Podcast Interview:

Episode Summary

Mitch Caplan, the former CEO of E*TRADE and current CEO of Willow Wealth, left the law firm Shearman & Sterling at the start of 1990 to buy a bank with a partner, drawn by the assets of failed savings and loans that the Resolution Trust Corporation was selling after the savings and loan crisis. The bank was based in the Washington, DC area, and Mitch quickly learned that a small branch bank could not work economically there given expensive real estate and a transient population. Rather than retreat to rural branches, he pitched regulators on becoming the first branchless bank in the United States, modeled on a little-known UK operator called First Direct. The regulator in charge told him it was his board’s decision but that he expected it to fail. Mitch built the bank, Telebanc, from what he recalls as about 50 million dollars in assets into a multibillion-dollar bank over roughly a decade, taking it public along the way.

When Telebanc was acquired by E*TRADE, Mitch set out to learn the online brokerage business as thoroughly as he had learned the bank from the ground up. He stayed at a Marriott hotel in Sacramento for four to six weeks to walk through every step of a customer’s experience in the operations center personally, saying that living in the details was crucial to building credibility, because people can tell.

After Mitch became CEO of E*TRADE in 2003, the company grew substantially before the financial crisis, reaching record total net revenue of $2.4 billion in 2006. Mitch estimates he was at best 50 percent right predicting in advance which members of his leadership team would rise to a real crisis and which would freeze. He spent much of that period convincing E*TRADE’s board to raise capital before year end, given how uncertain pricing had become, and says he ultimately left on his own terms, feeling he had gotten through the worst of the crisis. His family had told him during the crisis that once he got to the other side, he needed to create some distance and let someone else run the business.

Mitch rebuilt again afterward, deliberately keeping his next company, Jefferson National, private rather than public, working again with many of the same colleagues who had built Telebanc with him, before selling it to Nationwide seven or eight years later. He carries a specific bias into his investing today: he says he is now far more likely to back a founder who has lived through real hardship than one who has only experienced steady, uninterrupted success.

What You’ll Learn

Get comfortable saying I don’t know: Mitch says he would never have said it when he was young, but he is now quite comfortable with it, a comfort that comes from knowing what you can and cannot control.

Hire people who can handle chaos: one of Mitch’s first interview questions is whether a candidate works better in structure or chaos, because innovation and chaos go hand in hand.

Leadership is relentless optimism in the face of endless hardship, Mitch says, and he is more likely to invest in founders who have lived through real hardship because it gives them mettle.

Don’t let a long track record hide a flaw: Mitch’s bank had almost no loan losses for nearly two decades, and the financial crisis taught him to question even long-held operating principles.

Think big but celebrate the steps: Mitch remembers the celebration when his bank crossed 100,000 customers, and he says you have to be grateful for each step while believing you can go much further.

A leader who fails to build consensus still owns the decision, Mitch believes, and has to explain why they made it rather than simply announcing it.

About Mitch Caplan

Mitch Caplan is the former CEO of E*TRADE and the current CEO of Willow Wealth. He grew up in Portsmouth, Virginia, studied history at Brandeis University, and earned an MBA and JD at Emory University before practicing law in New York for five years. Mitch built and took public a bank called Telebanc, which was acquired by E*TRADE, where he later served as CEO from 2003 to 2007, into the early stages of the financial crisis. He went on to build and sell Jefferson National to Nationwide, and Tarsadia Investments, where he was president, led a Series C investment in Yieldstreet, which has since been renamed Willow Wealth, before he became its CEO.

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