On Being An Entrepreneur – Ariel Hyatt Interviews Derek Sivers
Being Derek Sivers’ best friend is a blessing.
He’s my friend who:
Helped me create Cyber PR® In fact the design of the Cyber PR® campaigns and software were his idea.
Always cheers me up and talks me through whenever I think that I can’t do something
Is the first call on my birthday
This list can go on for pages but I will stop here and say
Congratulations Derek on your new book!
“Anything You Want – 40 Lessons for a New Kind of Entrepreneur”
And speaking of Entrepreneur, I interviewed him in depth on just this subject… It’s long but it is a wonderful deep dive into all things Derek…
See the book announcement here: http://sivers.org/ayw
And the book page here: http://sivers.org/a
Ariel Hyatt & Derek Sivers… On Being An Entrepreneur
Derek Sivers. Derek founded CD Baby in 1997, and he invented what today is the distribution paradigm model for all independent musicians. Before CD Baby there was no way for independent musicians to get distribution without a record deal. Derek left CD Baby in 2008 to start a new business to help musicians called MuckWork. He had reached a point where he felt like CD Baby could function without him and he had this new idea that he could not hold at bay. Derek often speaks to musicians about the state of the music business, and how to sell and market themselves. This is a rare interview because it shows Derek’s business-owner side and it addresses thoughts for people who want to get into the business and not musicians.
Entrepreneurs are by definition problem solvers and Derek had a double-sided good fortune. As a musician he was frustrated by the fact that he could not get distribution for his own CDs. Because of personal experience, he identified a few major problems and he solved them with CD Baby.
Problem #1: Musicians could not get distributed anywhere unless they were signed. He solved this issue it by providing artists with an online distribution channel that allowed artists to accept credit cards
Problem #2: Distributors were only paying their artists 2-4 times a year and holding up valuable capital that was necessary for artists to use to self-fund their own development. Derek created a system that paid artists once a week no matter how many or how fee CDs they had sold which was revolutionary for artists who were not used to getting paid so regularly and fast.
Problem #3: Musicians are inherently lazy.
Ariel: Can you give us the Cliff Note version of CD Baby?
Derek: Actually, I’ve never told anybody this story. There was one artist I knew from Finland who was living in New York City and it wasn’t going well because a few weeks after I charged the cards, his customers started contacting me, saying they didn’t receive his CD. So, I contacted the artist from Finland and he said, “Oh, yeah, sorry, we forgot.” Oh man. Now I was on the hook because he was too busy to be responsible.
So, I said, okay, how about this? I’m glad to continue processing your payments for you, but please mail me your CDs and I’ll take care of the shipping, too. That way, the minute the card is charged, the CD will be sent out. That’s really what turned into CD Baby.
So, I went into this thing thinking it was basically going to be like what Paypal became. Then it turned into a store. So Derek was running a full fledged online record store, and then Steve Jobs asked if we could be a digital distributor to iTunes and I said okay, so then we turned into a distributor.
Even if you look at just CD Baby, it changed course a few times in its history.
Ariel: We have already touched on the CD Baby. So, I wanted to have you not tell that story. What I would love for you to talk about is your new company, MuckWork that you are just now starting.
One classic problem entrepreneurs have is they tend to bore easily so they jump around from one idea to the next sometimes prematurely. A successful entrepreneur needs to understand the concept of reinvention.
The basic premise of great entrepreneurs is they must know how to adapt.
This is a major trait of every person who was interviewed for this book. Only one person I interviewed is doing exactly what he was doing when he started.
Derek: OK. I want to start with a quote. I like this quote because it alludes to adaptability, which is what we are talking about.
“The illiterates of the 21st century will not be those who cannot read and write,
but those who cannot learn, unlearn, and relearn.”
– Alvin Toffler
The MuckWork story so far is: Every musician feels overwhelmed with all the things they should be doing and all of the solutions that are supposedly making their lives easier. Everywhere online they’re told what to do. Dozens of new companies that are all making them useful tools, crop up every single day and but nobody out there is saying, “we’ll do it all for you”.
The mindset of Web 2.0 companies is to find programming solutions for everybody’s problems. So I felt like doing the contrarian’s thing, which is to find people who can operate the implementation of creating solutions to these problems. It satisfies me business-wise because it’s the opposite of what everybody else is doing, but more importantly it’s satisfying the musicians’ need to have somebody take care of this overwhelming stuff for them.
Ariel: So, MuckWork is taking outsourcing to a new level for musicians. I think a lot of times musicians don’t even think about outsourcing. What led you to this?
Derek: Outsourcing is a hard mindset to get into. I first tried it after reading “The Four-Hour Work Week” in summer, 2007, where Tim Ferris describes his experience and his advice for using remote assistants, which in his philosophy frees up your precious time so that you can focus n the activities that make you money. I thought: “This is great; I have to try this.” So I started working with a few companies in India, handing them random tasks to get the experience of what the process of outsourcing is like.
Next, I started noticing that whenever I found myself doing something really uncreative, I’d think, “hmm, couldn’t somebody else do this for me”, so that I could get back to doing more valuable and creative stuff that only I can do. Any time I found myself researching online, for anything, I would stop myself and say, “oh, let me instead spend five minutes describing this task and have somebody else do it for three hours and I can get back to programming, and building my new business.”
After doing this for a few months, I was thrilled with it and I wanted to go tell every musician I knew about this. “This is great. You can have other people do all of your boring stuff like trade marking your band’s name, copywriting your songs, or updating your website.” I realized that the only reason I was able to do this is that I had years of management experience with CD Baby employees. I think most musicians I knew would call up India and say, “hey, I’ve got a gig booked in Chicago on October 10th and St. Louis on October 20th; can you fill in some dates for me in between?” The virtual assistant in Bangalore, India, would say, “I’m sorry, what do you need us to do?” To be successful at outsourcing you have to micro manage and delegate. An outsourcing company is staffed with competent college graduates, and they can do great work for you, but you have to tell them exactly what to do. You can’t just name a vague goal and expect them to fill in the 120 steps in between. You have to give them all 120 steps.
That was the last ingredient to realizing that MuckWork would be really valuable, was to create a remote virtual assistant firm that already had the knowledge to turn musicians’ ambiguous requests into very specific tasks that could be done affordably by people half way around the globe.
Running a small business is all about reinventing and nothing turns out like you thought.
When I started CD Baby, it was really just supposed to function like Paypal, because I started CD Baby before Paypal existed. It was 1997 and I’d spent a lot of money to get a credit card processing machine and a merchant account. It was over $1,000 in setup fees and it was months of red tape and at the end of all that hard work, I had a credit card merchant account so I could accept Visa, MasterCard, AmEx, and Discover. It was so hard that I told some of my friends, if they wanted to use my account they were welcome to. It was never meant to be a store. It was just meant to be a credit card processing backend so that my friends could use my credit card merchant account to accept credit cards. That was the whole point.
To me, the entrepreneur mindset is jumping in to do whatever you think you would have value. Whenever you see somebody needs something or there’s somebody willing to pay for something, you just say yes. This advice applies to everybody graduating with a degree in music business or anybody that wants to get into music business. Being entrepreneurial means you just keep your ears open for opportunities anywhere that you think you can help people and you jump in and help. You can’t just do something casually and expect big results. You don’t get big results without big actions.
Ariel: The definition of an entrepreneur is someone who solves problems for a profit. I this is something to keep in mind when you’re striking out on your own and figuring out what you’re going to do in the music business.
An A&R man doesn’t solve problems these days. That’s a job that’s now in the history books. But I can tell you, from someone who sits behind a desk and takes musicians calls all day long, a booking agent is someone who solves tremendous problems. A manager of online communities is a person who solves problems. There are always new problems cropping up in the music business. What Derek has done with MuckWork is he has realized a new problem: Musicians are overwhelmed with too much stuff.
Derek: Somebody reading this might like to work at a large company within the music business. Even in those situations, It’s important to still think of yourself as an entrepreneur constantly, that you are your own one-person company out to solve problems. If the problem at Warner Music is they need somebody handing their royalty licensing, then you can be a one-person in the company that will handle that for them, but you always have to think of yourself as a problem solver.
What you might be learning at your current job is some knowledge that you’re gaining in order help you go solve other problems in the future. The skills I learned doing the computer programming in the early days of CD Baby have helped me solve other problems for people as my career progressed. As your skills increase, you’re able to solve more problems for more people.
Ariel: What is the most important skill that you’ve learned or you’ve needed to learn in order to have success in your music business career?
Derek: People communication skills are the single most important thing I’ve ever learned.
Read “How to Win Friends and Influence People”. It’s one of the best books ever written on how to be considerate. It really puts you into the mindset of thinking of things from the other person’s point of view, which makes all the difference in the world in how you communicate. You will find that how you communicate means everything and it can either open all the doors or shut all the doors, depending on how well you do it.
When I moved to New York City when I was 20 and got my job at Warner Brothers and until then I’d thought of the music business as this big, giant, intimidating thing, as if record labels were like the Death Star or something. Then once you’re in it, though, you realize that it’s all just people. The people running the promotions department at Sony Records, they were just cool kids like me. They were like 24 years old, running promotions, sending out things. The people doing A&R were actually just like 30-year-old music fans that were actually cool people that you realized you had a lot in common with. As a musician, I found out I had more in common with all these people that make up record labels than I did with my friends from high school that were now managers at the telecom company. It was so enlightening, that day that I realized, oh my god, it’s all just a bunch of young people like me running this entire music industry that used to be so intimidating. Now that I’m in it, it is not intimidating at all. Talk about the How to Win Friends and Influence People thing, once you started of thinking of things from the other person’s point of view, you realize that the woman who works reception at Rolling Stone Magazine is just a woman who lives in Brooklyn, who has a job, who just has to show up and get the phone calls answered and not get fired. Once you realize what it is to be her, then it’s not as hard to call Rolling Stone Magazine. Once you start to realize what it is to be a writer for Rolling Stone and what it is to be them and all of a sudden that’s not intimidating. You realize what it is to be somebody who’s booking a club on Bleeker Street.
Ariel: Do you have a favorite book or movie that you think all people trying to break into the music business should read?
Derek: If you really fancy yourself an entrepreneur, I recommend reading “Think and Grow Rich” by Napoleon Hill. Even though it was written in the 1930s, it’s the foundation for a thousand other self-help books that have come since. It really gets you into that mindset that money is not some finite thing like gold coins, that if you have some that means you took them from somebody else. Money can just be invented out of nothing, because it’s value that you can just invent from doing things. You don’t have to think about how you can get somebody else’s money. It’s about how you can create things that didn’t used to exist the day before and create value out of your imagination. The key word in the title “Think and Grow Rich” is the first word. It’s all about telling you that getting rich isn’t just about being a laborer and moving things around. It’s about thinking, inventing, and creating things in your head.
“How to Win Friends and Influence People” by Dale Carnegie to me just means everything. This entire industry, all of a sudden, is the most un-intimidating, friendly… Maybe not friendly, but at least un-intimidating place once you realize it’s all just people like you that are just doing their jobs. You look at it from their point of view and all of a sudden the entire way that you navigate things is just, with every person you encounter, you think about why are they doing what they’re doing and how can you make their life easier while still getting what you want. Voila, that’s how you navigate your way through the industry.
Ariel: How many times and ways did you have to adapt or adjust your vision, your mission, and your company to stay not only afloat, but on top and one step ahead.
Derek: The first thing that needs to be said is in the original invention of it. There’s a beautiful quote. Let me find it. Seth Godin has been writing some of the best marketing books for years. They’re so digestible and fun and encouraging that anybody reading this who hasn’t read any Seth Godin book yet, should just go get any of them. What’s funny is I’m noticing a theme in his writing for the last five years. Here’s somebody who’s been in the business of marketing for 30 years. He’s noticed that times have changed so in his example, he said in the 1950s you could be a laundry detergent called Tide and you could put your detergent out, get it distributed to the grocery stores, and then run a bunch of advertising telling people to buy Tide and it would work. People would buy Tide because there were only three or four other detergents available. If you were the most recent ad they saw, and they went to the store, they’re only choosing between three, they’ll see yours and choose it. He said, but now, unfortunately, companies still act like it’s the 1950s. Like all you have to do is just put out a product that is decent and works and then run a bunch of advertising and people will come to it. But that thinking couldn’t be more wrong. Now because there are 100 kinds of detergents in the grocery store, almost no amount of advertising that could ever run will make people switch from their existing laundry detergent to yours. Unless your product or service is so amazingly remarkable that friends go tell friends about it. It’s that amazing.
So what I love about his message is that he’s saying that marketing now is really more about your creativity in creating your product or service. He simply says here’s how you start your business. He actually used this as a way of saying how do you sell your book. He said find one person who trusts you and sell him one copy. Does he love it? Is he excited about it? Is he excited enough to tell ten friends because it helps them, not because it helps you? What I love is that it puts the focus on exciting people.
Seth Godin’s message for the last five years has been that marketing is something that is built into your product or service because your very product or service is so remarkably amazing that everybody starts talking about it, so it therefore markets itself.
If it’s not, the big message is you need to go reinvent it until it is. “You’ll know you’re on to something because people will freak out over it. They’ll love it so much they’ll tell everybody. But if nobody’s freaking out about it yet, don’t waste time marketing it. Instead, keep improving it until they are.” That’s the part I love.
If you’re starting a new company, it’s crucial that you just keep your focus on improving your product or service or tweaking it or even radically changing it until you’ve noticed that people are freaking out over it, even if it’s just your first five customers. If they’re just going, “oh my God, this is amazing” Then they go tell their friends about it, not as a favor to you but because their friends are going to freak out about it, too. Then their friends find out about it and say, “This is amazing”. Then you’re on to something. But again, his key point is until that’s happening, don’t spend a dime marketing. Just keep improving or reinventing or whatever it takes. And he also says, some things you just need to completely abandon, if it’s not sticking, know when to quit.
Being a strong entrepreneur also means having the confidence to shut something down, and try a different company A few years into CD Baby, I started AgentBaby, a booking agency. I ran it for two years. It was failing and so I shut it down. I launched Tour Baby. It was meant to be like an ongoing tour for independent musicians, sponsored by multiple companies. I ran that for a couple years; it was a failure, so I shut it down.
It needs to come from this place of abundance where you know that you have lots more ideas and many different things you could do, maybe you’ll keep the name.
Paypal started out as being a mobile phone texting service. You would text money to a friend. It had no intention of making a website. Then people said that they wanted a website and so, okay, keep the same name, almost entirely different business plan. So it might be the same with your small business that you thought was going to be a booking agent but is now actually going to be royalty processing or something.
Ariel: What you’re really talking about here is obviously adaptability and also understanding when it’s time to give up on something. Pushing a boulder up a mountain is not smart. No matter how much you maybe believe in something at first, after you try it and realize it’s not for you or it’s not really going to be a moneymaker or, as you say, sustainable, I think that’s a really important quality.
Derek: So many times somebody will show me their business and want me to get involved and I’ll look at it and it will just be ordinary. It’s like, hey, we provide social networking for musicians and you can upload a profile and tell your friends. I look at this and I think, well, that’s already being… There’s nothing remarkable about that. It’s being done already. So what’s my advice? Shut it down. Stop it immediately. Just pull the plug today. Instead, you need to radically change what you’re doing until… A good idea should be like: You tell somebody the idea for your business and they gasp at how amazing it is. Then you should make a quick alpha version, quick sketch or dry run of the business, and everybody who sees it should be saying, “oh my God, this is amazing”. Until you get to that point, just keep inventing.
The original question you asked was about reinventing your business as you go. I think it’s kind of like being constantly entrepreneurial in the same mindset that I was talking about if somebody asks you if you can do something, say yes and figure out how.
You have to keep your ears open for what your customers are asking for or sometimes it’s the things that they’re not asking for, but all of a sudden you see a gap or a need there. Sometimes they don’t even realize it’s something they need. Nobody asked me to invent CD Baby really. I just noticed that all of my musician friends were not able to accept credit cards and as soon as I was able to, they kind of asked if I could accept credit cards. But then the idea of a store and the distributor just kind of stumbled along by accident. Apparently, it was needed, even though nobody was really asking for it.
Ariel: That’s interesting. No one asked me to invent Cyber PR® (Well you did), but I could see that there was a need online, a real need.
Ariel: What’s the biggest lesson you learned the hard way and what happened?
Derek: Biggest lesson learned the hard way. That you’ll never succeed at something that doesn’t excite you, so you should follow the compass in your gut that points two directions.
The two directions you should be very aware of in everything you do is whether this excites you or drains you. The stuff that excites you, that keeps you up late at night. It’s three in the morning, you should be going to bed, but you’re just excited as hell because you’re still working on this thing, whether it’s writing a song or tweaking the way your album art looks or answering e-mails or whatever it may be. That’s what you should be doing.
Ariel: This is another thing I think entrepreneurs should realize. Just because you think, oh, I’m really interested in booking, then you realize what a booking agency does and then you realize it’s totally not for you. That’s okay. Find something else.
Derek: Two quick accounts. My old musician friends are blown away that I’m not making music anymore, because from ages 14 to 29, I existed only to make music. My fingers were never off the fret board. When we would go to parties, I was the guy who would bring my guitar in the backseat of the car and continue to play while my friends drove. We’d get to the party and I just wore my guitar at all times. You couldn’t pry my fingers from the fret board. So they’re amazed that I’m doing this website now. But I hit this point when I was 29. I’d been making a full-time living as a musician for 12 or 13 years of touring. All of a sudden, I was really enjoying learning how to program in PHP and SQL databases and all this stuff that made CD Baby. It was what was keeping me up all night. It was 2 a.m. and I was like, okay, hold on. The girlfriend would be calling me, “are you still up, come to bed”. Hold on, I’ll be to bed soon. And I’d stay up until 3:30, learning about PHP and SQL and I was so into it that eventually I started turning down gigs to focus on the website.
On the flip side, the most common cases, like the bass player in the band will be the one who is booking the gigs. Okay, I’ll take care of it. Then, after a while, the bass player’s really enjoys booking the gigs and starts booking gigs for a couple other friends. Pretty soon realizes, I think I should just get a different bass player for the band. I’m just going to be the booking agent now.
Dina La Polt is a really successful music attorney in LA that was like a guitarist in a metal rock band and then picked up one of those big, giant, boring books about music business law because they had to work out a deal. She found herself fascinated, just stayed up all night learning how about cross-collateralization and points on contracts and loved it and said, “oh my God, I think I want to do music law”. Good for her.
The lesson is that whatever bores you or drains your energy, someone else somewhere loves doing that. So your goal is to find those people that love doing the things that you hate and as soon as possible stop doing the things that you hate because anything that drains your energy, you will never be successful at. Just stop it immediately.
You should only be doing the things that excite the hell out of you and spending as little time as possible doing the things that drain you. That’s the single hardest lesson I ever learned.
The flipside is what I’ve seen happen far too much is somebody gets into music because they love playing drums, for example. They love having the drum set setup and playing along with Zeppelin records and they love the physical feeling of the drumsticks thumping on the drums. So they decide that they want to be a musician for a living and a well-meaning person says, “oh, well, if you want to be a musician, you should really read this book by Donald Passman” about this business of music written by a lawyer and it’s a 500-page book about negotiating major label contracts. They tell you that you need to read this book if you want to be a musician. Then somebody else says, “well, if you’re going to be a musician, you’ve got to have a good website”. So you’ve got to learn HTML. Then somebody says, “oh, you can’t just learn HTML, you’ve got to learn Flash, because all good websites have Flash.” So now you’ve got to do this. You also have to be a really good networker and you have to be a really good this and you have to be this. You’ve got to be a good booking agent. You’ve got to be so and so. You’ve got to promote yourself.
After a while, this person who just really wants to play drums has been so discouraged by all this stuff that they hate doing, that everybody’s saying they have to do, that they just end up saying, “oh, fuck it” and they get a day job somewhere and they just end up playing drums for a hobby.
Whereas, instead, if that person would have just paid more attention to their compass in their gut and realized what was draining their energy, and found somebody else to do those things that everybody said were important. More importantly, it’s just realizing that only you know what’s best for you. Every well-meaning person, including me and you in this interview, giving people advice or anybody that will ever give you advice means well, but only you know what’s best for you and what excites you. What’s best for you is what excites you. Only you know what that is. So anytime somebody tells you that you should be doing this, should be doing that, you have to be the final judge to say, “okay, but that drains my energy, that bores me, so I just need to find somebody else to do that, because I just love playing drums.”
Ariel: Do you have a mentor in the music business? How did they help you?
Derek: Kimo Williams is a music teacher in Chicago that I ran into just a month before I was starting Berklee College of Music. I was still 17 at the time. He convinced me… Let me back up. I told him I was going to Berklee College of Music and he used to teach there.
He convinced me that the standard pace at Berklee is for chumps. He decided he was going to make me graduate Berkley four-year college that I was going to graduate in two years. He just raised the expectations, doubled the expectations of me. In just three intensive lessons, he taught me three semesters of Berklee harmony classes. So on opening day of school, I started in Harmony 4. Then in one intensive lesson, he taught me an entire semester of Arranging 1. Then I learned that I could buy the book for a course that I wasn’t enrolled in and do all the examples myself, without even needing to attend the class, that I could approach the department head and take the final exam for full credit. So I ended up doing this with all my other requirements. I ended up graduating a four-year college in two-and-a-half years.
Really just because of meeting this guy and him setting higher expectations for me. So he changed my mindset about accepting the speed limit that the world sets for you. It’s so ingrained in me now, because I was 17 or 18 at the time, and I put it into action and had real results and I graduated college with my bachelor’s degree when I just turned 20 years old. Which just changes your self-image to say, “oh, this is who I am, I’m an overachiever.” I had always been an underachiever, straight Ds and Fs through high school. Then I met him and I just became this massive overachiever, just because he set higher expectations for me. So sometimes a mentor can be somebody that helps you change your mindset and raises your own expectations.
Ariel: How should an entrepreneur decide which path to take?
Derek: You don’t have to be an expert at anything to commit to it. I think it’s more important that there’s an aspect of the music business that excites you. Then commit yourself to being great at it. Commit yourself to a process of being great at it. But just… They call it hanging up your shingle. It’s a reference to, in the old days, when everybody just had an office in an office building that they would be interchangeable offices, but there would be two little hooks on the door and then you would hang up, it was called your shingle, the thing that you would hang up on the door saying, “building architect.”
Hanging up your shingle is declaring that you are now in the business of this. So my advice is: if you decide that you really want to be a concert promoter, then just call yourself a concert promoter. Go get business cards made up and say, “I’m a concert promoter now”. Commit yourself to doing it before you even know how. Then go figure it out. Understand that it will be an ongoing process that you won’t have to wait until you’re a great concert promoter to call yourself a concert promoter. You just have to decide that this is what you want to do.
If you don’t mind going all the way back one hour, to when you asked me about MuckWork, that’s really what I’m doing with MuckWork. I have no idea how to make a virtual assistant, remote assistant company. I’m not sure how I’m going to pull this off, but I’m committed to doing it.
So I just gave it a good name and I declared that this is what I’m doing. I announced and I told people to come sign up if they’re interested.
So I think that’s my other big advice. Just whatever excites you, go do it.
Derek: One last story to leave you with: When I was a musician, I went to a college market seminar given by Peter Knickles, where he talked about NACA, The National Association of Campus Activities. He spent an hour talking about the NACA college market and how you can make like $1,000 a show. And I’m like, oh, I need to do this. But the key is that I didn’t just think about it, I dove head first into it.
So I learned about the NACA college market a mere 12 days before the once a year video submission deadline. I was so taken with it, within the next ten days, I got the guys together, shot a video, and had the video edited. This is back in the days before home PC video editing. I had to book time at a video lab. I had to find an editor, shoot a video with the band, write the materials, get 8×10 glossies, and submit all this stuff in ten days but then at the last minute I realized that there was this thing I was doing with the circus where I would get into this black Lycra bag and run around and scare people. Even though the reason I got into the college market was to advance the career of my band, at the last minute I decided to submit a second act, because you would only pay one submission fee per year, not per act. So I created another act called the “The Professional Pests”, which I quickly invented with a juggler from the circus. I got him to take a bus down to New York. We shot some photos and submitted them. I’m accidentally telling the long version, but the point is that that ended up being the most profitable thing I ever did. The Professional Pests is what earned me all that money and the reason why I was able to buy a house, with that quick last-minute thought of Professional Pests. It ended up benefiting my band, too, but again it’s just like another tail.
I think almost no business that you get into ends up like what you thought it would be or what it started out as.
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