Interviews → Forbes - Michael Ellsberg

Michael:

I just found reading this book there were all these moments where I actually gasped, because I'm just so used to reading the same kind of regurgitated clichés that just make their ways through business books. And your book has none of them, and just so many just fresh, sometimes even shocking, statements and ways of thinking about business.

And one of the moments I gasped is where you had a moment where you talk about how all the MBAs and the VCs and everyone would say "okay, what's your plan, what's your growth rate, what are your projections, what are your visions?" And you know if there is anything like a religion in business books: it's like goals and visions and goals and visions, and you are almost kind of a heretic to that religion. You just say "you know what? My focus is on helping the customers and the people we’re serving, and as long as we're doing that we’re doing okay and I don't care about the projections." Like, talk to me about that.

Derek:

Sure. I mean, just for a little context: when I set out to do this thing that turned out to be CD Baby I really expected that at its biggest I might someday in the future have 1000 customers and I might have two employees and this thing might take up my entire garage. That was the big long-term vision of this thing. But then I think just through luck and circumstance, it was just good timing, nobody else was doing it, you know, it just grew faster than I ever expected.

So within two years I had surpassed my big giant ten year dream vision. And then within three years it was like tenfold that, so only four, five years into the company I had like 50,000 customers and 25 employees and it was just so much bigger than I had ever intended, and even bigger than I ever wanted it to be. And it felt like everything that happened after that.

When people would say something like "whether your projections, what are your goals?", I just toss up my hands and say "look, I surpassed those goals and projections years ago, so I have no idea what I'm doing, and I'm just… at this point I'm really just responding to need, this isn't part of some big plan, I don't actually want to be bigger, I'm just trying to…"

Michael:

This touches on another theme I got from your book, which is that you seem to be very comfortable with just trusting that if you are putting your customers first, and doing the right thing by your customers and the people you're serving, everything is going to work out fine. And it just seems like so many people in business that I come in contact with are scared of that fundamental level of trust, so instead they come up all these plans, and detailed business plans, which probably will never actually work out the way their plans are anyways, but it somehow makes them feel more comfortable than just simply trusting that if they're doing the right thing for their customers it's all gone a work out okay. Like, how does that role of that, kind of basic trust come out being the way you've done business?

Derek:

Well, I swear I'm not just saying this, but it feels like: who are you really doing this for? Are you really doing it for your customers? Or are they just some kind of means to an end for you, is it just that you really want to be a rich and you really want to have a Ferrari, and your customers are just a means to an end?

I think that becomes apparent pretty fast in the way that people set of their plans and their schemes. Maybe it's because this thing really was a hobby, I was really just doing it as a… initially I was doing it as a favor to my musician friends, what turned out to be CD Baby at first was just a little free service I was doing. And then I realized oh my God, this thing is taking all my time, I better start charging something.

So, but I kept that original spirit to it that: no, I'm really am kind of just doing a favor for these musicians. And it really is an entirely for them, like I have no aspirations or dreams for this thing, I'm doing it for them. So, I guess it was just following that.

But then you do find it all the businesses of the world, you know that things like, what was the... that Tom Peters's gonna be in search of excellence... if you go out there into the world and you find these businesses that are doing things that are remarkable and breathtaking, it's usually because they are honestly putting the customer's best interests first, right? I mean, almost… that's why we get shocked when we hear about, like a Nordstrom's return policy or something we go "oh my God, they'll… they'll refund your money even if it's damaged? Why would they do such a thing?" Is because they're doing what's best for their customer. And it seems shocking, but... honestly... customers loved that. So, then they flock to you instead of somebody else.

Michael:

Right. A lot of your business philosophy seems to stem from the idea of making… like, being so awesome for your customer that they are just thrilled to talk about your business to other people. Like doing things that makes them just want to talk about you. And that seems like the best kind of marketing. I mean, I don't know how much you had to spend the marketing, but I imagine that if you have customers that evangelical about what you're doing, then that was your main kind of marketing.

Derek:

Yeah exactly, in fact I always just tell people that I didn't do any marketing. They say kind of "what was your plan, how did you grow your business?", I'm like "I didn't… I didn't do any marketing at all."

Michael:

Yeah. It was almost like a viral, I mean, it kind of just went viral 'cause people were talking about it, because they loved it. I love the part in your book when you talk about, kind of like, how things that you're doing are either gonna happen... that either gonna work or their not gonna work, and the biggest mistake is to, when something is clearly not working, to kind of keep flogging it and pushing it. And instead, you tried lots of different things and this one just had legs and you could just tell that people were excited about, and wanted to talk about it. Is that… does that, does that philosophy come at all from the dynamics of the way music works also? Because I saw a parallel there where in music also there is not a lot you can do to market a piece of music into a bestseller. Like it either spreads virally or doesn't, and we don't really know why those things happen.

Derek:

Yes, exactly! I'd say that that's one of the biggest lessons learned in hindsight. Like if I really zoom out and look at the last 20 years of my life, there were so many things that I thought were going to be a big hit, and just weren't, and I kept pushing them for years and people just weren't into it. Then there is this one little silly thing I started as a hobby that people were just so into, and that the CD Baby.

But even after starting CD Baby I have some other ideas, like I had something called Tour Baby I think, that I did for a couple of years while I was at CD Baby. And then one of my employees worked with me to make this thing called Film Baby that he thought would be huge, but that just didn't take off. And it's not like I've got this Midas touch, like anything I decide to do is big, it's still got this element of random chance.

So here's the best example: right after I sold CD Baby, on my personal site, I said okay here's my next project, and I wanted to do them all at once. I had six projects that I've been wanting to do for years, and now that I had time I announced them all. So, some of them I thought were going to be a big hit, I felt that this was a great idea. So one of them for example was I wanted to do a documentary about the inside of the grassroots music business. I wanted to take video cameras into the offices off, like the booking agent at clubs and publicists office and record labels and publishers. I wanted to understand what it's like to be on the receiving end of my music. So, I thought it was a great idea, but every time I would tell people about it they'd go… the response would be kind of like "yeah… that sounds pretty cool. Let me know if that happens." Right?

But on the other hand I had this other idea called MuckWork, that was like a team of virtual assistants, like remote assistance working from home, helping musicians with all the dirty work that they don't want to do. And anytime I would tell people that idea you would get this kind of like frothing at the mouth kind of response, like "my God, I need that! Wait, can I sign up for this right now, today? Oh my God I could use that, I need that so badly!" Sometimes I would tell people just over dinner and they would call me two days later going "hey, is that ready yet? Can I sign… can I be an alpha tester? I need this so bad!"

And so, looking at the difference in response to those two different ideas, I'd say: okay, maybe the lesson learned is don't keep pushing these ideas, like this documentary, that people just don't seem into. Even though I am into it, people just don't seem that into it. On the other hand when you get that kind of huge response from people, go with those things. But then, even more, in hindsight may be for all of the ideas we have in life, like, whenever you're not getting a massive frothing at the mouth oh-my-God-I-want-to-pay-you-now kind of response, just don't do it, just let it go and go "eh, all right, instead of pursuing that I'll just do something else."

Michael:

That's such a different philosophy than most people have where, you know, someone will have an idea and they'll get $20 million investments and they'll build up this whole thing, and like then they find out that no one wants it, and it's like "oops!"

Derek:

I know... it's so silly!

Michael:

I honestly do think that it had, that part of the reason you had that philosophy towards business is your background in music, because... it just strikes me that that is actually is how a lot of musicians I know think, is that they kind of know that songs... they don't know why certain songs are popular and others aren't. They just… they don't know. So it seems like that was born of that sensibility.

Derek:

You know what's funny? This has made me a really annoying guru, meaning that I… What do you call it when so many little startups come to me with their ideas and they say "hey hey you've had a success, so what do you think of my idea?", and they… everybody wants to tell me their startup idea, and wants to pick my brain and know what I think of it. And for almost everything I just say "well, our people into it? Are customers wanting to pay you?" I don't know. That's all there is to it, right?

Michael:

You know, I think you can get that kind of feedback like shockingly quickly, and from a small sample. I've seen this a lot in my life, you know, with my books. If I tell three or four people a book idea, maybe five, six, ten at most, a book idea, I can get a pretty damn good sense of whether that idea has legs or not just looking at their facial expression in the second or two after I say it. And I think that relates to what you said, it's like, when you're talking about the documentary, I'll bet if you look at their facial expression it would've been like very neutral or or even maybe a slight frown when they said like "oh yeah, yeah great, show it to me when it's done." And then, you know, when you mentioned the service for musicians I'm sure that, you know, their whole energy, there being just shifted up and you can see the excitement. And that kind of feedback is actually shockingly effective and can be had very cheaply and quickly.

Derek:

That's a really good point, that kind of, those impulsive gut reactions that we can't hide before we kind of put on our public faces on about what we're supposed to say.

Michael:

Exactly. So, you have a very, kind of, bootstrap philosophy and that's one of the big themes in your book is starting small… I love your comment about how, like, if you don't have money to waste you want to waste money. And starting small… Is that related to this other philosophy here where… I mean, if your philosophy is "look, put stuff out there, see how the market response, see if customers are responding to it, if it's helping them", it seems that related to that philosophy would be "start small, don't frontload a bunch of infrastructure and investment before you really know whether people are going to respond to this", I mean, do you view those two as related?

Derek:

Yeah. That's a good… interesting observation. I think it's also just, I'm a bit of a cheapskate and I'm absolutely a minimalist. So, I think in almost every aspect of life, when somebody says "you need to do this", I'm always the first one to go "do you really? I don't think you really do."

Like, there was this really funny thing, say for example as CD Baby was growing, once you get beyond, say, 10 or 15 employees and all of a sudden you're on the radar of business-to-business services that start pitching you every day, telling you all these things that you need: "you need to use our metrics…" kind of something like that. So, we'd even... you know we were based in Portland, Oregon and we've even get people coming by in person, in suits with clipboards to say "well of course you need to have an employee review policy…", for example, and I say "need, okay so if I do not do this will I be thrown in jail?", And they say "oh no no no, but you really should have…", I'd say "okay okay we're done here, good, go away." Unless I'm actually going to be thrown in jail for not doing it, then I don't need it. So then for example one day a person in a suit and a clipboard came by and said: we are with the city of Portland, or the state of Oregon or something and you need to have the minimum wage sign posted at the office. And I say "okay so I need that, like all be thrown in jail?", And they said "well, kind of, yeah, I mean you'll be deeply fined, and if you ignore it for long enough… yeah that's against the law." And I said "oh okay, alright, so this I will do." So I took the minimum wage sign, I said "does it say how it needs to be displayed?", And they'd say "no, just in a public place." So I said "okay." So I went into the bathroom and I hung it up on the ceiling. Like okay, there we go. There is my ornery streak.

But… a lot of that does come from this minimalist, kind of, ethic of not having more than you need, right? So, when all these businesses tell me… Like, the example that you just said where what we've got this idea so we need $20 million to make it happen, I'm like "do you need that? Do you need to write this fancy software?"

So, that's what I think is kind of cool sometimes about businesses that you talk to in India or Indonesia, where their mind is already in this kind of duct tape philosophy of what's the quickest, kind of, cheap best hack we can put together to make this happen? And I love that kind of mindset, right? Whereas a Silicon Valley entrepreneur might be looking to compete with OpenTable and they might think that they need to get a team of programmers to make this software that is going to be installed in the desk of every restaurant. Then somebody in India will say, and that's a real example of somebody I met last week, he said "well, we're just going to get on a motorcycle and go visit every restaurant in Mumbai and get their menu, and then will bring their menu back to the office I will just type their menu into our website and get their phone number and now anybody that wants to make reservations at those restaurants they just click on our web… they click on our site and will just pick up the phone and call the restaurant to make a reservation."

I'm like "yes!" That… I love it. Like, you can do that in a week. That takes no team of programmers, that takes no investors. That just like a week on a moped around Mumbai, people typing in the paper menu… I love those kind of solutions. So, anytime somebody says they need something, it's like "no, you don't, you don't need a million dollars to start helping people, you can just be a little more creative and start helping people."

Michael:

That gets to another theme that I thought was very unique about about your book and prominent in your book, was... a kind of emphasis on doing business in a casual, very humanistic way. So, you know, you have a lovely riff about... just because like one... there's one mess-up at one point around something, you don't need to create a policy that forever bars that again happening. Or, you have a whole riff about terms of service and this kind of stuff, and... I think the reason that businesses get into that kind of stuff is around fear. Like they're really afraid that if they don't have it, you know, something bad might happen. It sounds like your bar was sort of like: well, if I can go to jail over it then I'll do it, but other than...I mean, it seems like almost other that, you're pretty much willing to take the risk.

Derek:

Yeah, I mean, you're right: it's definitely fear-based, but to me it's more like, when you create a business this is your opportunity to make a little utopia. Like, in your business the world gets to work the way you think it should, right? Like this is your vision of the way that things should be.

So, you know, when I would see something like the terms and conditions legalese on the bottom of a website, it's like "really?", like nobody reads that. Why are you... what silly formality is this, like you think you need this. Even though nobody reads it, then like a lawyer says "well that protects you", it's like: how does that protect... like nobody reads it anyway, and then this is all common sense, like it's just... the emperor has no clothes kind of moment here, right? Like, come on this is just silly! So now, as you've got your business and it's your time and somebody's telling you you need the terms and conditions there, it's like: well, no! You don't actually need them and they're just silly, let's just admit it, so...

Michael:

Like, a lot of the decisions you make are just really ballsy actually, like, the decision not… I mean, to just basically, in so many words, flip a finger to major labels that wanted to distribute through your company. I'm sure you've turned down more than your share of people who wanted to invest, and they were probably shocked at… you're probably the only "no" they ever received to their money. And again it just seems like, where did you get the confidence to basically do it on your terms and not cave in to these bigger forces that many other entrepreneurs, basically kiss ass to?

Derek:

I've actually never told somebody this before, but my first long-term girlfriend from the age of like 21 to 27, her parents were classic hippies, like she grew up in a commune in Vermont with no electricity and they grew their own food and all that. And her parents, just on doing odd jobs, her father did photography part-time, her mother did odd jobs like sewing for people, just through odd they put their daughter through Smith College. And they lived in the little cabin in the woods and I think their cost of living was basically, like $400 per month.

And at the time that she and I met I was living in Manhattan working at Warner Brothers kind of doing my own little version of the rat race, right, kind of thinking that I needed to have a good paying job, that I needed to kind of like push for a raise. And then really getting to know her and then her parents I realized: know, actually you can just opt out of all of it, like as long as you are able to keep your living costs low… if you can live on the thousands bucks a month, or even better like, you know, $700 a month… you don't have to do anything for anyone, like, you can do just the occasional little odd jobs and then say no to the rest.

So I really adopted that philosophy when I was 22. I actually quit my job at Warner Brothers when I was 22 and that's the last time I ever had the job. Ever since then I found ways of keeping my life very cheap, just, kind of just saying no to the whole kind of advertising industry's desire to make you want things. So that was kind off… that's being my approach to life ever since. It's just that my cost have lowered so cheap that, hey as long as I'm making, like a thousand bucks a month I'm cool, anything after that is gravy. So, same thing with my business then that, like I said, I really never expected it to grow beyond even 1000 customers. And as long as I was making $1000 a month with it I was fine. So, as CD Baby grew to the point where it was making $20,000 a day, of course then, it's like anybody comes along saying "we want you to… you have to meet these demands if you want to work with us", then I say "well, no… like, I don't need you, I don't need anybody." I don't need anything beyond this level, I can just say no to all of it. It's a wonderful feeling.

Michael:

I love it. So on the topic of what you just said, I'm good to ask one question that kind of comes out of left field. And just for fun you can answer this any way you like. It just seems to me that there is some kind of underlying philosophy to what you're saying, to your writing…there's some kind of emphasis on simplicity, and kind of being in the moment and doing… just kind of going towards happiness, and it almost has a kind of Zen or Buddhist feeling to it or kind of Thoreau, like living on Walden Pond, kind of feeling. Like, did you have some kind of spiritual or philosophical background? Like, where did you get this sensibility of yours?

Derek:

Well, it's flattering that you say Thoreau, but I think of it a little more like Forrest Gump. I feel like I'm kind of… I've never went to business school, I never wanted to run a multimillion dollar company, I was just being a musician. So as I was thrown into this situation I respond a little bit like Forrest Gump. Things can often be simplified down to a simple little motto that you can tell a lady on a park bench next to you, it doesn't need to be that much more complicated, you know?

I swear it's really that, it's not that I sit under a lotus tree in my Zen enlightenment or something like that, it really is just… I feel more like Forrest Gump.

Michael:

I love it. And I think, I actually think your book can really be a way to get this message of simplicity and kind of just being in the present and going with the flow in the way that businesspeople can actually relate to, because it's not some guru in robes, you know, speaking from the mountains. It's like the real business person who's made real money, but who's living life in a different way than most business people choose.

Derek:

Thanks.

Michael:

Yeah. A couple more questions here. I love your little riff on setting up your business like you don't need the money, and you kind of have an analogy there towards romance where, you know, if you're really needy for some reason, well it's kind of obvious why, but people… that's like when you're least likely to attract romance or love. And when you're just, when you don't need it for some reason, that's when people are attracted to you. And you make that analogy to money that somehow when you are in a position where you can just turn away money if you so please, like, more money comes your way. Talk a little bit about that. Because I found that to be very true in my personal life and my business life, but I've never really seen it in print in the business book.

Derek:

Really? Oh wow! Okay. Well… I think… I think… it's a little bit like that thing we talked about a while ago about that, are you really doing this for your customers? Are you really doing what's best for them or is just that you have this desire to be a billionaire, because I think people can really see through that stuff. So I think that's kind of what I meant, like if you set up things in a way where it's like you don't… you're not being greedy, you're not nickeling and diming. Nickel and dime... nickel-and-dime-ing? if you're not nickel-and-dime-ing, if you're not being greedy, if you're not just putting yourself first at every little decision, people can see that and appreciate it. And then they choose to do business with you, because they feel better about. And then you'll win over the competitor that might be trying to be more ruthless and trying to… do you know what I mean?

Michael:

Uhuh, uhuh. Yeah.

Derek:

So I think it's, it's as simple as that, it feels like that customer focused… again, that... people say that a lot, but are you really, down to the micro level, doing exactly what would be your dream-come-true situation as a customer?

Michael:

Yeah. Yeah, absolutely. And on that topic of, of... people can see that you care and see that you're doing it for the right reasons, the… I remember buying a CD a while back from CD Baby, and I got that famous email of yours. I'll quote a few paragraphs for anyone who hasn't… Are they still sending that email out when you buy one, or is it…?

Derek:

That's a good question, I think so, I'm not sure though.

Michael:

Okay, so if you, a while… as of a while ago if you bought a CD on CD Baby you get this email that says, and I'm quoting here: "your CD has been gently taken from our CD Baby shelves with sterilized, contamination free gloves and placed onto a satin pillow. A team of 15 employees inspected your CV and polished it to make sure it was in the best possible condition before mailing. Our packing specialist from Japan lit a candle and a hush fell over the crowd as he puts your CD into the finest gold lined box that money can buy." And it goes on for several more lovely, charming paragraphs. And I just loved that one I got that, it put a huge smile on my face. And you talk in the book about how that was one of the best… that is one of the most profitable emails you ever sent you didn't even really intend it to be profitable and people loved it. And so that, to me that a larger point, is that I think part of why your business was so successful is that it really you had personality. Like you weren't afraid to put your personality in there. And, you know, it seems like a lot of businesses are really afraid of that because they're, they think they'll offend somebody or look unprofessional or someone might take something the wrong way or they might not think it's funny. So, how do you maintain a business where you can really put quirks in it like that and personality in it like that?

Derek:

There's so many great examples though. Like if you go to any, kind of rock 'n roll part of any city in the world and you walk down a little street and you can see so many little quirky shops, whether it's a skateboard shop or a record store, or sometimes there is, you know, these little shops that are like novelty shops, almost like art galleries work technically you can buy the quirky little things they found: old Polaroid cameras or Hello Kitty lunchboxes. There are so many great examples out there where the owner pours their personality into it. But I think maybe it's because.... record stores are often an example of that.

I mean, if you've seen the John Cusack movie High Fidelity, all right? It's like this classic example a record store where they're just like "no you can't buy Stevie Wonder here, get out!", you know? That kind of philosophy and I think it's a great role model to have and it's like, your business can be as quirky as you wanted to be.

And you know what? People love that. Because nobody needs another sterile, paint by numbers, typical business that's doing whether a typical business does. I mean, just again, yourself into the mindset of the customer, if you're a customer in the world which do you appreciate more: another cookie-cutter business that's absolutely normal doing things to normal safe way or the one where you walk in and the owner is the quirky bird that has funny policies and…? You just appreciate that more, so… knowing that you appreciate that as a person why not, when you are creating your own business, be true to that?

Michael:

And you're right in your book that, you know, you're really only going for the one percent of the people who get it, who get what you're trying to do and you're happy... if someone is like… If someone got that email and they are like "I didn't want this funny thing, I wanted a plain straight talking email about how my CD was shipped", you know it's like "okay, we're sorry, but we're not… probably we're not a good match as customer and company." You're just willing to say goodbye to that kind of person.

Derek:

Yes! So Michael, I think you're actually on to something that I hadn't even myself noticed. It's that, like I think that so many people, when they start a business, they so desperately want to be big big big big big, like they want to be billionaires, they want to please everybody. And so they're in that horrible mindset of "how do we please everybody?" And that's, your right, that's when you do things like making these policies that are sure not to offend because you don't want to turn away a single customer because you want to be a billionaire! But on the other hand if you just have that confidence to just… to realize that you only need to please .1%, as you say, that you do things in a different way and then you realize that .1% of the world that's pretty sweet. You know what?

I like this, you know, we've all seen the Social Network movie, so my quote is "hey a billion dollars, that's not cool. You know what's really cool? A million dollars!"

Michael:

I love it! Great, well we've been talking with Derek Sivers. His book Anything You Want is coming out from the Domino Project on June 29th. I just read it, I love it, I highly recommend it. It takes about an hour to read. They cost eight bucks on Kindle. It'll be one of the best eight bucks an hour you've ever spend. That is my recommendation. Thank you so much for taking the time, Derek, I really appreciate it.

Derek:

Thanks Michael! That was great questions, great conversation, thank you.

Michael:

Yeah, absolutely!