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July 26, 2023
John Rizvi, Esq.

The Grandfather of Possibilities I Inventor Ron Klein of the Credit Card Magnetic Strip 877-728-7763

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00:00

Welcome to patents, purpose and profits, day three of our virtual summit for inventors. I'm extremely excited to be here with Ron Klein. But before we have him start, I just like to tell you a little bit about myself by wrapping up new idea pops in your brain called a patent professor. That's my name. I'm a Law School professor and engineer too. I think math is fun. And patents are cool. When the patent office says Your idea is not new, that's just red tape for me to cut through.

00:46
I love it. Okay, with that, okay. Now the big question is, do you want to do a design or do you want to do a utility on that?

00:58
Yeah. Oh, yeah. Oh, I should patent the wrap. You're saying? Well, before I do that, I'm not the real hero. I'm gonna Jenny if you can play a quick video. And I'll tell you who my heroes are. And go ahead and play that now.

01:40
We are Intel sponsors of tomorrow. I gotta tell you like speaking having you here, Ron. It's an unbelievable feeling. I mean, if there is a way to get like a virtual autograph through through zoom, that would be unbelievable. To have someone of your, your stature real real quick, though. Let me share my screen again. And here you are purpose patents and profits. Those of you today's day three. Over the last couple of days, we've had an amazing group of inventors, innovators, really game changers. We started off the conference with Kevin Harrington, the original shark on Shark Tank to the inventor of the infomercial. He's launched over 500 products with $5 billion in sales. Oh, sorry. We have Terrell Williams, the inventor of Dreamland baby. Her story is inspiring for any any inventor. That's going through the process now. Again, Dennis and Mary Lou green 50 different products generating $120 million in retail sales. This is a married couple that have managed to remain married for over 40 plus years, while inventing. They're the developer of the sneaker balls. Christina Dave's is the creator of cosmetic designs, a serial entrepreneur, award winning inventor. She's a top inventor on the Steve Harvey Show. Weighing from none other than the inventor of the modern selfie stick. Amazing interview yesterday. Joe Thierry, the inventor of flex screen, and today, the final day of our summit, Ron Klein, the inventor of the magnetic strip on the credit card, and the multiple listing service in real estate. Ron is known as the grandfather of possibilities. So Ron, welcome to the show. Thank you so much for joining.

03:35
Thank you for that introduction. That was great. And and all those people that preempted me before, I'm honored to be the the catch up on the last. Well, my philosophy is pretty simple. And that's pretty much what my philosophy is. There is no such thing as a problem. When it's presented. I say problems or situations. And you can turn every situation into a challenge, if you so see where you can make it better. And there's a gift behind every challenge. So that's where all my opportunities came from. And my basic background is, I'm a graduate engineer. And I have a math degree also. But I was always known as the problem solver who turned things into a challenge. And I was the liaison between the consumer, the customer and the engineering departments and I enabled them to communicate, because I said, simplicity. That's what you have to do. You have to be smart, daring and different to really participate. What I mean by smart is, that doesn't necessarily mean the PhD from Harvard. It means learn something new every day. Be aware of what's around you. You don't have to be the sharpest knife in the drawer but you have to be aware. You have to be cognizant of where You are in this world, and to be smart and daring, daring is don't be afraid to make mistakes because from our mistakes, we learn so much. And I always say simply, if you painted the wrong color, the first time, painted a different color. But most important, whatever we do in life, or whatever we think about, it must provide a benefit. Because if it doesn't provide a benefit, it's no more than just a hobby. So that's my simple thinking. And probably the credit card invention, which was my first big invention was one of the simplest things that ever came about. Because I always say, and I learned this in, in grade school, from word problems, you have to identify there's a lot of ancillary information and things that you get in the word problem in school. And you have to sift out, what's the given? And what's the solution? What's the solution you're looking for everything else in between is the minutia. It's just the journey. So a large department store came to me in the early 60s, and said, Ron, we understand that with your engineering background, you are a good problem solver. And you can identify problems, they small, it's not a problem, turn it into a challenge. And they said, it takes too long to do a charge purchase. And that's what they call them. In those days, the credit card just had an invoice number on it, and the name. And then the merchant had to look up that name and number in a loan book of things that the credit card companies would give them every month for negative account numbers. And that took quite some time. So one of the problems was it takes too long to make a charge purchase.

06:51
Yeah, so let me let me interrupt you for a second because you have an old associate, Kenneth Passero, who says he knows you from the New York Stock Exchange, and has asked if I would say hi to you. Hi, Ken, how are you? It's a good it's a perfect point time for interruption anyway, because we found this amazing video, Jenny, if you can play that. And it kind of shows exactly what you're talking about of how Oh, magnetic card how how merchants were what they were having to do. It's unbelievable. Turn up the volume Jenny, and let's

07:27
well 609 million credit cards that are in existence just here in the US. When I hear those kind of numbers. I almost have to be apologetic.

07:41
They grew up right out of the depression. And I was just a very, very inquisitive kid very inventive, coming up with all my own toys. By the time I turned 18, the Korean War was on, I was drafted. And after I came back from the service, people were making what they call charged purchases, they would come in with their credit card, which had an embossed number on it. And the merchant would have to look up that credit card number on a long list of negative account numbers that they were given every month by the credit card companies to And around that time reel to reel tape recorders came out. And I figured I've got a great idea. If I could take a piece of tape and record the account number on that piece of tape pasted on the back of the piece of plastic and build a device that mimics a tape recorder so that if I inserted the card and pulled it out rapidly, it could possibly work. And it did. And that was the invention of the magnetic tape on the back of the credit card. I was delighted when I saw all the problems it solved amongst all these department stores in which we installed it never made tons of money off the patent. But I made tons of money. When I came up with lots more ideas and inventions with the development of the nutrition system to raise chickens in eight week period, the development of MLS multiple listing service for real estate industry, the development of voice response for the banking industry, which eventually took me into the New York Stock Exchange. And I was there for over a quarter of a century, developing things for the exchange. My nickname and what I'm known for is the grandfather of possibilities. And that's if I had my life to live over again, I would want it to be exactly the same way. A good friend of mine always said Ron, make sure you live life to the fullest. And when you go make sure you go empty. The life of credit cards may be coming to an end at some point because we live in a world of obsolescence. However, we've had great longevity of the magnetic strip on the credit card. I don't say weird but I am different. I'm a free thinker and I just do my thing and I don't worry about what people Think that's my plate in life?

10:07
Okay, I'm glad you played that, John, because what that came out and showed was, I took a very simple approach. It was like solving a word problem. What's the given takes too long? What's the other thing? The other given the burden is on the wrong person to make the decision? And the rest is? What's the what's the solution we're looking for. So that solves the problem. Now, because that was an engineer, I recognize that I learned something new every day about tape recorders. If I didn't know that, I would have hired an engineer and said, what other means can we do to automate this credit card? Okay. The other thing was, I used my my ingenuity to come up with the approach as to how do you how do you read, you know, I made use the motor, because I built a little thing that that would mimic the tape recorder. Because remember, tape recorders if he would go fast with something, it would sound like Mickey Mouse and down sound like Dracula. So I had to make sure that no matter how somebody ran this thing through this thing, it would make sense. And because I was an engineer, I remember the intellitype codes, they had start stop synchronization. So when that little piece of tape in between the account, remember, I put start information and stop information. So you would push it in slow and pull it out fast, that would solve the problem. So there were situations along the way, but it was a very simple solution. If anybody else was there with me, it probably would have done the same thing. So it's simplifying, understanding the problem, and finding that gift behind the problem. And then all of the other inventions follow through. Now, I'm still not empty yet. So I'm still making doing other inventions along the way. But the company started to grow rapidly. Here's the negative parts. Okay. The company started to grow rapidly as I was building it, because we had these interventions. And we were we had lots of orders. I needed money, I had to go out and raise money through funding, I had to learn how to raise capital. And then the company even grew larger. And I had to figure out, well, how do we need more money now? Well, I went back to the investors. They said, We'll take it public. I knew nothing about an IPO. I went and got myself a copy of the 1934 Securities Act of the library, read it cover to cover, I became an expert at the S one registrations, put together a prospectus, took the company public. And now we had all the negative situations as to I had Dressman engineers, production people because there was no software in those days. So I had to build everything from scratch. And we were building MLS units for multiple listing, voice response for the banking, and it was just growing rapidly. But the company was doing well, that just needed a lot of money. Some of the investors came back to me and a large, very large insurance company came to me and said, we like what you're doing. We'd like to acquire you. Well, I was 34 years old at the time, and I figured maybe it's time to retire. Jump from a very fancy family. Well, I took the deal. started fishing for three days, I became so bored. That's when I figured I've got to go back to work. That's when my career really started. And all the problems and headaches kimberbell. Here's the negative aspect. I didn't know what I was going to do. All I knew was I didn't want 125 employees anymore and big manufacturing facilities. All they wanted was residual income. So I figured I would sell other people's products, Cohen old clients until I came up with a good idea. While I was calling on a major user of teletype equipment. I saw a big sheet on his desk, and it was from Western Union. And I said what is this? And he said, Oh, well, you know, we're in the communications business big in the communications business. We we use these teletypes constantly and Western Union puts them up for bid every week. They refurbish them and say we have more inventory that we need you're welcome to take the bid sheet that changed my life

14:37
in a lot of times these are industries that you're not Was it an obstacle to you like for example with the you are not in the credit card business at all or that industry? Oh, how do you feel as an outsider to that industry? trying to you know, trying to solve a problem like didn't did it? Was that an obstacle thinking gosh, who am I to Address, they've thought a bit already

15:01
done. Here's the important thing. I didn't invent the credit card. I just made it better. So I looked at that as an issue and a challenge of what is the problem. And the problem was something took too long. And the burden of authenticity was on the wrong person. It didn't make any difference whether it was a credit card or anything else. That that is saying, I think I can fix it by speeding things up, because I simplified it and understood the problem. Now, along the way, I did try other things. I tried punching holes in cars, and all kinds of things. And then I recognized because I was a very inquisitive engineer, the mag tape, the magnetic tape reel to reel system. I forget, well, I know how that works. I learned about it. What else can I do with it? Or can I use this though my problem? And that's so what your people have to think about out there is you don't have to be necessarily an inventor, you have to be an innovator. How do you make things better? Man who met who invented the paperclip, he only didn't only invent the paperclip, he made it better? Because there were other cut types of clips, staplers, and so on and so forth. So there are many innovations on how do you join two pieces of paper together? Same thing as the how do you make the credit card better?

16:32
But but sometimes, like, like going back to your paperclip? Example, let me grab a post it and you'll see, sometimes the brilliance of an inventor is in realizing it just in realizing the problem. I mean, you're very humble when you said when you say that this was solving this was it was a simple solution. But you identified the problem. I mean, here's the the inventor of the post it note like paper and tape have existed forever before this product, somebody realized that, hey, there's a need for replacing paper and tape. And here's, here's like another example, like a sleeve on a cup of coffee. Jay Sorensen license this idea, it's but it's realizing that there's a demand. I mean, here's the final one, like some, you know, Ron Brown realize that when people see a label upside down, they start. It's a human instinct to turn it right side up. And now you don't have to hit the back of the catch up to get it out, is it's realizing the demand but not being in retail. How will you even aware that? Well, I guess as a consumer, when you go to run your card, you would see the store, like in your video go through them

17:41
at Christmas time, it would queue up a long line of people waiting while somebody was trying to run their card. But it's so it's really innovation, how do we make things better? With all the problems that are out there in the world today? People have to somewhat reinvent themselves and think about what do they see that can be made better? And approach that another way? My biggest gain was at the New York Stock Exchange now being on the trading floor every day, and keeping my technician the ability to maintain those machines. I was able to look around and see what else can I do for these people. So I was constantly rapidly came up with program trading and building little boxes here and there and fixing things. And then the big thing was in 1983, I saw the on the bond trading floor, New York Stock Exchange the two things they sold and marketed equity stocks, and they also sold debt instruments bonds. So that was the debt on the equity that they had at the exchange, the equity system and the stock brokerage systems were automated a long time before that. But they were still using an auction system for the corporate listed bonds. So I went on the bond trading floor and I see these guys throwing their hands up and down bidding in there on the phone, that that's so simple to automate. Because they had the main line with bond information coming out. Why don't they just take a little filter box, build a little box to filter out only the bonds and connect it to a video terminal. I came up with a solution on how to automate that. So I went to the exchange. And they said, I can automate this so easily. And they said, Ron, they've been doing it like this for 205 years. They're not going to change. And I said, Okay, if I can build something that can automate this, will you give me an exclusive license to be a bond disseminator for all the New York Stock Exchange member firms on Wall Street? They said Yeah, because it'll never happen. Okay, well, built a little box, gave her a video terminal went down there been trading floor, put it in, were beautiful. I started making phone calls to all the brokers bond brokers on Wall Street. And if I wasn't buying or selling a bond, they would hang up on me. If it hadn't, what am I going to do? Now I came up with this invention, this betterman. And I can't sell it. So I befriended the biggest bond manager of Wall Street. And I went to his office and I said, I'm gonna run a communication line to your office and give you a little box, and a video terminal free for 30 days. Just try it. Well, we did that. And within two weeks, all the guys on the training floor were starting to say, called him up, his phone rang off the hook. And they said, What do you do? We can't buy a moment, your top and every bond, we try and buy. He said, Oh, you need when I was little, we're unclaimed boxes. My phone rang off the hook. When I swung the club. And I said, Okay, you have to give me $10,000 to join my club. And there were many 1000s of guys out there. I said, you have to join my club for $10,000 to be an automated volunteer. And they said, Well, we can get that money back in a couple of months. That is pretty expensive. They did it. And they said, Well, now you have to buy the little box and the video terminal. They said no, we don't buy anything on Wall Street, we only rent equipment on the box. And the video terminal cost me $100. I said house $300 A month. Fantastic. And it was in there for a quarter of a century. So this is the opportunity, as you can see, by taking an opportunity and a challenge and turning it into a winning game playing

21:42
function eating. And when you say a quarter of a century, I would think I mean, that the credit card. The chip is relatively new. I mean, since I was I don't remember cards before the magnetic strip has that surpassed a quarter of a century. Well,

21:59
the patent I filed the patent in 1966. And it was awarded in 1969. Bell. And it's the reason it's so it was so successful, and I believe it's still successful, is the magnetic strip doesn't require energy. If it doesn't require energy, the law of engineering is can't radiate. It can't transmit, if it's not energized. The chip is wonderful, but I'm not a big fan of it. Because we the chip is a little computer, when you put that chip in the machine, the machine energizes the chip, okay, there is an algorithm and so on and so forth, to make it very, very secure. But when you put that chip in the machine, the chip is energized. And guess what happens, it now becomes a transmitter, somebody behind you in the line a few feet down, can have a scanner and say thank you very much. And that's how your cords get compromised. That's why they now sell sleeves to shield the card. So that it's not energized if somebody comes up and energize it with a scanner in your back pocket. But I don't want to throw the thing under the bus. But that's what you've got

23:15
to be I mean, we've all been to stores that were the chip reader is down. So it's got to be a great feeling for you to go to the store and say you know what, chip readers down right now, we're going to have to run your card with the magnetic strip.

23:30
But no, there was never fraudulence at the point of sale with the magnetic strip, there was always the man in the middle or or down at the server. And that was the interesting thing. Now the invention or the enhancement for the bond system that grew because it finally it went from the New York Stock Exchange, the American Stock Exchange, the Philadelphia stock exchange, the CBOE and it just grew and grew and went into the treasury market. So, the point is, all I did was read a guy's back a bid sheet on his desk when I was trying to sell him some communication equipment. Wow, you smart, daring in different pay attention. Learn something new every day. You don't have to be the sharpest knife in the drawer. You just have to be aware

24:19
well and willing to learn and that's that's an in being me. Your your humility is so refreshing because here's, you know, you're gonna every you know, this was simple and that was simple. But you know what, like, identifying the problem itself. Sometimes that's where the genius lies, that identifies

24:37
the problem, turn it into a challenge. First of all, I don't call anything a problem. It's a situation. Some situations can be turned into a challenge. If you can turn it into a challenge, and you understand it and simplify the challenge. There's going to be a gift behind that challenge. And I look at Usually, I look at challenges as a little house with a front door. And I say I open the front door, and I look at this house. That's my challenge. And I look around to make sure that there's a window or a back door. Because if there's not a backdoor in that little house, I don't walk in and close the front or behind me, if there's a backdoor worst case situation is at the back. So that's where I say, if it's a challenge, and you you look at this in yourself, you look at the challenge and solve it. You say to yourself, what's the worst thing that can happen? Oh, painted a different color, if I painted it the color wrong time, the first time. Same thing. So that's the approach I look at. And there's always some opportunity behind every challenge. Yeah, well, with patents and ideas, and this is your, your baby can fully understand. Consider a provisional provisional patent is great, it gives you the opportunity for having a 12 month window, before you could carry it to the next level. And there's so much you can do with a provisional patent, it's very difficult to a very simple to file. It just needs an abstract, and narrative, and some kind of either description, or flowchart of what your idea and your concept is, it goes through the patent office in four to six weeks, it's been given a an application number, and then now your patent pending. So that gives you that with a nondisclosure letter, that you can go out and talk to the marketplace, you're ready to see, do you have something that's marketable? Do you have something that maybe you want to license off to have them take it to a utility patent, and there are many functions. So the biggest mistake you can make is file the provisional too soon and you run out of the 12 months, best thing you can do is, do your searching first, search the heck out of it, analyze it, test the market question, and then file your provisional. Okay, now, I'm doing some very, very interesting things. Got two very big patents going now, where I developed within the last four years, and it's growing rapidly. And I can talk about that, but maybe we should answer some of the questions first.

27:30
Yeah. So one of the questions relate to your early days. Because it's, it seems like after you've had a couple of successes, it's easier to keep up the fortitude and the courage and keep going. But you mentioned before before this, that you had tried some other solutions, like punched cards and other things. Were there points when you were about to give up. And I've had during the summit, we've heard from several inventors that even put their idea aside and went on with their day jobs and their normal life, and then went back to it again. So tell us about that. Because it sounds

28:10
like early in my early days. First of all, I was very good. Before I was drafted in the military and went off to the Korean War. I was very good in graphic design, commercial art. And that's what I was really studying. But I really wanted engineering in my early years. My problem was, I thought I had to do everything myself. I never caught prototyping,

28:33
oh, you're prototyping you would do yourself. Everything was

28:37
myself. It always had to be my way. I never started listening until I really started building the big company, to find out that all of my people and my employees, they were out in the world in the field, they were out dealing with the customers. If I would have listened to them, maybe I would learn a lot more than just saying, Well, I got a lot of knowledge, I can do everything myself. That was my biggest mistake. And then once I learned that, to listen is to learn and that knowledge is power. I became a whole different person. In the stakes, I may along the way was because I didn't listen.

29:20
Well, no that's that's marvelous that we could have an I just knowing your story. We could have an entire segment on and you're on.

29:29
One quickie though, I'm sure there was no way that I get the name the grandfather of possibilities. I was on a radio show. And that host invited me for a big dinner in New Orleans, because he was going to be down there and he wanted to introduce me to some other people. And his wife was with them. And they were lovely people. And when we were sitting and having dinner in New Orleans, she said, Ron, what? You know, where are you? When was your parent parents in Venice? Was your father in bed or they said, No, not really. I said, but my grandfather, he was an inventor. He had such great capability. And she said, so most of your possibilities came from your grandfather. They said, Wow, what a name. Maybe I could be the grandfather of possibilities. That tele came about. So I owe it to her willing jellies wife. He was a bread tester in Washington, Washington, DC.

30:29
Okay, well, guys, there you have it. We've heard from an amazing inventor, the grandfather of possibilities. Ron Klein. It's such an honor to have you on today. And I hope you enjoy your weekend and the rest of this week.

30:43
Thank you. So John, thank you so much.

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