Derek Sivers

Interviews → New Man with Tripp Lanier

Capitalism with Heart and The Tao of Business

Download: audio (mp3)

Link: http://www.thenewmanpodcast.com/2009/10/tnm-081-derek-sivers-capitalism-with-heart-and-the-tao-of-business/


Tripp:

What I get about you, Derek, is that you created this massive business. I know that you just sold it for millions of dollars, but you created this massive business just by starting out helping people and doing favors. Is that right?

Derek:

Yeah. I think its kind of the download business, those people who get into something just to make money or they’re constantly trying really hard to make money and saying “How can I make some money doing this?”. Often it ends up not working out so well. Because it’s like there are parts in the wrong place. Because it’s not the right question they should be asking.

I can say this in hindsight because there were many thing I tried to do in the 90’s that were more about making money that went OK, but nothing that really snowballed and went extremely well. Then at the end of ‘97, I just put together a little website just to sell my own CD because times were different then. There was no Paypal, Amazon only sold books, and there was literally nowhere to sell music if you were an independent musician without a record deal.

So I just built this little thing just for myself. After a few of my musician friends said “Hey, man! Could I use that thing?”. “I guess so. Sure.” It was just really a hobby. And I started helping out a few of my friends, like letting a few friends sell their CD through this thing I built for myself. Then pretty soon friends of friends started calling saying “Hey, man. My friend Dave said you could sell my CD”. And I say: “Yeah, no problem”. So it’s really just literally doing this as a favor. It wasn’t meant to be a business.

But I think that was important, because the DNA of the company was just about helping musicians. It was just something I was doing for free at first, and after few months I said I better start charging something. So I started charging a few dollars. But up until then it was really just a favor I was doing for friends, and the spirit of that just stayed throughout. I think that’s why I did so well.

Tripp:

I was just curious because i know that you were a musician. Did you go get an MBA? There’s a lot of people thinking “If I’m going to build a business I need to go and do a bunch of stuff first. I need to climb a certain mountain of training” and all those kind of stuff. Is that true for you at all?

Derek:

God, no. Let’s use an example from the “New Man” description I saw on your site where the very first thing says: “Who listens to New Man? Guys who want to attract right one without playing pick up artist games or seduction tricks”. So, you probably know that sometimes learning too much can be harmful. If you’ve read The Game, and then this and that, and The Art of Seduction, and all of these books, by the time you get into a conversation or something, you might just be paralyzed trying to remember everything you’ve learned. And it can work against you. Or if somebody is just like cool, and natural, and a charming person, it can work in their favor.

I have an opinion about MBA. Sometimes, you can think you can be so lost in years of MBA crap that you’ve forgotten what it was really all about. You’ve learned so many details that, like in that phrase “the forest from the tress”, you forget what it really is about. I never learned anything about traditional-business-cool-stuff. Yes, I’ve read some books about business as you can see on my website. A lot of it is business learning, but it’s different from that MBA stuff. So I don’t really know about financial statement or a profit loss or balance sheet or whatever, but I think I do understand the general concept of doing something that helps people without it being clouded by too much MBA type learning.

Tripp:

Since you weren’t focusing on like the business-speak and all of that kind of stuff. What were you focusing on?

Derek:

Helping musicians. And that’s it.

Tripp:

Just staying in that place of “I’m going to help musicians”, “what are musicians need and I’m gonna provide whatever they need?”

Derek:

Exactly, end of thought. And every decision in the company came down to that: Does this help musicians?

Let’s just pick a tiny little day-to-day example. Say you’ve got a phone system, and one thing you can do is have all incoming call routed to something that says: “Thank you for your call. Your call is important to us. Please continue to hold”. When it really comes down to it: Is that benefiting them? Or is that just benefiting you? And if its benefiting you but not them, don’t do it.

Every decision in your company should be made by whether it is benefiting. Is it really the best possible thing for your customers for your clients or is it some kind of like half-assed compromise you’re trying to make. So instead, the answer for the phone system is NO. The best thing that could possibly happen for a client is when they dial our number: within the first few seconds, ring, a person picks up and says hello.

Tripp:

What a noble idea!

Derek:

And then it’s just these stupid little things like that add up. When you email us, a real person emails you back within a few hours, calls you by name, understands your situation, and not make you reference your client id number. Believe it or not, all of those little things added up on top of each other really can make a massive difference between your company and what everybody else is doing. So I think you can get quite far in business just by being considerate and using that simple rule to guide every business decision.

Tripp:

Did other business owners and other people you came across on your path think you were crazy by just following this notion? Because so many businesses are all focused on the bottom line, they are all focused on getting money and doing whatever it takes to get money. Are you crazy in their eyes?

Derek:

I hope so. The reason I took a couple of minutes to describe how CD BABY started is that, that was the DNA of the company. I was making a full time living as a musician. I was touring and I was producing people’s records. That was my full-time living. I bought a house in Woodstock with the money I made touring. I was not looking to stop being a musician. CD BABY was just a favor. I wasn’t trying to make any money doing it. I didn’t even want to make money doing it because that would have gotten in the way of my music career.

I call it the “Tao of Business” where if your intention is just to help people and you keep focused on that intention, then you’ll usually do better in business than somebody who is focused on the money.

Tripp:

I get about you that you’ve done a lot of personal development at least through the books that I see listed on your site. How much of that personal development influenced how you did business and vise versa?

Derek:

There’s business mindset and there’s personal mindset. Business mindset would be something like who comes before and after your company. CD BABY, for example, is an online seller of CDs; that was the original business model. So I had to think of what businesses come before that, like what businesses would my clients be using before they came to CD BABY, before they made an album --- CD manufacturing, recording studios, etc. And what companies would they be using after they released the CD and sell it through me --- promoters, attorneys, other like promotion-type companies. What I did was I worked out partnerships with the companies that come before and after. So that’s an example of a mindset that I learned from a business book.

Tripp:

And in that place, you’re putting yourself in the position of your customer and be like: “What does this guy need? What is going help him be a better artist?”

Derek:

Or how can I help more? How can I help make their lives easier?

But then on the personal mindset (something that I wouldn’t say this is necessarily business), would be something like when I learned a really important lesson. Repeatedly, it took me years to get that nothing in life is good or bad. It’s all just what you make it. Every thing, every event is just neutral; and it can only interpreted in different ways. Even if you take something that you think is as universally negative as death. In some cultures when somebody dies, they celebrate. Because they believe so strongly in after life that when somebody dies, it’s a huge celebration. In my personal life, it is that no matter what happens to me, I can ask myself the question: “okay, what’s great about this?” And it took years of doing that intentionally before it just became absolutely automatic second nature.

I think about the comparison with a 3-year old trying to catch a ball. At first they really have to squint and focus, and you throw a little curve ball their way, and they have to focus on their hands clap at the wrong time trying to coordinate their hands just to meet a ball coming their direction. Really takes a work when your 3yrs old. Now we don’t even think about it, I could just like be standing in a room with you and say: “ Yo, Tripp! ” and throw something your way and you grab it with your hand without even looking. So I think about that with the stuff that you can learn from like personal development-type books. Sometimes it’s awkward at first, sometimes you really have to do it very intentionally for even a couple of years. But then you noticed that the years passed and like “Oh, look! I’ve really internalized that”.

Tripp:

I’d love to hear more about how that practice has impacted you? Like why would a guy go through the time it takes to kind of cultivate that ability to see the gift and whatever comes along. How was that impacted you?

Derek:

That changed my entire outlook on the world. Nothing gets me down, even the most confident Mofo I know. Sometimes, all I have is confidence. There have been times in my life where everything was just going wrong. Like everything, all at once, was crushing down upon me and anybody else in that position would have been devastated. Now I would just laugh and say: “Alright. Well, if I can handle this, I can handle anything”. And just trying to say like: “Okay what’s good about this? Okay. Well, next time I get married I remember to do a plan. Next time I’m thinking about doing an employee compensation plan, make sure it’s based on things they actually they do. Next time a contractor says he’s going to take a month to renovate my apartment, get it in writing. And next time I sign a piece of paper, remember to read it first.”

There were all these lessons that I had to learn the hard way, but with all these I was just like “Okay, what’s good about this?” It just changed my entire life. These are just tiny examples but there’s lots of stuff that I’ve learned from books, even more recently in the last couple of years. There are books like “Stumbling on Happiness” or “A Paradox of Choice”. Both of those books I just read them in the last couple of years and just gave me these profound insights on what it means to make decisions.  

Tripp:

It seems like we have a choice so the shit hits the fan and we have a choice on that moment. I can kind of collapse and go on like shitville get rolled over by this or I can choose to see the silver lining and find a gift in this. Knowing that there’s gonna be a gift and this has me less scared to try things out, less scared to fail whatever that might mean. That’s going to affect my relationship, that’s going to affect whether I want to choose to kind of create a business or whatever. Coz so many people get stuck in the notion that something bad will happen or I will fail and re-orienting yourself to that possibility is huge and your saying that’s something we can learn.

Derek:

Yeah, Absolutely. We’ll make a comparison with girls, romance, dating, or whatever you want to call it. Sometimes people have built up the idea of dating or love or romance so much in their head that they just get paralyzed, and they are too scared to go talk to any girl they are attracted to. But then if you take a kind of approach like “whatever got to lose” or “it’s no big deal” or “hey whatever it’s just one other person”, all of a sudden you get this confidence to just talk to anybody. So what if that cute girl on the grocery store says like: “I’m sorry, I don’t want to talk to you” and you’re like “Alright whatever”. It’s not the end of the world.

Tripp:

Yeah, it’s not the end of the world.

Derek:

It’s the same thing with business. I think sometimes people build up business so much in their head. And again, maybe, perhaps this is the downside of an MBA. You spent years studying and you spent so much money on tuition, you want to make sure you get it right: “Damn, this is do or die”. And truth is that attitude can hurt you.

So if you approach business more light-heartedly and playfully and with an attitude of lets-see-what-happens-if: “Let’s see what happens if I email all my fans on my fans mailing list and tell them not to come to the gig next Thursday because it’s going to blow their mind”, “Let’s see what happens if I take this stupid little idea that my friends think wou1ld go well and if I give myself 10 days to start my new business”. Just get more light-hearted about it and just get into that attitude of “lets see what happens if”, or “there’s nothing to lose”, and my favorite one of course is “whatever scares you, go do it”.

Tripp:

Absolutely. We hear it all the time on the show for various guest, and it basically boils down to: i) stay curious, ii) like what would happen, and iii) stay playful. Like it matters and your playing big, but it’s still play. It’s still exploration about what’s possible. Man, we could die anytime so why not enjoy it, why not really go for it, and explore and turn every leaf over.

Derek:

Yeah.

Tripp:

Excellent. Let’s say a guy’s at home and he’s kind of paralyzed. Maybe he’s in this place of I-couldn’t-possibly-try-that or he’s in that place where he’s not playful, he’s not curious. Maybe he wants to start a business or he’s thinking about going back to school or making some change in his life. What’s one thing that he could do today to kind of get some traction?

Derek:

I have a lot to say about this. Instead of giving a short answer to the something to do today I have to give a longer answer to that. I had a lot of people tell me their business idea. Say for example let’s pretend that somebody wants to do a music recommendation service. This is a real example that happened to me just a couple of months ago. This music conference, and this guys comes up to me and his like: “Oh man, I’ve had this idea for couple of years. I’m looking for investors man because I need 20 million dollars to get this business up and going. Here’s what it is man: it’s a music recommendation service where people create profiles, and they will upload all their favorite music, and then they will analyze that music, then they will link to their friends who will analyze that, but now they will also start to enter all of the concerts they’ve gone to, and it will show them other people who’ve gone to or came to this concerts, and people upload thousands, and the musicians can create profiles, and then it links to the musicians that we think they like, and it’s based on the lyrics and not just that but when they listen to the music…”.

This guy had this long, long, long idea about this ultimate music recommendation service. That’s why he felt it’s going to take 2 million dollars and 2 years to make this thing. And I tried not to laugh but I said “Alright then. So recommending music is your passion, right?”.

And he’s like “Oh yeah man and I thinks that’s what’s key man. It’s all about music recommendation that’s like that’s how people discover a music and that’s how we all get turned on a music is by people recommending music. So yeah man I’m passionate about music recommendation.”

“Okay, so why don’t you start recommending music this week?” And he said “Huh?”

I said “How bout this man, how about you just give a few friends your phone number and say call me if you want me to recommend some music to you. And when your friend calls and you can say, okay what music do you like? And they’ll say well I like Bjorc and I like Tori Amos, and then you can tell them well then i think you like these 3 and check them out and you email the links and your friend goes like Thanks. And then you write down on the spread sheet what you recommended and why. And then the next person calls and you do this again. You can do this with a pen and a piece of paper you don’t need a website. Just tell people your phone number.” He said okay.

That’s what I called Version 0.1 of your business. I think most people have a business idea that they want to do, and they have this vision in their head like the big long one I described. Like in software version terms , I can think of Version 1 and Version 2. What you described to me is Version Infinity. You just described everything a software will ever do, you described what you are going to be doing years from now. But before you can do that you need to do Version 0.1, which is to get to the essential little core and just start. Because so many times, when you launch it, you find out that the world is not into it. And it’s better to find it out fast and cheap instead of spending 2 years of your life and 2 million dollars and launching something and then finding out that the world is not interested.

I always say that when you have an idea for a business, give yourself a 10-day deadline to start it. Just say you have an idea on a Monday and you think: “Oh, that would be cool”. And maybe your run it with some of your friends, and they say “Oh man, that would be awesome”. Give yourself 10 days to get it started. Even if it is just piece of paper and giving friends your number or an email. And the you can just build on that. So Version 0.1 was be my cellphone and a piece of paper. Version 0.2 is I’m going to enter all of these into a spreadsheet. Now you got a momentum.

Tripp:

And you’re making some mistakes along the way and you learn some valuable lessons from it. You couldn’t possibly anticipate that you could ever know from the get go.

Derek:

Exactly. there are two ways to bring an idea to reality. Either you can hide out and spend a year in development in secret with dozens of programmers, and spend a lot of money, and whoa, release your brilliant invention to the world. We’ll call that the “Segue”. You know that standing-up moving device called the “Segue”. I took years and years to development, and it was done completely in secret because the inventor felt that it was gong to change the whole world. And when it was announced, the world kind of laughed. If he could have launched a Version 0.1, instead of hiding out in secret all that time, he would have probably gotten a nice early warning from real people going: “Hey man it’s stupid”.

I like this idea of launching Version 0.1, and get it out there and get started. Imagine that there are 2 different people that want to do music recommendations service starting in August 2009. One of them goes into hiding for the whole year to development this thing in secret, and the other one starts in 10 days. After a year, I will bet everything I’ve got that the guy out there doing weekly improvements and dealing with real people for the past year, will be so far ahead of the person who’s been sitting in hiding and developing it for a year. Its just no comparison.

The person who’s been dealing with clients, making constant improvements based on customer feedback and got their idea out there quick cheap and easy will be so much further along than someone who sites in hiding. That is my long answer to your question, something that your listeners can do today: take whatever business idea you’re psyched about and give yourself a 10-day deadline to just make a version 0.1. Even if its just in a piece of paper or phone number, or even if its like an email to 10 friends.

With it of course also is an understanding that you don’t need a million customers at the beginning. You can have one customer. So take this little idea, your music recommendation service or whatever your thing may be and make one person happy. Make sure that they’re impressed. And once your 1st customer is impressed then contact your second customer and make them happy. Until your first 2 customers are happy, don’t even try to get your third customer. First impress those first 2.

If you found something that you love doing, and you’re doing it because you love it, not just for the money. And if you’re able to do it at least without losing money, like even if your only making a $100 a month doing it, then you can just keep doing it with out worrying that it is not a massive success. Just keep making people happy. It builds upon itself. And eventually its starts snowballing or that it just gets undeniable.

Tripp:

Excellent. I just love drilling it down to making people happy. Helping them out, and if they find it valuable they’ll pay. They’ll help you make it sustainable and make it moving along

Derek:

And they’ll tell their friends about it because they like it, not because they’re trying to do you a favor. You would do something that is making even a few people so happy that they’re telling their friends, like: “Oh, my God. This guy Tripp just started this thing. You got to hear this podcast. Oh, my God. This is amazing. You have to hear this.” Doing it not as a favor to you but because they really think their friends will love it.

And if that is still not happening yet, you should really be focusing more of your time on improving and developing, not marketing. Because people are not freaking out of what your doing yet, any marketing efforts will be wasted. You need to focus first on getting your initial fans/ customers to freak out.