I started working as a youngster for Digital Equipment (DEC) in the 80s. In the mid-80s, DEC was referred to by many people as a bank because it was so profitable. Its market cap cracked the top 10 in the NYSE. But when things were the best profit-wise for DEC was also the time when the seeds of its demise were sown. DEC refused to take the UNIX operating system and PCs seriously; they were “toys” with little profit associated with them (sound familiar?). The fact that DEC was so immensely profitable at that time worked to its disadvantage – it was making so much money off its proprietary systems it couldn't bring itself to start aggressively selling PCs and Unix boxes with their low margins. UNIX, in the 80s, was not as stable as the existing proprietary operating systems; UNIX boxes would crash more easily. It was a bit of a risk at the time to run “mission-critical” applications on UNIX. Of course, eventually these technical problems were fixed, and now any application can run on UNIX. Is there an analogy here somewhere? DEC did come out with a UNIX box just as a “me-too” product – it was ridiculously low-funded, and the world-class DEC engineers who worked on it had no chance to develop a decent product. It was barely marketed at all. It was simply something for existing DEC customers to buy who wanted to toy with UNIX (sound familiar?). DEC had an engineering staff second to none at the time and could have squashed SUNW like a bug if they had been allowed to – but they were repeatedly frustrated by the “old guard” who refused to fund or promote UNIX. Eventually DEC started to lose its profitability, which forced it to finally come out with a world-class UNIX that Compaq sells today – but it was TOO LATE, even though it's a good product now, SUNW rules (and will continue to rule) in the area.The parallels between what I saw at DEC and what I'm seeing now with EGRP vs the “old guard” brokers are amazingly similar. The “old guard” brokers, which are currently making enormous, record profits and feeling very good about themselves, could have squashed EGRP like a bug had they come out with on-line investing 5 years ago and promoted it heavily. Instead, in the last year they have come out with their “me-too” products. Are they promoting them heavily? Is on-line investing a new direction for them, or are they just content to use it as an instrument to keep their current customers? In addition to EGRP, I also own stock in NDB. As of February, NDB had over 200,000 accounts – which classifies it as a “2nd tier” on-line broker. I've read recently that MER has a grand total of 16,000 on-line accounts, or about 8% of NDB's total – MER is miles from being even a “2nd tier” on-line broker! And how many of those 16,000 accounts were created for existing MER customers? 80%? 90%? I guarantee you there are certain people at MER right now that are looking at their current profits and demanding that the on-line group receive no advertising dollars at all; that their on-line product simply be used as a “ploy” to get customers in the door so they can eventually be funneled to full-service brokers. It would not surprise me at all if some of the old guard brokers are meeting right now and tailoring a marketing plan to inform the investing public that the current market turbulence should be attributed to the “absurdity” of self-directed, on-line investing and the best situation for all would be to go back to the “good old days” of broker hand-holding and big commissions. I understand that MER's on-line product is very good; which doesn't surprise me, I'm sure that MER's IS staff is excellent. I'm also sure that there are many IS people at MER that are completely frustrated right now because they do not think everyone there takes them seriously; that others at MER think their jobs are in jeopardy because of them (true!), and they are sick and tired of waging battles with the old guard. All the hard work they did for 16,000 measly accounts! I feel sorry for them. I'm certain that the IS departments at the big brokerages know what needs to be done, but their hands are tied. Meanwhile, everyone at EGRP is on the same page…..I saw my DEC stock go from $199 to $18 because a company, that could have been great, paid lip service to a massive paradigm shift in computing. I'm hoping that I can be on the winning side of a paradigm shift this time. People need to have some patience; there has been a massive amount of FUD spread by the many people who do not want change; and there will be a great deal more FUD in the future. Hold tight! Eventually, the most focused companies, dedicated to innovation, with the best market model will succeed immensely. Nothing is a certainty, but I like my chances with EGRP.
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