I go to bed every night, and I wake up every morning, thinking about how to build relevant, enduring businesses that address some unmet need. It’s one of the things that makes life fun for me.
And for some time now, I’ve been thinking a lot about DNAinfo.
DNAinfo connects people through the communities where they live and work. We do this by reporting on fun and fascinating neighborhood news stories on DNAinfo, and by creating vibrant, virtual communities on Neighborhood Square. And we do it without spin.
Unpuzzling this important space – a space that exists at the intersection between people who live in neighborhoods and the businesses that serve them – is an irresistible challenge to me.
This week, DNAinfo introduced a new logo that speaks to the company’s partnership with neighborhood communities. Neighborhoods are alive and vibrant, and our new logo reflects our continued belief in the power and promise of neighborhoods.
If you live in Chicago or New York, check out DNAinfo. If you don’t live in one of those cities, stay tuned.
There has been a lot of discussion about the question, in particular about where and how brokers route their customers’ orders. As someone who spent his professional life trying to empower people to make informed investment decisions, I understand the concern. But it’s misplaced.
Consider the vast improvements in stock markets. Individual, or retail, orders get filled 10 times faster than a decade ago. Commission rates have fallen by nearly 70% since 1997. The prices at which orders are filled beat quoted prices 91% of the time, versus 14% a decade ago. And 99% of all market orders are filled in their entirety.
The supposed problem is what happens after an individual investor enters an order to buy or sell a stock. At this point the broker is legally obligated to try to make the trade at the most favorable terms reasonably available—including such factors as price, speed, the likelihood of partial or full execution, transaction costs, and customer needs and expectations. This obligation, called “best execution,” is a big deal; it is why regulators like the Securities and Exchange Commission and the Financial Industry Regulatory Authority require brokers to conduct regular, rigorous reviews of their execution quality.
A significant factor in determining the best execution involves where orders get routed. The broker who took the order may try to match buyers and sellers among his business’s clients in-house—called internalization—or he may send the order out to a third-party market center. Market centers include electronic exchanges like NYSE and Nasdaq, as well as market makers, which are firms that trade for their own accounts to make markets in particular securities.
Market centers compete fiercely for order flow. In part, that’s because they need strong order volume to produce robust trading and liquidity. When the market for a stock is liquid, it means investors are actively buying and selling it, and that means trades can be executed quickly and at good prices. The fact that the current equity-market structure has generally produced robust liquidity is one of the main reasons orders are getting filled faster, cheaper and at better prices.
Some market centers compete for order flow by paying brokers to get their orders, usually small fractions of a cent per share. And this is what all the recent brouhaha is about—irresponsible assertions that competition among market centers for order flow has led brokerages to ignore their best execution obligation and simply channel orders to the market center that paid them the most.
Yet there is nothing shadowy about market centers competing for order flow. Paying for order flow began in the late 1990s and has been well-established in the U.S. since the mid-2000s. Since 1994 the SEC has required broker-dealers to disclose publicly to new customers, on trade confirmations and in public quarterly reports that they are receiving order-flow payments.
The effect of this transparent competition has been extremely positive for retail brokerage clients. According to data analysis firm RegOne Solutions, competition among market centers for order flow has resulted in retail investors receiving more than $600 million in direct price improvement to buyers and sellers from market centers in 2014 alone, up from roughly $100 million in 2004. And that doesn’t take into account the extent to which revenue from payments for order flow permit brokerages to offer lower commissions and, in many cases, free extra services such as powerful technology platforms, access to third-party research reports and online education.
There is no doubt the industry can do even better. Providing investors with more and easier access to information about payments for orders will permit them to decide if they are comfortable with their broker’s routing practices. If not, they can take their business elsewhere.
But improvements need to be thoughtful, measured and informed by the fact that the current market structure has produced incredibly favorable conditions for individual investors. It is a mistake to obsess over one practice without considering how it, and all the other pieces, work together to produce the current, favorable environment for retail traders. As with doctors, the first rule should be: Do no harm.
Mr. Ricketts, the founder of TD Ameritrade, now pursues entrepreneurial and philanthropic projects. Alfred Levitt, president and general counsel of Hugo Enterprises LLC, helped with research for this op-ed.
I’ve said before that I prefer to look forward, so I’m generally not a fan of dinners honoring past accomplishments. But when the Museum of American Finance awarded my friend and longtime competitor Chuck Schwab its Financial Innovation Award, I was happy to be there, along with TD Ameritrade’s current and incoming Chief Executive Officers, Fred Tomczyk and Tim Hockey, and several members of TD Ameritrade’s Board of Directors, including my son Todd. For nearly fifty years now, Schwab and Ameritrade have been at the vanguard of a revolution in personal finance that has empowered countless individuals to take control of their own futures. Congratulations, Chuck!
I am student of history, so I was excited last year when I learned that the Abraham Lincoln Presidential Library and Museum was sponsoring what they were calling the Gettysburg Replies project. The project challenged presidents, judges, historians, filmmakers, poets, actors, and others to craft 272 words of their own to celebrate Lincoln, the Gettysburg Address, or a related topic that stirs their passions. (272 words may not sound like a lot, but it was all President Lincoln needed to write what most folks consider one of the greatest speeches of all time.) The project included contributions from President Jimmy Carter, Supreme Court Justice Sandra Day O’Connor, General Colin Powell, filmmaker Steven Spielberg, Poet Laureate Billy Collins, and many others, including yours truly. The hardcover book looks great and you can buy a copy from the Abraham Lincoln Presidential Library store here.
I was honored to be included in this fun and interesting project. My contribution, in 272 words (you can count them), is reprinted below:
In November of 1863, when President Lincoln went to Gettysburg to dedicate the new cemetery there, my great-great-grandfather Richard Rutter Ricketts was working the land at his farm in southwestern Iowa. Born in 1802, Richard was too old to fight in the still raging Civil War, but he was hardly indifferent to the struggle. Richard had grown up surrounded by slavery. As an apprentice carpenter in Baltimore, and later in New Orleans (where he made coffins during the terrible cholera epidemic of 1832), he worked alongside slaves, witnessing firsthand the injustice of their plight. Slavery may have been a settled part of his world, but it was not something he could abide, and in the 1840s, after he married my great-great grandmother Charlotte Platt Ricketts, an ardent abolitionist from a family of abolitionists, he joined the anti-slavery cause in earnest. When he and Charlotte moved to Iowa in the 1850s, they became active participants in the Underground Railway, their farm in Civil Bend, near the Missouri River, serving as a well-known transit point for escaping slaves.
Lincoln’s speech at Gettysburg was reported widely at the time, and there is little doubt that Richard and Charlotte heard about it. I’m sure its words resonated deeply with them. The proposition that all men are created equal was a defining principle of their lives, as was the notion that the great task of securing freedom remains a continuing obligation for us all. It’s a legacy I’ve spent my life trying to honor, for it remains every bit as pertinent today as it was when Mr. Lincoln first spelled it out back in my great-great-grandparents’ time.
I was born and raised in Nebraska City, and while I’ve done many things since leaving there when I was 18, something of that place stays with me to this day. It’s hard to put into words, but if I were to try, I’d say it’s the values of integrity and consistency – values I’ve tried to bring to my life and my work.
So it was a great honor when Grant Gregory informed me that Arbor Bank, which is headquartered in Nebraska City, had decided to bestow the J. Sterling Morton Award on me. The oldest state-chartered bank in Nebraska, Arbor Bank – or Otoe County National Bank of Nebraska City, as it was known back then – was the financial cornerstone for my family growing up.
Like everyone who grew up in Nebraska City, I was familiar with J. Sterling Morton. The founder of Arbor Day and a former cabinet officer who returned to the United States Treasury 20% of his department’s appropriated budget when he served as Secretary of Agriculture, Morton had a powerful commitment to environmental conservation and government fiscal responsibility that resonates strongly with me. Indeed, I’ve tried to champion the same values of environmental conservation (through the Ricketts Conservation Foundation) and fiscal responsibility in government (through Ending Spending), so it is a particular honor for me to receive an award that bears his name. I particularly like this quote by Morton:
There is no aristocracy in trees. They are not haughty. They will thrive near the humblest cabin on our fertile prairies, just as well and become just as refreshing to the eye and as fruitful as they will in the shadow of a king’s palace.
The Museum of Nebraska Art’s Exhibition “Scenes of a 19th Century Journey: Paintings by Alfred Jacob Miller”
The Ricketts Art Foundation has been working hard with The Buffalo Bill Center of The West and the Museum of the Mountain Man to create the world’s largest online catalogue for Alfred Jacob Miller’s artwork. FUR TRADERS AND RENDEZVOUS: THE ALFRED JACOB MILLER ONLINE CATALOGUE is expected to launch in the summer of 2015.
In the meantime, I am excited that The Museum of Nebraska Art is presenting an exhibit entitled “Scenes of a 19th Century Journey: Paintings by Alfred Jacob Miller” that will feature the Ricketts Art Foundation’s Miller artwork. The exhibit runs until June 21, 2015 and, on April 4, 2015, the museum is hosting a special reception featuring Peter Hassrick, among the foremost experts in Miller and his work. You can learn more about The Museum of Nebraska Art’s exhibition here: http://bit.ly/19f2ClT.
I hope those of you who have the opportunity to do so visit The Museum of Nebraska Art and see Scenes of a 19th Century Journey: Paintings by Alfred Jacob Miller.
Recently I was expressing my frustration to a friend about how environmentalists have hijacked the policy discussion around environmental issues and driven it in the wrong direction. I was explaining how environmentalists were forcing costly regulations on our society without, as Steven Koonin has put it, “acknowledging not only the scientific certainties but also the uncertainties, especially in projecting the future.” (Steven Koonin discusses this issue in his piece Climate Science is not Settled that ran in the WSJ on September 19, 2014.)
I continued explaining to my friend that environmentalist rhetoric has, unfortunately, cast this as a battle between those who love nature and those who wish to exploit it. In doing this, they’ve framed the issue in “us versus them” terms where you’re cast as an evil polluter if you want to have an informed discussion about appropriate regulatory scope. But an informed discussion on these issues is critical, for without it, we’re at risk of basing policy on guesswork. And while that’s never a good idea, it’s particularly bad where the costs of incorrect policy to our environment and economy are enormous!
“Wait a minute Joe,” my friend interrupted, “take a breath! I thought you were an environmentalist?”
“No,” I responded, “I’m a conservationist.”
“What’s the difference? And does it really matter that much?” he asked.
* * *
I’ve spoken often of my conviction that we all have a responsibility to do everything we can to preserve and protect the beautiful natural landscapes and abundant natural resources to be found in our great country (especially those of us lucky enough to live in Wyoming’s Upper Hoback Valley). This is why I’ve spent so much time and money over the years working on projects like the effort to preserve the Wyoming Range, the campaign to protect the Hoback Basin from oil and gas drilling, and our ongoing study to reestablish the Common Loon in its former breeding range.
This activism of mine surprises some people, who ask me if I’m an environmentalist. The answer is no. What I am is a conservationist.
Environmentalists believe in their hearts that man is an intruder in nature – that we have no business cutting timber or building dams or otherwise making use of any of the natural riches God has bestowed on us. The best thing we can do with wilderness areas, they say, is to leave them alone. To paraphrase John Muir, the man generally credited with being the father of environmentalism, when it comes to the great outdoors, we might occasionally look, but we should never touch.
Conservationists, on the other hand, believe that human beings are just as much a part of the natural ecosystem as any black bear, cutthroat trout, or trumpeter swan. That said, while humans may have the right to make use of nature’s bounty, we can, if we’re not careful, wreak havoc with the landscape. As a result, conservationists recognize that we have a special responsibility to be vigilant stewards of the environment. This means living up to the tenets of sustainability and balanced use that are so important to the continued health of all natural ecosystems.
This at least is how I see it, and it’s why I created the Ricketts Conservation Foundation. To my way of thinking, environmental stewardship is an enduring value that is everyone’s responsibility. We shouldn’t squander nature’s riches, but neither should we shy away from them. As with most important things in life, the key is balance and understanding.
And that brings me to the chief concern I have with environmentalist rhetoric, which often makes having a responsible and informed discussion about these issues impossible. It seems that if you want to acknowledge the limits of our scientific knowledge, and how those limits should inform the appropriate scope of regulation, you’re a pariah, hell bent on destroying the environment. But predicting the future is never easy, particularly when dealing with cause-and-effect within complex environmental systems. So there are some things we know for sure, and other things that we believe are true. Promulgating costly regulation supported by hypothesis rather than science is a very dangerous game for both the environment and our economy. To my mind, engaging in honest and informed discussion about these issues is among our responsibilities.