Optimistic On AI, Calm About Yields – But Own Land – Thomas Peterffy

Thomas Peterffy (0:00)

I think if you think about how you want to invest your assets for your heirs to have something down the road, if these things happen that I'm worried about, then I think land is the logical asset. I think the Fed will probably raise rates, although I'm not, as I said, I'm not, I would not be in favor of that, but they will have to do it just to demonstrate that they are independent. Slowing down, I mean, it's a very difficult thing because China is not going to slow down, so you know, this is basically a competition between the two hemispheres, and it's not, I'm not in favor of slowing down.

I would like us to win.

Wilfred Frost (0:58)

Welcome to The Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders and politicians in the world, giving you, our listeners, an edge. The Master Investor Podcast is sponsored by LSEG, Interactive Brokers, The World Gold Council, and BNY Investments. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice, or a personal recommendation. More on that in the show notes. My guest today is a titan of markets, a digital trading pioneer who founded Interactive Brokers in 1978 and built it to sit at a market cap of $160 billion today.

The performance in recent years in particular has been astonishing. Shares have risen over 40% per annum for the last five years.

Thomas still owns 75% of the company and therefore is worth over $100 billion himself. IBKR, Interactive Brokers, is one of the four sponsors of this podcast, I'm proud to say. I am delighted to welcome back the chairman of Interactive Brokers, Thomas Peterffy. Thomas, great to see you.

Thomas Peterffy (2:20)

Thank you, Wilfred. Great to see you too.

Wilfred Frost (2:25)

I should point people because I was tempted, because it's been a year, year and a half since you last joined the podcast, to recap your life story because it is so fascinating. But rather than doing a repeat episode, I would point people back to our first conversation just over a year ago for that.

Thomas, I wanted to just start on a theme that has continued since then, and that is the amazing share price performance, which comes from an amazing underlying earnings performance, 40% per year earnings growth from 2022 What's driven that?

Thomas Peterffy (3:07)

Well, it's basically what IBKR is all about. So when we started the brokerage business, some 33 years ago, we did that with the idea of providing a platform to floor traders on the various equities and options and commodities exchanges to continue their business as the floors go electronic.

Now, we were clearly way too early because the trading floors did not go electronic for another 10 years. Conversions happened between the year 2000 and 2010, and that was the time when we began onboarding our first target customers. So these were people with capital from half a million to five million dollars, and they conducted a regular daily trading business. So that our platform had to be very different than any other brokerage platform at the time, which were basically giving their customers order tickets to fill out. We had to provide the system for them, for our customers to manage several limit orders at the same time on different products. We had to enable them to do arbitrage, and pair trading, and shorting, and all those that professional traders regularly used to do. We had to obviously provide the best possible execution prices, low financing rates, high rates of temporarily available cash, interest on short proceeds, and all the features that these traders needed to make a regular income on a daily basis. As this business started to take off, we made our platform available to everybody else who could find us on the Internet, and that included larger professional investors and hedge funds with substantially greater levels of capital and retail clients with much less capital. But the focus remained on the professional trader, and that is still our target client today, and they are the ones whose evolving needs we try to satisfy as we serve them in more and more countries around the world. So that is the reason we can say that the more investors know about the ins and outs of the mechanics of investing.

The more people realize that in order to maximize their returns, it is not enough to pick the right investment strategy, but they also must pick the right platform to implement it. That is what drives our growth.