Skip to Content

Stanford GSB News

 

Capital One Chief Shares Entrepreneurial Advice at Award Dinner

April 2006

STANFORD GRADUATE SCHOOL OF BUSINESS—How do you succeed in business with no management experience, little content expertise, zero funds, and nothing but the dream of starting a company? Spot a trend, work backward in a straight line from where you think the market is going, and hire only the best.

That is advice from Richard Fairbank, CEO of Capital One, one of the largest and most well-known financial services companies in the United States. Crystal-balling where the opportunities are and constructing competently staffed enterprises around them is a two-pronged strategy that has worked for this visionary entrepreneur, who started out knowing hardly anything about running a company. Fairbank, a graduate of the Stanford Business School's MBA Class of 1981, has not only revolutionized the credit card business, he's also made innovations in loan financing and is now poised to transform banking itself.

As the recipient of the Business School's 2006 Excellence in Leadership Award, Fairbank shared his journey from managerial novice to exemplar with other alumni and friends at New York's Union League Club April 5.

Consulting with Strategic Planning Associates (later Mercer Management) gave him the chops for discerning the endgame, Fairbank said. After honing his skills for spotting mega-trends, he figured out in just one fateful afternoon that technology and information were going to transform virtually every consumer business—and that the credit card was the perfect place to start. "It was the most flexible direct-marketed product in the world," he said. "I remember having a kind of religious epiphany that you could take on the giants in the business by smashing the price of credit."

It took him a year to find a bank to finance the project, however, and another four years to see profits from his new low-interest, no-fee credit card, which was designed to undercut the universal 19.9 percent APR variety. "There were tons of near-death experiences," he confessed to the crowd about his fledgling enterprise.

Once his company stabilized its credit card business, Capital One began offering pre-approved loans for car buyers, and it is now the nation's second-largest auto lender. The firm branched into other lending services as well and recently purchased several banks. "Banking is the last great frontier in consumer services that hasn't been reinvented. We have a clear view of where the industry is going, and no one else is pursuing it," Fairbank said with characteristic prescience.

But no matter how important the ability to read the future is to any manger, he stressed that it is in fact secondary to the ability to make good hires. "Corporations have amazing forces that rise up to knock 20 points off people's IQ and suck the soul out of them," he said. "At Capital One, we treat hiring great people like it's our line job, and we make sure they're given a chance to be great."

Underneath it all, Fairbank said, "you need the grounding of something that's more important in your life than business. For me, that's been my family." The proud father of seven children, he said, "When you walk in the door, your 5-year-old doesn't ask you what the stock price is. You've got to remember that business isn't life and death; it's a sport."

—Marguerite Rigoglioso