Ep. 11 Matthew Lopez
Matthew Lopez oversees all management activities of MBL Title, including outside sales and marketing, and manages the strategic growth and vision of the company. In 2012, he founded MBL Law, offering sophisticated real estate legal expertise and general counsel services to a broad range of local businesses and real estate entrepreneurs. With increasing client demand, MBL Law expanded to provide the full breadth of commercial and residential title services to clients in Texas and nationwide. In 2014, in order to meet ever-growing client needs, Matthew co-founded MBL Title as a fully licensed title agency in Texas.
Matthew has represented clients in real estate acquisitions and dispositions, development and financing, including interim construction and permanent financing matters. He previously served as a transactional attorney at elite Dallas-based law firm Hughes & Luce, LLP, and then at international law firm K&L Gates LLP, following the two firms’ combination in January 2008.
Matthew’s experience includes representing clients in land acquisitions for large developments; complex contract and lease negotiations; analysis of development restrictions; land use and title issues; contract disputes and pre-litigation negotiations; foreclosures, as well as negotiating and drafting loan documents, company agreements, corporate resolutions, development agreements, purchase and sale agreements, and office and commercial lease agreements.
In addition, Matthew has worked with municipalities on development agreements and tax incentives, zoning and land use; and represented hedge funds and partnerships in the acquisition and disposition of hotel properties and retail properties, including multi-state and multi-property transactions.
Matthew is a LEED Accredited Professional (LEED-AP), a distinction he earned through the Green Building Certification Institute. As a LEED-AP, he has demonstrated a thorough understanding of green building practices and principles, as well as the LEED Rating System.
Matthew received his J.D. and M.B.A. degrees from Southern Methodist University’s Dedman School of Law and Cox School of Business, respectively. He graduated magna cum laude from Texas Christian University with a Bachelor of Business Administration, where he also earned recognition as a Division I Soccer Letterman and Academic All-American. In his free time, Matthew enjoys competing in triathlons (including Ironman distance), Brazilian Jiu-Jitsu and traveling.
00:50 CR: I'm excited today to have Matthew Lopez, who's the CEO of MBL Title out of Dallas, Texas. We have a very interesting conversation today about blockchain and blockchain technologies, how it relates to transactional real estate, how it relates to title, and really, the future of real estate transactions. We also go pretty deep into what it's like to start a business, what are the fears one has to overcome to be successful. So I hope you all enjoy the podcast, I'm very excited about it.
01:25 CR: Well, welcome to The Real Market. I'm here with Matthew Lopez. Matthew is the CEO of MBL Title out of Dallas, Texas, and I'm really pleased to have you on the podcast, Matthew.
01:35 Matthew Lopez: Hi, Chris. Thanks for having me. I'm excited to be here.
01:38 CR: Well, I'm excited to talk with you because, to date, while we've talked a little technology on my podcast, I've talked with Nick Romito from VTS, what we haven't really talked about on this is what we see happening with technology in some of the traditional businesses in real estate, and one of those happens to clearly be Title. My understanding is that there is not a jurisdiction in the country that does not require a buyer to purchase title insurance. So it's a massive industry. My suspicion is that it is going through changes like every other business. So I'd be really interested if you'd tell us a little bit about MBL Title, and what your company is doing, and what's exciting about the things you're working on.
02:27 ML: Okay. Yeah, thanks for setting me up there. MBL Title is a Dallas-based title company. We position ourselves as an elite boutique company that primarily handles commercial transactions, so large national portfolio transactions across all asset classes of everything from multifamily to industrial, to retail and hospitality, medical. So we have a good breadth of experience on fairly complicated transactions and are in a unique position of being small and nimble enough to stay abreast of some of these potential disruptions. Our industry, this is obviously a high-level statement, but it's been pretty stagnant and hasn't gone through a massive disruptive change, absent the adoption of computers and maybe some Internet efficiencies. But for the most part, hasn't faced this huge disruption and stated simply, I think blockchain technology is going to do that. It's a matter of if it happens in three years like I think, obviously, aggressively or 10 years like some people are saying that it will take some time to.
03:45 CR: Well, I think you make a good point. I think those of us who are focused on technology look very closely at what blockchain is doing. And I think most of our audience knows that when you say the term blockchain, yes, that would include bitcoin and other currencies, but really that blockchain technology itself is what those of us from real estate, that technology we think is going to be very disruptive, you just said that. You think it's three years. But before we dive too deep into it, do you have a basic definition that you use to describe the blockchain?
04:20 ML: Yeah. I'm actually really glad you gave me the opportunity to answer that question 'cause sometimes we just glaze over that, and I think it's helpful sometimes to back up and say, "What is this?" And I'm gonna be fully forthcoming and say I have attended a lot of conferences on blockchain technology and synthesized a lot of attempts at this. The one I like the best is blockchain technology to high level creates digital scarcity. So that can apply from everything to art to bitcoin, but the point that should stick out in your mind is that we know because of the way a public ledger works and the economic inviability of being able to online the transaction, that if I transfer a digital asset that it has only been spent once or transferred once, and that creates a lot of opportunity for disruption because what you're creating is essentially a trustless transaction that's devoid from human greed, human error. This isn't their reader's caveats, but devoid of human greed and human error. And so if you think about what that means at a high level, it's like, "Okay, what does it mean trustless?"
05:36 ML: At first, that term just even sounds that. Well, it's like it doesn't require trust. I just know that if this occurs that I don't have to ask anybody else, I don't need a human to verify. And so a way to frame your mind to see what industries are potentially going to be disruptive in your term, I think of them as middleman. So anything in, what I'll call the traditional world, that requires a middleman, because we need trust, in other words, not a trustless transaction. So that's everything from Uber; I need this driver to pick me up. And as a rider, I wanna know they'd pick me up. As a driver, I wanna know that I get paid. And so Uber provides a value-add to that transaction because it requires trust. Same thing with Ticketmaster or anything else. But then you can start thinking more traditional real estate, escrow agents, brokers. And in my opinion, anything that you have someone taking a slice of the pie away from the constituents of the transaction or the principals in the transaction, those are the opportunities for disruption.
06:51 ML: And so I'm sitting there, somewhat ironically, in my position as a title company, which is, that is the description of our role, we're an escrow officer. We are a middleman, to some extent, or a repository, and kind of an air traffic controller for transactions we get a fee for it. And so I'm having to evaluate and say, "Do I need to evolve and stay abreast of this technology or it may render us obsolete?" And so you can see I'm highly incentivized to understand this, to start adopting some of the things, and at least be on the forefront of understanding whether we need to adopt or whether we can fathom waiting a little bit and being a somewhat later adopter, but just aware of the potential of the technology.
07:34 CR: So let's break it down as it relates to title very quickly. I think people conceptually understand that a blockchain can be helpful to get rid of the middle person, say Visa or American Express, that right now, the way we have the system is, I owe somebody money, I send it to them, it goes through Visa's system. A week later, Starbucks get paid. I got my coffee a week ago. And the trust is that Visa is verifying me for the middleman. And I think it's very clear to all of us that, why would Starbucks or I want that middle person to take 150 BIPs or whatever that fee is, 100 BIPs, or point whatever it is, when on a public ledger that people are incentivized to monitor, and you could have that open debit and credit system? And that's really what the currency side of it all is. But let's talk about title. 'Cause title right now, title is a very local business in a lot of ways, and it's very state-focused business. So I go down to the county right now if I wanna see if a property... Who owns it and what the size of the property is, and there's a record there. I make the assumption that that's accurate, but just in case, if I buy the property, I buy a title insurance policy to protect me if the record is wrong. So that being the business, where does blockchain fit in to change it?
09:11 ML: Well, I think it's really multi-pronged. But if you just take what title insurance is or what our title industry is, effectively, what we do or what we used to do anyways is we used to, in law school and I guess out of law school at times, use the phrase, "Hey, I need to research the chain of title." So one word that should stand out just right there is chain. I'd say, "Gee, if we're talking about blockchain technology, what better application than the title industry?" And what I mean by that is you're literally researching a chain, which is a sequence of conveyances of title to a real property. And we used to search it back to what we call sovereignty. In Texas, that would have been the Spanish land grants. We'd make sure that we could trace every conveyance all the way back to when the Spanish granted land grants to the first Texans to come down and settle Texas.
10:11 ML: Now, practically, we pretty much only go back to about 1950 'cause, number one, we're only required to from a regulatory standpoint, but just practically, the risk of a claim coming from a date that precedes that is relatively low. And so you actually capture the essence of our industry quite well is, if you wanna be absolutely certain that you do not have any risk of loss on... You're exchanging your money for a good title to real property, you come in to a title company like ours, and we do a search that's obviously retroactive and we'd take a look at the land records, we order our title evidence from a county plant, and we do a search or have an examiner search. And then we say, "Okay, Chris, if you're buying property and you're paying 100,000 of your hard-earned dollars for this, here's what the chain of title looks like. There's two easements from the 1970s. So obviously, there's a little pipeline that goes here. There's some overhead power line."
11:21 ML: But absent those things, we will insure you and say there's not gonna be a claim on this property on any other rights to use the property and then crazy Uncle Joe is not gonna show up and say, "Hey, I bought this property in 1978, and I have this deed that I've kept in my attic all these years, but this property is mine, and move out." And then we would say, "Okay, Chris, we missed that one. We'll indemnify you for that and make you whole from a risk of loss." So you can see from what I just described that that entire process, if you think about the things that have to happen to convey a title, is extremely inefficient. We're talking about searching land records, then I have to issue a title commitment, and then we go through everything with the bank, and attorneys, and closing. And I start thinking about blockchain technology and how, in my opinion, the biggest threat to an industry is something that can move quickly. Usually, if you have a disruptive technology, you have this huge, at least, obstacle in converting whatever you're trying to do. So converting whatever infrastructure of the new technology.
12:37 ML: But I think what's interesting in blockchain technology in general, but particularly with respect to the title industry is, you used the term incentivize earlier. You can incentivize people to build that infrastructure for you. An example would be, yeah, we're not gonna be able to get all the title records online in some obscure town in Minnesota. I'm not gonna be able to walk in there and say, "Upload your title records to a public ledger." However, I could go to a major metropolis county plant and use game theory like we do in blockchain technology to incentivize someone to build out an infrastructure that we could all use the token to ride upon when we're wanting to quickly search a chain of title using blockchain technology. I'm gonna pause a second, but I do wanna make a point about just the potential of real estate to become what is traditionally an illiquid asset and moving more on the spectrum of a liquid asset because of technology. But I'll pause and see if I'm gonna answer any questions.
13:50 CR: I think you're doing a great job. I think one of the things I absolutely agree with is the slowness, why it takes us 30 days to close a transaction or 60 days? And so much of that is really tied to multiple parties having to do title research. The other part of the business that I think is very susceptible to change is how inefficient it is, my understanding, and I wanna throw it out you first, but of all the required transactions, every transaction requires to have title insurance, how often is a claim made that the title was inappropriate and someone had to draw on the insurance? Do you have any idea of the number, how often that happens?
14:32 ML: Yeah. I think I would be hard-pressed to maybe give you a submarket claim rate and speak intelligently about that. But I think the rule of thumb is that the claim rate in our industry is under 1%.
14:46 CR: Yeah, I've heard between 1 and 4%, and so that means everybody's buying this title insurance and they don't ever access it. That is a very inefficient system, in my opinion, and just prime for disruption. Yet, what we've done, and I'll just say in my opinion, is we regulated, especially in the State of California, title companies to the point where they can't really make a profit because there's so much regulation, the margins are very thin. They can make a profit, but they're thin. And you start to look at the whole system and go, "God, that's really inefficient." What I think the biggest problem that real estate faces and title faces, if it's going to move over the blockchain though, is this trust issue. Not that we all should, [chuckle] but we tend to all say, "Well, if the county says that's who owns it, that's who owns it." So there's a trust put to the county. How do you think people will all of a sudden go, "Well, I was okay with the county, but now there's blockchain and I don't really know who's monitoring it." How is that trust thing gonna happen for the blockchain to be accepted by buyers and sellers?
16:00 ML: Well, I think if you part ways of the premise that we framed earlier, and if I just say, "Hey, Chris, do we agree on that it is true digital scarcity that it can't be undone a public ledger system that I can trust it?" If we part ways there at that juncture, then it's gonna be hard for us to continue much further for me to convince you because, essentially, what you said is, "I just don't even believe in this concept at all."
16:24 CR: That's true.
16:26 ML: But if we get there and we say, "Well, what does this really look like? How would this play out?" And you have a governmental entity playing what is traditionally a government's role; your custodian of records. Who else would do it? Who else would we trust to do it? And so the prospect of converting all government records or all custodial records is somewhat daunting, but envision a world where we took one asset. And so let's say that, I'm gonna make something up here, let's say that the Comerica building in downtown Dallas goes up for sale, and somehow we're involved in it and we say, "Hey, this would be a good test case for one asset to be uploaded to a blockchain technology where we could effectuate this single asset transaction on blockchain." And what we could do is I could use my title company to search the traditional land records, just like we would, and then once I have them, work with consultants and engineers to encoders to build that out on the blockchain, and then effectuate the transfer with ER20 tokens and smart token technology where we could do everything, if we wanted to, with amortization schedules using those ER20 tokens. And of course, I'm skipping over a lot of the issues...
18:00 CR: Yeah, I was gonna say...
18:00 ML: Like, what would the lender do? What would the lender say? And all that stuff. But the point is, is you could do it. And the reason why I'm saying that like that is because I think that's actually how it's gonna start happening, and it'll go major assets and your backstop is always like, 'cause I think what all the listeners are probably saying right now is like, "Ah, but what if it screws up? And what if somebody in the transaction says, 'I'm not doing that, and I don't believe it'?" Well, that's fine, but we don't have to ignore the real traditional world. If someone says that, it's like, "Hey, we still have the title commitment that you're used to seeing, and we still have a chain of title that you're used to seeing." It's just, from now on, if the new buyer wants to sell this asset, they can say, "Hey, it's blockchain-compliant. It's blockchain-ready.
18:51 CR: I think you just... I just think you hit on exactly. I think you're exactly on... The way I see it is that it's gonna work compatible with the current system, and over time, over time... It'll start with this blockchain-compliant stuff, and then over time people will just go, "Why? Did you actually use to go down and pull out the track map and really look at it?" It's gonna happen that way because... And I think it has to because it's just another way of documenting, so it's just making the county's records more secure and having more backups. Sorry, I'm having trouble saying it, but it started as a backup to what the current system is, and then the technology will become so pervasive that people will say, "Why do we do it the old way?" And that's really how I see it.
19:40 CR: I think the other driver, and you brought up the ER20 Token. So, just for the audience, you're talking about Ethereum and building a system on Ethereum. I think there's another step that we have to get to, 'cause Ethereum has had one setback, where... And then it sounds like they're having another one. I think that's why it's gonna be with a traditional title along with blockchain for a while until Ethereum or whatever blockchain becomes kinda industry standard, works itself out.
20:13 CR: So I see that. But I really... I think it's always hard to predict the future, but it's really easy to look back five years ago and see how much things have changed. And I think, if you go five years forward, immediately, we'll look back and go, "Wow, every transaction has a blockchain-compliant piece to the title." And then it's just a question of when does the iPhone moment happen, where people suddenly realize the whole world has changed. 'Cause in 2007, nobody knew that the world changed when we got the iPhone. I stood in line and I got one and I used it for the first few years just like a flip phone. It took a couple of years to realize that this was a computer and I can do a heck of a lot more with it. Well, before we get too deep into jargon on blockchain, I do wanna understand how a guy who was an attorney, practicing attorney, and those of... And I didn't practice very long, if at all. But for someone who goes to law school and business school and spends a lot of time in academics, how did you, all of a sudden, become an entrepreneur? That was a pretty big jump.
21:18 ML: Alright. Well, actually, it was one of those times where the skies kinda parted and it was like now or never, and it was a confluence of events. I feel like God blessed me with an opportunity where... I was relatively young at the time certainly, maybe for...
21:41 CR: How old were you?
21:42 ML: Twenty-nine, I guess. And me and my best friend, John Myers, were colluding. We always knew we wanted to do something together from an entrepreneurial standpoint, and we really scratched our heads and relied on some mentors. Some of your actually mutual relationships there over at Santex. And we said, "What industry could we bring a major league expertise to and really capitalize on it?" Where we were competing respectively, I was at a elite law firm and you're competing, obviously, with the cream of the crop there. And similarly, John was in private equity, at a reputable fund, and competing with the cream of the crop there. And I heard an interesting segment just on what to do when you're exploring, to say, "I wanna be an entrepreneur, where do I deploy my efforts?" And it's kinda like sometimes you evaluate what they call the ball bearing industry. So it's like, how long has it been since the ball bearing industry has been revolutionalized, and that may seem like anecdotal or whatever. But the point is, you look at something that, really, has stayed the same for quite some time and see if there's an opportunity to evolve it.
22:57 CR: Now, I gotta interrupt you there, Matthew. I gotta interrupt you, because...
23:00 ML: Taxi and Ubers, right?
23:03 CR: Hey, I've gotta interrupt you buddy, 'cause you just made a comment and you didn't follow it up with a Fletch reference. It's all ball bearings these days. The point of that being that... Can you dive in? I was trying to slow you down 'cause you're going real quick. Go back to that ball bearing analysis about... Because I've heard this before too, about becoming an entrepreneur, 'cause you were going real quick. So break it down. You're making a nice living. You are doing things that, just knowing you and your interest in athletics, and hunting and jiu-jitsu. So you're doing... You're making a living that is providing you a life you like. Then you look over this deep end on the diving board and you say, "I'm gonna jump." Dive into that a little bit more, on that ball bearing analogy that you were giving.
23:56 ML: Yeah. So I think if you were gonna make a move, you could do a lot of things, but I think the lure for me, and I believe what you're getting at is if you could take something that has been stagnant. And so the anecdotal pieces, the ball bearing industry, it's like, I'm not very educated on that market, but I know if you just think about it, it's like these little balls that help things spin and provide a way to minimize friction and all the other uses they have. But at the end of the day, how much can you change a ball that provides a function very well, but those are the industries that are... It's time to circle back on and say, "Okay, if we just re thought this, let's look at this through a totally different prism and say, 'Is a ball even the right thing to use it all? Is there any sort of new lubrication or synthetic material that we could use to totally supplant this, do it on a cheaper basis.'" And then all of the sudden, the people that are manufacturing ball bearings go, "Oh, my gosh, we're out of business." When we looked at becoming entrepreneurs, you're sitting up there and you're right, the golden handcuffs are there, and you don't have a whole lot of incentive once you reach a certain level. I'm not really talking about in terms of monetary success.
25:23 ML: I'm just talking about a career path. And once you get there, it becomes very hard to break out and you almost kinda have to pick your head up from the controls and say, "Where do I wanna go?" Well, for me, and I believe I'm speaking for John when I say that, it became exciting to really do something on your own, to have the opportunity to build a team in a good place for people to work, and then taking an industry that you believe is ripe for disruption and say, "I'm gonna plunge headlong into this. I'm gonna figure it out. We're gonna bootstrap it. We're gonna grow by revenue. And meanwhile, we're gonna be monitoring and saying, 'Hey, I'm building relationships. We're building teams, we're transactioning in the existing world and the status quo. But we've identified this as an industry, like the ball bearing industry or the taxi industry, that's like some massive changes can come along.'" And there's billions of dollars at stake.
26:19 ML: I don't even know if I could give you a stat on real estate transactions requiring title policies, but you're certainly in the billions. Look at the market cap of the title companies that are publicly traded, again, in the billions. So you have high stakes, you have an asset class that is astounding. And so if, all of a sudden, I can come in and say, somehow I can transfer a billion or keep a billion dollars or $10 billion in wealth in a real estate asset. When people that are trading them all the time, they're like, "Oh my gosh," that becomes game changing where it's like, you go back to the 2007 iPhone. It's like you grab it at first and you're hearing about it. And then we sit here five years later or six years later and saying, "This is big. This changes the way we do business."
27:11 CR: Yeah. Well, I think you're on to... I think you're hitting exactly what defines a successful entrepreneur is the way you look at it. It's kind of that first principles thinking about an industry. If you were gonna say, okay, five years from now, and you were gonna look into the future, what do you think the title business will look like in five years?
27:37 ML: Well, I think you'll have... Like we always have, I think you'll have some stalwarts of the industry. I'm gonna make an analogy to airplanes. We have alternative fuel sources, but when companies and Boeing and other airlines have spent billions and billions and billions of capital expenditures and have capital equipment that are gonna be on their books for the next 30 years and converting those and all of the cost of going with that, the fact remains that those assets are gonna be using fossil fuels, even if we have some amazing, cleaner fuel technology. So I think at a five-year juncture, we certainly still have title companies in various states that are, for the most part, operating in the way we know them today; very traditional, not wanting to switch over.
28:29 ML: You're gonna have some slow-moving, late adopter banks that are gonna be crucial to get on board and they're not going to within that five-year period. And so you'll still, I think, see just traditional real world transactions as we see today. However, I think that in the major metropolises, and I think in we were going back to early, kind of the maybe the marquee assets or trophy assets in certain cities, will go the way, like I described, of having their asset marketed and say, where you and I are making up a term, which I like actually, but blockchain compliance. So this is blockchain title compliant asset.
29:18 ML: And so let's talk about what that means for one second 'cause I think it's a really important point to make. So in any asset class you have, and your bankers ask it too, but you have illiquid assets and then you have liquid assets. And real estate, for the most part, is a very illiquid asset. Like if I wanna sell my real estate absent some unicorn circumstances, it's like, "I'm have a lender involved. I'm gonna have a buyer doing due diligence. I'm gotta weigh on a third party title company to provide title insurance. So best case scenario on, a home, I might sell it in 30 days. And on the larger asset classes, it goes a lot longer than that.
30:03 ML: Well, if all of a sudden, and we could just assume that a blockchain transaction can make, as a title company, my rendering to you of a title commitment in five seconds, which is not far-fetched, by the way. So you say, "Hey, what is the chain of title look like on this asset?" It's on a public ledger. I have a smart contract that's already built where I know all the chain of titles. So I'm able to spit out a commitment, a title commitment, pretty instantaneously. Not to mention the fact that you're gonna be able to trust in a transpose system that that chain of title is accurate. And then you can effectuate the transaction without using banks and the cumbersome wire transfer fees.
30:55 ML: Our tax code recognizes even the huge disparity in value between an illiquid asset and a liquid asset. So if you have an interest in obscure Family Limited Partnership, our tax code allows you to value that at a lot less than the same value of a stock in Microsoft that you could sell in two seconds on a public exchange. The reason why I'm diving into such detail there is I think if you just think about $100 million asset and if you could convey it... Obviously, you're still gonna have buyer's diligence. But what if you can convey that, instead of six months, you could convey it in five days. It would move real estate to the spectrum of a liquid asset, and it would, presumably because the liquid asset is more valuable than an illiquid asset, it would presumably unlock a lot of value in a real estate industry. There's some counter points there.
32:01 ML: There's counter points that, "Hey, that's existed for a long time in a REIT structure." We'd have to dive in a lot further. It's not actually the same thing. A reference here, and I would like to get an update. My information's about two weeks stale. But Kevin O'Leary, Shark Tank, not saying that's the end all be all by any means, but he is trying to capitalize, I believe, on exactly what I just described which he's taken a marquee asset in New York. He's gonna put it on Blockchain technology, and he's gonna sell it. He's gonna sell shares in that real estate asset on an ICO basis. And I would argue that if he took that asset to market with the best brokers in the nation, just in our traditional world, let's say he gets $300 million. But if he sells it, if he sells however many tokens in that total capitalization, I think is gonna well eclipse the $300 million mark.
32:58 CR: I think you're right. And I think that some of the things to get us there... I have long talks with my friends from Fifth Wall, the VC firm who are firmly of the belief that fractionalizing on an ICO basis major office buildings is gonna happen in the next 12 months, if not, at most, 24. But to get there, you're gonna have to really have these smart contracts that Ethereum can provide. And once that happens, I think that's kind of the jump off the ledge to me. Once people see a few transactions where all the information that you spend 30 days getting, 60 days getting, is available, I think it's gonna be harder for an outright sale though, because if you're gonna sell a building you own, you're gonna sell 90% of it, there is a trust factor there that what you say is what's there. But if you're buying something new, there's still gonna be, "What's the property condition report say?" So I don't wanna confuse the two. I don't think we're about... Everybody predicted auction.com was gonna change the world and that didn't happen. And the reason it didn't happen is you do have to do physical due diligence on these assets.
34:07 CR: But I think if you own it, if you're a family in New York that owns a million square foot office building and you wanna get some liquidity, you put all the reports you've done online into smart contracts. You do all this stuff, and then you use the blockchain to do an ICO. And that's the evolution, I think, of crowdfunding, because people say, "Well, that's a heck of a lot easier than just having an LP interest in that building that takes months to get done. I have to be lucky to be in the group." And then once that happens, I think it goes back to the blockchain compliant stuff. You just stop on the compliant and just everything is blockchain. But these are major, major twists and these are very forward looking things. But I wanna get the audience a chance to know you a little. How did you go from being a lawyer, then into title, to getting interested in this type of thinking and this type of technology? Beyond the, "You were afraid the industry was gonna change," your knowledge shows that you spent a lot of time looking at this. What do you find interesting about how technology is affecting your business?
35:15 ML: Yeah. I think that's something that I had to take some time to figure out, it was basically, why am I going headlong into this and why am I obsessed? For me, personally, I think it's just one of those things where I'm pretty sure I would bet a lot on the disruptive potential of the technology. And so I started moving that way and saying, "Okay, what can this do just in terms of my everyday life?" And I think what drew me to it that was most alluring is there's so many components to what blockchain technology is. So back to the iPhone, I think that Steve Jobs kinda had his aha moment when he was like, "What I am singing is I'm singing, I'm getting excited about building a company that's based on the transcendence or conversion of art and technology." So he wanted to make beautiful pop products from the inside out but then also have a highly technical component.
36:21 ML: Well, I think here, you have so many things going on, but you have for me transactional, which is my world, but you have a philosophical component. And so you have this component of like why should a third party be able to capitalize on, and let's just take an example, my data. So we trust Facebook with our data and they provide a service where we can interact socially and all the other services they can provide, but at the end of the day, they're harvesting our data. Well, what if we just said, "Hey, we're gonna get together, we'll have our own ecosystem that we all agree to, but the data's ours, it's not anybody." They can't sell it. They're not charged with failingly protecting it. It's like we trust them to protect the data, a la Equifax, and then the data gets stolen and then we have all the fallout and then they say, "Oh, sorry." But as consumers, we're still left holding the bag.
37:19 ML: And then that goes, taking it in a real estate context, if I wanna sell you a building and we agree the price is $100,000, the less people swooping in and taking $100,000 out of that pie, the better off we are. And I think that is what became really appealing to me, is almost like a... [chuckle] I don't know, not Robin Hood necessarily, but it's like to quote Bane "back to the people", right? You're keeping something that has traditionally gone a bad way when you talk about middlemen, and there could be a possibility of adopting a technology that's just like you said earlier, is like, why would we ever do it another way? I know when I transfer this house now on Blockchain technology, because of the way the technology works, that it did create digital scarcity and there is no way that it got transferred to someone else and so your aha moment becomes, "Why do I need a title policy?"
38:24 ML: And I realize why that's hilarious that I'm saying that, but I think that is just what excites me about it, is like we're gonna have to evolve, it's better for the consumer, and it will get us to a place where we're working together as a society more efficiently. We're not wasting resources and slowing down things that don't need to be slowing down, we're not risking data unnecessarily. So there's a lot to it of why like I got excited about it, and what I did, just the short answer on what I did is, I had a friend that was one of the founding investors in Zcash, and so he was kind of whispering in my ear. And to be honest at first I like waived him off of, I was like, "I don't have time to understand that. I don't even know what that means."
39:11 ML: And then I just started reading some blogs and I forced myself to start utilizing some of the things. So I started just playing with transferring Zcash amongst friends, and did buy bitcoin a few years ago and just wanted to own it as an excuse to ante up to educate myself on that ecosystem. So really all I did at the end of the day was read probably 500 hours worth of materials and tried to be an expert on something that I just believed on. It was a big bet because, for a long time, you probably know this too, for a long time nobody would really listen to me or pay attention to me.
39:53 CR: Well, I followed a similar path on my blockchain interest. I was introduced through Peter Diamandis on the Abundance 360 conference, to a book called The Age of Cryptocurrency which is about two or three years old, written by a couple of Wall Street Journal reporters. And then I'm just finishing The Truth Machine, the same gentlemen came back and are writing about blockchain two or three years later. And while there's a lot of focus on the thead, on the currency side, what I continue to go back to in the book, The Truth Machine, is that the blockchain really is a truth machine, and we will be able to... When somebody is born, that birth certificate will be on a blockchain, so that people from the day that they are brought into this world, have an identity and what that will do to reduce sex trafficking and child labor and just think of these war-torn countries where records are destroyed and nobody knows if that person really is alive or not.
40:53 ML: I know.
40:55 CR: And then I think then that's the same thing with title, is we are going to be able to have a permanent record, and that is probably gonna come with a lot of heartache and change, and they'll probably be some attempts at fraud, but I think the power of the technology is such that we all have to understand it because it's gonna happen. And if you don't, quite frankly, as a title, if your competitors aren't doing it, they're gonna become Kodak, they just are.
41:18 ML: That's right, Yeah.
41:22 CR: Let me ask you this, at this point, how big is your company? How many people are in your company?
41:28 ML: We have 14 people in our company.
41:30 CR: And how do you... Are you a company that works on email or do you use a project management system? How do you run your business in 2018, so you can effectively communicate and grow your business?
41:45 ML: So we have an industry-specific software in our case, there's really a few you can adopt, but the big ones... We adopted RamQuest. So that's like the closest thing to... And it's not even close, but it's the closest thing to automation and how we utilize technology to transact. And so what RamQuest does is it does everything from autopopulate documents, to provide a source to store all of the documents that you're getting as a title company. So lawyers on both sides sending things, we have to have one central place where we can search a file, get all the documents, get all the closing statements. And then from a compliance standpoint, print reports and analyze data and go pull an entirety of a file for regulators and whatnot. But primarily, we interact with our clients on email and phone. And then now that all of the data protection and data privacy requirements of the banks, that becomes cumbersome because of the requirements on the secure servers, on the email, and having to log in.
42:57 ML: Really, the reason why I'm answering that question like that is because, instead of technology making us more efficient, because of the regulatory... And really rightfully so, but hyper-sensitive information that we have access to. But the way we do it now really only slows us down further. It's 'cause we have to take all these steps to protect it and analyze it and whatnot. So yeah, I think that's probably the best answer to that question.
43:26 CR: And do you foresee that being disrupted? It does sound, to me, more cumbersome. In my business, while privacy is hugely important, and confidentiality is usually important, we are able to use systems like Asana and Box, to move everything to the cloud. So that really our time in the office is about creative collisions and talking and not signing papers. Do you think your industry will move towards that? Can move towards that? Or you think it'll be this, "Yes, there's technology, but it's cover someone slow," for a while.
44:06 ML: I think what will have to happen, and this is the most succinct way I can say it. The lenders, in my opinion, are gonna drive everything because they're the ones, again, rightfully so, that are hyper regulated. And until they get onboard... For the Title industry to be the impetus for change in a real estate context, is the proverbial tail wagging a dog. It doesn't matter whether it's me, meaning my little title company or a giant one going to JP Morgan, they're gonna lock us out of the room. They're gonna say, "We're gonna do this when we're ready." And by the way, I believe they will do that. I believe they're working on things right now, not withstanding, what you see Jamie Diamond say in the news about blockchain technology. I believe that they will roll it out when they're ready. But harking back to my early example on the airplanes, they're gonna make as much money off their current infrastructure that they've spent money on as they can. And when they have to switch over, they will.
45:10 CR: Yeah, I think they are gonna have to get threatened.
45:12 ML: If you see the banks flip that switch, then we will immediately flip that switch. And so I think we'll be in a world very soon where a title company is having to evolve its role, and then not only doing things like you're talking about where your paperless and the records aren't as cumbersome. But if the banks have either lobbied they're way out of the hyper-regulatory environment, because of the trustless nature of a blockchain technology. Or if banks start getting bypassed all together because we sit here and we scratch our heads, as these early adopters and say, "I just need a bank that is not a traditional bank," meaning they were created for a purpose of understanding how to lend on blockchain technology and secure their interests with ER20 tokens, and somehow obviate the need for all of the regulatory components that apply to a traditional bank. That could be another scenario where you have a much quicker adoption rate.
46:22 CR: Well, the one thing that does give me hope about our banks and technology is that Venmo has so scared, and PayPal so scared 'em that all of the major banks now have some sort of App where you can send cash. So they saw a threat and it took them a while, but they've addressed it. And I think it's the threat of the business changing that... I agree you. I think everybody knows the Kodak story now. So they have R&D departments and they're ready, but it's a balance between how long they can suck profits out of the current system before they have to switch.
46:53 ML: I thinks that's it too, Chris.
46:55 CR: Yeah. So let me ask you this, this has been a great conversation, but one of the things I always wanna know is, you started your business and were there challenges or any lessons that you learned or things that you went through that really defined your success today, that you'd wanna share?
47:20 CR: I'm sure it didn't go... You opened the doors and everything went great. So what were some early challenges when you started your business?
47:28 ML: You know the word that's coming to mind as you asked that question is just persistence. Because if I was... Say that you keyed me up to just a 30-year-old is about to start a business. There are certain things I would tell him, but I think it may be pulling a line out of Winston Churchill's rallying cry to the Allied Forces; just never ever, ever give up. And literally, every person that we talked to at first, would say no, "Title industry is saturated, oh, it's hyper competitive, oh, it's a commodity business, bank-less business, you'll never make it, all the big boys consolidated, it's a monopoly, you're never gonna break into the bigger transaction." If you listen to those people and you listen to what the world tells, you'd never do anything.
48:16 ML: And so that's the first bit of encouragement is like, not that you can't hear people say no and value their opinion and digest information, but that sometimes you've gotta charge head-long through the nose as the obstacles. And then just preparing for the fact that nothing is gonna go as you planned. What can you do? I mean that's a statement of obvious, right? But what can you do? Well, you can do things and make sure before you leap out of your current career that's providing a good income for you and your family, that you have some backstops. And so what do backstops look like? We need to have relationships with banks and some running room. The key in our industry is surviving. We're constantly preparing for a downturn, which real estate is a cyclical industry, it's gonna come. And so how do we, not only survive, but how do we maybe capitalize on a downturn?
49:16 ML: And so you have to be thinking of things like that when you choose your industry. So line of credits with banks, assurances from your clients or customers that they will actually use and value your business. And sometimes people will give you a high level yes. And the reality of it is there is a lot more to it when the actual ass comes to write the check or to send a transaction your way or to buy your product. And so as much comfort level as you can get from those people, the better off you are as a safety net, 'cause if you can secure one customer or one client, then it changes your whole run rate to survive.
50:00 ML: So I know I kind of rambled there, but I truly think that's it. It's persistence. You have some backstops, you make sure you do your diligence in who your customers are and the fact that they'll use you. And then you just gotta know that you're gonna have to hustle along the way. And when an obstacle hits, it's not a crisis, and it's not a time to yield, it's a time to grow. It's a time to figure out a way around the obstacle, and it's a time to double down and just be prepared for that 100-hour weeks and the sleepless nights.
50:34 CR: I think you hit on a lot of things that I share and think about. And I think one of the things that is very difficult, I think, for people who first jump out into being an entrepreneur is how do they get comfortable with fear. And the fact that there's a risk going on, that means there's gonna be a fear factor. And how do you use fear as a benefit and not let it destroy you? And I think part of that, the way you do that is you're consistently persistent. You just get up and you take your hits and you keep moving. I think we're on the same page. On that same note though, so if a 22-year-old came to you today or a 25-year-old, and said, "You know, I really wanna start a business, I really wanna do something." Outside of persistence and all of that, do you have any advice for just kinda the younger people in our audience who are looking at maybe title as a career or looking at Real Estate as a career. Anything you'd say to them about what they need to be thinking about?
51:33 ML: Well, number one, I would say, don't be deterred by fear. And number two, take an assessment of your life stage, sometimes when we're younger it's the best time to take a risk. When I'm evaluating a risk, I look at it and I say, "What is the absolute worst thing can happen?" 'Cause sometimes our fears are healthy, but they're too much of a deterrent, meaning I'm scared of it. But what does it actually mean if you're worst fear happens. So when I was leaving, if I played out my worst fear, I had that same, "Oh, my gosh, I can't do this. I can't leave the paycheck of a law firm." But then when I started thinking, what's my worst-case scenario? My worst-case scenario is I leave the paycheck of a law firm. Me and John start our business, we don't get one deal, we sign a lease, I spent my savings that I've put in place to last me for a year. Well, am I gonna die? I'm not gonna die, and I don't mean that flippantly.
52:35 ML: So what am I really scared of? Am I scared of having the budget and watch my monthly expenditures? Am I scared of becoming homeless? Is that a real fear? Would I have friends or family that would help me? And when you start thinking about it, and it's like, if I'm 25 and I'm advising somebody and they're like, "Oh, man, I just don't wanna take the risk. I'm just gonna stay here working at IBM." And I would say, "Would it really be the end of the world if you tried your best and knew you tried and kinda checked that off. And at the end of the day, you had to eat some ramen noodles and miss some fancy dinners down along the way, but you still had a roof over your head."
53:19 ML: And I would just argue that if you feel something kinda turning in your spirit where you're like, "This is not... I'm called to do something more, I'm inspired to do something more," to go ahead and do your diligence, and do everything you can and mitigate your risk, but at the end of the day just to know that there's never gonna be a perfect parachute. There's never gonna be a perfect cushion for you to land on when you jump. And you jump and you jumping off a cliff, and that's the moment you feel alive, right? And then you hit the water and you're terrified and you're in open water, but then all of a sudden, it's maybe rougher season, you're kinda but then you start swimming. You realize, "I can float," and then you calm down and then things stabilize, and you're building something that you've taken a risk on. And I would just say it's an amazing ride for the people that are wired like that and those are usually the ones that make the leap. Don't be afraid. Don't let fear slow you down. Be smart about it. I heard a quote, I'll just say it real quick, it says, "Sometimes the sword of fear is pointing directly towards our destiny." So you just face it and you plunge head-long into it and don't let it deter you.
54:34 CR: That's a great quote. Well, this has been a terrific conversation. I know that we have left a few things on the table, so I'm gonna have to have you come back. We didn't talk about jiu-jitsu, we didn't talk about Iron Man, and we gotta catch up and see where the blockchain and where we really go not only in title, but in real estate as a whole. Matthew, thanks for being on the podcast, I really enjoyed the conversation.
54:58 ML: Chris, I really appreciate you having me. And hey, if you need me out in LA on the next podcast, I'll fly out there and see you and endure that weather out there.
55:06 CR: Terrific. Well, we will have to do that in person next time. Well, thank you so much.
55:11 ML: Thank you. Bye bye.
55:13 CR: Thank you, Matthew. That was a wonderful conversation, I really appreciate it. And to our audience, please follow us and subscribe to our podcast. Follow us on my website at chrisrising.com. And please go to either Apple Podcast or any of the other podcast subscription services and follow The Real Market with Chris Rising. We could really use the help to put up reviews. We've had some great remarks so far, but I'd really love to hear more people put their score and a few remarks about the podcast. And don't forget to follow us on Twitter, @chrisrising. Thank you for listening.