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Stock me if you’ve heard this one before
Two decades and some spare change ago, I worked at a now-forgotten business magazine called Red Herring, writing about the onslaught of newly public companies hitting the market on a daily basis. Even today’s IPO wave seems a mere ripple compared to what we were seeing in 1999; the Herring hired a full-time journalist to serve as IPO editor.
The print magazine’s audience was manifold: venture capitalists, tech company employees and curious onlookers. But I worked on the online side of things, and I had the sense that our readers were increasingly day traders: people who made an independent living buying and selling stocks.
The profession seems quaint now, the moment long past. If you want to relive it, find a copy of “Dumb Money,” by my former boss and Suck.com co-founder Joey Anuff. (There are three copies at the San Francisco Public Library, I am reliably informed.)
I had flashbacks to that era early Monday as I read that Charles Schwab is buying TD Ameritrade for $26 billion. Schwab had eliminated commissions on most stock trades earlier this year, putting huge pressure on rivals like TD Ameritrade, which remained far more dependent on revenue from those trading fees.
Startups like Robinhood and SoFi accelerated the shift to zero, though commissions were likely headed there anyway. SoFi is blanketing podcasts with ads promising free stock for signing up, which tells me something: It’s a huge challenge to get young people interested in stock trading. If you have to give something away — free commissions, free stock — that speaks to a marketing challenge.
Online stock trading actually predates the modern web; a small outfit called PCFN, later DLJdirect, offered trading through the Prodigy online service as early as 1987. After various deals — a spin-out, a spin-in, multiple sales — some remnant landed with the Bank of Montreal.
Banks are combining with brokerages in a way we haven’t seen since the mashup of Citibank and Salomon Smith Barney. The latest rumor is that E-Trade — once a Palo Alto tech startup, now a New York firm — might be sold to Goldman Sachs. But these days, it’s the banks that seem sexy. As Crunchbase News recently noted, every startup and every big tech company seems to want to become a bank.
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Even with no commissions, it’s hard to blame ordinary savers for looking askance at the stock market. What are they supposed to buy — tech IPOs? Ask Uber and Lyft investors how that one turned out. To the extent that there are modern day traders, they’re swapping cryptocurrencies. Which is fitting, if you remember the bubbly ’90s. Why trade on numbers when you can substitute pure belief?
— Owen Thomas, othomas@sfchronicle.com
Quote of the week
“When do you check your phone in the morning? Is it before you pee or while you’re peeing? Because that’s pretty much the range!” — Tech investor turned critic Roger McNamee, to an audience of fund managers in Baltimore, via the New Yorker
Coming up
It’s Thanksgiving: Be thankful for a break from your inbox. Tech Chronicle will return on Monday.
What I’m reading
Gabriel Sherman on the Greek tragedy that is WeWork. (Vanity Fair)
Roland Li on another aspect to the Schwab-Ameritrade deal: San Francisco is losing another big headquarters. (San Francisco Chronicle)
Tatiana Siegel raises questions about the Sony hack. (The Hollywood Reporter)
Tech Chronicle is a thrice-weekly newsletter from Owen Thomas, The Chronicle’s business editor, and the rest of the tech team. Follow along on Twitter: @techchronicle and Instagram: @techchronicle