Interviews → Escape from Cubicle Nation

Pam:

Hello and welcome to the Escape from Cubicle Nation podcast, my name is Pamela Slim and I am really delighted today to welcome Derek Sivers. Welcome Derek!

Derek:

Thanks Pam, hi!

Pam:

Derek is the founder of CD Baby and just released a really lovely book called Anything You Want: 40 lessons for a new kind of entrepreneur. And I got it, surprisingly, in an envelope for my friends at the Domino Project and as soon as I opened it I smiled widely, first of all at the picture on the cover which you have to see for yourself, it just makes you smile widely. And I also really smile because I thought it contains a lot of very very practical advice, and some of it contrarian to what you hear about starting a business, that can be really useful for the Escape from Cubicle Nation audience. So Derek for those people who don't know you, can you give a little bit your story as it pertains to what led up to, and then the founding of CD baby.

Derek:

I was a musician my whole life. In fact, I decided when I was 14, I was not just into music, I was fiercely determined to be a professional musician.

When I was 14 and deciding that is kind of like deciding to be an entrepreneur. You know it's funny that years later people would say things like "how did you get courage to quit your day job?", and I was like "that wasn't courage that was almost like an old decision." It's like when you decide you wanna be a musician, that means no salary, no healthcare, no pension, no security… to be a musician IS to be an entrepreneur. I guess I was already in that mindset, but I was really just, from the age of 14 up until 28-29, I was just a musician.

So last time I had a job was 1992. I quit my last job in 1992 and I was just a professional musician and then in, let's see, 1997 I was selling my own CD and to understand the situation of time there was no PayPal, Amazon was still just a bookstore, so if you were a musician there was absolutely nowhere to sell your CD. Unless you had a big record deal, you know? There were places like... CDNow was the big online record store at the time, but as an independent musician with a CD to sell there was literally no way to sell it online. So CD Baby was really just me setting up a tiny little website to sell my CD. But then my friends asked if I could sell theirs and that led to the rest.

Pam:

And for those of you who don't know the rest of a very strong and successful growth over a period of years. You sold the company... when, what year did you sell it?

Derek:

2008.

Pam:

For around some, the story goes, for about 22 million dollars, which is, I imagine, one of the reasons why people then flock to you for advice about starting a business "oh my god, you started this business and you had this huge plan..." When I went on Twitter and I said "hey, I'm talking to Derek, does anybody have any questions?" and somebody said: "well how extensive was his business plan when he started?" and I just laughed after having read your book.

Derek:

Awesome.

Pam:

Because how extensive was your business plan when you started?

Derek:

About as extensive as my grocery list is today. No, there was no business plan.

It's funny, you know, the thing about like once you get some success everybody wants to know your thoughts, I feel little bit like... on Tuesday I'm some dork that nobody cares about my thoughts, that I win the lottery and the next day people know my thoughts on world hunger or whatever, you know? But no, CD Baby is really not a business plan it.

To understand the context: I didn't want to start a business, because I was a full-time musician. Like I was living my dream as a musician I was making my living playing gigs and producing people's records and playing on people's records. I even bought my house in Woodstock New York with the money of I made touring. Like, this is it. To me this was like the culmination of a musician's dream come true. So when I started this little hobby to help my friends sell their CDs it was really supposed to be something I do like an hour a day. I didn't want to get in the way of my music career. So as it grew, I actually not only did I have a plan for... I mean, not only did I not have a plan for growth, I actively didn't want it to grow. I wanted it to stay small so wouldn't get in the way of my music. So it was kind of a non-plan or even an anti-plan. It's weird when people ask "what did you do to grow your business?" it's like "I didn't, it just grew anyway..."

Pam:

Well, part of the theme that I really read in it, because, you're right, so much of what you are committed, as you tell the story in the book, in the early stages because you are not looking at it as a business or "how can I turn a quick buck", was a pretty fierce loyalty toward other musicians that you were doing the work for, it seemed like to me, you can tell me if this is true or not from your perspective, but really real focus on the simplicity of what "I'm really trying to do and how can I just make this absolutely work for the musicians for whom I am doing this?"

Derek:

Yeah... it feels a little bit like... in hindsight I can say "oh yeah that's the tao of business." I feel a little bit like Forrest Gump, meeting like it was just stumbling through this thing I can't take much credit, I'm not a brilliant entrepreneur or anything like that. But in 10 years of doing this I did learn some things and I do feel that... one thing that I learned is by staying, as you say, like fiercely focused on just helping people and that's priority number one, and like making money is second. I feel that it actually helps your business more than if making money was your number one priority. Do you know what I mean? That's why... it kind of feels like this, the tao of business works like by... by focusing on helping people and doing the right thing at all decisions like every little minute decision you have during the day, always do the thing that's selfless to you and helpful to others, but by doing that it's actually the best thing you can do for your business.

Pam:

Exactly, because that was the kind of relationship that you were developing with your customers, who were very excited to spread the word and share and, as you said, it wasn't based on listening to some management guru telling you to be customer focused...

Derek:

Right. Right.

Pam:

It because it felt like it was the right thing and, I have to say, I was... I was really smiling as I was reading a number of times throughout the book, it actually made me smile quite a bit, you notice the theme in the podcast is a lot of smiling, but one of the things he talked about I believe in so strongly and I believe it to my core for myself and my business, and I wish it for every one of my clients, is that if you're not enjoying growing your business and doing your business while you are doing it, what is the point? And over and over in the book you kept saying a huge reason to be in business is to be happy while you're doing it. And for you in many cases it was learning how to do stuff, sitting in a room and coding, even when that wasn't necessarily your strong suit, but you were kind of fascinated by how to make it happen.

Derek:

Yeah. Sorry if this sounds goofy, but I mean... it applies to so many things in life, it's a how many of us kind of slog off to, like, somebody's birthday party that we don't really want to go to but we think we should, and I just have this philosophy in life of, I call it "hell yeah or no", which means that if... don't deliver trying to decide between "uh maybe or uh maybe not", I kind of think of it more black-and-white, like if you're feeling "hell yeah!' about something, like "absolutely yes I want to do this, that would be awesome!" then you do it. But if you feeling anything less than then they just don't. Like, you don't have to do anything. So it's like even if there's some birthday party that you don't really want to go to then just don't do it.

And if you started a business and somebody's telling you that you really need to have like a little privacy policy and legalese and terms and conditions and privacy policy on your site, it's like, no! You don't have to do that, you don't have to do anything you don't wanna to do. And so I think you gotta keep applying that during many little times in life. Your business doesn't have to be like a normal business just as that's what other people do that someone is telling you should do. You know, there's no like invisible jury of MBAs that you need to impress, you can just do whatever the hell makes you happy.

Pam:

Right, I was coached by Martha Beck, who's a woman who's done a lot of writing about... "your essential self and your social self" were the terms that she uses. So your essential self is really being in touch with that voice that says "it's okay to do whatever the hell you want", right? Despite the imaginary set of MBAs. With a lot of my audience for Escape from Cubicle Nation the social self has been developed so strongly especially by... for many people living in a corporate environment for many many years, where you're conditioned, by virtue of corporate life to absolutely shut down your essential self voice. So I know for... maybe because of having connection with owning being a musician, not necessarily doing it for money, and maybe by virtue of design who you are a human being, I'm not sure. That sounds like that essential self voice was was strong and you listen to it. Where you supported in that, I'm curious, by a friend's, family, others, or did you get resistance?

Derek:

I think no matter what choices you make in life, somebody is gonna be there telling you that you're wrong... no matter what it is. So maybe some of your listeners are fiercely focused on money and if that's, like, their focus then I say "great, okay cool!", then just admit it. I think whatever it is: admit it. So here's another example, like, you know if you've ever been to New York City you see the word "Trump" a hundred times... all around town it's like Trump Plaza, Trump towers, Trump something then Trump this. I even drove two hours upstate from New York City and in the middle of nowhere, all of a sudden there is the Donald J. Trump State Park. And at first I was like "what's with this guy?", like there have been plenty of real estate billionaires before him that didn't feel the need to stamp their name all over everything, "what's with this guy?" But then I realized, like "ok hold on", at some point he must've realized that what makes him happy, or what he wants is to have his name on things. So, he'll probably even lose money in a deal to make sure that he the one that gets his name on it. Like he could have let Pepsi put their name on it and make more money, but no he wants his name on it and he'll make less money... and at least he's kind of optimized for that, right?

So, say, if one of your listeners here is really focussed on money, fine, then just admit it and optimize for it. And if that's what makes you happy then, of course, people are going to tell you that you're wrong and that you shouldn't do that, but no, if that's what you want... you can optimize for it. So for me, my choice was freedom, that I always made the choice that gave me more freedom. At any point, like multiple times a day, when deciding how to setup my business, where to set it up, how to set it up, like the internals and what not. It was always like, which decision would give me more freedom to do whatever the hell I want, whenever I want, and disappear for months if I want or sit there all day and read a book if I want. That was my choice, and so along the way, of course, there are people telling me that I could be doing it better, I could be optimizing my business for profitability and what's my growth percentage of return based on something something per square foot... and I'd say "I don't care", like, I'm happy I'm doing it this way. So I think it came more from that, it just made me realize early on, like, the reason I'm doing this is: for one it's a hobby, it makes me happy and it just happened to grow larger than I expected, but for two, I make my decisions based on freedom. So...

Pam:

Definitely. So in... interestingly enough I find a lot of people... some are driven by money, but most... that at least... are folks and friends around my site, it really is more about meaning, but they think that they should be focussed on all of these other elements. So it's refreshing, it's refreshing to hear that voice, and I... we're so happy to hear somebody else besides myself trumpet the same philosophy! Phew, you helped me out with that.

But... so... given some of the different stages of growth, you did start out doing everything yourself as you described as the business grew, and perhaps because of having the values of freedom and being happy, being stretched by working so hard and so many hours, you did do specific things in order to delegate a lot more work, bring a great team of people in.. you know classic things that you do when you're really trying to grow your business and get out of the day-to-day details. How did you go through that experience, and what were some of the challenges and benefits of that?

Derek:

Hmm I think that was one of the hardest things, especially for a small business founder/entrepreneur, if you're used to do everything yourself, learning to delegate is so damn hard. Because it's learning to let go a bit. You know, you're used to kind of being a perfectionist and doing everything yourself and all of a sudden letting somebody else do it, and not micromanaging, and just letting them do it, you really gotta like kinda step back and trust. To me the magic words were "good enough". It's like "yes I could step in and maybe with hours of work do it a little better than them, but you know what? Somebody else is doing it and it's good enough. So just let it go."

The stuff I did that was more systematized is, I realized around my fourth year after starting the company that, I was trapped. Talk about making the freedom choice, I was trapped. There were so many things in the company that didn't run, unless I was there. If I went away for a week everything fell to pieces, you know. So realizing I was trapped, and always wanting to make the freedom choice, I found a way... I just started teaching everybody else, not one person, but I taught everybody how to do everything I was doing. So that if anything was still my responsibility, say like, even the bookkeeping or going into the bank account and doing the payroll or something, I'd say ok, this sucks that this is still a me-only kind of thing, so let me show everybody how to do it. So I would actually gather around like a few people and say "let me show you how to do this stuff" and I'd walk them through it and then I'd make it somebody's job to document it. I'd say "ok, write down everything I'm telling you, ok?" And somebody who'd watch says "I do it" and they document it, and I'd even make sure that you communicate the philosophies behind what you're doing, so that instead of having to dictate every tiny little decision, if you're dictating the philosophies behind what you're doing, like "this is why we do this, this is why I do this, this is why I respond to emails in this fashion" then it helps the people that you're teaching kind of, make decisions along those lines by themselves in the future. So, I just kind of kept doing that and kept doing that, until eventually I wasn't needed at all for the operation of my company. The whole company just ran without me.

And that's, honestly, that's when the business really started to take off. Because once I was free to put my time into improving the business, instead of just maintaining it, things really improved. So what I did around this time just as a symbolic move, my girlfriend had moved to Los Angeles, even though the business was up in Portland, Oregon, so just kind of symbolically I was like "you know what, I think I'm really not needed to the day-to-day things here, I'm gonna prove it." So I said "all right everybody, moving to LA... good luck! Let me know if you need help." And honestly for the next four years the business quadrupled in size while I was gone. It went from, like, twenty million in sales to eighty million in sales while I was gone in those four years, and went from twenty employees to eighty employees. And that was all while I was in Los Angeles, and so, granted I was still involved in the company, I was available by email and phone, but most of what I was doing was spending my time programming and improving the new services that the site would offer. Whereas the actual operations of the existing business were taken care of by everybody else.

Pam:

Yeah, kinda humbling, isn't it? You know you can worry a lot: "oh my god what's gonna happen when I leave", and then you're like "wow... it actually is better when I'm not around!"

Derek:

It was so awesome, and especially in Los Angeles which is such a, kind of "everybody is a freelancer" kind of town. So many people in LA were saying: "...but, who's running your business?" And I'd say "well... my business runs my business."

"Well no, who's in charge up there?"

I'd say "it's not any one person, I made it a system that works... so, even if anybody up there would just quit tomorrow, anybody else could step into their shoes, it just works." There's... if, if you're interested in this stuff there's an amazing book on it called E-Myth Revisited by, I think it's Michael Gerber...

Pam:

Michael Gerber, yeah?

Derek:

Yeah, brilliant book on how to get into this systematized kind of mindset of turning your business into a system instead of having it just be something that requires your own two hands.

Pam:

Yeah, and what I found in my own experience with my own business and with a lot of clients is it's often a point where then you realize that you really wanna put that in place. As you said, when you started, it's what I finally just call your side-hustle, right, just something to do, kinda to be helpful and sell your own... sell your own things. But then you do get to a stage where you realize this is really worth it. And it's growing and I wanna maintain the value on freedom. And happiness.

Derek:

Yeah...

Pam:

So... so when and why did you decide to sell it?

Derek:

Hahaa! So after ten years I was feeling... done. It mostly started with the fact that I had rewritten... I rewrote the software start to finish. Over ten years of CD Baby I didn't really know how to program when I began, but over ten years I had learned a lot about programming. But the computer code behind CD Baby was like a big spaghetti-mess, right? So after ten years I said ok, give me a clean slate, I'm going to re-write this software start to finish. And I did. And Pam, it is like the most beautiful thing I have ever done, it was the culmination of everything I have ever learned with programming. It was so well done, it was so beautiful. And I did it! So I guess that was, let me think... a little before christmas 2007, so ten years after starting the company. It was launched with this new version 2.0 code, and it worked amazingly well. And we had this great christmas season, everything went really well. And so then it was January, and I was kind of feeling like "so now what?" ...and I kinda would... could try to invent things that the business could do... ok, maybe now we will be multi-currency, or set up different warehouses around the world, but everything I thought of I felt a little kind of... "ugh..." you know, like "ugh..."

That'd be a lot of work and I'm not that excited about that and then... I thought about it and I realized what had happened was kind of like a painter of a sculptor that works or a single painting or a sculpture for years, I think I had kind of put my final brushstroke on it. And I just kind of sat back and looked at everything that that business was, and I was feeling done. I was like "yeah, that's it." Like, I have no future vision for this. This is kind of beyond anything I ever thought it would be. So you mentioned Seth Godin at the beginning of this call, and now my publisher, he's always been an occasional mentor to me, so I called him up and I explained the situation and he said "if you care, you need to sell." Meaning, like, if you're feeling done with your business... your clients, those musicians are not feeling done. And you're actually doing them a disservice by remaining at the helm of this company. You should sell, if you care about them. And I was like "wooow I never thought I would sell my company." I thought this was something I was gonna do until I die. But... yeah... I just kind of updated my mindset and I realized that... yeah I was done. It was time to let go. And that is hard! Selling your company is kind of like graduating and getting a divorce at the same time.

Pam:

I was just thinking about the divorce analogy and like... letting your kid go after college and like every heart-wrenching thing that could happen in someone's life.

Derek:

Yeah, it is like all that wrapped into one, it is sooo tough. And... so... you know, the stuff I won't get into too much, 'cause it just gets really ugly, so like the last year and a half I was at CD Baby, I really... got very bad at managing people. Let's just say I think the culture of the company changed in that last kind of year and a half while I was away. In fact the four years I was down in Los Angeles, everything was fine. It was actually after I came back, and then somewhere around there it's like the culture of the company, internally, just got so... bad that it was really irreversible, like a couple, what do you call it, rotten eggs spoiled the basket, the barrel or whatever the saying is. And the culture of the company internally had gotten so bad and so far from what I wanted it to be, that I felt that my options were either to kind of like fire everybody and start all over again, or just kind of walk away. And...

So in a way it's like, selling the company was... definitely a bit of a failure on my part. It was like things got so bad I had to sell. So it was kind of bittersweet when people would say congratulations afterward. I'm like "no!" Like it's not congratulations. I had to sell my baby, like this is... this is bad! But... you know, it's just... I think anybody at a certain point when you're... no matter what endeavor you've taken on, at a certain point you'll feel when it's time to walk away. Like you'll get that feeling of when you're done, whether it's like you hate going into the office, even though it's your office... or you just have no future vision left for it, or you're just feeling like it's too tough and you see no way out and you don't really care about a way out. At a certain point you just know that you're done. And then you gotta have the courage to admit that you're done, and let somebody else take it. And kind of like selling your house, it's not... just 'cause you lived there for ten years doesn't mean that it's only yours. It's like somebody else can live here now and make it their dream house.

Pam:

Well, and what's interesting is listening to you talk about that is... there are kind of two things happening: one really was an internal process for you as a human, right? With your path and what you wanted to do in the world and deciding that you were ready for new things, and you weren't as excited 'cause you were through with the work. And then sometimes, conveniently and annoyingly, you know, situations come up that can help you along in that decision, which sounds like it was a hard help, you know, where the culture was totally falling apart. And I could see where that... you could feel like, you know, not wanting to walk away from it in that particular set of conditions. But I just find it more common... more common than not it's hard to get that perfect configuration, where everything is just perfect the ways that you want it, you know, I know at different stages of my life similar things have happened, you know, I've walked away when I didn't feel like it was the perfect kind of wrap up, but I think that's an illusion. If that makes you feel any better.

Derek:

Yeah. Yeah, true.

Pam:

So, and what... what are you doing now? What have you been doing since?

Derek:

Hahahaa! Well the... literally the day after I sold CD Baby...actually no! The day after I had an agreement to sell CD Baby, like eight months before it was done, but the next day, literally, I set up my next company called MuckWork. I registered the domains, I incorporated... set up the corporation, spent a few months programming and coding, I even, like, hired a manager. And a few months into it I said: "what the hell am I doing?" I was supposed to, like... I wanted to change the trajectory of my life, I didn't wanna just take off the CD Baby title on my forehead and put on the MuckWork title. Like, nothing's gonna change in my life if I just keep on like this. So I forced myself to stop, for the first time in my life. I've always just been a workaholic. For the first time in my life I made myself stop and decided to take a sabbatical.

And I wander around the world, I learned how to scuba dive in an arctic lake in Iceland, I spent a month going around India, I... what else did I do? I don't know, moved to New York City, met this amazing woman, we got married, we... on our second date I said: "how do you like to live in the rest of the world for the rest of your life?", and she said "ok!", and so two days after we got married we grabbed a carry-on bag each and spent a year going around the world looking for a new country to call home. And we went down to Brazil and up to Sweden and lot's of places in between and we ended up in Singapore. So, moved to Singapore a few months ago and... in the meantime I... in these couple of years of sabbatical, I read pretty much every business and psychology book I'd always wanted to read and... not just read, but really took very detailed notes.

It's... something that I love is to really internalize what I'm reading. To not just quickly read it and go "eh it was good", but to, like, no... really get the wisdom and knowledge out of this and memorize it. So, if any of your listeners go to my website, there's a link at the top that says "Books", and actually I've posted my full notes from every book I've read. So you kinda get in my cliff notes, well I could say the Derek's notes version. And, yeah now three years later, after three years of sabbatical, I finally set up MuckWork again, so right now I'm programming... doing the programming behind my next company called MuckWork.

Pam:

That's awesome, well now it all makes sense, TheGirlPie on Twitter said about you "he's swell, ask if his terrific book summary annotations will increase frequency, I'd pay for a subscription." So maybe... maybe you have a new little side-hustle when you set up MuckWork. Well there's so many great stories including how you made a 3.3 million dollar mistake in your business and a lot of other really great anecdotes, and just really grounded wise advice and anti-advice, as you said before in the book. So I really really enjoyed it. I think folks will as well. It's an easy thing to read, a perfect summer beach read, if you're heading off somewhere where it's warm and tropical. And if you wanna find Derek, you can find him at sive.rs, that's SIVERS.ORG and his Brand new book "Anything you Want" is coming out today from the Domino Project, available on Amazon. So Derek, thank you so much for taking the time to talk with me today, I really enjoyed it and hope we can cross paths sometimes soon.

Derek:

Yeah, thanks Pam, I appreciate it.

Pam:

Thanks.