CEO Stories: Lessons learned
Serial entrepreneur Charles Morgan talks about his journey from working for his father to starting data analytics firm Acxiom to his latest venture, First Orion, which helps fight phone scams, and what he has learned along the way.
In his latest book, Now What, Morgan describes himself as “a geek at heart” who loves “problem solving”–whether it’s figuring out what it takes to get a racecar running right, prototyping software, or devising solutions for customers’ needs. Those skills showed themselves early, when his father, who owned a hardware store, sent teenage Charles on his first business trip, from rural Arkansas, to Andersen Windows, in Philadelphia. Charles convinced the Andersen engineers that he had found a better way to assemble the company’s signature product.
LIFE AFTER ACXIOM
Despite having founded data and marketing company Acxiom (after being a top systems analyst at IBM), Morgan was pushed out by the machinations of an investor turned board member. Not one to spend his time idle, Morgan, who had already invested in First Orion, turned his attention to the tech startup. He admits that despite having had experience starting a business that it’s “easy to forget how difficult it can be and all the challenges one has to overcome as a small company.”
In 2008, Morgan faced a big decision when First Orion was just about out of money: invest more or fold? He says he learned never to operate from fear, because doing so only leads to bad decisions. He says he trusted his gut, and that trust has paid off: First Orion’s signature app, PrivacyStar has blocked billions of scam calls. Another key lesson learned, according to Morgan: Never burn your bridges.
This Is Capitalism, Charles Morgan
RH: This Is Capitalism. I’m Ray Hoffman.
CM: Good to see you again. [Laughs.]
RH: Good to see you again, Charles. You know, when anyone asks me what was the absolute most fun interview you’ve ever done with a CEO, before the word CEO even comes out, I say Charles Morgan!
RH: Yeah, Charles Morgan is a lot of fun to be around and to learn from. He learned business first from working for his father starting when he was a little boy. As IBM’s top systems engineer for the entire state of Arkansas he sold Sam Walton his first IBM System 360 Mainframe, which allowed Walmart to take off. He’s a pioneer of big data, having built one of the first companies in the industry: Acxiom Corp.
And now, at a time when most of his contemporaries are retired, he’s having fun being a very hands-on CEO at First Orion, whose PrivacyStar app is blocking billions of scam calls, literally billions.
But then he has also driven the 24 hours at Daytona, most of the other major tracks around the U.S. too. He has the X-rays to show for it. So I asked Charles Morgan if he could give me a sense of what it was that shaped him and gave him the confidence to take on the risk that allows the reward in capitalism.
CM: You know what’s funny, to some extent Ray, I think that’s a DNA thing, I really do. My father was an entrepreneur, he always wanted to do something new and different. Incredibly enough, my grandfather on the Morgan side was a hotelier, he was a carpenter, he was a farmer, he did all this stuff. And so there’s got to be something in the Morgan DNA. I guess.
So I think that helps a lot to begin with that you have a family history of it and I wasn’t afraid of it. And I’ve worked in the family businesses, the small businesses my father had. And somehow or other, I guess I probably knew but I never verbalized it, that I would probably be an entrepreneur also. So for me it wasn’t courage so much…it was just like that’s what I ought to do.
RH: What does capitalism mean to you and what does it require?
CM: I think to me capitalism is the freedom to be able to actually pursue your own talent and pursue your interests in a business sense that allows you to be all you can be. Be all you can be for yourself and your own creative side, be all you can be for your family. And it to me is the essence of the joy of life.
I think capitalism…You know, if I was in a controlled environment and somebody was telling me where to go and when to do it and what work to do, I wouldn’t do so good. I’d probably flunk at that one. You always ask hard questions. You know that, Ray? I don’t know where you get that.
RH: What does capitalism mean to you? That was kind of easy compared to this one.
CM: Yeah, yeah, yeah. Oh, God.
RH: Which is the first words in the sentence that starts your book, Now What, read as follows: “February 4, 2008, my 65th birthday.” Now today is February 26th, 2019, as we tape this.
RH: So now you’re 76. Shouldn’t you be out on Lake Conway or something right now?
CM: Probably. As my wife said, I have miserably failed at retirement. But she also said in the same breath, “you know, I did not marry you and agree to do lunch.” [Laughter.] She says, “it’s just fine with me if you go and I don’t have to do lunch and I can be free to do lunch with whomever I want to do lunch with.”
RH: It’s good now that you know the terms of the deal.
CM: That’s right, exactly. [Laughs.]
RH: What is it about fighting the good fight of a good business idea that keeps you in the game?
CM: You know what? I’m actually a geek at heart and I just love problem solving. It’s kind of funny. What I liked about car racing was the technical problem solving of getting a car right and getting it set up. And I actually designed some racecars. So I like people problem solving, business problem solving. I mean coming up with a really good organizational strategy can be an exciting thing for me.
How are we going to organize this thing because we got a lot of work to do, you know? We’ve got to innovate, we’ve got to produce results for the customer, we’ve got to…Who goes where and what slots.
And whether you’re a small company like we are now at a hundred and sixty people, or we’re the seven thousand we had at Acxiom, it’s a people game and it always has been. So you’ve got technical problems, which I still love and I’m still…by the way, I’m still programming, by the way. [Laughs.] I can’t help myself. I’m still doing prototype software for our current solutions, which we may talk about in a minute.
But I like to solve problems. I’ll wake up at 5:00 in the morning and run into my computer, make a cup of coffee, and start working on a current problem. And I love those quiet times in the morning where, uninterrupted for two or three hours I can…and then I go to work sometime and get to work at 9 and do whatever I have to do.
RH: And that’s the kid mechanic in you who became a techno geek.
CM: Right, I think it is. And I think all of us have to decide what we’re going do with our life. What is retirement? That’s just stay at home and die a little bit everyday. I look at retirement as quite the opposite: It is the freedom to be able to get up everyday and do what you love to do.
And I think everybody’s job ought to be retirement everyday from the time you’re 21 on. If you can get up and love what you’re doing, be excited about your job, and the challenges of the day, whatever it is…so you can be retired your whole life under that definition.
RH: I want to go back to your first book, Matters of Life and Data. You said your father, who had started two businesses…
RH: …that might’ve had the potential of turning into something big, the motel outside of Fort Smith and then the hardware supply store for buildings in town, you said he understood reward but not risk.
CM: My father was not a real good… I would say he had a vision for things that he knew were opportunities but somehow or other he did not understand how to make it all happen, how to get the right people and doing the right thing, where to take the risks. He would just go off in all kind of different directions. And he didn’t, I think, achieve the level of focus he should.
In the hardware business, for example, he was supposed to be a builder’s hardware. The next thing we knew, we’re selling wood doors and frames, we’re selling aluminum windows, we’re selling plywood. It’s like, “gee, Dad, we’re just a little old bitty country… we’re trying to be all things to all people.” He didn’t have the discipline to sit down and say, “okay, what is my business plan and how am I going to do it and where am I going to find the resources to do the things I need to do, who am I going to bring in the business to help me do it?” It was a little bit too helter-skelter. He knew what he wanted, he knew the reward he wanted was a successful business, but he couldn’t organize it very well.
RH: That family orientation, members of the family, in fact, you as a kid in high school having a prominent role in the organization…
CM: That’s right.
RH: …and so I have to get you to tell the story you tell of that little drive that you took from Fort Smith to Philadelphia to the Andersen Window Factory.
CM: Oh no. [Laughs.] Oh no… gosh. Do you know as we sit here in New York where I…We drove by Penn Station today and I said…I was telling him the story first. I said I arrived here in 1958 at 6 AM on Sunday morning and we caught a taxi and I remember going up Eighth Avenue, there was not a car on the street. I said, “nobody lives here, this is weird!”
That’s the end of a journey where my father decided that I needed to help him go pick up a load of windows at the Andersen Factory in Philadelphia and that I should take my little brother. So I am 17 or 18, my brother is like 14 or 15, I can’t remember now, and he put us in a two-ton bob truck and says, “go to Philadelphia and meet with the Andersen guys and you tell the Andersen guys about the improvement to the Andersen windows that you have been pitching. And I’ve written them a long letter and explained it to them.
So we get to Andersen Window. And we drove all the way and guess…my 14-, 15-,year- old brother had to drive part of the way, nonstop. You can imagine that was a little bit crazy. And so we get to the Andersen Factory and they had a big conference room, kind of like this conference room we’re in at the moment, and they all came in and sat down and said, “your father wrote us this great letter about this cool way that you have figured out how to put windows together that’s better and our engineers all want to hear about it.”
And I’m sitting there and I’m going “okay.” And I explain it and they all said, “oh that is really cool, we’re going to look at that and see if that is something we can do.” And then they put my little brother and I on the train that night and we rode, we literally got into New York at six in the morning.
RH: So you were on the milk run coming into…
RH: And to go to the theater, right?
CM: We walked all day and we had a theater date that night. My father had gotten tickets, “will call” tickets for two plays for us. So we did one the first night and the second night and then we got on the train and got back to Philadelphia and drove all the way back to Little Rock.
RH: Straight through.
CM: We did.
CM: Yeah, both ways. My father was, that’s why I say…you know, I don’t know.
RH: Not the way to scale a firm though.
RH: Your first real career job was at IBM, 1966.
RH: You became top systems engineer for IBM in all of Arkansas. And in the new book you recount an early lesson about not burning bridges that you learn from a senior IBM executive when you’re just getting started there about how important that lesson would turn out to be five and six decades later.
CM: Yeah, you know, it’s so funny. All over the years you’ve gotten little bits of advice from people that are golden. I don’t know why I remember some things more than others but this is one I remembered well enough to put in my book is that this guy sat down with me one time in some kind of a setting- I don’t remember exactly what it was–and said, “don’t ever burn a bridge with somebody that you’re working with. I don’t care if you thought he was the worst employee you ever had or the worst boss you ever had it doesn’t matter, he’s a human being, respect him, and bite your tongue because this person may change or your circumstances may change and one day you might be working for that person.”
RH: And let’s talk a little bit about what PrivacyStar is and what you got yourself into after you got pushed out the door at Acxiom?
CM: I don’t know! Well what got me into PrivacyStar and did the first investment was a guy from Boston came and had this idea, and it sounded fascinating to me, about going inside telecoms’ networks and putting software into their switching systems that would allow individuals to block their own calls that they didn’t want, so they could enter numbers or had a way to do that.
And it sounded interesting and the thing I didn’t realize at the time is no network is going to let a few goons from Arkansas and Boston come in to start fiddling with their networks. So that idea didn’t work out. But it came at a time when I knew I was probably going to leave Acxiom and I was going to be looking for something to dabble with. I moved to Dallas, as you’ll recall, even before I left Acxiom, and I invested in this business about the time I left Acxiom, about the same time frame.
I put a million dollars in it, so it was not nothing. I put a million dollars in this company, I helped Jeff Stalnaker to be the COO, not the CEO, but he was supposedly going to be doing most of the operating of this business and he was also going to be watching out for my money. It really was never intended to be something that I got extremely involved in but it just didn’t turn out that way.
RH: I’d like to talk a little bit about how it happens that in a public company, when the face of the company, the person most responsible for building it, in your case over a 35- year period at Acxiom, how even the most important person in the company can be pushed out the door.
CM: Well I think a bit of the personal responsibility I’d take in that is I truly was getting tired of the process of running a company of that size. And in the later years, we had Sarbanes-Oxley and we had all the new accounting and rules and regulations and then we got in a proxy battle with no less than Jeff Ubben, who you may have heard of.
CM: And Jeff, Jeff is not a nice, kind man. And he also doesn’t always tell the truth. Tried to do everything he could to make my life miserable because he wanted me to do a bunch of financial engineering to enhance the value of the stock. And he had all these schemes that he wanted me to do and I refused to do them. And he continued to buy more stock in the company and put more and more pressure on us. And then he engaged in a proxy battle.
Well in the end, that thing got really nasty. And in the end, he called me up one day and said, “I want to come to Little Rock and meet with you,” and I wondered, “what is this about?” He flew into Little Rock, I met him at Bill Dillard’s hangar in Little Rock, in the Dillard’s Department Store hangar. And we sat down and he said, “okay, you beat me.” He said, “but I need to save face, would you let me be a director for six or nine months?” I fell for it, I felt sorry for him, he was practically…he had tears in his eyes. He also acts really good.
RH: What an operator.
CM: Oh he was. He was so slick. He was like [in a weepy voice] “Charles, I just gotta say, this would be a horrible blow to me and I, I…can you help me save face with my firm and my family and every…” It was like, “oh gosh, Jeff, I feel so bad about this.” So I agreed to put him on the board. Immediately from the inside he started trying to oust me to get back at me and that was his thank you for putting him on the board.
So anyhow, long story short, I got tired of that. I was sick and tired of that. I didn’t want to do that anymore and I didn’t know what I wanted to do. But one of the reasons I invested in this business I think…I think it’s something to get my mind off the crap I was dealing with. So that’s really a long-winded answer, I know, and I really apologize for that. [Laughs.]
RH: I hung on every word.
CM: Ha! [Laughs.] No you didn’t.
RH: Now going into this new venture, First Orion PrivacyStar, you hadn’t forgotten, had you, how long it took to build Acxiom and to get your first big deal with Citibank?
CM: Yes, I had! Yes I had!
RH: You did?
CM: Yeah you don’t…you know, you’re looking back 35 years and it’s like, “gosh those early years kind of flew by, didn’t they?” Well they didn’t. It was 10 years or so of hell really. And the crazy part about it was somehow or other you just tend to make some of the same mistakes that you made before but not as bad as you made them. In other words, you catch yourself earlier. How’s that, Ray? Is that fair?
RH: Yeah there’s a little muscle memory there.
CM: There’s a little bit and it comes back. And I’ve given this speech many times to my team. I’ve said, “hey I did that before, it didn’t work, it ain’t going to work this time.” And so I have done that quite a bit. But I think you do forget, Ray. I think you forget how long it takes, how difficult it is, all the things you have to overcome as a small company.
Yeah, you get kind of cocky. You’re the most dominant company in the direct marketing industry, and I could call on banks, executives at any level on any of the big money servicing banks and Amex and I knew all the senior guys at GM and the insurance companies. As my son says, “you were kind of a big deal.”
RH: There is a phrase you repeat several times in the book—“a good entrepreneur knows what he doesn’t know.”
RH: And you didn’t know the telecom industry and what’s worse…
CM: That’s exactly right.
RH: And what’s worse, taking it one step further, you didn’t know how little the fellow that was dragging you in as an investment, how little he knew about the telecom industry.
CM: It was awful. It really was awful. And he claimed to be an absolute expert. You know, you would ask him about something and he would get out and draw pictures and squares and boxes and lines and talk about all these things and it turned out he literally was making most of that up.
I had one of my good friends, Bill Connor, who met with him in Dallas, and I had begged Bill Connor to meet with this guy before I’d ever…Because Bill had been in the telecom industry. And I begged Bill to meet with this guy before and…
RH: As a kind of sounding board to check him out?
CM: Yeah. And somehow or other we were going to do the meeting and all a sudden my guy didn’t have time to meet with Bill. It happened two times. He said, “I just don’t have time. I just really…” I finally, after I put the money in and we got together, after I met with Bill, I said, “what did you think, Bill?” And he said, “well, I hope you’re successful.”
After I broke up with him, you know what Bill said? “I knew that guy was a fraud and what am I going to tell you? What am I going to tell you? You’re so far into this thing now. All I’m going to do is upset you and there’s nothing you can do about it other than what you’re doing” And he actually tried to help us a little bit but it didn’t help a lot.
RH: Work your way out of it.
CM: Yeah, I tried.
RH: But to quote you, “We had no idea of the vastness, the complicatedness, the downright convolutedness of the systems that we were stepping into.”
CM: Oh, they’re insane. They absolutely are insane, these telecommunication networks. They are really not IT things. They’re old…remember how telephone systems started, remember you plugged things in boards and… hat started way over a hundred years ago. And we have layers of technology, layer upon layer of technologies that all have to work together.
In the end, you have the worst nightmare kluge of crap that somehow or other phone calls get completed and you can call from anywhere in the world to anywhere else in the world and get a phone call through. And I’ll be damned if I understand how. But we have had to integrate our technology into those networks and it’s only because we’ve got a bunch of amazing people that we’re able to do that. But even to this day it’s very complicated.
RH: Basically the easy way is just to patch a cord in and just add another layer.
CM: Yeah! [Laughs.] Yeah.
RH: And you had to go into the network.
CM: Yeah. And we’ve had to… to do what we’re doing right now, which is actually interrogate every single phone call to every user of T Mobile today, we have to see every phone call. We have to see all of the characteristics of that phone call to try to figure out if it’s a scam call. It’s a lot of data and it’s a complicated process. And the guys who are scammers are very clever dudes.
RH: Well, how much ahead are you of the scammers on any given day?
CM: I would say today we are able to block or identify about 90 percent of all scam calls. So if you used to get 30 a week, which is about what anywhere from 15 to 30 a week is what people get, you’ll get 3 maybe, 3 scam calls. And we are fast heading to the point that that’ll be 1. And then within the next few months you’ll maybe get one or two, maybe one a week. I’m only getting about three a week right now.
Because we’re covering 62 million people right now and we see every phone call coming in and we’ll see 2,000 characters of data about all the information about that call, everything we know about where it came from and where it’s going to and the routing data that got it there and any other characteristics and the equipment that’s in it. And there’s a lot of data.
We don’t actually get involved in the voice call itself. We’re careful not to transmit outside of the network the call being made to…so we are very careful about personal information and the only data we take outside of the network is not identifiable to the person getting the call. So we’re careful about all the privacy. That’s a big issue in the industry.
RH: Charles, this is a 10-year process to get you this far, for you to be able to say “we are doing this now.”
CM: So how old am I now? What did you tell me?
CM: Oh no! [Laughs.]
RH: And you put a million dollars into this company right away, in 2008, and within 18 months time the company was just about out of money. And you had a serious choice to make at that time.
RH: And I’m wondering, is there a particularly fine line between genius and insanity when it comes to putting up good money after bad.
CM: It is a fine line, it really is. And I think, Ray, it comes down to gut feel. And that’s the entrepreneur risk taker. But let me tell you, I like to do managed risk. And the conversation we always have is “what is the worst-case scenario.” And I had enough money at that time, I could lose that million and I could lose another few million and it was not going to impact my lifestyle significantly.
So I don’t do anything out of fear, I don’t do it out of fear or have to. People make terrible decisions at what time of dissolution of marriage or bankruptcy and a lot of it’s about money. You’re getting divorced and you’re going to lose half your money or it’s going to be a financial nightmare, you’re going bankrupt, that’s a…I say don’t…we don’t do anything out of fear. Don’t say, “oh my God if I lose this million I’m going to be in trouble.” Then you’re going to make bad decisions.
And so we made a decision that I believed in this thing long term. And I had come to believe it was not going to be doing…what we were originally trying to do in wire-line networks but it was going to be in mobile technology. I started getting really excited about the mobile phone devices in late 2009, 2010. I said, “this little computer that you put in your hand is going to change the world.”
And I said, “I don’t know whether it’s going to be that we’re going to block phone calls or what but…” We had a BlackBerry application then and that’s all we had. But I knew that there were going to be a lot more mobile devices and that mobile technology was going to change the world. And I said that is worth chasing and getting a foothold in and then we’ll figure out what we’re going to do.
RH: And you make the point that when it comes to dealing with multiple difficult issues, as you certainly were a couple years into Privacy Star, that a successful entrepreneur or executive needs to be inspired by those multiple issues. That is a very interesting word to use.
CM: Yeah. If you don’t like problems, if problems keep you up at night and worry you death, you probably ought not be doing it. People that say “I couldn’t sleep all night worrying about the problem…” you know, hey, I may have a couple of extra whiskeys and go to sleep, sleep like a baby, but I’m not going to lay up all night worrying about something.
Don’t sit and mope and worry about something. I say, do something about it. And sometimes it’s better to do something even if it’s wrong. You can’t just sit there and be frozen by “I don’t know what to do, I don’t know what to do.” It’s better sometimes even to do something wrong. Don’t do anything disastrously wrong but to take action to move towards a solution of whatever that problem is.
If the problem is a personnel problem don’t sit around and say, “I don’t know what to say to them, I don’t know how to deal with this person, I don’t know what to do about it.” You’re better off to go ahead and hit it head-on. That’s my approach. Sometimes people say I move too quickly or I…But I think a good entrepreneur has got to move quickly, measurably, but move quickly.
RH: Well you sure didn’t move too quickly when it came to moving yourself into the office and actually taking a hands-on position.
RH: I mean it was four years before you became executive chairman.
CM: You’re pointing out everything I did wrong! [Laughs.]
RH: Well you did all these things that were wrong!
CM: Well I think it was part of do I want to commit myself in going back to work. I was trying to look over the shoulder of the guys who were running the business. And the question is, am I going to keep looking over their shoulder and saying hey, you ought to do it that way, hey, you ought to do it that way…or should I just go in and take over?
And when we got to the point that the stress, the CEO, the guy who was really runnin’ the company, Jeff, had really gotten to the breaking point. We didn’t get an AT&T deal we thought we were going to get, and we had lost literally in the first few months of that year, we had lost over half a million dollars and that was comin’ outa my pocket. So it was really time for me to say hey do I want to shut the thing down or do I want to just take over, put some more money in it, take over, and make it a success. And I can’t ask somebody else to. I’ve got to do that myself.
And so I put together a plan and I met with a team and said guys, we are going to turn this thing around, we’re going to add revenue in the following ways and we’re going to cut expenses in the following ways and before the end of 2013, we will make a profit. And of course with that huge loss in there everybody kind of looked at me like you’re nuts. And we made a profit by December of that year.
But you got to get your people with you. And you can’t be on the sidelines. You can’t direct that from over the fence.
RH: How does a guy of 70, as you were at the time, a guy who was previously known as just someone that wrote the checks, how does he demonstrate to the employee force, many of whom are way younger, that he still can get around on a fast ball?
CM: You know, actually it was a problem. You’re not talking about something that wasn’t a problem. I did have some serious non-believers in the crowd and I’ll absolutely admit it. But I was dogged about it and instead of just comin’ up with ideas I said here are specifically things we’re going to do and here’s some of the changes we’re going to make in how we organize and approach things. Here’s some various…
I said, “I’m going to take on the job myself of cutting our IT costs in half.” We’ve been trying to cut it but I’m going to do it. Now I’m going to take that on. And then the other leaders, I said, you can do other things. And by God, I cut the IT cost in more than half.
RH: And you traded pay cuts for stock options, which worked out very well.
CM: I did that. I did everything. I want everybody to be a partner and not an employee. And so you’re making partners by gettin’ stock in their hands and getting options in their hands, which we did. So all those things together…
You know, Ray, it’s a holistic look at these things. You can’t just have good technology, you can’t just have good people, you’ve got to have good products, good service, good…all these things. And it’s even more important in a small company.
RH: You said that being audacious in business means being persistent and going after the senior people that you’re going to be selling to.
RH: The people that you really have a right to have a relationship with, not being timid about it.
CM: It works so well. We came to this conclusion in the years at Acxiom, that when you could build a senior relationship, here we are in Arkansas at Acxiom and we’re trying to serve these money center banks and we had to struggle with them because they just looked at us as a data processing bureau in Arkansas as we were getting started, particularly CitiBank. And we came to the conclusion that the only way we’re going to succeed is get a more senior relationship.
And I initially took that on myself at Citi as a challenge. And I actually got in a bit of a fight with some of the people we were directly serving. And I said, “you guys are terrible customers, how do I know…? You know, I never know”…this is talking about Citibank, I said, “you’re the worst customer.”
“We pay a million dollars a year.” And I’m…”I don’t care, you’re a terrible customer.” And I said, “you never tell us what you want, you demand everything. How do I know how to serve you better if you never talk to us?”
And long story short, I got them to let us come brief and develop a relationship with them and their bosses. And then we kept movin’ all the way up till we were talking to the head of the credit card divisions. And you just got to keep pushing a relationship up. Because what we were doing was important to the head of the credit card division.
And now what we’re doing is very important to the senior most people at T Mobile and the carriers. And we are getting the same kind of relationships.
John Legere at T Mobile knows very well who we are and he has some dialogue with the guy, Jeff Stalnaker who is still with us, he has…several of the top executives–Seibert and several of the others–that our guys have regular communication with. And so we are using that same strategy at T Mobile.
RH: Considering you came from the data world, how could it be that it took you a few years into this company before you accepted the fact that you really weren’t providing a telephone service but a data service?
CM: Haven’t you heard it’s the data, stupid? You know, I think its weird. I think we thought originally we were just providing a service and then it hit us that we couldn’t do this without good data and that instead of thinking of ourselves as a traditional service company, we ought to think ourselves as a data and analytics company that were going to use data and analytics to make the phone experience better.
And whatever we do, it was going to be data and analytics driven for the most part and all the solutions that we had at that time were about obviously identifying the bad guys and the scam calls. But it was all about the data supplying a better name. If you get a phone call that comes in and it’s got no name or an incorrect name on it, that’s all still about the data.
So, it was the data stupid at Axiom and it still is the data, stupid at First Orion. It really is not a different world. And it took us a little while to realize that. Again, I didn’t say I was the smartest tool in the shed.
RH: You just owned the shed.
CM: I just owned the shed, right. [Laughter.]
RH: Now what does it take to build a scam ID into a network?
CM: Well I’ll tell you what it takes. It takes, number one, a massive Amazon footprint where you can do a lot of analytics.
CM: AWS, right. And it takes software running in the network that can take the output from the analytics in the form of a knowledge base and see a phone call coming in and say okay, here’s a phone call, here’s all the characteristics of the phone call, let me go into the knowledge base and let it help me figure out is this a good call or a scam call. And so we do that about a hundred and 75 million times a day and then we take the results of that and send it back to AWS.
And so now we update our analytics. And we update them every six minutes so that we have new knowledge base updates going in every six minutes as…The scammers are very clever guys and gals. And it is very challenging to stay ahead of them. And as you see, you’ve seen…we call them “neighborhood scams,” the same six digits they call on your phone. You’ve probably seen those. And as you start blocking those, then they go to three digits, four digits. I got a five-digit sequel the other day, not six-, five-digit sequel. And they’re always changing their schemes.
Those are all spoof calls. Those are calls that they just create the caller ID. And when the networks were created, remember this gobbledy-gook, all the carriers wanted to be sure that nobody could tell where the phone calls came from. And so they all had their secrets. We’ll (send you a call over it?) but we’re not going to tell you anything about it. Oh, clever idea. It’s a great world for the scammers because that was designed into the system and they wanted to obscure the source of the call. Great. Nobody thought about scam calls.
RH: Yeah thank you very much, yeah.
CM: Yeah, that was a “thank you very much, you dummy.”
RH: Now that you have this network product with major clients, how long can you keep a product like this vital without going into major, major iterations
CM: Well, we’re continually iterating. It is. We’re going to iterate. And we’ve got 50 people continually iterating on it and we keep adding functionality to it. The current thing we’re doing is realizing that what the scammers are attempting to do today is they want you to get a scammed number from an email they send you or a text they send you.
So you’ll get a…it won’t be a call coming in, it’ll be a text that says you got to call this fraud alert number. And you call it and it’s actually a fraud number that’s going to defraud you. And people fall for that in amazing numbers. We have blocked or tagged 10 billion calls, “B” with a billion, and the savings to the customer at T Mobile is now in the billions.
RH: I want to go back to two years removed from leading a one and a half-billion dollar company and you’re becoming increasingly involved in this little firm that’s operating out of…
CM: Well, I’m still in Dallas and the firm is in Little Rock.
RH: Yeah, Conway. And you’re in between a martial arts studio and a Mexican restaurant. Now I read you’re building your own building in Little Rock.
RH: Can you tell me the sense of reward and satisfaction that goes with that cycle of renewal?
CM: When I recruited a lot of the original Acxiom guys I said, “guys, let’s go have fun and I’ll do everything I can to be sure you get to become a millionaire before this is over.” That was crazy. I did it then a lot. A lot of the reward I get in that business and this is being able to help people out. And I did, it made quite a few millionaires at Acxiom.
And to some extent it’s the same thing. I see people who’ve worked really hard, who have given a lot of options out. I’ve given away 25 percent of this company, in fact, and these people are going to make a lot of money, Ray, if this thing is successful. And I look at guys and I said hey Keith, you’ll be able to build a house and pay for it out of this, out of your stock options one day, and it won’t be too long.
We’re actually looking for a scheme to monetize because we’re starting to generate a good cash flow. I want to figure out a way that we can buy people’s stock back from them and actually allow them to monetize, particularly some of the early ones, significant numbers of dollars and not have to wait another five years before we sell the thing or do whatever we do to it. I don’t really want to run a public company again, you understand?
RH: I got that.
CM: You got that. So…[laughs] I don’t even know if I…And we looked at doin’ some private equity and their pound of flesh is…it turns out the pound they want is really 10 pounds so…
RH: Yeah it weighs heavy on the scale.
CM: That’s right. [Laughs.] It’s heavy on the scale.
RH: And I want to ask one last question about the water in Arkansas or the soil or whatever it is that’s helped nourish a really disproportionate impact on the part of the Fords and the Waltons and the Stephens family…
CM: It’s amazing.
RH: …and the Tysons, Dillards, Murphys, Morgans.
CM: It’s crazy.
RH: How do you explain it?
CM: You know this book…It’s really weird you’re bringing that up. This book, Now What, you know what the working title of that book was? It’s In the Water. And it was because I was fascinated with the same topic. And we actually did the research on the topic and we actually interviewed…I knew Madison and I knew Charlie Murphy really well, I was fascinated by their story and how it grew up.
We could do a whole, I’m telling you we could do a whole other segment on what’s in the water. And I promise you, I’ll leave you with that because there is something about the culture that allows that to happen. It is a cultural thing in Arkansas. And I don’t want to let the other segment, I don’t want to preview it too much.
RH: Well we better stop right here.
CM: Right. [Laughs.]
RH: Always a treat Charles Morgan. Continued success.
CM: Hey, Ray, thanks, it’s fun to talk to you.
RH: Charles Morgan is capitalism and This Is Capitalism.
About the Series: Featured stories from the intersection of the free market and entrepreneurial success. Here we speak with leading CEOs, academics, philanthropists and up and comers on their contributions and perspectives on the American economy.
About Ray Hoffman: Ray Hoffman, a veteran business journalist, is highly-regarded for his news and analysis features and insightful CEO interviews. Representing BusinessWeek on air for twenty-one years, Mr. Hoffman was the morning business news voice on the ABC Radio Networks from 1995 to 2006. Mr. Hoffman also represented The Wall Street Journal, on air, for eleven years. His daily WCBS CEO Radio feature was recognized by the New York Press Club as best radio business news report in both 2012 and 2015. In this podcast, Mr. Hoffman invites some of America’s most dynamic CEOs to share their stories as business builders and perspectives on free enterprise.