundamental tenet, that service to others is the highest honor and greatest obligation of a true leader.

Henry S. Givray
Creator & Lead Facilitator – Leadership’s Calling®
Former Chairman, President & CEO – SmithBucklin Corp.

But wait. Some background is important for the rest of this story to make sense. Most companies have three different data handling departments: backend, middleware, and frontend. The backend is the customer and transactional databases. This story isn’t about them. The middleware determines what information can be shared, keeps the bad guys out, and directs the traffic. This story is about them. And the frontend delivers pretty applications and pages to users. Frontend. That’s where I worked.

And we were dependent on the middleware. Unfortunately Ameritrade’s middleware was really old by the time the internet came along. We struggled to work with it, but an application is only as good as its data. That middleware had to be replaced.

The middleware team was also long in the tooth. There had been few new requirements for years, and they had grown complacent. They resisted change on procedural grounds and were viewed as uncooperative. When the mandate came to rewrite it, they were not prepared for success. Deadlines came and went, attrition skyrocketed, and even the new requirements started falling out of date. The danger the company was in because of this can not be overstated.

This is where the story ties into the quote above. My team was terrific. Because we did the fun stuff, we could hire the best people, and many of the best technologists in the Company had chosen to join us. I realized our talent, our understanding of customer needs, and our productive attitude could solve the middleware problem. But I also knew that pulling my team off frontend development would temporarily hurt us in the competitive standings and direct a lot of negative pressure towards me – from the encroached upon data services teams, from the business units, and even from the financial press. Just so you know, I am the guy in the white hat here. Guess what I did?

Marshall Will Kane is not part of this story, but he’s still cool.

I offered up my best project manager and all my senior developers. But it got worse than I predicted when those folks were assigned to another VP. Not only would I lose their productivity, but I would not receive the spotlight of their success.

Following this, my options appeared limited. My crippled team was living off scraps, our competitors pulled away dropping us to dead last in some standings, and my once bright star was fading fast.

But as clearly as I knew my days were numbered, I also knew that I still had control of the future. Three powerful things were left in my pocket. First, my remaining team, having written the middleware requirements, knew what to expect when the project was finished. Second, my knowledge of the customers allowed me to predict what an industry leading application would look like in the future – even if I could not build it yet. And third, the rewrite had not taken my graphic designers, that creative core that turns good data into great applications. Together my scrappy band would design the application that the Company would need at the other end of this dark, 8-month, tunnel.

My professional capital fell far into the red. I had a terrific boss who tried to shield me, but there was only so much he could do. His boss, a man for whom I have great respect, chose a different path – which must have been very difficult for him. He knew what I was doing, and he got out of the way. He protected the necessary resources to ensure the success of our future knowing it might be the last thing I did with the Company.

And it was. But it was also a homerun. The data streaming through the new middleware coupled with our visionary application design put us back atop the competitive rankings and painted my team in great light. I left proud of what I had accomplished and knowing that my superiors valued my efforts. Ride off into the sunset. End credits roll.

So, here’s the lesson. For years I have viewed this story as me self-sacrificing a job I loved for the betterment of the Company. But through recent introspection I have reached a different conclusion which is made clear by understanding the true options I faced:

I could take on another department’s problem. I was confident my involvement would facilitate the best outcome for the Company but also understood it would lead me out the door. I could hope that the act would end with the Company back in its preeminent competitive position, my team – a group of people I loved – once again positioned to build fantastic things and maintain their position at the top of the corporate cake, and me exiting in a super strong position to go build wonderful things for another firm.

or

I could do my job and let the middleware do as it would. It was not my problem to fix, and my head would not be on the block if it failed. My team and I could still build new applications, but the opportunities for building groundbreaking things would continue to diminish. Ameritrade’s competitive advantage might slide and eventually turn us into a takeover target – at which point I would be viewed as an average manager, and either be let go or receive a position appropriate to an average manager.

You see, I was faced with two options and neither was perfect, but my genuine desire to serve others, to improve the standing of the Company, and to make my team successful, led me to the best outcome – for all of us, me included- even if it appears to have been against my self-interest.

The harder you work, the luckier you get!

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Today marks the drop of Joe Ricketts’ memoir, The Harder You Work, The Luckier You Get, a book to which I contributed and within which I am portrayed.

Joe Ricketts is the founder of Ameritrade, and he was my boss. I was initially hired to run marketing but was quickly moved to the more historically interesting job of leading the company to the Internet (with a capital I, because back then it was spelled that way). During the creation of this book, I was interviewed several times and it’s hard to remember everything I said, but I do think the following story will be new.

In the fall of 1995, we launched the world’s first internet trading site under the brand, Aufhauser. Aufhauser was a scrappy New York based brokerage which we had recently purchased – I think largely to provide us some NY street cred which as Omaha “bumpkins”, we were in desperate need. Aufhauser had been uniquely using the internet as a platform for messaging between clients and brokers.

Understand that at this time, no one had ever traded stocks on the internet. In fact, No one had ever paid a bill on the internet, transferred money on the internet, or even viewed a statement on the internet. We were the absolute first financial services company to have a functioning website! We may have been the first to have any website, but I am not certain of that.

From a technical perspective, it wasn’t that difficult. We already had a call-and-response system (an API) created for our touch-tone phone application so we could get the information to the client’s web page. The real challenge was navigating the unexpected objections of just about everyone!

One of my favorite brouhahas from the period involved the exchanges (The New York Stock Exchange and NASDAQ), the regulators, and our compliance team. They all hated me, and I like to think Arthur Levitt, Chairman of the SEC at the time, may have even known my name (but he probably did not). The issue, which has been thoroughly eliminated since, was real-time verses delayed stock quotes.

Randolph and Mortimer Duke. Old-timey Brokers.

You see, the exchanges did not want regular-guy investors to have access to real-time stock quotes. Old-timey stockbrokers (think: Randolph and Mortimer Duke, left) were big clients of the exchanges and access to real-time quotes was one of the reasons people had brokers. Every time that phone rang, the broker had a chance to push another transaction and trade commissions were hundreds or even thousands of dollars per trade. As a result, financial service companies who wanted to share stock prices electronically did so by delaying the quotes by 20 minutes.

But the regulators – the people from the executive branch of the government who enforce laws – required that every trade be preceded by the presentation of a real-time quote. Even if an investor wanted to buy a stock and hold it for 20 years, he had to see the actual price at the time of purchase.

Previous electronic systems such as Ameritrade’s touch-tone trading and clunky Accutrade for Windows had located a compromise wherein real-time prices would be delivered at trade-time and delayed prices would be used everywhere else. This was the model we were following when we launched. Business was slow at first, but within a few months people started to take notice, and I got a call from compliance.

Um, yeah…

I don’t remember who worked in compliance or who called me, but over the years I have inserted Bill Lumbergh into my recounting of the story. “Um, yeah”, drawing out that second word as long as possible, “we are going to need you to stop using real-time quotes on the internet.”

Compliance was the organization in our company – any company – that ensures that laws are being followed down to the letter but also that contracts are being adhered to. They watched our every move and scrutinized every application we built. The internet was untested territory and, although I am speculating, our recent success had been noted by brokers who were pressuring the exchanges to keep professional tools out of the hands of retail investors. The exchanges were very clear that this violation put our service with them in jeopardy. In no uncertain terms: to continue would risk our access to real-time quotes altogether and threatened our ability to stay in business.

Adhering to their request required choosing between two untenable options. We could provide delayed quotes at trade time – and be in violation of the law, or we could stop allowing trades over the internet all together. I thought hard about this before going to Joe Ricketts with my thoughts. Joe and I had a great relationship at the time. I had shown him I was capable, I had made a positive impact, and he gave me more than enough rope to hang myself and the whole company.

I returned to my team with the news. “Fuck it, we are moving forward as is.” I expect that, at the same time, Joe was on the phone warning compliance to buckle up because the next week was a bull ride worthy of a rodeo. Compliance was fighting with exchanges, exchanges were fighting with regulators, and regulators were trying to figure out how they had gotten stuck in the middle of this. I took calls from all sides, received an earful, and was called an upstart (maybe more than once). But at my core I knew that efficiency always prevails over the objections of those profiting from that efficiency. Our business depended on exactly one outcome, and I was confident it would come.

And it did. The law won out, and the exchanges agreed to allow real-time quotes in certain situations and in return for a hefty sum every time one was presented.

I remember a year following this event, Amazon announced that for the first time, they had surpassed $1 million dollars in a single day. No one called us for that story, but we had been doing 100 times that for months. According to a recent story on NBC, TD Ameritrade now processes nearly 1 million trades (and an estimated total value of $1 billion) per day.

This story started off as a classical example of the exchanges’ channel conflict – one company profiting from two clients who had competing business models. In retrospect, the resolution was the moment when the new disrupted the old, the tipping point was reached, and the paradigm shifted. When that happened, every obstacle to internet trading had been eliminated, the industry was allowed to rush forward, and it did. I am proud to have been there.