The Asia InsurTech Podcast spoke with James Benham, the co-founder and CEO of JBKnowledge and the host of the InsurTech Geek Podcast about the crucial components of innovation, the lessons learned from being an entrepreneur and investor and the biggest opportunities in the insurance industry.
Here is the transcript of our conversation.
Michael Waitze 0:05
Hi, this is Michael Waitze and welcome back to the Asia InsurTech Podcast. I’m just hoping today that my camera doesn’t go down. Today we are joined by James Benham, the CEO and co-founder of JBKnowledge and easily by far the easiest name I’ve pronounced today, James, how are you doing, by the way?
James Benham 0:22
I’m doing. I’m doing quite well. How are you?
Michael Waitze 0:28
It’s just 32 years of Asia for me. So yeah, I’m doing super great. Where are you based, by the way?
James Benham 0:35
I’m in a beautiful city called College Station, Texas. It is a lovely place on the banks of the Brazos River. Just north of Houston, about an hour and a half north of Houston. So it’s home to Texas A&M University, which is what most people in Texas know it for.
Michael Waitze 0:56
Aggies. I was a big college football fan before I moved out of the United States. Like I used to watch all the bowl games and stuff like that. And Texas A&M was always had a great football team, at least when I was a kid. So I think that’s the only reason why. Aggies, my stand for like agricultural, something. Yeah, something like that.
James Benham 1:14
So A&M, stands for agriculture, mechanical, college in Texas, agricultural, mechanical. So ag and engineering, it’s a very similar thing to what all the major land grant colleges were formed as back in the day. And so that’s, that’s really what it all stood for is his ag and mechanical why I got two degrees from there and decided to start my business when I was in my dorm room, my senior year. And I’m still running it today.
Michael Waitze 1:41
And you still living in College Station?
James Benham 1:44
Yep, never left. I travel all the time. So you know, I travel the world and we have offices in Argentina and South Africa and the USA, and it just never made sense to leave. It’s a lovely place to live and really, really quiet nice and easy drive to downtown Houston from here, about an hour to Houston. And so it’s, it’s it’s pretty nice. And I’m a pilot so I fly myself everywhere. And we’ve got a great airport and I’ve got a good hangar and, and it you know, it’s my portal to the world. So I get to go all over the world. But I get to come home to a nice quiet, smaller town.
Michael Waitze 2:21
Yeah. So one of the things I’ve never understood is why like a really successful college football coach would want to leave a college town and just the unbelievably incredible life you get to live when you’re living in one of them. And go watch like the Carolina Panthers. Like it just never made any sense to me. Do you know what I mean?
James Benham 2:38
Correct. I understand completely because in a college town, you’re a god. I mean, you’re it. When you’re a college football coach in Texas, in a college town. You are you are then you’re okay. You’re the you’re the number one guy in town, you know, you’re the top dog and always always blew my mind why exactly like, why they would pass up on such a sweet deal then what their 10 year guaranteed contracts they all have now it’s I mean, our guy, our team is doing terribly poorly this year. And and we have a I think we have a nine year contract with our coach 10 Year 10, like 10 million a year for nine years or something. And so, you know, he’s got 90 million reasons why he’s not going anywhere. And yeah, it’s it’s a it’s a great deal for him. Great deal for him.
Michael Waitze 3:28
So one of the things I think about a lot, right, so I grew up actually in Massachusetts, at least for part of my life, right. And back in the day, you had Route 128 they used to called the information highway before they called the internet, the information highway, right. And one of the reasons why they call it that was because you know Harvard, MIT, Tufts, Brandeis, all these sort of great universities were there. And I hadn’t thought about this actually, before we started recording. But do you think that like for you maybe for at least two reasons. Besides the hangar and all the normal things that go along with being a college, right, or being near university, but just the idea that you like you’re around young people and new ideas all the time, that there’s some sort of, even if just by osmosis, you feel that you still get to be in a place that’s still innovating, because just new kids come in all the time. Does that make sense?
James Benham 4:14
Makes sense totally. And actually, it is one of the things I love about this place. A&M has 75,000 students. It’s a massive University. And so And what’s cool for me personally, is that my nephew is a sophomore and my niece is a junior Yeah, my cousin’s a freshman. There’s an energy to being in a college town. It’s like endless optimism, you know, because they’re, they’re at the beginning of their lives and careers. And that energy is really infectious. So we always have interns always, I always have a&m interns in my office. We do a lot of work with A&M, not there not as a client, but like I do a lot of volunteer work where I mentor. For the last 15 years I’ve been involved in running a mentoring programme and so I’m around them all the time. And every Sunday, we have a bunch of college kids to our house for dinner. And it’s just exciting. It’s fun, it’s interesting. They’re in a phase in their life where they want want to talk about challenging big, interesting ideas. And they’re not tired of them, you know, and so you’re always around that energy plus, like 10 months a year, you have college sports, that you get to go to, and that’s exciting to, you know, again, really positive energy. And, and then I spent five years as an adjunct professor teaching once a week, I’m no longer an adjunct, because I actually got appointed to be an administrator at a public university in Houston. But it’s, it’s, you know, there’s again, there’s an energy there around being around teaching and, and learning. And you’re always, you know, it’s hard to get stuck in a rut here for me,
Michael Waitze 5:49
but don’t you find that that helps you and work things? And that helps you work as well, right? I mean, because the whole point of JBKnowledge and all the stuff you’re trying to do, and we can get to that in a second, too. Is it about trying to take people out of a rut and get them into this innovative mindset? No?
James Benham 6:02
Yeah. I mean, we’re, we’re a technology firm, right. 21 years is building software for people, we, we’ve always been trying to get them out of the doldrums of where they’re at, and elevate their game with technology. And of course, you’re always doing consulting work on top of it. You’re I mean, you can’t talk about technology and not talk about process and companies and, and so yeah, it’s, it dovetails well, with, with the mission of the company, it’s been a fun place to live and work. And again, I travelled probably a third of the year. So it’s, it’s a nice place to come home to the I was in Michigan last weekend, I was in Florida, the weekend before that I was, you know, all over the southeast last week, and I’m going to New York City this weekend. And, you know, if you I get the big city fix, and then I, you know, after two or three days, I’m like, Man, I, I need to go back to my town where everything takes 15 minutes to get to by car. And there’s parking spaces available everywhere. And, you know, Texas is a pretty kick butt place as well, you know, we we have super low taxes here. And we’ve got a very, very, very business friendly environment. It’s the laws and the statutes and the tax structures, and everything is built around entrepreneurship. So it’s easy to hire people, it’s easy to run a business. It’s, you know, there’s very few regulations that really bother you. The government is very pro business, the tax structures are almost non existent. We pay property tax and a little bit of sales tax, and that’s about it. So it’s just a really, it’s a it’s a there’s a feeling in the air. There’s a reason that so many tech companies are relocating here. We have about 1500 people a day moved to Texas, and we have corporate relocations announced all the time. And that’s because it’s a it’s a really sweet place to build a business.
Michael Waitze 7:51
Are you Texas born and bred?
James Benham 7:54
No, I’m born and raised in Louisiana. Which is our neighbour to the east.
Michael Waitze 7:57
So not that far away? I wanted to I’m born and I’m born in California, but raised in Massachusetts and Connecticut, right? So I’m a coastal guy. But I followed Texas for a bunch of different reasons, not the least of which is when my sister graduated from college, she considered moving there. And I actually recommend that you move there because at the time, Houston was this massive, but really rapidly growing city. Right. And then Michael Dell just, you know, started this company. And I feel like it was a watershed. i But I’m curious from your perspective, right? Because you’re closer to it than I am, didn’t have as big an impact on the state its identity as sort of a tech hub, as I think it did. And did you watch the spillover part of what not convinced you but kind of inspired you to get into what you got into?
James Benham 8:41
Yeah, sure, 100% Because, you know, Texas, historically, oil was discovered at the spinnaker site near Beaumont, I think it was near Beaumont, Southeast Texas. But 110 years ago, I think, I want to say it was in the early 1900s, nine to nine to A. And for, you know, for the for another 80 years, Texas was about one thing and one thing, only oil, oil, and the state’s fortunes rise and fell on oil. And that’s not a healthy place to be in. And I think that, you know, if you talk to people in Dubai and the United Arab Emirates, and if you talk to people in Saudi Arabia, they’ve all acknowledged that having a kind of like, it’s almost like having a single line insurance carrier can be pretty dangerous. It’s why you go into having multiple lines. And, and, and so they they diversified. But they diversified by creating a good environment for business and then waiting to see what happened. It just once tactical there wasn’t just Dell, I mean, there were a whole, like cadre like a graduating class of technology entrepreneurs that ended up forming, you know, venture capital companies like Austin ventures came around and then, you know, you had Texas Instruments, you had National Instruments. You had some civic Dr. Companies, and then Dell they all got started around the same time. And it’s like Malcolm Gladwell book Outliers, right? Like this. This group, this little cadre of tight people ended up forming these massive global multibillion dollar behemoths. Yeah, that ended up really transforming the shape of the state. And if you look at it now, we’re a monster technology hub. I mean, just absolute, a monster. Like, if you look at like Fang, you know, Facebook, Apple, Amazon, Netflix, Google, they all have massive offices here. I mean, they should offices that rival the size of their headquarters buildings, I mean, you know, and so you got, you’ve got these huge corporate presences and, you know, HP Enterprise reflagged here, and, you know, Oracle push a tonne of operations here. I mean, it’s just, it doesn’t seem there’s a month that goes by that a major tech company doesn’t reflagged, their headquarters here. And so we’ve got a much more diversified economy and starting a tech company. Yeah, it was, it was cool. Of course, my premise was that we can have the next Austin in College Station and we’ve got a really cool cadre of technology companies that started here in this town. Universities are wonderful incubators for innovative efforts. So you know, and now I’m friends with a bunch of us. And the interesting thing is a lot of us started companies around the same time, a lot of us sold companies around the same time, you know, a lot, you know, and a lot of us became venture capitalists and private equity guys at the same time. And, and so it’s been interesting, that ecosystem, you know, the ecosystem really, of course revolves around money too. And it’s, it’s, it’s getting created here. And so it’s yeah, it’s it’s really cool. Houston’s diversifying too. Houston’s a, you know, massive city now, not massive on the terms of Bangkok or Singapore, I think, you know, but it’s still several million people.
Michael Waitze 11:56
Were you a software developer by training?
James Benham 11:58
From early age? Yeah. So I went to this real I went to a public school system in Baton Rouge, Louisiana, and was in the magnet programme, which is kind of like you have to test to be a magnet, school kid. And then, once I got into the magnet programme, they had, believe it or not, these STEM focus schools in the 80s that were just stem. Yeah, just as just engineering and math and science and a whole lot of tech. And so I took computer science in sixth grade, seventh grade, eighth grade, ninth grade, 10th grade, 11th grade, 12th grade, and my computer science there was just as rigorous as any of the comps I took in college. And, yeah, so I could code in like, eight programming languages. By the time I graduated high school, and had built some massive projects, competed with them, because we had, you know, these different technology competitions and science fairs. And, yeah, totally incubated my business. In fact, my co founder, I have two co founders, my dad and one of my best friends from high school, Sebastian, who also went through the same engineering programme. And if you go back and look at our High School, graduating class, a bunch of co founders got incubated back in high school.
Michael Waitze 13:06
Did you start a company when you were in high school as well?
James Benham 13:08
I did. Yeah. I started when in Middle School. I when I was 12, my dad owned a Teflon company. He owned he owned the fourth largest producer of Teflon in North America. Well, he started it from his garage in 1979. He told me though, he said, I will never hire you, you will never work for me and you’ll never get any of this business. And I was like, Holy crap, that’s kind of harsh. And so I borrowed 300 bucks from him and started a lawn service business when I was 12. Yeah, and had a nice racket in the neighbourhood cutting grass and edging lawns and blowing off sidewalks. I did that for four years, and then was 16. The internet had commercialised this was like 1995. The the internet had just commercialised a couple years before. And so I started a consulting business, setting people up on the internet and teaching them how to use it. And when you know, 1995 I was making 40 bucks an hour doing that I thought I was just loaded 40 bucks. Yeah, like minimum wage is like four bucks at the time or something. I was making 40. And it was great. I ran that business for a couple years thought about not going to college. I thought I was you know, making all the money you can make and my dad made me go to college. And that was kind of the next step.
Michael Waitze 14:21
Do you do you feel like entrepreneurs are born and not taught? Oh, come on. I mean, you started a business when you were 12. Like my brother and I was selling cards door to door. We were nine and eight years old.
James Benham 14:35
My sisters and I grew up in the same house. And I’m the I’m the only entrepreneur really and but you look at my dad’s family, and he and his siblings. He has three sisters and then a brother. So there’s five of them. That grew up broke on a farm in Mississippi. All five ended up being business owners all five and they had no good example of business ownership. Yeah, so Is there a genetic predisposition towards risk taking? And that’s the point, maybe maybe a little healthy lack of authority, lack of respect for authority, or you want to be the authority? Yeah, sure. I think there’s a disposition. But for me, I, you know, unlike my dad, my dad had no playbook in front of him. I had a playbook in front of me, my dad, my dad is my one of my best friends on the planet. He is absolutely my number one mentor. And so I, you know, I saw the playbook. And he taught me, but the thing that he did, he didn’t give it to me. Yeah, he made me he made me earn it, he loaned me the money in demand that it be paid back. There were no gifts involved. It was all it all had to be paid back. So I think that people have a genetic predisposition to it to taking risks. But they also, you know, when you’re surrounded by something, you’re a lot more likely to do it.
Michael Waitze 15:52
That’s what I am saying. When you were your venture capital hat. When you wear your investor hat or your angel investor hat. Do you feel like you can smoke that out relatively quickly, in a way that maybe somebody else who hasn’t always been an entrepreneur can’t? Do you know what I mean? Because you know what that feels like? Sorry? Go ahead.
James Benham 16:11
Yeah, no, you’re right. You do you have a gut feel like, your gut can lie to you? Sometimes. Sometimes, you know? Yeah. But you get you definitely, I mean, because there’s, there’s what I would say is I have a gut feel for who’s a good operator and who’s not right, right. Like, you can tell the difference between someone who’s a deal guy, and someone who’s an operator. And when when you when you meet deal, guys, and there’s nothing wrong with deal guys?
Michael Waitze 16:38
No, no, I’m not making a value judgement. I’m just trying to make a separation. I’m just gonna make a judgement. Like who’s good? Who’s good at that? Yeah. Yeah.
James Benham 16:44
Who’s good at this? No, because at that, because the world depends on deal guys, the world has to have deal guys, then the world has to have operators. So they’re both have deliver value. But you can tell pretty quickly if someone I would say has a willingness to roll the sleeves up and get dirty, right? Like, if someone’s too good to do a job in their company. That’s an immediate indicator that they’re gonna have a hard time with entrepreneurship. Yep. Bootstrapping our business in general. I mean, you know, like, if they’re, you know, if they say things, and whenever, and there’s certain things they say that are huge triggers, some of which I know and some which are just subconscious, like, if they say, Well, I just need to hire a sales guy, and I’ll be okay. Immediate trigger. Okay, you’ve got to be, you’ve got to be the chief evangelist, you’ve got to be the one that’s willing to go do the sales work, until you can afford to hire them, you know, so that’s always a hallmark for me. So yeah, there’s definitely indicators and things they say things they do body language, their willingness to get out and travel, their willingness to get out and work, their willingness to get up early and go to bed late. Yeah, you know, those, those are all indicators that someone’s going to have a, maybe an easier time or a harder time with with entrepreneurship.
Michael Waitze 17:58
I want to share a funny story with you. When I first joined Morgan Stanley, one of the guys that was hired that was hired into my training programme. You know, at the beginning, you don’t know anything, and they’re just training you to do a whole bunch of different stuff. He went home, he came from a blue collar family, and he went home and told his dad, he’s like, Dad, I don’t I don’t get it, you know, supposed to be in this really fancy management training programme. Why don’t they, you know, why did they give me all this drudge work to do? Why don’t they just hire someone to do that drudge work is dead. He said his dad rested his beer on his belly and looked at him, took a sip of his beer looked back at his son. And when they did hire someone they hired you stop complaining.
James Benham 18:32
You are the Drudge work, like you are that guy. It’s like, you know, the first years, I did all of the software development until I didn’t and then brought Sebastian and others in. I did part of the software development and then then I eventually did none of it. I did all the sales. Now I do part of the sales I did all the customer support. Now I do part of the customer support. I did all of the like you have all these things you end up doing I did all the server administration for years. I love it. I did all the network networking, I ran networking, cable and punch, you know, had to do wiring and had to do switch and and hardware management punch panel. You know, you got it. Yeah, I did. If you name a job in this company, other than graphic designer, because I just don’t have them with you. No, I did. I did just about all of them. And it’s good. It’s reassuring, because it helps you understand what you’re selling what you’re leading and what your people have to do. I think your your people like it, because they say, Hey, this guy has done at all in this company. And so I need to listen to him when he when he gives me some advice.
Michael Waitze 19:38
Talk to me a little bit about insurance, like what was driving you to get into that. And I guess the more important question for me, is it scale? How do you see like, how do you see market gaps? Do you know what I mean? Like where do you find these market gaps? And then how do you build into gaps that you think? Because I always say Right, like, I can see all these marquee apps but I know I’m not the right person to build into them because I don’t have Some kind of embedded expertise, and I know I can do something else better or somebody else can do it better than I can. What was it for you? Like? How do you identify them? And then how do you decide I’m serious? Like, I can actually do that one really? Well?
James Benham 20:12
Yeah, I’m smiling, because I’m thinking of all the times that I said, there’s too many players in the space. And then I got into this space and found out that most of them were just as clueless as everybody else. And you know, imposter syndrome is a real thing. And most people don’t feel qualified to be in the room that they’re in. And so you have to get over that, that that that’s actually one of the most limiting things is the feeling that you’re not qualified enough to go after something, or there’s other people who know it so well, that you shouldn’t go after them. You know, insurance happened by accident. We started JBKnowledge in 2001, to build websites and custom software for anybody. And I found out really quickly that when you compete against everybody, it’s a really, it’s a really hard world. And when you don’t have a niche, it’s very difficult to differentiate yourself. When you’re a generalist.
Michael Waitze 21:05
How do you define yourself? You can’t Yeah,
James Benham 21:07
I sell software to everyone who needs to write software. That’s, that’s really, I know those kinds of companies. And it’s not what I want to run, it’s you can’t get really good at something. Because to build software, well, you do need to understand the problems you’re solving. And to understand the problems you’re solving. It helps to understand the industry and the functions. So in 2004, three years after I got started, we had built a bunch of websites for ad agencies. I started to understand the ad agency business I started understand, you know, the software business better, but I didn’t like the ad business. We had built some websites and custom software for plastics, manufacturing companies, lumber manufacturing companies, executive search headhunting firms. And a friend of mine said, hey, look, he was a deal guy. He still is a Deal Guy. Great guy. Great guy. He’s a great, he’s a freaking he’s one of the best deal guys on the planet. Like, I love this guy. And he said, Hey, I just bought an insurance company, you know, how many conversations like that? Do you have, Hey, I just bought into, and it’s an ad, I swear, it’s just as casual as that. Yeah, hey, I just bought an insurance company. And I need some help with the software. That’s like how that was like the whole thing. It’s like, almost as almost as casually as someone says, I just bought, I bought a power tool, and they just showed me how to use it. That’s, that’s how casual it was. And so I said, Okay, so I went and checked it out. And I found out that the insurance industry in 2004, like the insurance industry today, had an incredible amount of needs around technology, and was really grappling to deal with the next generation of automation and integration and intelligence. And so we started building software for an inspection company that inspected properties for some of the large property lines carriers, they would go, they would go after, you know, after the quote, buy and pay, then the carrier sends out an inspection team to check the property out, make sure that they’re not going to cancel the policy, because you lied, or something on the application, right? Like, that’s the way it works. And so I started working for them. And I built a bunch of software. And I was like, Man, this insurance space is cool. Like it serves a critical need, people have to have it, right. There’s their systems are old, old, old, been antiquated and mainframe based, and they need a lot of help. And so we started building a lot of software there in 2006, a friend of mine told me that this bidding system that I had built, because you know, when you’re in a software company, and you sell time, you almost always want to sell widgets, you want to sell product, the dream of every software company, in general, very few software companies dream is to just sell services, they almost all want to have a product suite. And so when you you know I was I built a bunch of different products and they didn’t take in the market. I built like a content management system and an E commerce system and an intranet product and a product project management product, built a small business ERP nothing took but I built this bidding system and a friend of mine said, Hey, that bidding system, it doesn’t work for the industry you’re trying to sell it to but it would work in construction. And and so in oh six, I modified it for construction. My team did. And we started selling it and it sold like hotcakes, man I mean, it’s sold, sold sold. And so by by 2010. We had this nice software outsourcing practice for insurance and nice software product business for construction bidding that had fingerprints from insurance all over it right. The surety bonding space and builders risk and sub default insurance lines get heavily involved in bidding because they really care what subs you pick, because if those subs default it’s going to trigger an SDI claim. And that’s going to also potentially sink a bond and force them to make good on bond. So we started Getting involved in the surety bonding space and the sub default insurance space. And we built this really awesome bidding system that ended up having clients all over the world. So you know, Hong Kong and London, Dubai, all over North America, Canada, United States, Caribbean, we had we were translated in three languages, we are localised all over the planet. We had a quarter million companies using it every day. And I sold it in 2018. But kept all the people. It was really cool transition.
Michael Waitze 25:31
That’s a great deal.
James Benham 25:33
It was, it was a great deal. And because I sold it to a competitor, right, all along, I had been building software for insurance and oh eight I discovered work comp because up and from 2004-2008 I just built property and casualty. I just property software, just property in 2008 comp and comp is like, I don’t know, if you how much you will do with work comp, but holy crap. It’s like, work comp is the dedication of a lifetime. You could spend a lifetime just working on work comp, and never finish diving to the end of the well. It’s that big. Wow. I didn’t realise it, you know, go ahead. It’s just, it’s just, it’s just so complicated. Because you have you have an indemnity payments and medical payments, you’re dealing with PPOs and health networks, and you’re dealing with, you know, paid time off and you’re dealing with investigations and ancillary service providers, the claims can take 10 years, yeah, you might pay a what you, you can pay a work comp claim out for a lifetime of a human right, you know, you can have an 80 year old claim name another in line insurance, where you can have an ad, I mean, that maybe general liability claims when you’re involving people who get injured that come on site. I mean, there’s just, it’s it’s a unique and fascinating business. And so we built a lot of custom software for work on TPAs, carriers, brokers. And so in 2018, we sold smartbid, we just went all in on insurance, and we decided to build our own policy and claim software called Terra, we decided to build a really build up a certificate of insurance tracking product called smartcompliance. And you know, today we’ve got about 270 people full time, that do custom software outsourcing for carriers, brokers and CPAs, and also build our two products, but it’s all about InsurTech. And so that’s what’s so exciting is that this industry that has no limit, no end, that has all these big challenges we spend all day trying to solve the problem was on it. And it was a windy road to get here, though.
Michael Waitze 27:31
I mean, but isn’t it always this is this is something that I’m actually trying to put into words, and maybe you can help me with this. It’s like you have to be in business in a way. And again, this is not the most thoughtful nor the most elegant way to say this. So I’m hoping you can come up with something better. But I’ve been having this thought a lot over the last year or so. And that is this is that. Like, you just need to be in business. Right? Like if you were if you weren’t in the software business, your buddy who just bought an insurance company might have said you had just bought an insurance company and you both would have had like another glass of wine and gone away. But because you were in some kind of business, even though you weren’t even building that bidding system for the insurance business, right? Or you were you were building it for something else. But because you had this already out there, you got to be able to say, hey, maybe we could port this over to that thing, right? But even if you just been like a super smart dude who even could write code in eight languages, you had to be in business to be able to do this thing. Does that make sense? Right. So it’s not just that idea. Like, I’ll just start today. And you said you built all these products before and some of them kind of took most of them didn’t take, but you just keep going like I don’t have the right words for this. But because you were in the business, in some business, your buddy when he came to you and said, Hey, I just bought an insurance company. You were like, Okay, how about this thing? Because otherwise, you’re just on your own? Sorry, go ahead.
James Benham 28:48
No, I’m gonna use my dad’s word to try and try and explain this to my dad put it beautifully. Go. And he said this to me. He said this to me. 21 years ago, he said, James, you’re about to be in business. We are going to start JBKnowledge. Here is something you need to remember. When you’re not in business. When you’re when you’re working somewhere an employee an opportunity comes along once a year. Yeah. When you’re in business, an opportunity comes along once a day.
Michael Waitze 29:14
Yeah, that’s the title of this episode, because that’s exactly it. Sorry. Go ahead.
James Benham 29:19
Yeah, so he said, there’s an inertia to this. Once you’re in business and you’re in the game, then you get constant opportunity flow and the big question, whether you succeed or fail is which ones opportunities you keep and which ones you kill? Because you can’t go after all of them. You’ve got to start sorting through them and picking out which ones you have a chance at winning and which ones you don’t. And something I’ve said in my book, I have a book that’s dropping November 15 called Be your own VC. And it’s all about bootstrapping a business. And the book I say when you’re in the game, a big part of being in business and having success is staying in business being persistent is the number one rule businesses to serve. If not, not generate profit, not anything, the number one rule is to serve. And so the main thing is people look lucky. The reality is most of them just hung in long enough for something good to happen. You know, like, you know, the, the longer I’ve been in business, the luckier I get.
Michael Waitze 30:17
I mean, that’s the Gary Player quote, right? It’s like, oh, my god, I can’t believe you sunk that putt. It’s so lucky. He’s like, it’s amazing how often, like, how much luckier I get, the more I practice, it’s the same thing.
James Benham 30:23
Yeah, exactly. So you have you have this thing, like, the harder I practice, the luckier I get, you can also say, the longer you’re in business, the luckier you get, because you just have more time to sort things out. And so you know, in insurance, one of the big goals for me was to create a sustainable business, building custom solutions and software for insurance companies, why learn the industry? Identify the problem segments? So you asked this question earlier, you because you’d have to learn where the issues are learning where the challenges are. And then one thing I think the way you asked it was identifying the gaps or identifying where the spaces you can step into are right. And one of those came up several years ago, and it was around certificate of insurance tracking. And that came because I was building a lot of custom software. And we identified that there was this problem with tracking certificates of insurance. And there were enough dissatisfied people that it created a market demand. And so we went in and solve that demand. Now, I can’t say we’ve ever built a product that was truly what you would call is Greenfield, right? Where like, you’re literally operating in a field by yourself. There’s no one else eating the grass. It’s just you. In fact, I know very few people who have operated in Greenfield even like Apple. Apple did not create the first multi touch display. Apple did not create the first smartphone. No, they did not. They didn’t create the first No, they didn’t they didn’t create the first mp3 player. They didn’t create the first laptop computer. And if that’s that was not Greenfield, there were a lot of players. I’ve been buying hardware. Since 1991. I bought a gateway 2046 In a cow coloured box, right? I mean, none of those things were Greenfield, they just did it way better. There are dreamfields pieces of technology. But even those weren’t the first one like the in my opinion, one of the best holographic display units is Microsoft HoloLens. I own a couple of them. I love HoloLens. It was not the first holographic device I bought, I had a ViewSonic I have an Epson Moverio, BT 200. I mean, I had all these other devices. So that’s really where if I almost feel like people think you’ve got to be, you know, Nikola Tesla, or Albert Einstein or you got to be, you have to be used to be like one of these, you don’t have to necessarily invent an entire new category, you do have to identify where there’s kind of a weak underbelly, you have a lot of legacy players moving very slowly, delivering an overpriced product to a market that’s ready for change. Cool, yeah. Okay, let’s go build something that’s more than just one increment better. Let’s say it’s five increments better than what’s on the market. And, you know, maybe it’s just slightly better price delivered more quickly. My dad always said faster, better, cheaper, pick two, right. So, you know, maybe you’re faster and better, but not cheaper, or you’re cheaper, but cheaper and better, but you’re not faster. I mean, whatever it is, and then roll the market. And that’s what we did with smart compliance. And we’ve got hundreds of clients using it now. And that’s really exciting to see that kind of uptake. With Smart bid, we had, you know, 1000s, and then 10s of 1000s of companies in the hundreds of 1000s of companies using it that was really cool to see that with Tara, we’re at the the Infancy again, because I think there’s a, I think there’s a real opportunity and policy and claim software for self insured groups, funds and companies, this this different category of the market. That’s not all the really big heavy, multi 100 billion dollar carriers, but SIG sifts captives, they all need software for policy and claims. And you know, when when I talked to them, they’re largely not super happy. And so it’s created an opportunity, we’ve already acquired some really great clients and built some really great software. And that’s really how you do gap identification, I think is say, Look, can I deliver something that’s enough increments better here, that I’m going to flip some customers and then I’m going to make some real change. I had a guy in a podcast interview yesterday say that technology wasn’t the real challenge. It’s all these other things. And I said, Well, actually, I beg to differ with you. I know way too many insurance companies that struggle with rolling out lines and states and with managing their technology, infrastructure, technology still is there is still a legitimate problem in tech.
Michael Waitze 34:40
Do you think, so I have easily the largest insurer tech and insurance podcast in Asia, right? It’s not even close. Just like you we’ve got listeners and 165 countries, right? So people listen, I’ve done 182 episodes of this thing plus 50 episodes of other stuff that’s related to it. We’ve done a lot of work on this. So I follow the news, right? I mean, in a way, it’s like if you buy a Honda Accord, everyone seems to be driving a Honda Accord, if you know what I mean. So like once you get once you get into the business, like I can’t unsee all the news in it and who was it a couple of days ago Julian Teicke the founders of WeFox was quoted as saying like, it’s only a matter of time until WeFoxes number one because big incumbent insurance companies have a hard time like rolling up product. Are you convinced just based on all the work that you do that like some InsurTech is going to come and just eliminate at scale? A whole slew of incumbent insurers? Or or is it more likely that companies like yours because I had a conversation with a guy based in Malaysia, but an Indian dude who said to me InsurTech is going to go away? Because the real innovation is Value Chain Innovation, finding those gaps, you talked about where your customers are telling you essentially, God, I wish somebody would fix this thing. Does that make more sense?
James Benham 35:57
Yeah, I kind of categorise insurtechs into two groups. You have the insurer Tech’s who are trying to compete in the open market against the incumbent providers, then then you have the to the tooling companies like mine, that are trying to develop radically better tools.
Michael Waitze 36:15
That’s the value chain innovation that I’m talking about. Yeah, that’s what I call it. But anyway, yeah,
James Benham 36:19
not one increment better, but like five increments better than what they already have. And so I fall into the tooling camp, it doesn’t mean that I don’t think the other camp of people who are trying to actually come in and disrupt by competing against the mainline carriers won’t have some success. I’ll tell you, it’s been very interesting watching the number of people who were ringing the bell five years ago and three years ago, saying saying brokers are gonna be gone, we’re gonna have direct to everybody for everything. All of a sudden, like, half of them are now tooling companies for brokers. Like seriously, like legit, Like, legitimately? And they’re like, they’re like, Oh, well, okay. Yeah, we’ve pivoted our business model. And I’m like, Yeah, you did. Because insurance is complicated. I’m a business owner to write I employ hundreds of people, I don’t buy my insurance direct, I use a broker because it’s really complicated. And I don’t have a full time. I don’t have a full time Risk Manager in my company. And so I lean on my broker as my risk manager in some cases, and we put together a programme every year, and we execute that programme through the broker and his Commission’s more than make up for more than than justify, you know, the cost, right. Yeah. His value add justifies his commissions, I meant to say, so it’s, you know, you’ve watched them habit to pivot, and then you’ve watched the people and the companies that were supposed to be the grand disruptors. I mean, we can pick on a couple of easy ones to pick on like lemonade. Yeah, eliminated hippo. And you look at let’s be, and this is this, this drives me bananas as a bootstrapper. This really drives me bananas. If you look at business fundamentals, loss ratio, and profitability, right? Yeah, like the loss ratio and profitability at some size, when you get to a certain size, you should be at a healthy loss ratio, and you should be profitable. And I know, you can’t use the excuse anymore. And of course, the public markets aren’t allowing them to use the excuse anymore, that you should last subsidise your growth curve. And so
Michael Waitze 36:27
Think about your dad’s business building the Teflon business right out of his home or out of his garage, or wherever he started. Yep, there wasn’t enough time for him to employ that. And I’m using him as a proxy, right as a metaphor for other businesses. There wasn’t enough time for him to run a business that could just like run losses forever, until things kind of evened out, you know what I mean? Yeah, it was it was impossible. So the fact that just because I give you 100 million bucks or 20 million bucks, doesn’t mean and you saw me doing this, right? It’s like, what could a real business person do with that amount of capital? And how quickly could they get to profitability? Right, if they didn’t have let’s just say somebody behind them going just growth at all cost growth at all costs growth at all costs, because the next round is going to be higher kind of thing.
James Benham 39:15
Yeah. And like you and maybe that person behind them might have been SoftBank. I mean, you know you look at yeah Masayoshi Son right like It’s like maybe like if you look at the growth at all costs mindset was soft bank was like the Grand Champion of if you watch we crashed the TV series about we work in their implosion. You know, you had this irrational, unhealthy relationship. At the top with that was drive growth at all costs and a real estate company. At the end of the day, if you’re not profitable at your basic unit economics, like if you’re not profitable in delivering office space, you’re going to you know, if you’re if you’re least by the year and then if you’re if you’re buying by the year and you’re selling by the day, you’re gonna have a hard business no matter what it is.
Michael Waitze 40:08
Running a leveraged real estate like that is the one that actually told me that there must be a mechanism out there to short startups. Yeah, because I would have shorted that until I was blue in the face.
James Benham 40:17
Oh, man, I was yelling. So I had another podcast in construction called the Contact Group. And that one was similar, like we had a million listens. We had, you know, tonnes of audience all over the world. And I was yelling at the top of my lungs, because wework claimed to be a tech company, no waves. And they started they, they started acquiring construction tech firms to have to have some SAS revenues, they could try and justify their multiples. And so I like I went bananas, like, I lost my mind, on almost every show, I’m like, this company’s gonna fail. It’s all going to go down. And then when it happened, like all my listeners, were texting me like, you got it, you got it. I’m like, Dude, this was easy to call, right? This was so easy to call, I wish there was a way to buy short positions on startups, because definitely you and I can bet against a few of them. But when you go back to insurance, if they can’t make their unit economics work, like if they can’t be profitable on an individual policy, then they’re not going to do well. And insurance losses will scale with the scale of the business. And so all you have is an accelerating loss situation, because you’re what it appears is that all of these hypotheses, and not just from lemonade, there’s been a few providers where the hypotheses that they could drive a lower loss ratio, and could you know, lower their expense ratio and go direct to consumer? It turns out, it’s super expensive to acquire customers directly. Right. And that kind of got blown out of the water there. Google Adword click cost was insane. Their customer acquisition costs, was it saying that it was too easy for people to move to other providers, and then it looks like they might have just straight up mispriced some markets? Yeah, like underpriced and then got got walloped by their loss, you know, their losses in the claims. And so that’s where I think that we got to be careful. That’s why, by the way, I’ve leaned hard on being a tooling company, because there’s so much opportunity insurance to fix these fundamental basic problems. And this was a comment that was made to me at InsurTech connect a couple of weeks ago in Vegas, there’s somebody came out of a session, and that person said, James, it’s great to be here. But we’re still talking about all the same problems that we were talking about five years ago, if they haven’t fundamentally changed our policy software is overpriced and too difficult to implement, takes too long and takes too long to deploy lines and states are claim software isn’t effectively helping us adjudicate claims, our infrastructure is still not completely cloud based. We still have to deal with legacy mainframe applications, because all these problems still exist. Where’s the progress, you know? And then you have the incumbent technology carriers acting like they’re disrupting themselves when they’re not. And then you’ve got the upstarts that are trying to disrupt, you know, the insurance companies by going direct to consumer. It’s an interesting mix, it doesn’t mean that InsurTech is doomed. It’s actually a better time than ever to jump into the space. Yeah, it’s a it’s a wonderful industry filled with creative, wonderful people. I just think that, you know, there’s a tonne of low hanging fruit and big, big, big, simpler problems to solve. And that’s why we chose to go and build new tooling because I think there’s a lot of opportunity there.
Michael Waitze 43:30
I am gonna let you go. I think that’s the perfect way to end James Benham, the CEO and co founder of JBKnowledge that was awesome. You got to come back two more.
James Benham 43:38
I’d love to Yeah, let’s let’s let’s do a live in real life and like Asia, that’d be even better.
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