Recently, a fantastic biographical profile of Thomas Peterffy – the founder of our deservedly beloved Interactive Brokers – came out on Colossus. I recommend reading it in full; below, I’ll toss in a few fragments that struck me as especially interesting.
🐌 Thomas ranks 21st on Bloomberg’s list of the world’s richest people, with a net worth of $75.8 billion. His main business (IB)’s profit margin is 9.78% – higher than even Visa’s in some metrics, though not quite 71% as I initially thought (that’s more like gross margin territory; net is solidly strong for fintech).
🐌 Peterffy was born in 1944 in Hungary during a bombing raid by the Red Army, and lived under communism until age 21 – when he left for the U.S. and started rebuilding his life «from scratch» (barely knowing English).
🐌 He had next to no money, so for a while he moonlighted translating palm-reading results from Hungarian to English for another immigrant gypsy woman (which she wrote on napkins). He couldn’t decipher her handwriting, so he just made up the «translation» himself. When he finally confessed to her years later – she replied, «Bro, it’s all good – honestly, I can’t even read or write...»
🐌 On his first job in 1965, Peterffy was the only one who sat down to figure out how the computer worked (simply because fiddling with numbers was easier than tasks requiring English knowledge).
🐌 In the early 1970s (a few years before the famous Black-Scholes paper was published), Peterffy devised his own version of an options pricing formula – naturally, for use on a computer. The strategy worked well, so in 1983 (27 years before Jobs’ iPad), Thomas built his traders a «pocket computer with a touchscreen» so they could shout out the right orders on the exchange by voice. But these «iPads» got banned on the floor, so Peterffy had to hang a monitor in the corner of the trading hall, where he could remotely output signals for his traders – encoded as colored squares.
🐌 In short, the «human factor» was still a hassle, so in 1987, Thomas hacked a Nasdaq terminal (literally, with a soldering iron) and became the first to send orders fully electronically. But a Nasdaq employee said, «That’s cheating, enter orders on the keyboard like everyone else!!». So Peterffy and his colleagues assembled an army of iron-fisted motorized typewriters over a week, which mechanically hammered out the needed orders on keyboards at inhuman speed…
🐌 In 1993, he launched Interactive Brokers with the goal of creating the world’s most democratic high-tech broker. For the first dozen or so years, this new business was essentially subsidized by his market-making empire, Timber Hill. And by 2017, it was the other way around – Peterffy fully exited market-making, as IB had turned into a genuine giant money-printing machine, dwarfing the old business in scale.