Interviews → Amber Rae

Amber:

Hello everyone, my name is Amber Rae, and I'm here with Derek Sivers, a professional musician who turned his hobby for helping people and his friends sell their CDs online into a hundred million business. So part of the Domino Project of the last few months I've had the pleasure to work with Derek on the launch of his new book: Anything You Want, 40 lessons for a new kind of entrepreneur. So hello Derek, it's such a pleasure to be talking with you today.

Derek:

Hello!

Amber:

So, why Derek's book is so special because it's unlike any business book I've ever read, probably because it's not just about business, it's about following your passion and doing the things that make you happy. And so today we're going to dive into some of Derek's inspiring philosophies and his experience starting and selling his business CD Baby. Ready to get started, Derek?

Derek:

Sure. So, you lead with a compass, you know why you do what you do and your purpose and your value are extremely important to your being. You believe that business is not about just making money, it's about making dreams come true for others and for yourself. How did you come to obtain this belief system?

Derek:

I think anytime you are setting out to do something... most of us have been through stages in our life where we were doing something for the money and we're miserable. Or we're doing something that both which should be enjoying and then we get miserable doing it. Or that awful feeling where you're just kind of feeling vaguely dissatisfied and you don't know why.

So, maybe it's is because I did that stuff for 10 or 15 years long before I started CD Baby. I kind of went through all those different stages, pursuing something that I thought was my dream and then I got there and then I went "eh". So maybe I just realized that unless you know why you're doing what you're doing and you're doing it in a way that actually makes you happy, that's what's really important, if you're not doing that then it's kind of moot and empty. So I guess I learned that the hard way through trial and error.

And I guess it also has to do with the fact that CD Baby was never really meant to be a business. It was this silly little hobby that I started to help my friends and then it grew from that. So I felt that I was kind of honoring the initial intention of it by making it this thing that helped my friends instead of just me.

Amber:

Gotcha. More than anyone I've ever met you're sincerely driven to help people. You accidentally started your business because you wanted to help your friends. Why?

Derek:

Actually it was from Seth Godin I got this great line where one time I was telling him about... there's a time, a year or two ago, I was just kind of coasting for a while, I was just on a sabbatical, and I told him how I went off to the TED conference and having these conversations with people and I felt that I didn't have much to add. He said "well, you don't want to be spreading ennui" and I had to go look up the word "ennui", I forget the exact definition but it was something kind of like a blasé disinterest or something like that. And in further conversations with Seth he would say things like "you gotta be doing something useful with your life, your chance just hang out and playing video games, what's the point of existing then?" Not that I was playing video games, you know what I mean, but just as an example.

And I guess that's kind of how I'd been feeling for a long time anyway, any of us could do something that makes some money but feels empty. Say if you're working at a bank somewhere in your moving digits around but it's not really doing anything for anybody, it's not really benefiting you or your customers or anything. But the feeling when you can actually see that you're helping people, like getting an immediate response, like you do something for somebody and they go like "oh my God, thank you, wow! What a difference!" It's such an amazing feeling, like that's your real payment, you know what I mean?

So there is another great example: a friend of mine, he was actually my old college roommate, he went on to be an engineer, I think he was like a construction engineer or something like that for 10 or 15 years, I lost track of him for a while. And just a couple of years ago I ran into and I said "Matt! What is going on? Fill me in." And he said "well, after 10 years I quit my job as an engineer, because it's like every day, even though I was only working 9 to 5 I would go home at 5.30 exhausted! I would just hate my life and I quit and I went to nursing school at the age of 34. I love it, I've never been happier! It took a few years, but now I'm an official nurse. Every day, I help somebody in some real, concrete "they were in pain and now they're not in pain" kind of way. I don't go home tired anymore. I'm probably working like 10 or 12 hours, but I go home psyched and feeling good."

So, that was kind of a more concrete way of putting it but it's such a better feeling when something you're doing is actually useful to people instead of just making you money.

Amber:

Definitely. Definitely. So we all have a lot of ideas and projects. How do you know what's a hit and what's a miss?

Derek:

I think you gauge the response of people. This one took me a long time to figure out. Say you've got some business idea and you tell people like "hey, I'm thinking of starting an online dog washing service." And you tell your friends and they go "yeah… wow… cool… well, let me know when that's happening." If you're not paying attention you think that you just got a great response. You think, "Hey my friends seemed to like it, they said to let them know when it happens. Woohoo, I'm gonna do it!"

But, it isn't until you get this kind of reaction when people say like "oh my God! I need that! Can I pay you right now? Can I give you some money now so I can be your very first customer? Because I need that so bad!" When you get that kind of reaction then you're really onto something.

I found this out the hard way when I decided to sell CD Baby and I went on to launch all of the other things that I've been wanting to do. For 10 years of running CD Baby I didn't have the time to do anything else, so when I sold CD Baby on my personal website I put my six projects that I've always wanted to do. I put all of them on my front page. I said: Derek Sivers home page. Here are my projects, click into any single one of them that interests you.

For example one of them was a documentary about the inside of the grassroots music business. So I wanted to take a video camera and go into nightclubs and booking agents and publicists offices and show musicians what it's like to be on the receiving end of their music, and talk to those people that musicians are often sending their music to, to ask them about their job and what's the hardest part in what they would recommend and stuff like that. I thought this was a brilliant idea, I was so into this. And I would tell people about it and they'd go "yeah, cool… yeah it sounds cool, let me know when that's happening." Okay, so that was one of them.

But then I had this other one called MuckWork, I'll skip the details but it's basically an assistant service for musicians, like: give us the stuff that you don't want to do, I will do that stuff, we have these assistants that are trying to do that. And every time I would tell people about this they would go "oh my God! I need that! Is that ready? Can I sign up right now? Can I give you money now?" And often I find this things like two days after I told somebody about it, say just over dinner or something. They'd call me a couple of days later saying "hey, so that MuckWork thing, can I start using that yet? How can I get in on it? I need that. I've been thinking about it and I want to do it."

So that's when I got the feeling that I was a really onto something with MuckWork and decided to let go of the other five.

I'm telling you this story not to talk about me or my new project or who cares. But I think like whatever you're doing look for that kind of reaction where people are so psyched about it that they got that oh my God kind of response and especially if you're doing something that people are willing to pay for, not just like "hey, yeah that'll be nice if you hand it to me for free on a silver platter", but if you are actually willing to pay for it. Then you know you're onto something. If not, my best advice is to just keep inventing and adjusting your plan to do something different, instead of trying to persistently knock on all the doors with that idea that people don't seem very into.

Amber:

Makes sense. So how about when we take on too much and then we become really busy. Then how do you determine what's worth doing?

Derek:

I'll use a PG-13 word. But replace my PG-13 word with the cuss word of your choice and you'll have my real philosophy here. I have this philosophy called "Hell yeah or no." And what it means is that whenever you've got all these options to do something, like somebody says "hey do you want to come to this conference, do you want to go to this party, can you come work at my bakery next Saturday, hey do you want to do this and that?"

Often times we say yes to everything with the best of intentions, California people especially are notorious for this, being so optimistic that you say yes to everything. And you'd think "yeah, I can do that! Cool, I'll be there. I'll come to your gig. I'll buy your book, I'll read it, I'll let you know what I think. I'll be at that party. I'll show up to this event. I'll help you wash your dog next week." We have the best of intentions when we say it, but unfortunately as it gets closer then you start feeling like "oh God, why did I say I would do that? I don't really want to do this thing but I have to."

So, my new filter that I've made that I realized that we all say yes to too many things and the way to narrow it down is if you're feeling like "hell yeah, I want to do that!", then you do it. But if you're feeling anything less than that, like if you're just feeling like "yeah, I could... maybe I should, I owe them a favor, I'll do it." All that stuff, just say no to all of it and only say yes to the stuff that you're actually feeling like "hell yeah!" to.

Because if you're saying no to almost everything, it's a really hard thing to do to say no so much, but imagine everything that comes into your life if you're not absolutely feeling like "hell yeah, that would be awesome!", then just say no. And all of a sudden you have all the space in your life, you have free time because you've learned to say no to things. What's cool is that when you have that much space in your life, then you're ready for more hell yeah type things enter your life. Then you actually have the time to give them one dose few, rare occasional things show up.

Amber:

Got it. I love that. How do you say no? That's always a challenge that I have.

Derek:

I asked Seth that and he said: "just say no. Just no. No. Just no." I was like: dammit, I can't do that.

You know I'm living in Singapore now, there is this whole kind of like Asian... there's a different way to say no here, there is a lot of kind of saving face. Bluntness is not a virtue. So, really, I just use some manners… and I'm very sincere when I say something like "I would love to, but I really committed to work on something that I'm working on right now, so I can't. I honestly would really enjoy sitting around for hours and talking with you about life and love and happiness and whatnot, but I really need to work on this project. I'm sorry. Definitely at some point in the future I would love to. That might be days, weeks, months, years, I don't know. But let's keep in touch and hopefully someday…" So I kind of have my soft no like that, but it's a clear no.

The worst thing to do if you don't do that thing where you say "yeah, maybe I'll be there" and then you don't. That's just like c'mon have the guts to say no! It's almost rude to give them maybe if you mean no, but instead you just kind of find a soft but the real way to say no.

Amber:

Very helpful!

Derek:

This is like Dear Abby.

Amber:

So let's get into CD Baby a little bit. So you accidentally started that because it was a favor to friends. You wanted to sell your and your friends CDs online, but there is no business that did this yet. How hard was it actually setting the online store and how did you feel when you were going through that process?

Derek:

It wasn't that hard in hindsight. I mean it was hard for me because I didn't know any programming skills or whatever. So I really just had like a static HTML site. It took about three months of paperwork to get a credit card merchant account. Because I set up CD Baby before there was PayPal, before there was Amazon. Amazon was just a bookstore and PayPal didn't exist yet. So that was the environment when I set up CD Baby, like the end of 1997. And so to get a credit card merchant account you had to go apply through a bank and there was like three months of paperwork. They actually had to send an inspector out to my location to make sure I was a valid business. I had to incorporate, I had to set up a business account, I had to do all this stuff. And after three months and $1000 in setup fees I had a credit card account and I could charge people's credit cards.

So I set up this site just to sell my CD, but after I did a couple of my musician friends in New York City kind of said "wow dude, can you sell my CD through that thing?" and I said "yeah sure, okay." So it was really just like as a favor to friends. It wasn't even a separate store, it was just on my band's website. It was like "click here to buy my CD" and a big "buy now" button. And below it said "or some of my friends" and they had their CDs down there. But then I started getting these calls like "hey man, my friend Dave said you could sell my CD" and I was like "ah sure, if you're a friend of Dave's…" But I was doing it all for free as a favor. But after I've hooked up about 20 friends of friends for free as a favor I realized I had to start charging money for, does this 20 friends and I took him off of my band's website, put it on cdbaby.com and that was my stupid little hobby.

Amber:

Love it! Stupid little hobby that turned into a $100 million business.

Derek:

Yeah, oops!

Amber:

So you believe that starting with no money is actually an advantage. Well, I wholeheartedly agree. Was money ever an issue or concern for you?

Derek:

No, I think there is a way of doing something, I call it version 0.1, which is: often people have these business ideas, they say "I want to make the most ultimate music recommendation service that's going to do the back-end music recommendations for every business on the Internet and the whole world and it's all going to go through me and it's going to bring in your friends and your concert calendars and on this and events in your area and… pictures of your friends at will appear in your fridge when you drink…" okay anyway.

So, people often have these giant ideas, but I kind of think like that's everything it will be someday. Kind of like software has version numbers, like version 1, 2, 3.0, 3.5... so I say what you just described is the version infinity. That's everything it will ever be someday.

But now let's go back to version 0.1. Version 0.1 is the thing that you can just start right now with no money, it doesn't cost anything, it's kind of just a proof of concept to say you did it, you could make just one person happy. Like if you could satisfy one person, and especially if you could do something that makes that one person pay you to do it, then you're onto something. And you don't need fancy systems to do it.

So for example, we all know OpenTable, right? Most people know what OpenTable is, restaurant reservations online. I met this guy in India that said that OpenTable doesn't work with India right now, and he wanted to do OpenTable in India. But the tough thing is we're trying to develop all the software and then we got to go to every restaurant in India and get them to use our software for the reservation management, and this kind of stuff, it's going to take so much work.

I said: hold on, what if you just, right now, set up a simple little page with a phone number on your site and you send somebody around on a scooter to all the little restaurants in India, got their phone number and got their menu, and you just go home and basically type in the menu onto your website. And if somebody wants to book a reservation they just call you, you get their info, then you hang up the phone and you call the restaurant, you make the reservation for them. There you go, no software needed. It's just like phone calls and it works... and some scooters and you can start that with no software this week.

So that's a me is like a version 0.1 proof of concept, right? So I think that sometimes when entrepreneurs get too focused on raising money, getting venture capital and then perhaps they did it. I think this is more like a first dot-com boom thing, you know when people were all of a sudden just given $20 million because they had a silly idea. It's not happening that much anymore, but I found that especially back then it was really harmful, because once you get too much money you start doing a really stupid things that make you forget the whole point of actually helping people. Helping people doesn't really cost money.

Amber:

I love that, it's great! I think it might be happening again here in New York, but I don't know. We will see, I guess.

Derek:

We'll look back at this interview a few years from now and see if we can laugh about it.

Amber:

So you definitely have an unconventional approach to business. How do you feel about corporate formalities, like privacy policies, employee review plans and things like that?

Derek:

How do you think I feel about them? I love them, I love corporate policies. I want policies and legalese everywhere! Before I enter the bed at night I read my wife some of these, I tell her our privacy policy for the bedroom.

No, I think people try to make business a lot more complicated than it needs to be. And you know what I love remembering, is that if you've ever been to the beach and if near the beach there was one of those places that will rent you a snorkel and fins or sell you a drink. You didn't see posted terms and conditions and a privacy policy at that place. And you didn't see the giant legalese. And you didn't have to sign your life away, you know, you hand the guy ten bucks and you get some fins and you go in the water and bring them back.

And I would always tell people at CD Baby: you know that's a valid business renting your flippers for ten bucks. It doesn't need to be more complicated than that. And I think all that other stuff, especially those legal disclaimers, at the bottom of every email there is like a giant paragraph of legalese basically saying you are not allowed to read the email and sending it. People get fearful and they think that all this legalese is going to somehow protect them. But just look at so many examples of businesses in the world that don't need that and you don't need it.

And I just think that if you wouldn't do that to your friends then why do you treat your customers like enemies, you know? If you treat your customers like friends they almost everytime will treat you like friends. And that's a rather occasional case where somebody screws up or screws you then, oh well that's just the cost of doing business and you fit it into things. One percent of the people are going to screw you, so oh well, you know? I think there is such a thing as like overprotected, trying to protect against every possible thing and make it worse for everybody, it's like punishing everyone just because of one person might mess up.

Amber:

So then what about advertising?

Derek:

I've got a personal bias against advertising. I'm one of those freaks that, I don't have a TV, all my laptop I put all that ad blocking kind of stuff, I just never see ads. I don't listen to regular FM radio, I only listen to Internet radio and even then I pay $20 a year so I don't ever have to hear advertising. So I've got a pretty advertising free life.

So ads just kind of offend me. So whenever somebody's talking about a site that's relying advertising to make money, of course I just got a personal bias against it.

But one thing I used to do just to screw with friends is when they would show me their website, say that somebody sitting over my shoulder saying "hey, check out my new site, what do you think?" And if I go to their site and there is like a banner ad or something on top, I just click it immediately and it takes me away. And they are like "what are you doing?", I'm like "well, you wanted me to leave. Well, why did you put that thing on top if you didn't want me to click it? So, yeah I'm gonna check out some Sony headphones now."

Amber:

I think they have them for a reason. Okay, so for the first years though, I think it was only you and two employees, right?

Derek:

Uhuh. Well actually, the first year it was just me. Second year it was me and one guy and by the end of the second year we got a second person and it grew from there.

Amber:

Okay, and how did you feel when it started to grow and how did you go about hiring people?

Derek:

Growth was always reluctant. Meaning, I was making my living as a professional musician so I was already kind of living my musicians' dream. Like I was making my living, and I bought my house with the money I made just playing music. It was a dream come true. So as CD Baby was growing I was kind of thinking "Uh-oh I don't want this little hobby to take over my music life." So I was growing very reluctantly so I'd only hire another person if I absolutely had to, if I had so much work that I just couldn't handle it anymore.

So the first guy I hired, John, was the guy that happened to be painting my apartment and I kind of said "hey man, you're looking for some extra work?" And he said "sure", I said "can you help me pack up some CDs a couple hours a day?" and he said "sure." So that was John, and he went on to be the vice president of the company.

And then when we needed to hire I just asked John if he knew anybody that needed some work and he said "yeah, I know this guy Ryan", I said "is he good?", Who said "yeah, he's a cool guy", I said "all right, tell them to start tomorrow."

Same thing, then every time we needed to hire we just ask the existing people that to work there, like "hey who has any friend that needs work?" That somebody would say "Hey I've got this guy named Ben, friend of mine." "Is he cool?", "Yeah, he's cool." "All right, tell them to start tomorrow."

So, it's a wonderful way to hire because then everybody's friends of friends, you've got this kind of pure responsibility to your peers, that you won't screw your friends over if they recommended you and it's really made for a good kind of a happy family, at least for the first eight years or so.

Amber:

Gotcha. And I mean I love how that just so naturally fell into place. Nothing was forced about it.

Derek:

Yeah. Me too.

Amber:

So in 2003, so five years into growing CD Baby, Steve Jobs disses you in a keynote. Tell me about that experience And how you felt when you are going through it.

Derek:

All right. So in 2003 CD Baby was rolling along quite well and got this email from Apple asking us to come up to their office and talking about getting the CD Baby catalog into the iTunes Music Store. So at that point the iTunes Music Store was a really only a few weeks old and it just launched, a lot of people thought it wasn't going to do well. I was kind of doubtful because other companies like eMusic had done that exact same model, trying to sell $.99 downloads and failed.

So we went up to Apple's office, to a little room with just like 100 people in it. And I kind of thought that I was go to be talking with a marketing guy or whatever, but Steve Jobs himself walks out. So in full presentation mode he's saying how he wants to get everybody's music up and selling in the iTunes Music Store, our catalog, everything. He said even if it's discontinued, we want everything available.

I said great. And they gave us all the contact that day. I took it back that night, signed the contract, sent it back to Apple and didn't hear anything.

So the next day, I had been taking notes on this whole meeting at the Apple campus, and I posted my notes on the cdbaby.org bulletin board site and I emailed it to all the musicians. Because I said "hey, I went to this meeting with Apple yesterday, Apple really wants to get everybody's music up and selling in the store, here's my notes from the meeting, just thought you guys should know where again putting something together and we're gonna do this." So I posted that, went to sleep that night, and then in the morning I woke up and like Apple's lawyers around the phone just like "what are you nuts? That was a private meeting, that was a nondisclosure whatever!" I said "hey, I honestly didn't know, I didn't sign anything saying, I wouldn't share it if I would've signed something I would have known that it was secret but I honestly didn't know it was secret."

Amber:

Corporate legalese.

Derek:

So to respect our relationship I immediately pulled the notes down. But, I noticed that whereas Apple told us that they were ready to begin, first like, nobody was returning our contract. And I thought oh no, I pissed them off because I posted the notes of the meeting and now they're letting me have it and they're punishing me. And all these little conspiracy theories because I just have no idea why they weren't getting back to us, and I try to call them and they wouldn't tell us.

This went on for like two or three months. We set up a system where we digitized everybody's CD, it involved all this work, right? So in order to send somebody's CD to Apple, we had to actually go out into the warehouse, pulled the CD off the shelf, stick it into a Mac using their software, re-digitize the whole thing using Apple's encoding software, type in all the song titles and everything all over again. So it's a lot of work per album, So I sent a $40 processing fee per album, right?

So the only reason this is important is that when we just weren't hearing anything back from Apple, Steve Jobs did a kind of Apple, one of those events that's simulcast, and he went on stage and said something about: "do you know that there are these companies out there that are promising just anyone that they can get their music up on iTunes, charging $40 to put music up onto iTunes. well we don't want that stuff here. We believe that the major labels give us a good quality filtered product, and we only want the best stuff here."

My heart just sank. He like said $40, like that's me. Like there is nobody else, you know? So I felt like personally dissed. And so that night I sent an email to all my musicians saying "sorry, change of plans, Apple doesn't want anybody's music unless they are on a major label, so nevermind." And I refunded everybody's $40, I sent it all back, it was like 200,000 bucks I refunded. And then the very next day we get a signed contract back from Apple, saying "great, start uploading the music now."

Amber:

Do you know why?

Derek:

Never found out why, even years later. Talked to people that used to work at Apple and they say it's a mysterious black box there.

Amber:

Interesting. It's fascinating.

Derek:

We're talking on a linux laptop with my android phone. My friends every now and then say "Why don't you use a Mac or iPhone?", I say "I'll tell you later."

Amber:

That's funny. That's funny. So one thing that you really recommend is making yourself unnecessary to the running of your business. How do you delegate while still making sure that the business runs smoothly?

Derek:

I think that entrepreneurs have this tendency to micromanage and trying to do everything themselves. You know, you started the company, it's a very tied up with your personal passion and ambition and often your personal identity, everybody knows it's your company. So it's really hard to let go.

First the psychological barrier to get over that I highly recommend to anybody is this feeling that letting somebody else do what you used to do. Probably, maybe they won't do it as good as you, but you just have to have the sense of good enough, the kind of say like "okay, technically if I did it, maybe I could do it a little bit better but, you know what, relax, exhale, good enough." Because you just have to realize that if you try to get in there and do everything yourself, you're holding back your business. Like it can never grow beyond a certain point if you try to do everything yourself. You have to let other people help you and then you have to have this sense of good enough.

And then if you're lucky, and this is what really impresses me about the Domino team honestly, is that if you find it amazing people they can do things actually better than you could do it yourself. Then it's an awesome feeling. So of course you keep working to try to find people that are even better than you at, say at customer service, people that are more patient than you were more friendly than you on the phone. Or you know financial wise, people that have more of a sense of numbers and you do. Hopefully eventually you'll get your team to that point, but even if you're just starting, if you have people helping you that are just good enough, that's a big one, that's a huge psychological barrier to get past is that the sense of good enough

But then the next thing is documenting. Every time something is on your shoulders, is there something that still your responsibility, document everything you're doing. Even trying to document your thought process. Like, how do you reply to emails? What is your thought process? Like if a certain person asks this kind of question you say that. If they're asking you to go to coffee tomorrow so they can pick your brain for three hours, how do you say no? If you start to document all this so that you could show it to somebody else, eventually the somebody else is doing it, and then you ask them to document all the things that they're doing. So I just think that this kind of constant documentation, the goal being that you can actually have a handbook that says how to do what you do. It's almost like a cookbook. Like a recipe for how do you make your decisions.

A lot of it is that the philosophies, you know? So it's showing not just the exact, like, how do you respond to this question with this answer. But instead it's like trying to communicate the philosophy behind how you came up with that, so that eventually the person doing it without you understand your philosophy and can have the autonomy to do everything themselves understanding the mission. You know what I mean?

Amber:

So instead of just what to do, how do they go about thinking what you do. The thought process that goes beyond just the action.

Derek:

Yeah.

Amber:

I like that.

Derek:

It's hard, I mean learning to delegate is one of the hardest things a small business or startup entrepreneur can do, it's really difficult. But it's so worth it, because you just can't grow without it.

Amber:

Right. Noted. So you sold your company to a charity for $22 million. How did you know you're done with CD Baby and why did you decide to give the company to a charity?

Derek:

Okay. Wait, what was that, how and why?

Amber:

How did you know you're done with CD Baby? And then why would you decide to give the proceeds to charity?

Derek:

Okay. All right, so how I knew I was done with CD Baby? That was really tough. I really thought I was going to do CD Baby for the rest of my life. In fact, there was a kind of national public radio that did an article about CD Baby, or a little show about us. And I said in that show, like "I'm never selling the company", because of course that was people's question often is "yeah, when are you going to sell out?", I said "no, I am never going to sell out, I didn't get in to this for the money, I'm not going to get out of it for the money. I'm just got to keep doing this till I die." And I sincerely meant it.

But then after 10 years it started to feel a little bit like I had nothing more to add. And metaphorically it's a little bit like: imagine some painter or sculptor that is working on one of those giant murals, you know that takes up a whole wall, that takes years to do. And I'm sure at a certain point they put the this last brushstroke on it, and they're just looking at it, and they're just like "yeah, it's done." And it's kind of how I was feeling about CD Baby, like everything I had set out to do I have done, and I had no vision left for it. I actually didn't want to add anything new to it, I didn't want to change anything, it just felt like I'm done. I didn't want it to be bigger, I didn't want it to grow.

And it was actually Seth that helped me decide. I called him. He's like an occasional mentor to me. I get to ask him questions and he replies. And when I told him about my predicament that I was kind of feeling like a little bit done, and I didn't want the business to grow, he said "you know, if you care you need to sell." The point was that if you care about your clients, if you care about your customers, you need to sell. Because the way you're feeling, you're actually doing your customers a disservice because the musician clients they want your business to grow, they want their own careers to grow. And if you don't want to grow then you're actually doing them a disservice. So you should sell it to somebody else who wants it to grow. And that's really helped make my decision to sell. But mostly it was just that artistic sense of just feeling done.

So I'd always had companies calling asking to buy CD Baby and I always said no. So in January 2008, as usual I had a company call and asked if I wanted to sell. I said "no I'm never selling, goodbye." And then just like two days later another company called out of the blue and said "hey we were wondering if you're interested in selling CD Baby", and I said "no, not interested at all, goodbye." Then two days later I had the third company call, all in one week, asking if I wanted to sell. And I told the third one no.

But that weekend I had some soul-searching time. I realized like okay, take a hint: I'm feeling done, Seth said I should sell, and I got three calls in one week. I think I should take a hint, like this is a seller's market, this is a good time to go. So, yeah I did the thing that I thought I would never do, I told all three companies that I'd be willing to sell, I let them bid against each other and chose a company that didn't have the top bid, but I felt they knew my customers the best. And my musicians would be in the best hands. So this company called Disc Makers that I've been working with for years and they're good. So we had this agreed-upon price of $22 million. I was like "$22 million, what the hell do you do with $22 million?"

So, onto Amber's next question, which is like… What was it again, like kind of why did I...?

Amber:

Why did you decide to give your company to charity?

Derek:

There was about eight months of time in between the agreement to sell and like when all the paperwork was done, so I had eight months to kind of think about life and what I wanted to do with $22 million. So just to give some perspective, CD Baby had already been making a few million dollars a year net profit for the last few years. So I already had enough. I had paid off my mortgage, you know? I was not in debt. So I had more than enough already.

So I was thinking about $22 million and I've realized that I didn't even want it. Like there was nothing I was going to do with it, in fact, I was probably just going to give it all to charity when I die. So I mentioned this to my accountants that I was talking with anyway, because of the sale of the company were talking often. And I said "you know, I don't even want to money. In fact I would feel better if it wasn't even in my hands. I don't want to be one of those rich fools.

I wanted it all to go to charity when I die. But while I'm alive, I'd like it to be there just kind of like a nest egg, just to know that I won't have to like to get a job at Walmart someday, you know, to know that I'm... nothing against Wal-Mart. But just to know that I'll be comfortable while I'm alive.

So there's this thing called a charitable trust that you can set up where it does just that. So it's like I can donate it all now and it's gone, it's irreversibly gone to charity. But while I'm alive I get like a little kind of, almost like a salary, just to pay all my living expenses and whatnot. So yeah, that's what I did. I realized it made me happier, I like feeling kind of lightweight, I was happier not to have $22 million just sitting in my bank account, that would just feel weird. And I like the idea that it's all going to go to charity when I die, so the whole is like, while I'm alive my actions get to be as helpful as possible, like I can try to continue to be as helpful as possible when I'm alive. And then when I die, then the money gets to be helpful in my place, so that was the idea.

Amber:

Very admirable.

Derek:

Eh. But you know, you see the thing is like it wasn't that altruistic. It's like I'm already quite comfortable, it's not like I'm living in a shack or something because I gave it all away, it's like, I'm doing fine. I actually did it just because it made me happier, I wasn't even trying to be altruistic or charitable or admirable or anything. Again, it's like that compass you got to pay attention to like all the different options you have, which one makes you say "hell yeah", Like what makes you the happiest. Well I just looked at all my different options, it was like "yeah, that would be really nice. I'd like that, I don't want to have $22 million."

Amber:

So then, which was better, starting your company or selling it? And why?

Derek:

Starting. Yeah, selling is icky, selling is weird. It's a little bit like graduating and getting a divorce at the same time. It's a lot of emotions tied up and I had a lot of paperwork. As a divorce is. So starting a company is a really cool and exciting. If you read the autobiographies of anybody, whether it's Howard Schultz with Starbucks or Richard Branson or Dell or whatever, they often talk about those early days with kind of a twinkle in their eye, like "oh wow, that was so fun." And it is.

In the future I think I'd like to start more companies and probably sell them earlier. Like, I wasn't happy the last few years of CD Baby when it was big. I think everybody has their natural set point they like, right? Apparently somebody like Bill Gates, when his company was, whatever 500 billion, he felt extremely inspired he wanted to be bigger, Right? Richard Branson, some people are like that.

On the other hand you've seen some people, like the notorious lottery winners who their set point is like down here, like if you give them $1 million they spend it all immediately so they're back to nothing. So I think my set points was somewhere about here. But I didn't want to be too big, I didn't like having 85 employees. I was really happy with like 10 to 20, that was a really good size. After about 20, I wasn't as happy. So I think I can use that knowledge for the future to just like, I'll do things from here to there, but after a certain point I think it's good if somebody else takes it from there.

Amber:

So, speaking of starting things potentially selling them earlier, you're living full-time in Singapore now. What's next for you?

Derek:

Let's see. What's next for me is a peanut butter and jelly sandwich after this phone call. I mean I'm starting another company, but I'm feeling kind of living more in the moment. Like right now I'm learning Chinese a few hours a day, and just absolutely loving it. I'm relearning the Ruby programming language. A lot of what I'm doing fields like putting myself through school, except instead of going to university I'm kind of doing it all myself. But I really spend like hours a day just starting, learning and reading a lot, writing a lot. So, I love that.

But yeah, I'm starting another company, or two, or three to help musicians. And we'll see which ones people seem to like the best. I would talk about it, but you know honestly, I have this core philosophy that nobody knows the future and I wish people would stop pretending like they do. Because they don't. And I think it's wiser to just admit that you don't know. So even if I were to talk about my new company that I'm doing, I know it's been a turn out different than I expect, as everything does. So it's kind of like: eh, why talk about it? if you want to check out my site, as it goes you'll see how it progresses and changes.

Amber:

I can't wait to see what you come up with. So your book Anything You Want comes out on... what month are we in? It comes out June 29th. What are three takeaways that people should take from the book?

Derek:

I think a big one is paying close attention to the compass in your gut that says like what excites you and what drains you. And they really close attention to what makes you happy, because often not the thing that you thought would make you happy, I think sometimes we end up like getting a little dream in our heads when where teenagers and we pursue it and then we get there and we go "uhh."

In fact, those years that I worked at Warner Bros., I worked at Warner Bros. in New York City for a few years in their kind of music... and I met so many miserable rock stars that had gotten to the pinnacle of their teenage dreams. They were the rockstar that they always dreamed they should be. And they were just miserable. And they just felt bad, like "God you really... you gotta get out of this! Do something else, because you're not happy." So yeah, pay close attention to what makes you happy, because it's often not what you expected. So that's a big take away.

Number two is this thing that I call uncommon sense. Often the best things that could be doing for people, whether as a business or just as a favor, are often the things that aren't radical or revolutionary. They're just kind of, they make common sense. But sometimes it's shocking how a lot of other businesses out there aren't doing the obviously helpful thing, they make things more complicated than they need to be or don't see the obvious straight path and try to fill it with lots of hurdles. And if you find a simpler way to help people, it just feels like uncommon sense. So that's a big one. And so what's number three, can you give me a hint? Com'on Amber Rae! What's something that stuck with you?

Amber:

You say when you're starting a business it's a really when you're creating your own utopia. And so kind of what you did with CD Baby is you painted your idea and potentially unrealistic future of what is new music distribution system would look like. And it just turned out that by creating that vision you actually were able to make it happen. So that was something that really stuck with me.

Derek:

Cool. Thank you, I've forgotten all about that.

Amber:

It's one of my favorite parts.

Derek:

That is a really big take away point. Yeah, thank you! Yeah, it's like when you make a business this is your little chance to make market perfect world, you know? In this circle it's my rules. And I think the world should work like this. I think we shouldn't have privacy policies and user agreements and terms and conditions and I don't think we should have, you know weekly, daily meetings, and I don't think we should… You know, whatever it is, you can set up your business as just like your own little utopia where things work the way that you think they should.

Amber:

Yeah. Exactly. Well, I think that's an incredible place to end this interview and it was really amazing talking with you hearing your perspective. And I think it's can inspire a lot of people. So, thank you so much.

Derek:

Thanks amber! Good to see you again!

Amber:

Yeah, you too! All right.