The Evolution Of The Online Brokerage Business

Joe Weisenthal (0:11)

Hello, and welcome to the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, do you know how I got interested in markets and stuff?

Tracy Alloway (0:22)

I have a sort of vague memory that you started trading, I wanna say tech stocks in the 1990s. I'm sure we've spoken about this before.

Joe Weisenthal (0:31)

You're right, I think we have. And I think you basically have it right. One summer, I think it was summer 98, I made $2,000 over the course of a summer from my summer job.

And then in 1990-

Tracy Alloway (0:43)

Wait, what was your summer job?

Joe Weisenthal (0:45)

I don't really remember what I did, to be honest. I think I had a few like-

Tracy Alloway (0:48)

That says it all, that you only remember trading stocks. You don't remember the normal jobs.

Joe Weisenthal (0:53)

Yeah, I don't remember the normal stuff.

But I remember having $2,000 from a summer job, it was the late 90s, and everyone was super interested in stocks and markets because there was a bubble going on. And I invested that money and tried to trade. And I grew a tenfold, so I grew it to $20,000. And I've been hooked on markets ever since.

Tracy Alloway (1:16)

Okay, so that's a total humble brag. But let me just ask you, before I start asking about your trading strategy, how did you even know to start trading stocks?

Joe Weisenthal (1:26)

I don't remember. It was just what people were doing. Like that was the thing I think that like people don't necessarily remember. They look back at the bubble of the late 90s and they know that stocks went up.

But I don't think they remember like how pervasive it was as part of the culture.

And it was just like what people were doing. It was what people were talking about. Very similar to say like people talking about cryptocurrencies in 2017 and 2018 It just became like this cultural phenomena.

Tracy Alloway (1:54)

So here's my other question. How did you actually trade? And full disclosure, in the 1990s, I would have been in middle school, but I would have had no idea exactly how to get started.

Joe Weisenthal (2:06)

Well, I had a good friend. He worked for his father's investment company, but I remember there were just ads on TV for all these online brokerages.

And there was this one, I actually used this website called SureTrade. I'm not really sure what happened to it, but I think they had these ads on TV for $7 a trade, and I just signed up and filled out some paperwork and stuff like that. And next thing you know, there you went. You can just buy and sell stock.

Tracy Alloway (2:31)

Next thing you know, you have $20,000.

Joe Weisenthal (2:33)

Exactly.

Tracy Alloway (2:33)

That's pretty good.

Joe Weisenthal (2:35)

I got really lucky because I studied abroad my sophomore year in college.

And so I didn't lose all my money because I stopped trading. Otherwise, I definitely would have gone to zero because I would have just been like everyone else. So I did end up slightly positive for the bubble.

Tracy Alloway (2:50)

And you weren't tempted to start currency trading while you were abroad?

Joe Weisenthal (2:53)

No, I didn't.

Anyway, the reason I bring this up is not just to brag, but because today we are going to be talking about the online brokerage business, which was a huge part of what made that period so special was this idea, as you put it, that you didn't really need to know anything. You could just go to a website and start trading. It was much simpler and cheaper than it had ever been before. And that business obviously is still around and grown, but that really is like when it sort of got going.

Tracy Alloway (3:25)

Yeah, and this still crops up nowadays. You see people pointing to certain advertisements coming out of various of the big internet brokerages, and people say, oh, well, this is evidence that the stock market rally has gone too far. You know, people are just coming in to make some easy money now. So brokerages still play an important part when it comes to measuring sentiment around the stock market.

Joe Weisenthal (3:48)

Yeah, and what's interesting to me and what I want to get into on today's episode is back then in the late 90s, there was this sort of like obsession with individual stocks and the internet stocks and Yahoo and eBay and Amazon and all these stocks that were making people a fortune.