The Most Valuable Lessons from a $100 Million Founder with Derek Sivers

If I raised the bar all the way up, if I said no to almost everything and said yes to almost nothing, then what would happen is I would be less scattered, I would be more focused, and most importantly, I would have free time so that when occasional rare thing came along that made me go, oh, hell yeah, no, that's a great experience. Like, that's so worth doing, I'd be able to throw myself into it all the way. Like this conference. Ha. People change the world with only one endeavor, right? Like one invention, and you change the world. One Nobel Prize, one problem solved in your lifetime. It's what you will be legendary for. But I think that if we try to do it all, we end up doing nothing great because we're spread too thin. So I think it would be better to do almost nothing and then throw yourself entirely into the occasional rare thing that comes up.

All right, so, Derek, for people who may not be familiar with you, how did you turn CD Baby into a company with 100 million in sales? Let's start with that.

All right, sure. I got six things for you guys. Number six, no competition. There was literally not a single business doing what I was doing. It's hard to imagine these days, but this was 1997, and I was just a musician trying to sell my cd, and there was literally not a single company that would sell independent musicians music. So after I started this little thing to sell my cd and then I helped out some of my friends, the situation in 97, 98 was if you were a musician that wanted to sell your music online, literally like, the only way to do it was a guy named Eric in New York, and that was me. So independent musicians were a market that didn't seem to be anyone's effort or investment. But I wasn't looking at it that way. I just needed to sell my cd and I knew a bunch of musicians that needed the same thing. But by the time the competition came in, about a year later, I had already built a strong foundation. I was kind of entrenched, and the musicians knew about me. So even Amazon competed directly against me. And I thought that I was going to be toast when they entered my market. But musicians still preferred me for reasons I'll talk about next. No investors. I think having no investors was a huge advantage because shortly after I started CD Baby, the dot com boom began in full swing. So everyone with a vague business plan was given millions of dollars. But I just refused all of it. I stayed true to my mission to serve the musicians. So I think that you can feel A difference in a business that is trying to please investors versus trying to please their clients. So I think of it like, you know, these new superhero movies that are almost entirely cgi, where the villain is made from all cgi, and for some reason you're just not feeling feeling a real feeling of threat. You're not really feeling affected, you're not really feeling freaked out or spooked by that villain because they're all just cgi. So like the fight scenes don't feel real. Right. Characters jump around, but you're not feeling the weight of it. So to me, companies that are trying to please investors are kind of like that. Like they're not quite connecting with the audience for some reason. Like they're. Their DNA is a little off. I think that when you don't have investors, you can make better decisions based on what's the right thing to do, like the moral thing or the fun thing, which is not always the profitable thing. Right. So it's making decisions from a different place. Not just the big decisions, but like the thousand small daily decisions, like how you talk to customers, how you answer the phone, and what you ship them when they sign up. In fact, just before I began the call, I thought of a fun example of this. Years ago, I bought a font. There was a guy named Chank C H A N K in Minneapolis that makes fonts and I wanted to buy one of his fonts. So I did. And as a backup, he mailed a disk of the font to your home address. And when I received this thing, it was wrapped in wrapping paper. That was a bunch of penises. I just laughed like no company with an investor would ever do this. But here we are 20 years later and I remember this font that I bought from chank.com because of this ridiculous offensive wrapping paper. Right. So I think it's counterintuitive that by doing these many things to thrill your clients instead of watching the profits. I consider it like the dao of business. Right, Right. By not focusing on profit, you can ultimately profit more. Your customers will love you. They'll loudly tell everyone how awesome you are. They'll tell stories like this 20 years later about offensive wrapping paper and then more people come your way because of it. So by not focusing on profit, you can ultimately profit more, leading to number four, being frugal. Because I didn't have money to waste, I never wasted money. These investor funded companies, a lot of my friends took investor money and then they would spend so much on advertising and technology that they didn't need they would brag about their massive database server or their super security system, but then their money ran out quickly because they were spending it recklessly. So I started CD Baby with $500, and I earned $300 the first month, $700 the second month, and it was profitable every month after that. I always just refused investors. So my expenses were only ever a small percentage of my net profit because that's all I had. I only had 500 bucks to start with. So I think that if you're frugal, you can continue indefinitely. Leading to number three, by the way. Audience, thank Joe for sending me these questions in advance so I could prepare, like, a succinct thing for you here without just going, I don't know. Good question. Okay, so number three, patience. People who start businesses often ask my advice when their business isn't going as well as they thought it would. So I often say, well, how long has it been? And their answer is often, like, weeks or months. But CD Baby took about four years to really get rolling. I could tell I was onto something good right away because the people that were using it loved it, but it was like a slow birth. I think you can tell when you're on the right track, when people are thrilled to open their wallets for you and they're thanking you for how much you've helped. But then it's just a matter of patience and focus. So leading to number two saying no. Hence the title of my yellow book. The company Citi Baby was doubling in size every year, So I honestly never spent that much effort trying to grow it. My biggest effort was keeping it focused. So people will always ask you to add features, so you need to be the curator of what's worth doing. I ended up saying no to everything thousands of times and said yes to maybe only, like, one thing every year or two. So I think that we've all loved an app or a service or a product or a software that keeps getting more and more bloated. They keep adding features, but, like, 1% of people like that new feature, and 99% are annoyed that this thing that they loved is getting cluttered and booted, right? So for CD Baby, during our biggest growth time, I didn't add a single feature for four years. Like, literally not a single line of code. The website and the business, I mean, grew by 800% in clients, in profit, and in everything, but I didn't add a single single feature. And somebody even teased me after three or four years, said, dude, you know, your site has stayed exactly the same for four years. And I went, okay, so number one, I don't know if you're able to, like, kind of do a call out, but to the audience, yeah, I totally can. Okay. Because whenever I would be out at conferences like this, especially in the music business, they'd be full of my musician clients and musicians that were not clients yet. And so I'd always listen really carefully to what my musician clients would tell other musicians about me when they would talk about CD Baby. So guess what was the top reason, the number one reason that my existing clients told new musicians why they should use CD baby. Can anybody take a guess?

Easy. What? Easy. What else?

Keep going.

Nice. He's one of them.

Close.

It's consistent. What is it? Phallic wrapping paper? Is that what you really said? Am I getting that right? Okay, relatability. Good person.

Very close.

Personality. He's a musician. Who said that one?

All right. Should I jump in?

Care? Yeah, jump in. Good. Sorry, everyone. I can't hear it all.

All right, now, this was fun. That more than everything else combined. By the way, thanks for the. You're right. The thing that you said about, like, irrelatable and he's also a musician, that was definitely, like the second reason. But the number one reason, the reason I'm sharing, you guys can consider this for your own situation, is the number one reason musicians told new musicians they should sign up was because they said, you can reach a real person. You call them and they answer the phone. That's why I love these guys, is that. That's what Amazon couldn't do. That. That's the reason why even when Amazon went head to head directly against CD baby, musicians stayed with CD Baby. Because you could call us and we'd pick up the phone on the second ring. And that just gave them this feeling of trust that they felt that they couldn't trust Amazon, that they could just call us to deal with situations. So when people would call, we would always take a few minutes up front to get to know them, Right? So a musician would call up and say, hey, yeah, my name's Jeff and I'm thinking of setting my CD with you guys. And I'd say, oh, cool. All right. So, Jeff, what's your full name? I'd say, Jeff Wilkins. You got a website? Oh, yeah, it's the angryfrogs.com and I say, okay, hold on a second. Angryfrogs.com and I say oh, is that you on the COVID here? Is that a real Les Paul dude? He's like, yeah, It's a real Les Paul, man. I think. Hold on, let me hear your music for a second. So the point is that all the customer service staff, whoever was answering the phone, would take a couple minutes up front to get to know the person that was calling. They read their bio for a second, listen to a minute of their music. And this meant the world to people because they could tell that they were getting a real personal connection. And then we would tell them, like, hey, my name's Derek. If you ever need ask. I'm sorry, I'm saying me, but like, whoever was on the phone, you know, my name's Lindsay. If you ever need anything, just call. We're here, just ask. We're happy to help. So we'd answer every phone call. No automated menu even. There was a phone in the warehouse. So that even if everybody in customer service was busy, if the phone is ringing, the guys in the warehouse would just pick it up and just say, seedy, baby. Even if they didn't know how to help people, just knowing that you could get somebody on the phone that would pick up an answer was the number one reason people chose us over others. So I had 85 employees, and out of those 85, 28 were full time customer service. And I think that people really underestimate the profitability of customer service because it's harder to measure. Right. It's human, it's soft, it's reputation, it's word of mouth. And I just want to spread the message that customer service is not an expense, it's a profit center. Like, when somebody contacts your company, that one interaction, even if they've been a quiet customer for years, they need to call you once. That one interaction with you will shape their opinion of your company more than everything else you've ever done combined. More than your name, your price, your features, your design, nothing can compare to the effect you'll have on one minute of interaction with people. So I have a lot more to say about this in my new third edition of my book called Anything youg Want, about how I, like, started, grew and sold CD, Baby. The book was released in 2011 and I did like a 10th edition rewrite of it and added a lot more to it.

How many of you prior to this follow or read Derek Sivers? Yeah, a few of you. Yeah, actually quite a few. Yeah. So, you know, you know, he's great. Hey, I hope you're enjoying this video. And I want to let you know that I have a new book that's come out and if you'd like, to get it absolutely free. There's a link below in the description. Or you can wait till the end of this video, or you can Simply go to joe'sfreebook.com and you can get a copy there. So one thing I want to touch on that. You just said, so 85 employees, you said 28 of them were customer service. So more than a third of your entire team was all devoted to customer service. Yeah, I mean, in my company, we still strive answer the phone. You know, like, in the world of connecting, I cannot imagine. You know, it's like, make a phone call. There's this thing called talk to a real person. I mean, it's such. It's not complicated. It's so undervalued how the importance of what you just said there. I mean, that piece of advice, if everyone just incorporated that by 10% improvement, it would have a dramatic impact. I think a lot of people would literally double their revenue with just a 10% improvement in customer service. So thank you. All right, so the. The hell yes or no philosophy. So I'll say it this way. I love the philosophy you have of things being either a hell yeah or a no. So can you share the history of that with everyone here? Because I think so many people say it now, but you're the originator of this, and it has. I mean, I can't imagine how many hundreds of people have. It's either hell, yeah. And I have it written on a little heart thing in my office. And we even had. We even bought, you know, like, those. What are those? Was it staples that did the thing? Yeah, that was easy. I have one that's hell, yeah, and another one that says no, the red ones, you know, no, the green one's hell, yeah. And so I have that sitting on my desk, the office. But you originated this thing, so let's speak to that.

I love this idea that's like. I invented those four words.

Yeah, well, you popularized it. You popularized it.

I was in Acai Bowl Shop in Singapore, and somebody walked in with a bag that said hell yeah or no in huge block letters. I just kind of did a double take and just got a quiet nod out of that. Anyway, the history is just that. I was. I was living in New York City, and I was invited to speak at a conference in Australia, and I was weighing the pros and cons. I was like, maybe I should. Maybe that would be a good maybe. I. No, maybe not. Oh, God, that's a lot of time. I don't know. But then I made a Change in my thinking where I decided to, like, raise the bar all the way up. And I realized what would happen if I did that. If I raised the bar all the way up, if I said no to almost everything and said yes to almost nothing, then what would happen is I would be less scattered out in or focused. And most importantly, I would have free time so that when that occasional rare thing came along that made me go, oh, hell yeah, that's a great experience. Like, that's so worth doing, I'd be able to throw myself into it all the way. Like this conference. Huh. So people change the world with only one endeavor, right? Like, one invention, and you change the world, one Nobel Prize, one problem solved in your lifetime is what you will be legendary for. But I think that if we try to do it all, we end up doing nothing. Great. Because we're spread too thin. So I think it would be better to do almost nothing and then throw yourself entirely into the occasional rare thing that comes up.

Yeah. Love it. So let me grab the book that I happened to put on the floor as I'm on this big white stool here. All right. So you sent out an email. As usual, your emails are. I get a million emails. I love reading the emails that come from you. You don't hammer people with stuff. And you. And it always has a bit of a cliffhanger feeling about it, like, huh, this is. It evokes curiosity. And so, you know, I'd read your other books, and I had, you know, your newest one came out, and you said, this is the best thing I've ever done. So the question I have is you released something that you said is the best thing I've ever written. I've poured my entire life into this. And it's your book, how to Live. Okay. It's a green book. And the subtitle is 27 Conflicting Answers and One Weird Conclusion. And so when I first read the book, what are you pointing at? If I want to look like. So if Derek thinks I'm looking directly at him, don't look at the screen. Look there. That's what Eunice is pointing out. Thank you. Okay. Yeah, you tell me that now after we've screwed up the video of this whole thing. So when I first read the book, at first, I did not like it because I was like, I'm confused here. This is all contradictory. This is how dumb I am. Right? And then as I get to, I look at the title. Oh, this is on purpose. 27 conflicting answers in one weird conclusion. So talk about this book because I truly think it is amazing. This book is so profound in so many ways.

Thank you. I'm still kind of in awe of it. It's a little weird thing to like to talk about your own creation like that. So the background is there's a brilliant book by David Eagleman called Sum spelled S U M Sum. Its subtitle is 40 Tales from the Afterlives. And I love this book so much. If I had to pick one single book to say, this is my favorite book of all time, I would probably pick this book because of the format. It's 40 little short stories, little fictional short stories, just two to four pages each, about what happens when you die. But the format is like, you know, chapter three. When you die, you're surrounded by a bunch of thuggish little creatures looking at you with a furrowed brow, saying, what does answer? What does answer? And you find out that what you know of as your life was an artificial intelligence program. You are an artificial. Artificial intelligence program. And the program has stopped running now. And it's your job to tell them the meaning of life. That's why you were written. So you do their best. Do your best to tell them what you've learned in life, but no matter what you say, they just look at you and say, what is answer? And you realize that if we were to write an artificial intelligence program smarter than us, we would be too dumb to understand its answers. End of story, right? But then the next one, it's like chapter four. When you die, you're greeted by somebody who tells you that in your last life, you chose to be a human. But in the next life, you could choose to be any animal you want, just like you did last time. And you think about the day that you enjoyed watching a horse grazing in the grass. What a nice, simple life a horse has. And you say, you know what? If I do get to choose again, I'm choosing a horse this time. No sooner said than done. You start to feel yourself changing into a horse. Your hands turn into hooves, your neck is lengthening. But then you start to feel your brain turn into a horse's brain. And you're starting to forget what a man is. And you really realize, oh, no, I've made a huge mistake. What I loved being was a complex man appreciating the simple life of a horse. But if I'm just a horse and I don't know what a man is anymore, I won't be able to appreciate it. And so you try to say, wait, but all that comes out is. And at the last minute, before you become a horse, you have a horrible thought which is, I wonder what kind of complex, beautiful creature I must have been before that chose the simple life of a man. Like, so cool. So these beautiful little three page long stories. But what I loved most of all is how they all conflict with each other. This book is just so confidently, every chapter saying, no, here's what happens when you die. And it just conflicts with what they just said two pages ago. Right, right. So I love this book. I read it twice over a couple years and one day I went, I want to write a book called how to Live in this same format. Because probably like a lot of you, I've read a lot of self help books that are all convinced that they have the answer, right? Like 0 to 1 by Peter Thiel will tell you one thing and then atomic habits will completely conflict it. And then you'll read a book about the power of how you must give a fuck. And then Mark Manson will say, no, here's the civil art of not giving a fuck. And then there's a book called Getting Things Done. And they all conflict, but they're all correct. And I love that juxtaposition. So each one chapter gives a philosophy thoroughly convinced that it has the answer for how to live. And then the next chapter contradicts it with its own philosophy, how to live. Each one is correct, each one contradicts the rest. It's like reading a bunch of these tele books. But because of this, it ends up kind of destroying the genre that uses the genre to destroy the genre. It kind of mocks the entire genre, but yet along the way in writing it, I put everything I've ever learned in my life into this one book. So the original first draft was over 1300 pages. And it took me two more years to edit that down to 112 pages. It's really succinct. It's almost like poetry. It's really unique and very powerful. And I think everyone should read it. Yeah, it's my masterpiece.

No, thank you.

Thank you.

So now, those of you that have not read it yet, you're bad people. And that is not the right way to live. And you need to go read this book immediately. But you know, I'll say, Derek, one of the reasons that I think I resonated with it after it kind of occurred to me that, wow, this is kind of conflicting, is that I often thought, boy, it'd be interesting to live this way for a month, for 27 months straight, and explore all these different ways to live. What a interesting, fascinating way. So it's great. So read the book and then we'll maybe have another discussion about this after you do. What are you most proud of and most excited for in your life right now?

Most proud of. Can you tell? My notebook. Seriously, I'm not just saying that for some bullshit promotional thing, but, like, if how to Live was the only thing I ever created, and I was on my deathbed, I think that that would be a life well lived. What am I most excited for? Honestly, you sent me this question in advance and I sat there thinking for a long time, and my real honest answer was, like, my relationship with my wife and my kid. It's like the most exciting thing in my life. It just, like, keeps getting better every week. It's really amazing.

Yeah. How old are you now, Derek?

52.

52, wow. I just turned 54 last week. How old is your child?

Just turned 10.

Just turned 10. Awesome. And how many different places have you lived in the last 20 years?

Ooh, lived. I'm going to say 10 off the top of my head. Something around 10.

And how many of those were different countries?

Eight.

Eight, yeah. Yeah. And those you'll see more if you read. Derek. I think a lot of how you've developed your thinking and your perspective is you've expanded yourself in so many different ways on how you know, just how you've lived. So. All right, well, then let me ask you this question. What recommendations would you give to the entrepreneurs in this room in Genius Network on how to live? Like, out of all the ones you've written, which one's the best one?

Oh, okay, wait, that's two different questions. Do you want to know what I think is, like, the best chapter? And then we'll do the.

Sure, yeah.

What? My recommendation for the entrepreneur. Okay.

Yeah, yeah, that'd be great. Yeah.

The best chapter. I had to think about this, that I think that the. It depends on the purpose, the time of life, and the context. Right. This is something anybody wants to nerd out about. This next subject I'm about to talk about, please email me, because I'm, like, currently fascinated with this idea that beliefs are useful, not true. Like, so many times when I'm talking about a belief that I hold intentionally, like, say, if I choose to believe that I'm below average, that's a useful thing for me to believe. I don't care if it's true or not. So some people, whenever I kind of state a belief, some people try to challenge me on Whether that belief is true. But I don't think that any beliefs can ever be true. I think that beliefs are only useful, not true. We choose a belief to be useful. So say that you're 20 years old right now, and you want to get stronger in your resilience. So you should believe in a philosophy that tells you that you should pursue pain and always choose the most difficult option, taking on greater and greater challenges. Avoid comfort. But let's say that you're 30 and your challenge is you want to be more present. You want to live a more present, focused life. Like, say you have a kid and you want to not be thinking about work. You want to be present. Well, then you should believe a philosophy that says that it emphasizes the power of now, the physical senses, where anything in the past is just a memory and the future is just your imagination. The present is the only real thing there is. That's a good thing to believe if you want to help yourself be present in the moment. But that's. It's useful, not true. Now let's say that you're 50 and your primary focus, your goal is you want to leave a legacy, right? So in that case, you should believe in the importance of thinking of everything super long term. Like, think in terms of decades. Forget the present moment, Reduce your current indulgences, Think about sailing today. What you need to focus on is things that will matter in 30 years to serve the future. So different philosophies can either make you famous, improve your relationships, make you rich, or help you explore the world or whatever. But they're beliefs that you take on because they have a use to you to believe that. Is one of these philosophies true and another is false? Is one right and another one is wrong? Of course not. They're just. You use them for different purposes. So that's what the how to Live book is trying to communicate between the lines. Between. That's why I can't answer, like, which chapter is my favorite. But despite everything I just said while I was writing the book, I would keep becoming convinced that the chapter I was writing in that moment was actually true. Like, yeah, I'm writing this whole book, but actually this is the one. Like, this is the one I actually believe the strongest. Like, all the other chapters are. They're. They're okay, but, like, this is the one that I think is actually true and right and correct. But then I'd work on the next chapter the next day, and I'd feel the same thing about that chapter. So that was kind of a fun mind fuck about writing the book.

Yeah, totally.

Okay, wait, so you asked a two part question though. Do you want to stop there with anything or do you.

Oh yeah. Let me just say one thing.

I would give entrepreneurs.

Yeah. What recommendations would you give for the entrepreneurs in the room on how to live? What I wanted to say though that made me think of this is I heard this quote a long time ago. A belief means you're just not sure. So someone says I believe in God, well, they're really saying I'm just not sure or I believe this is the right thing or whatever. So it's a very, it really causes you to really evaluate what you believe in in the moment because you may believe in. You know, I mean, look at politics, right? You know, even, even when I see people that are, have a completely different belief than I do, what I try to do is put myself in the position of if I had to argue for their belief, how would I defend it? How would I stand for that? Just to try to give myself perspective of how, why this person believes what it is they believe so I can get better understanding of it and hopefully be more empathetic and not let my own distortions of what I believe to be true get in the way of, you know, hopefully connection and progress. So yeah, it's, it's, yeah, that's how I think about it. So yeah, the question of what advice would you give to the entrepreneurs in the room on how to live? Because you certainly have done well and I believe you've had a hell of a lot. It's my perception, I don't know, it seems that you may have figured out how to not have as much angst as so many entrepreneurs do because you've, you really, I think you have kind of lived your life thinking about how to avoid quicksand and land mines and things like that. So whatever advice you have.

Maybe I got lucky with the DNA of the early days of things. Like I was pursuing things for a different reason. But yeah, that kind of ties into my suggestion for the room is I think it's crucial to know the nuances of what kind of success you want. Right. So anybody can say I want to be successful, but we don't all agree on what that means. If you know the nuance of what kind of success helps you squirt through the noise and advice. So maybe you really want to be like a huge Amazon sized company, but maybe you just want to be a really profitable small three person company or solo, right? Maybe you want to be really rich above all else. But maybe you really want to be famous above all else. Like maybe in your heart of hearts, what matters to you most is to be well known. You don't care so much about how much money it brings you. But the thing is, you not only need to know it yourself and admit it to yourself, but you need to admit it to others as well and be prepared. Because no matter which one is true to you, everybody's there's always going to be people telling you that you're wrong. Like if you actually want to be rich, there's going to be people saying like, you're a jerk, you should really be giving away all that money. But if what really matters to you is how much you give away, somebody's going to say you're an idiot. You should be keeping that for yourself. So no matter what you choose, people are going to tell you wrong. So if you know it and admit it, then you can just filter the incoming advice accordingly, right? So like Peter Thiel's zero to one book I mentioned earlier, that advice in that book is great if you want to be a big Facebook sized company, but it won't help you be a small, profitable company. Advice I write in my books won't help you be the next Facebook. It's about being a small, happy, profitable company. So know what you want, know why you want it, and I highly recommend writing it down in advance. So even just on the fly, if you're some kind of live situation interview or something and somebody saying, well, why did you do that? Why did you give the money away? You need to just note with like a simple declarative statement, well, this is what I'm doing. This is why I'm after this. Like, I might not be like the other entrepreneurs you're used to, but this is what I'm pursuing. And lastly, okay, that's the end of that next section is you should know that your answer will probably change over the years. So please don't feel any need to be congruent with your past self. Like, you need to accept that your needs change over times and do not have any loyalty to your old proclamations. No matter how many people you told in the past that your beliefs are such, feel free to just let that go and say, I'm doing something else now. I have a different goal now. I'm pursuing this. There's a beautiful book I hope you all get the chance to read since I imagine that most of you in this room are in a position of leadership in some way. It's called what Got yout Here, Won't get yout There. And it's an amazing book on business leadership, saying the skills it took for you to climb your way up from nothing to the heights of where you are now are a different set of skills than you'll need to go to the next place you're going in life. And it's such a great point about how you need to change your strategy along the way to keep going. So don't forget that.

No, I love that. So we have Dan Sullivan, the founder of Strategic Coach, in the room here, and he has a great line. The skills that get you out of Egypt are not the same skills that get you to the promised land. Okay. I hope you found that video awesome and useful. So if you want to get a free copy of my book, I want you to click here. And if you want to watch some more videos that will be useful and awesome, click here. Go ahead. They're over here. Do it now.

Come on.

Thank you.

Watch them.