On this episode, Elio interviews Bernie Moreno, Chairman of Ownum. Ownum is on a mission to identify, support, and commercialize the most promising applications of distributed ledger technology. Enjoy.
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[00:55] 614Startups Nation, welcome to another episode of the 614Startups podcast. I’m here with my man, Bernie Moreno, founder of Ownum. Bernie, how you doing, man?
Bernie: [01:04] Great, how are you? Thanks for having me.
Elio: [01:06] All right. Right before we press record, man, it wasn’t just the tan. It was also the shirt. And I guessed that you were in Florida. So you’re down in Florida right now?
Bernie: [01:14] Yeah. So I have a home down in the Keys and so it’s a little COVID respite. There [have] only been three deaths down here. Only, I think, 70, 80 cases, so we figured it was a nice place to be during this crazy time.
Elio: [01:28] Yeah, not only that, but you can get out, enjoy the weather, enjoy the beaches. Have you had a chance to do a lot of that stuff? Have you been down there for a while?
Bernie: [01:35] Yeah, so we go boating, go play pickleball, go play golf. It’s all pretty open down here because again, it’s a pretty closed community. Actually, you can’t even get into the Florida Keys if you don’t live here. There’s actually a roadblock so you can’t come in otherwise. So it’s been great. I’ve been coming down here since I was a little kid. I love the water, love boating, the idea of staying inside my house.
Elio: [02:00] Yeah, for an extended period of time, right? Even if it’s necessary, I get it. After a while, it gets to you, so if you can get an escape out there, that’s great. So you’re my first guest from Cleveland, so welcome. Thank you for opening the way for us to cover the Cleveland area. For people who don’t know you though, can you give us a little bit of your background? Are you a Cleveland kid the whole time? What’s your backstory?
Bernie: [02:22] Sure. So I’ll give you my life in three minutes. I was born in Colombia, South America. Moved to the United States when I was five, actually, to right here in South Florida. Learned English when I was seven years old. Went to study school up at the University of North as you guys refer it to. So from there, went to work for General Motors, the Saturn division. Worked for that company while I was in college, as well as Automobile magazine when that got created up there as a spin-off from Car and Driver. Then when I graduated, went to work for Saturn full time. Then went to work for a car dealer in Boston. Worked for him for 12 years running a bunch of his dealerships. Moved to Cleveland 15 years ago this past May, and to buy one little crappy Mercedes dealership in North Olmsted, Ohio, and then grew that into 30 different brands, four different states. We did a billion dollars in sales, and then about three years ago started selling those dealerships and sold all of them but the Infiniti dealership down here in Coral Gables, Florida, and turned my attention to starting tech companies.
Elio: [03:23] Wow, what a [story].
Bernie: [03:23] How did I do? Was that three minutes or less?
Elio: [03:26] Listen, it was the most interesting three minutes ever in the history of this podcast, right, because you said a lot there. And I just want to touch on one of the things. When I was younger, I loved the Saturn brand. And I don’t know if this was kind of the thing Saturn was really known for but if I remember correctly, the brand was really known for customer experience.
Bernie: [03:46] Hundred percent.
Elio: [03:47] Yeah, and I know Saturn is no more, right, but your time at Saturn, what are some lessons from that venerable company that was so customer-focused?
Bernie: [03:58] So a few things. Number one, Saturn was basically like going to college again. It was, no barriers. Everything was approached as a clean sheet of paper. We looked at the concept of best practices. We looked at the idea of teamwork. We looked at the idea of consensus. Saturn built an insanely incredible culture. Sadly, what happened was General Motors killed it, right? So the idea theoretically was, Saturn [was] to create this culture, which it did, and then that culture would infuse itself into General Motors, except the transfusion worked the other way around. The General Motors culture eventually killed Saturn in the late 90s. Then by that point, once they had lost their culture, there was really no compelling reason to be with Saturn because it’s just another car.
[04:43] But during that magic window when I worked there really, it was from 87 to 92, it was just unbelievable. So, again, fresh looking at things, don’t hold any barriers back, look at everything from a clean sheet of paper, think outside the box, expand your mind. All those things were there. Then on the customer service side of things, it was all about obsession with clients. How do you make the client experience the best possible experience you can? We really worked hard at that and created an amazing culture at Saturn that really carried me through my entire automotive career. From that moment forward, I had never worked at a car dealership in my life when I went to work for the guy in Boston. Worked for him for 12 years as a general manager, that was my first job. So I never worked in a car dealership in my life and started as a general manager. And really, the success of that was really because of the concepts that I had gotten from Saturn.
Elio: [05:37] So now, if you work in the car world, particularly at the dealership level, I’m guessing you were a master salesperson, right? Or at least you have to master some of the skills of being a great salesperson and I love sales. I think it’s absolutely essential for entrepreneurship. So you’re working in that world, you’re basically learning the retail side of the business, but you decide to go into business for yourself. Is that something that you always wanted to do? Or like you described this little old Mercedes Benz was an offer that you could not refuse – the dealership? What was it? Was it always the plan or you just came upon a deal that was too good to say no?
Bernie: [06:14] The latter. So I always believed that the difference between successful people and unsuccessful people is that successful people seize opportunities, and those opportunities are available to everybody. Because sometimes there’s a viewpoint that says, “Oh, you got lucky.” Everybody gets lucky, right? So the idea is that, if you can see that luck has come your way and a window of opportunity opens, most people don’t jump through that window. Most people see the window, understand the opportunity, understand the risk, and blank. So the prize goes to the people who jumped through that window. So for me, listen I was making a ton of money working for this guy in Boston. I had four kids in private school. I had a couple of vacation homes and all of a sudden decide I’m going to either go broke or be incredibly successful on my own, and it worked. And in hindsight, it was an easy decision, at the time it was a very difficult one. But again, it goes back to “Do you see the opportunity? Are you willing to really jump through it and make it happen?” So what I did, it’s really about believing yourself. It’s not about being cocky or arrogant, that’s different, but truly believing that you can accomplish what you set your mind to accomplish. And, I believed that could and thanks to a whole lot of other parts of the story, we’re able to have some really great success.
Elio: [07:34] Now, I’m originally from Liberia so immigrant story, kind of first generation. Moved to Jersey when we first came to the States and then my parents decided to move to Ohio. Now, what was that sales job like? This opportunity comes up, you got to move the whole family. Was everybody excited to move to Ohio? Did you have to do some selling Cleveland, Ohio at the time? What was everybody’s thinking?
Bernie: [08:00] So you’re married. I know because I saw your daughter the other day. And anybody who’s listening to this who’s married knows the answer that question.
Elio: [08:07] Yeah.
Bernie: [08:10] Obviously, the answer was there was no way she wanted to move. I mean, at the end of the day, our spouses, especially if they don’t work like my wife doesn’t work outside the home, they make a huge sacrifice to be with the kids. They have a network and groups and playdates and structure. So, think of it like trees with roots that go deep in the soil that we don’t understand because we’re so tied up in our business every day. But for me one day to say “Hey, I’m going to rip up your entire world and transport it 1500 miles”, yeah, that’s not easy. That’s tough. But my wife’s a trooper. She did it and re-established roots in Ohio and it worked out really, really well. But yeah, it was a tough first couple of years moving to Cleveland, especially at the age our kids were. Our kids were little which makes it easy for them, harder for her. Because, again, all of her friends were now 1500 miles away, you know, blink blink. But again, fortunately, celebrated 31 years of marriage yesterday. I’m a very lucky guy. I have a great wife and so that worked out really well.
Elio: [09:17] Yeah, talk about pressure, man. There’s a lot of different types of entrepreneurial pressure but you had to make that work, right, because it wasn’t just about you putting your money and skin in the game. You made that big sale like we all have to sometimes to our spouses to kind of believe in the dream, and it all worked out, that’s great. Now, you said at the high you were across four states with your dealerships, how many different brands?
Bernie: [09:39] 30
Elio: [09:40] 30 different brands and close to a billion dollars in sales at some point?
Bernie: [09:44] Right, exactly, in 2016. Yep.
Elio: [09:46] Okay. And so, midlife crisis, what happens that you decide to liquidate this whole thing? What was that process like? Did you have partners at the time? What was everybody’s thinking when you decided to do this?
Bernie: [10:00] Yeah. So no partners at all, no partners ever. My thinking was this, my youngest son had expressed interest in being in the car business. And for the first time, it made me realize, what kind of business am I in, that if I have him come in, when he’s my age, what kind of business does he inherit? A car dealer is basically an intermediary, right? We don’t produce anything, we just sell. But that role of intermediary is the most threatened role by advancement in technology. So I didn’t see a long term future and what I didn’t want to do is create a business that he then took over then failed and said, “Well, it failed because of me.” When not really because of him, it was really just because of the business model. Of course, then the next question was, “Well, wait a second, if the business is going to eventually go away or massively diminish, why am I in this business? Why don’t I get out now when the multiples are very high?” So I did, and the multiples were very, very high. Much lower today, I mean God with COVID, a fraction of what they were at the time.
[11:05] And then I’m too young to do nothing, although I’ve proven in the last few weeks that I can do nothing, right. But what are some things in technology that I can do? I’ve always been somebody that really is obsessed with tech. I joke that I’ve had two obsessions in my life, technology in cars. What are some things that I could do around tech really, I could add some value? So we looked at blockchain, saw the applications, not in the crypto space, which is where everybody is focused. Because, again, I believe that a lot of times these opportunities that come along, is not focusing on what people are today, but rather what does this world look like in two or three or four years? So where blockchain was all crypto, crypto, crypto, it’s like are there other things that you can do with this underlying data system? And the answer was, yes. You can take a lot of paperwork out of the paperwork intensive processes, and that’s where we started Ownum, focused on first car titles where there’s just a lot friction, and everybody in the ecosystem loses. So we created that company. Obviously, I know a lot about that, and it’s gone really well.
Elio: [12:08] We’re going to take a quick break and be right back after this message from our sponsor.
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[12:57] So you hear about like Buffet selling airline stock and it moves the market, right, and the car world is massive. But somebody doing a billion dollars in business decides to liquidate, is there a kind of like a ripple across the industry like, “Bernie Moreno’s selling?” or is it something that just happens and “Hey, it happens all the time, people sell their dealerships”?
Bernie: [13:18] No. So there’s a big difference between Bernie Moreno and Warren Buffett.
Elio: [13:21] Okay, all right.
Bernie: [13:23] So, no for me, there [were] a lot of dealers that looked at it and said, “Hey, we’ve been through many [crises] in the past this guy’s he’s…”, you know, maybe raised a little eyebrow. The one that would have tanked the dealership market is if Warren Buffett had sold his dealerships. He went in deep with a company called Van Tuyl that he had bought out West. Had he liquidated that company and sold it, that would have probably been a catastrophic blow to the retail model. But me selling didn’t really faze much other than it made news. I’m not going to be immodest and say it didn’t make any difference, but it didn’t change the valuations. The big thing that’s changed that right now is this COVID-19 crisis because it’s reinforced this idea that, “Hey, why do I go to a physical place 5, 6, 7, 8 miles from my house and sit there for three hours, going back and forth on pricing and picking cars out? Why don’t I just hit a button and it shows up at my house?” So that was always [burling 14:24] but COVID has certainly taken that, absolutely strapped a Falcon 9 rocket to it and turbocharged it and every other cliche you want to use. So that’s going to really look at that model. And of course, Tesla, which does not have car dealers, is valued at what all the big three are, combined. So I think in the next three or four years, you’re going to see some real structural change in the car business in a meaningful way.
Elio: [14:52] All right. Now, Ownum, like you said, you’d always been interested in technology and looking at blockchain, in particular, everybody was focused on crypto, but you knew that this technology had multiple applications. So even though I know the term, I’m happy to confess, I don’t understand what blockchain is. Can you give us the cliff notes version of what it is? And then we could base our conversation on that definition.
Bernie: [15:23] Sure. It’s pretty straightforward. I mean, I wouldn’t worry too much about it. Like right now, listen, I’m sitting in Key Largo, you’re in Columbus and I’m looking at a five-inch thing of glass and my voice and my video [are] somehow making into Columbus. How the hell that happens, I have no idea, but we just accept it, right? We just accept it. So we don’t worry about how it works, we worry about what it can do, right. So blockchain, I would caution you and everybody else to say worry about what it can do and not how it does it. So what blockchain can basically do versus a single-use database is it allows– Think of it like a Google Doc on steroids, where you can have collaboration around paper-based systems and validations. So I guess the most rudimentary example I can give you is a notary. So back way before you and I were even inklings of humans, if you wanted to have your identity proved out in a document, you would go to a government building, show all kinds of documents to some person that you waited in line to see, and they would authenticate your signature, right? Eventually, the government said, “This is really horrible. We have these crazy lines. We’re going to deputize notaries. And these notaries under the penalties of perjury and death and public shaming, are going to authenticate these signatures for us.” And so now you go to a notary public.
[16:47] That’s basically an analog version of what blockchain is. So instead of data residing in a central place that I have to go to that was really inefficient, I can go to a variety of different places, and the system it’s called nodes, and those systems authenticate data and prove out whatever it is that you need to be proven out. In the crypto space, that you own that Bitcoin, that you sold it, right. And in a case of car titles, that you have the authority to transfer this title, that you indeed own the vehicle. So it allows data to be stored in a very secure, encrypted way, and to be able to share that information with a lot of trusted parties. So that’s basically what blockchain enables. Think of it really [like] anything that requires a lot of manual verification of paper-based systems, that’s where blockchain works.
[17:37] The most cumbersome paper-based process is money because somebody’s got to validate that you have that money, that it’s real, that’s it’s authentic, that it’s transferable, that it’s transferred. You have a whole ecosystem around that, so Bitcoin kind of solves all that right. I can pay you immediately right now, directly, versus going through an intermediary like Venmo or PayPal, or credit card company or a bank. If I owe you $9,250, I can send you one bitcoin. And it’s instantaneously and I transfer it from me to you with nobody else in between us. If I owe you $9,250 without crypto, I would have to deposit that money into a bank account, that bank would then send it to you, you would then get it from your bank account and both of us would pay a lot of fees in that process. And it would be slow because there’s a lot of verification and validation that would have to happen along the way. So the blockchain is just basically a very, very sophisticated database that allows me to transact directly to you and transfer value to you. Value, whether it’s a currency. Value, whether it’s a car title, or anything else.
Elio: [18:44] Okay, so now I can see why in the world of car titles, paper, paper, paper everywhere, we now have to go to a location to transfer titles, you and I. We got to verify signatures and notary public needs to be there. I can see the value proposition. So, where did this idea come from for you? How’d you even come up with this idea for CHAMPtitles? And where are you guys now in terms of your product? Is it built out? Is it deployed? Where are you guys in the cycle?
Bernie: [19:13] So step one was understanding what blockchain was. So everything I just said to you, but over a period of months, understanding the technology, right. So not, somebody said, “Hey, here it is” in 30 seconds and that’s it, right? So really, genuinely diving deep. What is this technology? What can it do? Most importantly, I’d say to people who are watching this, understand what blockchain can’t do, because there [are] a whole lot of problems that it doesn’t solve, that people try to make itself. So really understand that. That for me was phase one.
[19:41] Phase two was saying, “Okay, now that I understand what this technology can do, what are some things that I reasonably am knowledgeable about, that are problems that this technology could solve?” And anybody who’s in the car business knows that car titles are absolutely a bane of every dealer, bank, insurance company and manufacturer’s existence. They’re just horrible. This paper is just an abomination to deal with. So I’m like, “Haha, I know a lot about that. This system solves this technology, let’s start a company that solves that problem” and from there CHAMP was born. And where we are right now is we’re fortunate to have some really innovative people in government in Ohio. Lieutenant Governor is probably the most forward-thinking government official in the country along with Mike DeWine and so we hope to launch paperless titles, as they call them in Ohio, in the next few months.
[20:32] The idea was, you don’t need to go to a physical location to [transfer]– Like if I’m selling you a car, right? We can agree on everything, the price, everything. You can send me the money but how do I get that title to you? How do you prove out ownership? If it’s paper, it just slows the whole process down because you enter a situation where I say to you, “All right, Elio, send me the check.” You’re going to say, “Well, send me the title.” An I go, “Dude, I’m not sending you the title until you send me the check”, and round and round we go.
Elio: [20:58] Mm-hmm, yeah
Bernie: [21:00] All right, so I can hit a button, send you the title electronically, you can hit a button to send me the money electronically, and through a smart contract, that transfer happens and we’re both knowledgeable that I’m going to get the money and you’re going to get the title. And now it’s done right. You know that you have a clean, secure, clean title in your name, and I know that I’ve gotten paid for it. So we can enable that without having to spend enormous amounts of friction putting this thing to paper.
Elio: [21:27] Thank you for listening, we’re going to take a quick break and be right back after this message from our sponsor.
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[22:05] Now I work in healthcare and I think the big innovation in healthcare going from paper, tons and tons of charts to try to go more electronic where everything is documented on a system, the first step was to get all the existing paper onto this system. So what’s the plan even though the state has the goal of going paperless? How do you get now all these existing titles into CHAMPtitles so that they can be transferable between people? I would imagine that would be the first thing that you need to get done right?
Bernie: [22:37] No, not at all because that’s not important. So the state could still issue paper titles. They have something called electronic titles, which your viewers don’t care about that but it’s this hybrid thing that was created for banks, and then paperless title. So as new titles are transferred, so I sold you that car, that title could be paper today, and you can say “I want to keep it in paper”, right. There’s going to be people who say, “I don’t care about this fancy tech stuff. I want my paper title”, right, so that’s no problem. People can say, “I want it paperless”. Banks can want it paperless. So you transfer it [to] paperless digital estate as these transactions happen. So there’s no need to move everything from paper to digital immediately. You just wait for this and eventually, over the next 5, 10 years, the vast majority of what used to be recorded on paper is now recorded digitally. You used to fly in a plane, and you used to board with a paper boarding card. Now you do it on your phone and you kind of saw that movement from people who did it, right? Maybe one guy, “Who’s that guy? What’s he doing with that phone over there?” To all of a sudden, “What’s that guy doing with a piece of paper over there?” And so you have this transition from it becomes unusual, you hit a tipping point, and then you move where it’s just massively adopted.
Elio: [23:55] I got you and so I think that’s very, very smart. So the idea here is to get in where most of the transactions going forward are happening, which is at the dealer level, is that correct?
Bernie: [24:05] Yeah
Elio: [24:05] So dealers will offer you at that time the option, and then your title will be there or the bank holding the title will be in this system, let’s call it CHAMPtitles from now, right? Just saying, as this rolls out, maybe you guys are first to market and you represent a lot of those transactions. So do I have to have an account to access CHAMPtitle? Once my car is paid off, how is that ultimately transferred to me from the bank when I make my final payment?
Bernie: [24:31] Yeah, it’s all done through a web portal.
Elio: [24:33] Okay.
Bernie: [24:33] We do it through the web portal so there [are] no issues there. It’s very, very frictionless, very, very easy. And by the way, the big consumer of car titles is also fleet companies, right? Leasing companies, banks are huge consumers of titles. Only a small percentage of customers actually pay cash for vehicles and own them outright. So this is really an amazing savings for banks and leasing and fleet companies that can manage their– You know, Huntington bank, for example, probably has a million paper car titles and so for them to be able to have those gone and be able to have a million digital records is just huge cost savings. Again, they’re not going to do it from one day to the next, but they can do it over a period of a few years.
Elio: [25:14] Okay. Now COVID-19, you’ve mentioned that multiple times, right? It’s kind of the unseen thing that’s maybe going to change our lives for maybe at least the next 20 years, or maybe 10 years or whatever. Affecting the car industry, but then you also mentioned fleets, so news of Hertz filing for bankruptcy and some of the others that are managing large fleets of vehicles. So how has COVID-19 either affected your rollout or potentially could affect the move by the state of Ohio to go paperless?
Bernie: [25:42] Well, it definitely helps us. You know, I hate to say that because this is something that’s hurt so many people, but it’s definitely helped us a lot. It used to be that people weren’t willing to go because of convenience and now it’s “I’m not willing to go because of safety.” So this has definitely helped us a lot and I think we’ll see a dramatically faster acceleration of online transactions as a result of COVID-19.
Elio: [26:08] Now, what does CHAMPtitles look like at scale? So let’s say we boom, flip the switch, we’re going paperless. What does that mean for you operationally? Is that you adding a lot more people? Do you already have the capacity built-in? How do you handle that when that switch is on day one?
Bernie: [26:22] Yeah, so we see a very controlled rollout so we hope to start in Ohio. We have some states out West, states in the Midwest, states in the South. And we would bring states on and eventually get to a 50 state solution, and then go international from there. Then from cars, we can do motorcycles, boats, ATVs, personal watercraft, all kinds of things. So we see a giant amount of runway, but it’s in a very controlled way because we want to make certain that, you know, what we’re doing we can’t miss a beat and we have to make certain that we execute perfectly every time.
Elio: [26:52] Well, Bernie, thank you so much for joining me, man. This is my final question. I end all my podcasts this way. Let’s project out, five years, 10 years from, Ownum, CHAMPtitles, maybe some other companies, what are you looking at over the next five to 10 years?
Bernie: [27:06] We want to create the largest technology company in Ohio, so it’s a small little goal. That’s what we want to be. We think we can do that. We think that CHAMP is a Fortune 500 company. We have another company Vital Chain that we think that we can launch there. And we want to grow and create a Midwest ecosystem, and help be part of creating a Midwest ecosystem around technology. We think that a lot of the technology that was created in the coasts, were created by people from the Midwest and it’s time to bring those people home and have that technology created here and convert the “Rust Belt” to the “Tech Belt” and we want to be a big part of that.
Elio: [27:42] Awesome, Bernie, thank you so much.
Bernie: [27:44] Thank you, Elio.
Elio: [27:44] I end every podcast with my one takeaway and here is my takeaway. You sold it all, but you kept the Infiniti dealership in Coral Gables. So the car thing is in your blood, you’re a Porsche lover. You get to drive them. I’m still visualizing my Porsche. Here is my one takeaway. When the window of opportunity opens, jump through it even if it’s from the 150th floor. Thank you so much, Bernie. Thank you, audience for joining us again. Peace.
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