Interviews → Venture Voice

Greg:

Welcome to Venture Voice. I’m your host, Greg Galant, and today our guest is Derek Sivers, the founder of CD Baby. Derek was on our show, almost exactly three years ago. Since then, he sold his company CD Baby. We decided to have him back on our show, to hear about how he sold it, why he sold it, and what he’s doing next. Hope you enjoy the show - we really get into the nitty gritty of how you go about selling a company. Also, as a special treat, for the first time ever, Derek publicly announces why he sold the company, and how much he sold it for. Enjoy. Derek, welcome back to Venture Voice.

Derek:

Thanks.

Greg:

It’s good to have you back on! Last time we had you on the show - and this is a first for us, by the way, in having a guest back on, after a period of time - last time we had you on it was November, 2005, just about three years ago, on the mark. At the time you were happy as a clam running your business CD Baby. You told me you had $25 million in revenue and about 50 employees…

Derek:

And no plans to ever sell it.

Greg:

And you were going to hold on to it until the day you die.

Derek:

I really meant that - that wasn’t just posturing, even close friends would ask and I would say: “No way man, this is what I love to do, and I’m going to do this until the day I die.”

Greg:

So, I guess now you’re begging the question why, but before I get into that, first just give us the quick pitch for what CD Baby was for anyone who doesn’t know, and tell me up until the time you decided to sell, what happened to the business over those three years.

Derek:

Sure. In 1997, I was a musician selling my own CD, and at the time there were absolutely no stores anywhere online that would sell it for you. Amazon only sold books, CDNow only sold major label artists, there were a handful of other businesses but they were only a front-end to the major label distribution system. If you were just a guy with a CD that you wanted to sell, there was absolutely nothing. So, I didn’t even mean to start a business. All I did is, I went through all the boring monotony to get my own credit card merchant account and build my own shopping cart - by the way, this was before PayPal too, so if you wanted to accept money from anybody, you had to go on a 3 month long, thousand dollar set-up process, mountains of red tape and separate bank account kinda stuff just to be able to accept credit card payments online. Those were the days.

So I really built this infrastructure just to sell my own CD, but then some of my friends said: “Hey man, would you be able to sell my CD?” And I said: “Yeah, sure, okay.” And that was CD Baby.

So it really grew out of this desire to help my friends - it was this co-op feeling, like ‘Okay, I built this thing just for me, but as long as it’s here, I’ll let you use it.’ It’s funny, because that became the spirit of everything I did. I went and paid the huge setup fee to get my own UPC barcode account so I could generate UPC barcodes, because some of my friends said they needed barcodes, so I said: “Yeah, okay, I’ll make you one.” And then I learnt how to set up a nice, strong unix web server that could handle a lot of load, and some of my friends were complaining about their web-hosting company, so I said: “I’ll host your website - I’m doing it for me.” So then I made Host Baby.

For over the next 10 years, the company kept that same kind of spirit, and CD Baby grew into one of the largest sellers and distributors of independent music online.

Greg:

Great, and so since 2005, what changed between 2005 and the beginning of this year? Had the business changed a lot - had it grown, had it flatlined, where was it at?

Derek:

It was somewhat at a plateau, more just from a personal point of view. From a business point of view you could see that the line just kept going up. It was doing better than ever - sales kept growing, the number of signups kept growing, everything was cool, except it just hit this point where I just personally felt like I’ve been doing the exact same thing I’ve been doing for years.

I haven’t figured out a proper metaphor for this yet, but it’s this feeling that it takes a certain amount of energy to go from 0-60, and it’s almost like it takes the same amount of energy to go from 60-70. I’m quite organized, and when I had all my projects laid out in front of me and I was thinking: “Here’s some of the things I want to change.”

I’ll just give you a specific. CDBaby.com only sold complete albums. You couldn’t buy a single song, say track 7 off of an album, it was only a complete album. So some of our users said they wanted to be able to only buy one song. But the technical work in order to make that happen would have required almost a complete overhaul of every last little bit of code in the base, since everything since day one was designed, programming wise, around the album as the atom. That was the unit. So to break it into a song would have required a massive complete overhaul.

I found myself at the end of 2007, looking at projects like that, and imagine about 40 other projects like that. A complete overhaul in order to accept multiple currencies. A complete overhaul in order to have multiple warehouses in other countries. And I looked at all these projects and I thought: “You know what? That’s going to take 9 months of hard work, and when it’s done, it’ll be a tiny incremental improvement. I think I’d like to go do something else.”

That’s all there really is to it. I just hit that point where I wanted to do something else, and it’s kinda cool when you’re the owner of a company that you can…actually, even if you work anywhere, if you work at a company, or you own the company, you can make that decision - you’re just ready to do something else, even if what you’re doing is going really well, it’s just this decision where you realize that the personal challenge lies elsewhere, and it’s time to get out of your rut and do the scary challenge of doing something new.

Greg:

When did you make that decision in your mind that it was time to sell?

Derek:

i actually haven’t ever told this publicly, so here you go. It was January 18th, my sister’s birthday, just by coincidence. It was this day where 3 companies in one week had called me asking if I wanted to sell CD Baby. And I told them all no, as I had for years. A couple days later, and I just remember that it was January 18th, 2008. I thought, well, what if, okay, I have an imagination, let me pull up a blank text document and start typing, what if I did sell it? Then what?

And for the first time ever, it was an inspiring idea. I think, before I had done that what if scenario in years past, but every time I wrote it, it would be like ‘No, this is terrible! This is my baby, this is what I do, this is what I love, no! No amount of money, forget it!’ Then when I looked into it again, in January 2008, it was like ‘Yeah, you know what, that would be kinda cool.’ Because, what it really came down to, there was so many other things I was aching to do for musicians, things like this idea I was calling Muckwork, and this idea of doing a documentary, interviewing the grass roots music biz people that are on the receiving of your music, or telling success stories of artists that are doing really well. Things like that, there were all these projects that I wanted to do, and didn’t have time to them because I was still responsible for CD Baby, even though I had been kind of absent. I just hit this point where I thought ‘Yeah, I’d like to.’

So then I sat on my decision for a couple of days, and then I called back Disc Makers, who were my first choice. They were not offering the most money but I knew they would do the best job running the company, because we had already been working side by side for 7 years, I’d seen their operations and been really impressed. They were always my first choice for who I thought would do a good job at running CD Baby. I gave them first dibs, and they took it.

Greg:

Give me a snapshot of the company on your sisters birthday. What was it like at that point in terms of how many employees you had, how much revenue you had and how many CD’s you were processing?

Derek:

Off the top of my head I think it was about 85 employees, I forget the amount of revenue but I think we had paid about $80 million so let’s say the amount of revenue - $90 or $100 million, and number of CD’s was about 200,000 albums, from about 150,000 clients, and I think thats about it. But more interesting for your story, is that I hadn’t actually been to the office in about a year. In about Spring of 2007, I sold my car, and up and left and moved to London for 6 months, and if any of your listeners have read ‘The Four Hour Workweek’ by Tim Ferris, I read that book while sitting in London - it was preaching to the converted, talking about how to be just the business owner, so that you’re not required for the day-to-day operations of the business. I was kicking it in London, hardly ever talking with my company, just working on some programming and stuff like that. I lived there for 7 or 8 months last year, and ‘The Four Hour Work Week’ was definitely good inspiration for giving further ideas on that path.

Even when I came back to the States at the end of the year, I didn’t even go into the office, I just didn’t want to see anybody there. So by the time I sold the company in August 2008, I hadn’t been to the office in a year and a half, so I already had one foot out of the door, you could say.

Greg:

Why didn’t you want to see these people? I mean, you hired them, I’d imagine they were your buddies?

Derek:

You got both of those wrong, so far.

Greg:

So who hired them, what, uh…

Derek:

We shouldn’t go into the ugly details. If you don’t have anything nice to say, etcetera. But I hired the early gang of CD Baby, from when I started it in 1998 through about 2001, 2002. I was really involved, and the original gang that were first few years was just awesome, and I was really close with them. After that, I really started letting go in 2002. There’s this moment that any small business owner has to get to, where you realize that if you don’t learn to delegate, you are trapped. I meet so many people with so many business where they felt that starting their own company was going to be liberating, but all of a sudden you find out that owning your own company can be this trap where you get no peace. I mean, these people hadn’t had a day off in 5 years.

It was really at the end of 2002 where I stepped back. I started not going into the office and just teaching everyone else there how to do everything I was doing, and making myself unnecessary to the operations of the company. So I hadn’t really been there since 2002, and we set up a system where they did their own hiring. The side effect of that was that I didn’t even know the people that worked there anymore. I had this company that had about 85 employees, and I think I knew about 20 of them. I was friends about 10 of them. So I was already pretty alienated from my own company at the time.

Greg:

And do you have regrets about that, or do you feel like you did the right thing, and you’re having a blast at home all day?

Derek:

I think there’s no regrets. Looking back, there were some cultural things. I take full responsibility for everything that happened. Some really messed up things happened, culturally, inside the company near the end, and it was this weird imbalance where they had created this culture that wanted to things a certain way, which is the opposite way from how I wanted to do things, and I learned that there’s such a thing as over-delegate. I over-delegated to a point where I wasn’t even checking in. The company had gone off in this direction that I didn’t even realize, because I was trying to be so hard to be good at delegating. The culture took twists internally that I never would’ve expected, and it wasn’t the one I wanted, and instead of changing it, I just let them have it the way they wanted it, and I decided to walk instead.

Greg:

Wow, it’s interesting. The only time I’ve ever heard that - we had Jay Adelson on this show, of Digg, and his previous company Equinox, he’d actually said he over-delegated and did too good of a job and made himself irrelevant to the business.

Derek:

Well, being irrelevant to the business can be a great thing. Being unneeded for the operations is a crucial thing. I’ve learnt a lot of lessons since then - it hasn’t even been that long, but I’ve been fascinated with what I did wrong. So I’ve been studying a lot about that. There’s this beautiful book - it wasn’t a top seller, but if anyone is interested in this subject that we’re talking about right now, check out this book called ‘What Got You Here Won’t Get You There.’ It’s all about communication skills in a business.

Man, just reading this book, it made it sounds like the guy had been living inside CD Baby and studying me and wrote a book about what not to do, because it’s just everything I did wrong. He said: “Now, very often leaders will have fully formed ideas in their head, and they will either call a meeting or give a quick memo to the company saying ‘Attention company, from now we’re going to be doing X, Y, Z. So, please make it happen, go. Goodbye.’” And he says three months later, the leader checks back, and says: “What’s going on? Why isn’t this happening? I told you this three months ago!” But you have to remember, people aren’t mind readers. You can’t just say something once and expect it to happen. You need to be follow through, you need to be specific, you need to be diligent, and make sure that if this is something that’s important to you, you follow through and make sure it’s happening. It’s all in the details. You can’t just stay in the top level and bark something out once and expect it happen.

So yeah, real forehead slapping moment there, where you look back and go: “Ooh, yeah. I did a lot of that.”

So I don’t know, I’m sorry, I wasn’t sure if this was the tangent you wanted to take with this phone call, but that’s the summary of what went on.

Greg:

I think this is great stuff. Most people don’t delegate enough, it keeps them from growing and having a good time, and I guess the flip stuff is whether you can have it both ways - can you delegate and also keep things going in the right direction. I think it’s a great lesson.

Derek:

Yeah, you’re right, there is a good balance. Luckily, there are some great books that talk about it - another one besides ‘What Got You Here Won’t Get You There’ is a book called ‘Execution’, by Ram Charan. ‘Execution’ is a brilliant book about exactly this, how to take things that are goals or things that you want to make happen, and how to follow through to make sure they happen. In that case though, it says that the leader must be the one that’s really there, on a day to day level, really getting to know people, really involved in everything, everyday.

So I think the other difference that I learned from all of this is that I don’t want to be that guy again. So for anything new I start up, I’m not going to be ‘President’. I may be ‘Founder’, or ‘Owner’, or in corporate terms it’d be ‘Chairman’ or something, but I don’t want to be ‘President’ again, because I think the other trouble was that I was still ‘President’, which is a role that requires you to be there and be involved. I wasn’t, so I really should’ve put another president in place that really shared my same vision through and through that I could’ve trusted to just do it, Instead, there were lots of managers, but nobody that I thought really shared my vision for the company.

In fact, this may be old hat for your users, but it’s worth repeating every now and then - one of the hardest lessons learned is, the difference between being self-employed and being a business owner. Robert Kiyosaki has this beautiful phrase: “You know you’re a true business owner when you can leave your company for a year and come back and it’s doing better than when you left.”

I remember reading that in 2002 and thinking: “Hell yeah! That’s what I need.” But in order to be a true business owner, you do need to delegate the role of leadership. At that point, you really are just the owner, almost just being an investor. You’re just the one that owns the shares of the company, and because you’re the owner you can perhaps occasionally give a little guidance and say: “I think we should be doing this” or “I want to fund this new development.” But if you’re not going to be there, the company really needs a leader.

Greg:

That’s a great distinction. I want to get that more in how you’re going to take that to the next level with your next venture, but first lets jump back to January 18th. Did you own the whole company, or had there been any shares given away where you had to bring other people on for the sale?

Derek:

No, it was 100% me. There was a situation where my Dad had lent me some money in return for some shares but I bought him out. So I was the 100% owner. Another fascinating bit of advice I read from a guy named Felix Dennis, who is one of the most successful British magazine publishers in the UK. He wrote a book where, I think the guy is in his 60’s now, and he has that wonderful cocky tone of a guy that has nothing to lose, like: “ Fuck it, I’m just going to tell you the truth, because I don’t care what you think of me and I don’t need you anyway.” He wrote this book sharing his philosophies on business, and by the way, the guy parties apparently. He doesn’t have long left.

But one of the things that he said was: “Never, ever ever give anybody a piece of your business. Yes, you can give big bonuses, you can give big rewards, but I never, and I mean never, gave anybody even a single percentage of equity!” And he just talked about countless times he’s been so glad he made that decision, and it was almost the single biggest lesson he had to share in his whole book, he kept coming back to it. Actually, one was to do the things that you’re scared to do. But two was never to give anybody a piece of your company, and I thought that was fascinating.

Greg:

I’m glad I had the chance to see him speak once in person, he was a real character.

Derek:

Oh, you did!

Greg:

Actually, he was reading poetry. That’s his second passion.

Derek:

Where did you see him talk?

Greg:

Down in Atlanta, about three years ago. He had this event, and I think to get people there, since he was less proven as a poet, he had all this free wine and stuff, and it was open to anybody, so I came down and shook his hand, and he signed his poetry book for me. Real character.

Derek:

That’s awesome. I loved his book - if you liked his talk, check out his book, it’s fascinating.

Greg:

So, let’s jump back into the sale now. So you had $80 - $100 million in revenue, people wanting to buy the whole company and you decided: “Ok, I’m going to sell this thing.” What number did you come up with to sell it at?

Derek:

$22 million.

Greg:

How did you arrive at that? What kind of math went on?

Derek:

I had looked into selling it earlier, and decided I didn’t want to. But I decided after already going through the due diligence process, through having a few different companies making their bid. I knew that it was about the right price, and talked with some other people. I probably could have got more, but there was a certain point where it wasn’t about the money to me. It was really just that I didn’t want to work at CD Baby anymore, and I wanted to make sure the company was in good hands, so I just said: “Well, whatever.” Fair market price, good enough. We actually didn’t bicker or negotiate over the price one bit. I just said a price, they said: “Okay”, and that all happened back in early January. Then there was just 7 months of boring due diligence paperwork that the banks and lawyers had to do to make this official. But it was as simple as me stating a number, them saying okay, and that was that.

I’m sorry, I’ve been quoting a lot of books lately but I’ve been doing a lot of reading the last 8 months. There’s a beautiful book called ’Stumbling on Happiness’. Actually, I think it might even be the ‘Paradox of Choice’. Anyway, the idea that people that always try to make the absolute best decision end up torturing themselves. If you think: ‘I want to buy a car. A computer, something like that.’ Some people will spend months and months in anguish, trying to get the absolute, best decision, and trying to get the absolute, best deal, and they will negotiate for hours or days or weeks, and in the end, interestingly enough, psychologically, people who do that end up feeling worse about their decision, and people who just shrug and say good enough, psychologically, are much happier. And in the end, the people who try to maximize and get the best deal possible, and the people who are satisfied with good enough, the difference between the two, decision-wise, is not very much, the difference between 1 or 2 percent. But the difference between happiness is immense.

So I think I’ve learned through trial and error, and some good examples, to be a ‘good enough’ kind of a guy. I’m happier that way.

Greg:

So I think this was the first business you started, but is it correct to say this is the first business you’ve sold?

Derek:

Yeah, definitely. Both CD Baby and Host Baby together.

Greg:

When you went into this, did you manage this all on your own, or did you rely heavily on advisors, bankers, lawyers, other entrepreneurs, how did you go about getting your compass on how you should handle the process?

Derek:

It was me, calling up the cell phone number of the president of Disc Makers, who I already had known as a friend, naming a price, him basically saying okay, and we were like: “Alright! There we go.” So we both said okay, and then they shot over something next week, a fax of a letter of intent, and that was that. Then I called up my lawyer who was already working with CD Baby anyway, and said: “Okay, make it happen.” And again, this was something where I decided it was fine for me to stay out of the process. Along the way they tried to involve me many, many, many times for the next 8 months of the paperwork. I realized that this isn’t some specialty knowledge that only I have. There’s a lawyer at the law firm that that’s what he does, which is to help companies sell. He’s done this a hundred times in the past 10 years, so I just let him do his thing. Many times he’d refer to me and say: “What do you think about that? What do you think about this?” And after a while I ended up telling him: “Look. Here are the four most important things to me. As long as these four things are met, you just work out the details. I don’t really care about the other points. I just want to make sure that the company is in good hands, and I don’t need to do anything the day after the sale. I’m not going to work there anymore.”

So that was that. I got them to take care of it. And of course, the legal bills were huge, but whatever.

Greg:

How much were the legal bills?

Derek:

I don’t know. “Whatever”, was my real answer. I’ve erased it from my memory, I don’t remember.

Greg:

That’s probably a wise decision. I imagine what would jump out at people is that you said it took 7 months to sell. We all just read about JP Morgan Chase buying Bear Stearns. They hammered that deal out in a weekend, and it was a multi-billion dollar company. Why does it take 7 months to sell a business?

Derek:

I don’t know. I was really surprised at that too. I think the deal was that the buyer was borrowing money from an investment bank in order to do the purchase, and they had to present the case to somebody else. Even though Disc Makers, the company that bought CD Baby, believed in its profitability, we had a willing buyer and a willing seller with an agreed upon price way back in January, and then it was really just 7 months of details just to get back to the same point. 7 months later, they had everything proven to make their case to the bank so they could get the money, so they could buy the company.

A lot of it was hell. They’d say: “Prepare for us a list of your top 100 customers in descending order with lists grouped by country, grouped by month of invoice with a summary of the monthly invoices, something something, sorted in descending order excluding those who had been there longer than six years, and such, and such, and such.” I ended up taking this as a kind of database challenge - I’m a programming geek. So I’d say: “Alright.” I’d squint and say I could that, and I’d spend a few hours with the database and give them their damn summary, all the while knowing I could be a cocky bastard and say: “No! Here’s my database, you go figure it out yourself.” But I ended up liking it as a geeky, tech database challenge.

It was lots of that kind of stuff, endless niggling back and forth on the occasional sentence in the contract, but in the end we ended up in the same place as where we started, which was back in January I told the guy my price, and my four important terms, and that was that. We just ended up in the same place 7 months later but now the bankers were happy.

Greg:

They’d earned whatever their chunk of the sale was.

Derek:

Yeah, exactly.

Greg:

The deal closed, just to finish the story, over the summer, right?

Derek:

August 1st, yeah.

Greg:

So August 1st, you get the money in the bank. I guess that’s enough money that you don’t have to work another day in your life, so did that change your lifestyle at all?

Derek:

Not one bit. I wasn’t sure if it would, and the answer is that it didn’t. I thought that was kind of interesting. This sounds weird and you might think I’m lying, but part of the reason I didn’t want to sell before was that I didn’t even want the money. I felt icky about having that much money, that’s just a stupid amount of money.

In 2007, when I started to feel like I wanted out of CD Baby, I actually reverted back to my original plan, and I should have included this earlier in the story. Back when I started my company, in 1997, ’98, it was a little before the dot com boom. Just a year into it, I’m still a guy in my house with one employee working part time, and people were already asking me if I was going to do an IPO, or if I was going to sell it, and I always said no. But I said: “You know what? If I ever want to sell it, or if I ever want to quit, here’s how I’m going to do it. I’m going to do it like Willy Wonka. I’m going to put five golden tickets into five CD’s.

We’re going to run a massive campaign so that everywhere people are buying millions of CD’s just to find the five with the golden tickets in it. And then I’ll get the five who got the golden tickets together. But since I don’t own a chocolate river to push somebody into to knock them off, instead what I’ll do is hold a musicians event, where all of my clients, all of the musicians, can come for free. The five finders of the golden tickets will be up there on stage, like a presidential debate, except all of the musicians can then grill them, saying: “What are you going to such and such? What’s your philosophy?” And each one of the five finders of the golden tickets would have to give their philosophy, where if they owned the company, what they would do with it. And then the musicians would vote who they wanted to be the new owner of the company. And then I would literally sign the papers over, and that person would be the new owner of the company, but on one condition that they also can’t sell it. That at some point, if they want out, they would have to do the same process again.”

I thought it was a beautiful plan. And I actually, seriously, almost did it, in the fall of 2007. I got quite serious about it, and I was planning on doing it, and I was going to move to New York City and get ready to do a whole press barrage. In the end, a bunch of friends convinced me that it was just stupid. A friend said: “Us Jews have a saying. That’s like leaving money on the table. You don’t leave money on the table! What are you talking about?”

So I decided not to do that, but it was a beautiful idea. That was plan A, and actually selling it was plan B.

I’m sorry, how did we get on this tangent? Oh, we talked about the money, and the day before and after the sale.

Part of the reason I wanted to do that was because it even want the money, and it wasn’t about that. So when I did decide to sell, what I did is create a charitable trust. I transferred the ownership of the company, as much as I could, before selling it. When Disc Makers bought CD Baby, they actually purchased it from the charitable trust, so all the money went into the trust, and the name of the trust is the ‘Independent Musicians’ Charitable Trust’, and all of that money is going to go to music education when I die. So it’s not even mine, it’s sitting in the trust fund that will never go to me, never go to my kids or my grandkids or whatever, it’s all just going back to musicians. In the meantime, while I’m alive, I get to live off the interest from it, so that I don’t have to go get a real job. But when I die, it all goes back to musicians anyway, that’s how I justified it, saying that’s better than a golden ticket PR thing.

Greg:

I guess the obvious question is that there are some people out there that would say, why not just take the capital, buy a yacht or a helicopter with it, change the lifestyle?

Derek:

You couldn’t pay me to do that stuff. I sure as hell don’t want a fucking helicopter, and I don’t want to own a big house with ten rooms because it’s a pain in the ass to clean. I’d already made those lifestyle choices, and I don’t want to own that kind of stuff. Everything I own fits in two suitcases. For a lot of the last year and a half I’ve lived out of a backpack and I like it that way. I’ve got my laptop, a few books, and that’s about it. That’s all I own, and I like it that way. I’ve already made that lifestyle choice, and I didn’t want all of that stuff.

Greg:

Part of continuing that lifestyle is launching another venture. You’ve alluded to that before with Muckwork and some of your other projects. How did those come about while you were selling CD Baby?

Derek:

It was actually in the years leading up to it. The reason I started CD Baby wasn’t to stick CD’s into envelopes, that wasn’t my mission in life. It wasn’t to upload files to Apple. That wasn’t a big passion of mine. It was about helping my musician friends with whatever I could help them with. And I found that it was still my passion. A reason why I said I would never sell CD Baby was because it never really felt like work. This is just what I do anyway, even if it pays nothing. The wonderful idea of selling CD Baby was like: “Oh wow. If I was to do this, then I can continue to do things that help musicians, forever, and I won’t need to worry about whether if it’s going to make a good return on investment or anything like that.”

Let’s talk about the more obvious ones - for years, I’ve wanted to make a documentary interviewing the people that are on the receiving end of your music. I think a lot of musicians send our music out into the world, and we don’t really understand, or even think about, what it’s like to be on the receiving end. For example, you send your music out for people to review it, and you get really self-involved, saying: “What the hell! Fucking jerk didn’t review it.” or “This guy gave it a bad review. What an ass!” You never really think about this guy named Jeff, who’s living in some apartment in Cleveland, reviewing albums. Why? It pays ten bucks and it’s a lot of work.

When I was out promoting my own record, in ’97 or ’96, I found it really enlightening to meet these people. People that work at radio stations, and the people that are writers for magazines, and the people that do the bookings at clubs. It sounds simple, but they’ve got their own set of worries and concerns that have nothing to do with what the musicians want. That also made my job as a musician a lot easier, being more understanding, understanding what it’s like to try run a profitable venue, because most people that run venues aren’t rich. They’re always on the verge of going out of business. People that review music for magazines are always on the verge of broke, but they do it because they love it so much. I’ve always wanted to do a documentary profiling these kinds of people, but I doubt it was the kind of thing that could really sell, and I wanted to do it for education purposes. I didn’t care about selling a CD for 40 bucks and making some money off of it, I just thought it was something that needed to be done. What I love now is that I can do projects like that, infinitely, without worrying about some kind of return. If its something that I think musicians could use, or something that would help them, I could just do it! And I love that. That was the big inspiration with all of these new projects I’m doing.

Greg:

When someone goes into a new venture or business they’re thinking about how big can it get, how profitable can it be, how scalable is it. What are your criteria then?

Derek:

It’s more just like - is this usual for musicians? Would it be fun? And is it interesting to me? There are just somethings that naturally passionately attract you, and thats what you should be doing. It’s funny, I feel like those silicon valley jerks that start something with no plan of it ever earning money, except the difference is they go ask people to give them a million dollars to fund a thing that’s never going to make money, and instead, I’m saying: “How do I keep my costs low and just do this thing, and not worry about what it earns or what it costs?” Just to do it, to be done.

If you look at my website now, www.sive.rs, it’s a collection of projects I feel like doing. The only one thats going to have any chance of profit or being a real company is Muckwork, which I felt is needed for years. It’s a company that says: “We’ll do it for you”, for musicians. Meaning everybody else out there is giving musicians a bunch of tools, and widgets, and stuff like that, and directories full of information, and all of it is part of this ‘do-it-yourself’ movement, like: “Hey musicians, you can be your own record label, and your own graphic designer, and your own producer, and your own booking agent, and your own this and this and that!”

And it’s kind of funny - in the late 90’s, that was empowering. Now, 10 years later into the ‘do-it-yourself’ movement, it’s a little overwhelming. Every musician I know knows all the things they should be doing, but no one has time to do them all. So it’s like: “Oh, great. I am oh so empowered. I can do it all now.” It’s good in some ways, but in other ways it’s just like: “Hell no. Everything’s on my shoulders.” So, I just wanted to make a company full of assistants, like an army of assistants, that can help musicians do all the uncreative, boring, dirty work, that needs to be done, so that they can finally free up their time a little more to get back to actually making music, instead of spending their life clicking ‘add MySpace friends’, or upload their music to yet another social network. All these things that musicians are doing, that really is not a good use of their time. Somebody has to do it, but it doesn’t have to be them. So if there’s a good, cheap way to take care of it for them, that’s what Muckwork is committed to doing.

Greg:

For musicians out there who are pretty excited about this, where is it now?

Derek:

www.muckwork.com, is there, though there’s nothing there yet. But who knows, by the time you hear this, there may be.

Greg:

Catchy name.

Derek:

Oh, yeah. The other interesting thing is that the change, you wanted to keep a theme about what’s different now versus three years ago. A couple months ago, I was talking with a manager of an artist, and I said: “Your artist has a fascinating story, I’d really like to do a success story interview on them.” And she said: “Yeah, sure, we’d be glad too!” That was about two months ago. Just yesterday, she emailed me to say: “Just checking in on that. Wondering if we could make that interview happen sometime close to January, because that’s when their new album is coming out, and I’d really love to time it with this.”

I always try to be honest as I can. And I was about to write something more polite, like: “Oh, okay! Sure, I’ll see if I can make that happen.” I thought: “You know what, you know what my real answer is? It’s just, I don’t know. I’m just doing this stuff when I feel like it. I don’t really feel like some imaginary pressure that’s not needed.” I imagine, when we’re 70 or 80 years old, sitting in a rocking chair and looking back at our lives, we’ll see that a lot of the pressure we create for ourselves is pretty imagined. Once I was thinking of letting go of CD Baby, I was thinking: “Oh, but I have to do this and I have to reply to emails, I have to manage my team and I have to check in on the health of the company.” This was before I sold it. I remember thinking: “God, I don’t want to have to do all that stuff anymore.” And a very wise friend of mine said: “Well, you never had too. You told yourself you had to, and you felt like you had to, but at any point you could’ve walked away.” And it was like: “Oh, yeah. That’s a really good point.”

You don’t have to do anything. You have to pay your rent, or buy food - you have to eat, and breathe, but all that other stuff you feel like you have to do? No, you don’t really. You actually do have a choice that you don’t have to do anything. I’m trying to be more conscious of that choice now, and not create this artificial pressure to, you know: “Okay, I have to do this success story interview in January with this artist, so I try to schedule it to…” But it’s like: “Oh wait, I’m just doing it for fun anyway. Why create that pressure?”

Greg:

Fair enough. I’m glad, given that you said that, you felt like you wanted to come on Venture Voice and you didn’t feel like you have to.

Derek:

Dude, Venture Voice rules. Our interview three years ago really surprised me. You asked me some really insightful questions, and drew some stuff out of me that I’d never really talked about before, and you did it again today. We’ve been on the phone for 45 minutes or so, and I have just told you a bunch of stuff I have never told anybody except for a few close friends. I really like your interviews.

Greg:

Thanks so much Derek. All of our listeners are under NDA, so it’ll be our little secret.

Derek:

Yeah, I wonder if I wasn’t allowed to tell you some of the stuff I just told you. I guess we’ll find out, huh?

Greg:

We’ll find out the fun way, right?

Derek:

Yeah.

Greg:

Cool, thanks so much for coming on. I’ll put links on the site so that all of our listeners can check out your new ventures, and I hope we can reconnect soon and hear about how well they went.

Derek:

Thanks man! And for anybody listening, I’m more available than I used to be, so you can drop me an email at derek@sivers.org, even if anybody is looking for free advice on their own project, I enjoy offering advice to help other entrepreneurs. I assume it’s mostly entrepreneurs listening to this, so seriously, feel free to ask me for any advice, I’d be glad to help.