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on a great educationwp's richard reiss has a conversation with E*TRADE ceo christos cotsakos |
He is a
charter member of the business world's cyber elite. He doesn't
just talk about change, he talks about changing the rules of
engagement. Wherever he has been, he has been successful -- very
successful. People who know him call it the Christos Factor.
He is Christos M. Cotsakos '73, chairman of the board and chief
executive officer of E*TRADE, the global leader in online personal
financial services.
His office is a ten-year-old boy's fantasy it's organized chaos
and there's no one there to tell him to clean up his room. The
TV is tuned to the Financial News Channel. The computer screen
monitors world financial markets and the stereo is playing classical
music. Two sumo wrestlers serve as anchors to the hundreds of
books that cover the shelves, his desk, the floor. There is a
bull, a dinosaur, a sword, a lion, and an electric remote-controlled
car on the floor. There is a Purple Heart and Bronze Star for
Valor from Vietnam and a huge poster that reads, "All I
need to know about life, I learned from Star Wars." Get
the picture? This is a man who does not like to be bored.
Born and raised in Paterson, New Jersey, Cotsakos was a 1965 graduate of Eastside High School. He will tell you -- "barely."
Cotsakos: I almost flunked out of high school. I was one of those kids they passed each year to move up and out. I was restless and bored and lucky I got through. But I loved to read and was very active in a lot of "stuff" outside of school.
WP: You graduated in '65. What did you do then?
Cotsakos: The St. Athanasios Greek Orthodox Church became an extension of my living room: I was president of GOYA (the Greek Orthodox Youth Organization) as well as president of the Sons of Pericles (a Greek, young men's fraternal organization). I played at a lot of odd jobs: stock boy, grocery clerk, railroad agent; but at the end of the day, I said, you know, there's absolutely nothing going on in my life, I need a drastic change.
My brother was in the National Guard. I also wanted to experience the military. I also wanted to experience the war so I volunteered to go to Vietnam. It was "a rite of passage" I just had to experience.
I also wanted to fly jets. One morning I went to the Air Force Recruiting Office at the Paterson Post Office. All the recruiters asked the same questions. "Do you have a college degree?" I said, no. They said, "Do you have a high school degree?" I said, barely. They said, "Can you get some recommendations?" I said, no. They said, "Well sir, there's not a lot we can do for you. Why don't you try the Navy."
The Navy said, "Do you have a college degree?" No. "Do you have a high school degree?" Not really. "Well, there is not a lot we can do for you so why don't you try the Marines."
The Marines recruiter was out to lunch.
The Army recruiter was the last in line. I changed the story
a little -- now I wanted to fly helicopters. If I could not fly
jets, I wanted to fly choppers, go airborne, and earn my parachute
wings. The Army recruiter said, "Yes...yes... yes."
I enlisted and within 90 days I was in basic training at Fort
Dix, New Jersey.
After a stint in the 82nd Airborne at Fort Gordon, Georgia, I
was assigned to Company B, 2nd Battalion, 501st Infantry with
the 101st Airborne Division (The Screaming Eagles) at Fort Benning,
Georgia. I was preparing myself for Flight School when our unit
was mobilized in one of the largest troop movements at that time
called Eagle Trust (December 1967). So, I went to Nam as an 11
Bravo, infantry paratrooper (I was promoted in the field to Sergeant
E5).
WP: In Vietnam you served on a fire team and infantry
squad. Can you describe that?
Cotsakos: Two
fire teams make up a squad, four squads make up a platoon. I
led fire team A and also became squad leader of the 1st squad,
1st platoon. Our mission was reconnaissance, search and destroy...
continuously engage the enemy.
WP: It sounds extremely dangerous. But I wonder if that
was exciting for you as well?
Cotsakos: I hated
the "kill or be killed." I loved the camaraderie, duty,
honor, and country. It became a character-defining experience
for me. Being alive took on a whole new meaning. After Vietnam,
my outlook on life changed: you're not only remembered by who
you live with, you're also remembered by who you choose to die
with. Camaraderie, trust, and loyalty became the hallmarks that
I now live by.
WP: What happened when you returned from Vietnam?
Cotsakos: When
my enlistment was over, one of the many places I looked for a
job was with a bank. The vice president said, "Tell me what
you can do?" Well, I'm a weapons expert. I was a fire team/squad
leader. He said, "That won't help," and he had me out
of his office in less than ten minutes. It was the same everywhere
I interviewed.
I was thoroughly frustrated and angry. I spent three years in
the military serving my country and there was absolutely no recognition
or appreciation for being a veteran.
My brother, John, went to Paterson State. He said, "You've
got to go to school. It's the only way to channel your anger
and energy and it is the only thing that will get your life going
again."
So I went to William Paterson for an interview. My test scores, like my grades, were no badges of honor. But I sat down with a group of interested and helpful advisors and talked about who I am and what I wanted to do with my life. I was in class the next day.
I am forever grateful to William Paterson
for giving me my re-start in life when most people wouldn't have
given me a second look, let alone a second chance. I have a strong,
emotional connection with the college and the environment that
it helped create for a young kid trying to find himself.
WP: What do you remember about the University?
Cotsakos: I hung
out with the music and theater majors and spent a lot of time
in Shea Auditorium rehearsing for plays and working backstage.
My college tuition was paid by the G.I. Bill, an alumni scholarship,
and by working odd jobs. It was an exhilarating collegial, nurturing
environment. The professors spent a lot of time trying to ensure
that you not only got the best possible academic education, but
that you had more of a life experience with respect to who you
were as an individual. For me, it was a huge learning experience
and it was the third character-defining experience in my life:
first, the St. Athanasios Greek Orthodox Church, second, the
101st Airborne Division and then, Vietnam. I can't imagine learning,
growing, and experiencing life at any other school during that
period in my life.
WP: After college you went to work for a new company called
Federal Express and you were there for nearly 20 years. Then
you went to A.C. Nielsen, where you quickly rose to the level
of co-chief executive officer, president, chief operating officer,
and director. You recently said that to come to a company like
E*TRADE you have to reinvent yourself. What did you mean by that?
Cotsakos: After
William Paterson I was encouraged to attend graduate school.
I was accepted by UCLA's master's program in theater and arts.
I also got married, got a $2,500 loan, borrowed $500 from my
parents, bought a Volkswagen bus, and drove across country with
my wife Tami (Eastside High School '67, William Paterson '71,
a music major).
Our rent was $125 a month. Tami worked as a preschool teacher
for $300 a month and I worked at Universal Studios for $1.40
an hour as a tour guide while going to school. After two-and-a-half
months we were dying economically. We had very little money,
so we sold the VW bus, moved to a cheaper place, and I dropped
out of school.
Once again, I was unemployed with no prospects. One afternoon I was searching the want ads with a friend of mine (who was a teaching assistant at William Paterson). Both of us were out of work and we saw an ad for a company called Federal Express.
I went down for the interview at the Los Angeles International Airport, but I got there three hours late. Everyone was gone. I found out where the guy who was doing the interviews was staying. I don't know what possessed me but I slipped the concierge $3 and said, "You've got to tell me what room this guy is in."
I went to his room and knocked on the door but he wouldn't open it. So he talked to me with the chain still on, through a crack in the doorway. I told him about Vietnam, my college experience, and about why I needed this job. I said, "Look, you're advertising for salesmen, couriers, cargo handlers, and a manager. I'll do all four jobs for four bucks an hour." He gave me an application, I filled it out, sent it in... and they never called. But they did hire my friend. So I just decided to show up every day and work anyway, and I did whatever I could, for free. Everyone kept wondering, "Who the hell is this guy?" Eventually they gave me a job. Sometimes, just showing up and being there works.
I started as a temporary cargo handler
for $3 hour. Ten years later I earned my M.B.A. at Pepperdine
University during three years of grueling nights and weekends.
Soon after I became vice president and general manager for European,
African, and Near Eastern operations and moved with the family
to Belgium. I learned the industry from the ground up. Prior
to that, I ran one of the largest U.S. divisions, taking it from
$80 million to $800 million in revenue in a span of about six
years.
WP:William Paterson, Vietnam, and Federal Express. How
did these three experiences lead you to Nielsen and eventually
E*TRADE?
Cotsakos: Vietnam was a character-defining experience, William Paterson and Pepperdine taught me the importance of lifelong learning, and Federal Express was my license to practice management. I was then recruited to A.C. Nielsen (the global leader in market research and television ratings) to be president and chief operating officer for Europe. After four years I left Nielsen and was recruited to the leadership of this little start-up company called E*TRADE...all my friends thought I was crazy!
At the same time I was being recruited
for E*TRADE, other major companies were also recruiting me --
a little bit different from the early days... I decided to take
the CEO job at E*TRADE because it was a chance to put my style
of leadership and brand on a whole new emerging industry.
WP: The company had some financial problems back then.
How was it when you arrived?
Cotsakos: The company had a lot of financial issues. I personally invested about $1 million. Then I raised another $2 million to keep it going and recruited a chief financial officer to partner with me in the business. Then we found out that the company was in violation of some securities regulations and all of the bank financing had fallen through. We hit a brick wall. We had to raise another $10 million in seven days or everything was over. We found a strategic investor, we did the deal, and we got the money in six days. Nobody at that time understood us or the industry, we were pioneers, breaking down all the old barriers... changing the rules of engagement.
The Internet was a new medium. It was both a tool and a channel for empowering the individual. I always viewed it as a lifestyle change and a fundamental shift in consumer behavior (I learned that from my Nielsen experience). At Nielsen, it was about wiring the household and understanding consumer behavior. At Federal Express, it was all about the transaction and understanding information and speed. At E*TRADE, it was about combining both these environments and connecting the individual to this new technology platform called the Internet.
My speech and theater background provided
me with a great communications platform to launch this new drama
called Internet financial services. If I had to do this all over
again, I would do it exactly the same way. Somehow my whole life
became interconnected...25 years after Vietnam everything came
together for me.
WP: Are there limits to the Internet?
Cotsakos: In
the next ten years the Internet will surpass telephony as the
primary means for communications. It has numerous applications
for reinventing health, wealth, and education. Ten years from
now everybody that is born will be an Internet user. The Internet
will be the great enabler and the great leveler... it democratizes
information and empowers the individual. Anybody can give or
receive information anywhere, anytime, through any device, eliminating
virtually any physical or electronic barriers. The Net will be
an enormous boost to man- and womankind in the twenty-first century.
WP: What's next for E*TRADE? Online trading companies,
large and small, are creating new competition. Are you drawing
away from the large, traditional brokerage houses, cutting into
their marketplace, or have you created and captured a new market?
Cotsakos:Originally, we tried to figure out what would be the biggest inefficient market to exploit and how would that benefit from this new technology and this fundamental shift in consumer behavior. The securities industry was that market and it has now exploded into every area of commerce. So it's not really about just this industry, it's about every industry and how it interacts with the individual.
We have our own financial mall: bonds,
equities, banking services, mutual funds, money markets, a variety
of financial instruments. We are morphing to a digitized financial
media company delivering information to a market segment company
of one. E*TRADE has over $28 billion in assets under its management
and over 1.5 million accounts. You come to us first. It's not
about the journey on the Net anymore, it's really about destinations
and brands that resonate with your lifestyle. We're building
a branded financial mall, a financial hub that integrates a variety
of other media properties.
WP: And for you, will it be as exciting ten years hence,
or will somebody come along and pluck you out of here?
Cotsakos: I'm
one of those guys who sleeps four hours a night; it's a blessing
and a curse. I'm on several boards, most of them leading-edge
technology and media companies. My role is to keep on reinventing
the company and the industries we compete in. We are going to
be one of a handful of blue chip Internet companies for the twenty-first
century. Reinventing yourself is also mission critical, which
is something few companies or individuals want to do. It's not
about change, it's about changing the rules of engagement. For
me, it goes back to my time in high school when I could never
change the rules...so I broke them. I think that's part of, what
they call here, the Christos Factor. My view is that you do make
a difference; you just have to create the right environment to
make that difference a reality.
WP: So it's not change for the sake of change, but change
with a purpose?
Cotsakos: Change for change's sake is useless -- whether economic, political, social, or educational. More and more people are looking towards themselves and their small network of friends to be able to plan their life's play and work. The Internet helps you do that. What the Internet is able to do is provide you with choice and control. The Net is as it was meant to be -- simple and intuitive. That's a pretty powerful tool. It's a frictionless environment, eliminating the middle man or middle woman, and placing the individual at the center of your own networked universe.WP
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E*TRADE,a global leader in online personal financial services, is the world's most-visited online investing site, offering value-added investing and research features, premium customer service, and a redundant, proprietary stateless architecture infrastructure. It is accessed on the World Wide Web at www.etrade.com. For the last two years, E*TRADE has been ranked first in the world for online investing by Gomez Advisors, an international consulting firm that rates online brokerage companies. Most recently, its Web site was cited as second in the world for "stickiness" in a report by Morgan Stanley Dean Witter & Co. Stickiness is the amount of time a user will spend on a Web site. On average, users spend more than 66 minutes per month at destination E*TRADE, second only to Ebay. E*TRADE has continued to extend its customers' financial services experience through the acquisition of Clearstation.com, a community-based financial analysis site, and its pending merger with Telebanc, the nation's leading branchless bank. E*TRADE has also expanded its value proposition through strategic investments in E*OFFERING, a full-service online investment bank, and Archipelago, a leading Electronic Communications Network (ECN). E*TRADE plans to expand its global presence by launching branded Web sites in the top twenty financial markets worldwide, and has taken a key step toward becoming the first online global trading network with the recent closing of its acquisition of TIR Holdings. |
