Anything you want by Derek Sivers, is one of my all-time favorite books. It’s a short book you can read in an hour and contains 40 lessons Derek learned while building and selling cdbaby.com, a platform for independent musicians to sell their albums.
The following is a summary of the 40 lessons. This is an extended summary where I try to not leave a lot of information from books. Read why here.
1. Ten year of experience in one hour
CDBaby.com is a little hobby that accidentally turned into a business from 1998 to 2008. Derek’s way of building a business is a little bit unconventional to what we currently see in the media or read about in books. That’s why he explicitly mentions that you shouldn’t follow his ideas and approach blindly. What worked for him may not work for you, so keep this in mind while you read the remaining.
2. What’s your compass?
The second lesson is about knowing your compass, or what you are trying to achieve. Most people don’t know why they’re doing what they’re doing. They imitate others, go with the flow, and follow paths without making their own. They spend decades in pursuit of something that someone convinced them they should want, without realizing that it won’t make them happy.
In life, you need to know your personal philosophy of what makes you happy and what’s worth doing. Then do it.
3. Just selling my CD
Derek’s was a musician. He created his own album and started selling it at his concert. In total, he sold 1500 copy and wanted to sell online.
At that time, the only way to get your album online is to sign with a record label company. But Derek was against the idea of selling his soul to a label. He wanted to stay independent.
So Derek decided to build his own online store!
But this was in 1997, and PayPal didn’t exist. He contacted his bank and paid 1000$ to setup a merchant account, and spent three months doing paperwork. He then got a programming book and started copying examples in order to build his store. After some time, the Buy Now button was live on the site.
After telling his friends, everyone started asking Derek if he can sell their albums. He said yes to all of them. And quickly it turned to 50 musicians wanting to get on the site.
4. Make a dream come true
Derek wanted to sell his album, but he’s spending more time setting up albums for his friends. It looks like he accidentally started a business!
Given he didn’t want to start a business in the first place, Derek took a utopian approach and wrote down what he wanted his company to do, from a musician perspective. In a perfect world, he wanted a company that:
- Pay me every week.
- Show me the full name and address of everyone who bought my CD. (Because those are my fans, not the ditributor’s)
- Never kick me out for not selling enough. (Even if I sell only one CD every five years, it’ll be there for someone to buy)
- Never allow paid placement. (Because it’s not fair to those who can’t afford it)
That was the company’s mission, and it kept Derek motivated to work on it.
When you make a business, you get to make a little universe where you control all the laws. This is the utopia Derek is talking about.
5. A business model with only two numbers
When you accidentally start a business, you don’t really know what’s your business model. And that was true for Derek too.
His approach is funny, but effective. Derek visited a record store and asked the woman at the store: “How does it work if I sell my CD here?”. The woman responded: “You set the pricing at whatever you want. We keep a flat 4$ cut. And we pay you every week”.
So Derek went home to his online store, and wrote: “You set the pricing at whatever you want. We keep a flat 4$ cut. And we pay you every week”. The reasoning was if it’s working for that store, it should work for him too. And given he spent 45 minutes adding a new CD to the site, he started charging a one time fee of 25$ per album and then raised it to 35$.
And that was the business model the whole time. A 35$ setup fee, plus a 4$ cut. A business plan should never take more than a few hours of work -hopefully no more than a few minutes.
6. This ain’t no revolution
After CD Baby’s success, the media said it revolutionized the music business. But that term is usually used only when you’re successful. Before that, you’re just a quirky person who does things differently.
People think revolution always involves loud provocations, fists in the air, and bloodshed. But if you think a great relationship looks like Romeo and Juliet, you’ll overlook a great relationship that grows slowly.
When you’re into something great, it won’t feel like revolution. It’ll feel like uncommon sense.
7. If it’s not a hit, switch
For the first time, Derek made something that people really wanted. Before that, he spent 12 years trying to promote his different projects with different marketing approaches, networking, pitching… But now it was different.
Once he got a hit, all the locked doors were open. People loved the product so much that it’s promoting itself.
When you present a project to the world and it’s not a hit, don’t keep pushing it as is. Instead, get back to improving and inventing. Present each new idea or improvement to the world. If multiple people are saying: “Wow, yes I need this! I’d be happy to pay you to do this!” then you should probably do it. Otherwise, don’t pursue it.
8. No “yes”. Either “Hell yeah!”. Or “no”
You can also use this to personal matters. If you find yourself saying something less than “hell yeah!” to something, then just say no.
We’re all busy. We’ve all taken too much. Saying yes to less is the way out.
9. Just like that, my plan completely changed
CDBaby was seen by Derek as a credit card processing service. Somewhere musicians can say, go buy my CD online. But one day, a customer sent him an email: “Any new releases?”. Derek didn’t understand the request and asked for more details. “Oh, sorry, I thought it was a store” said the customer.
A store? That’s an interesting idea. Being a store will be helpful for artists as more people can stumble upon their work. And just like that, the plan completely changed, and CDBaby was transformed to a store.
Five years later, Apple asked CDBaby to be a digital distributor. And just like that, the plan completely changed once again.
Anytime you think you know what your new business will be doing, remember this quote from serial entrepreneur Steve Blank: “No business plan survives first contact with customers”
10. The advantage of no funding
Having no funding is an advantage. Spending less time in investor meetings, talking about LOI, ROI, IPOs and all kinds of things that also had nothing to do with helping your customers.
None of your customers will ask you to turn your attention to expanding. They want you to keep your attention focused on them. It’s counterintuitive, but the way to grow your business is to focus entirely on your existing customers. Just thrill them, and they’ll tell everyone.
11. Start now. No funding needed
Watch out when anyone (including you) says he want to do something big, but can’t until he raises money. It usually means the person is in love with the idea of being big-big-big than with actually doing something useful. For an idea to be big-big-big, it has to be useful. And being useful doesn’t need funding.
12. Ideas are just a multiplier of execution
Ideas are worth nothing, unless they are executed. They are just a multiplier. Execution is worth millions.
To make a business, you need to multiply these two components: ideas and execution. The most brilliant idea, with no execution is worth 20$. The most brilliant idea takes great execution to be worth 200.000.000$.
That’s why Derek don’t want to hear people’s ideas. He’s not interested until he sees execution.
13. Formalities plays on fear. Bravely refuse.
Never forget that there are thousand of businesses, like Jim’s Fish Bait Shop in a shack on a break somewhere, doing just fine, without corporate formalities.
As your business grow, don’t let them suck you into things you don’t need. They’ll play on your fears, saying that you need this stuff to protect yourself against lawsuits. The’ll scare you with horrible worst-case scenarios. But those are just sales tactics. You don’t need any of it.
14. The strength of many little customers
When you build your business on serving thousand of customers, not dozens, you don’t have to worry about any one customer leaving or making special demands. If most of your customers love what you do, but one doesn’t, you can just say good-bye and wish him the best, with no hard feelings.
15. Proudly exclude people
When CDBaby got popular, record labels tried to add their artists there. But since the start, CDBaby was only for indie musicians and those record labels were politely excluded by Derek.
It’s a big world, you can loudly leave 99% of it. Have the confidence to know that when your target 1% hears about you excluding the other 99%, the people in that 1% will come to you because you’ve shown how much you value them.
16. Why no advertising?
This goes back to the utopian perfect-world ideal of why we’re doing what we’re doing in the first place. In a perfect world, would your website be filled with ads? When you’ve asked your customers what would improve your service, has anyone said “Please fill your website with more advertising”?
Nope. So don’t do it.
17. This is just one of many options
When creating your business plan, you can’t pretend there’s only one way to do it. Your first idea is just one of many options. No business goes as planned, so make ten radically different plans.
Same thing with your current path in life:
- Now you’re living in New York City, obsessed with success. What’s your plan?
- Now you’re a free spirit, backpacking around Thailand. What’s your plan?
- Now you’re married and your kids are your life. What’s your plan?
18. You don’t need a plan or a vision
Do you have a big visionary master plan for how the world will work in twenty years? Do you have massive ambitions to revolutionize your industry? Don’t feel bad if you don’t because you don’t need one. Just stay focused on helping people today.
19. “I miss the mob.”
Never forget why you’re really doing what you’re doing. When you get big, you’ll have MBA types asking you: “What’s your growth rate? What’s your retained earnings rate as a percentage of gross? What are your projections?”. Those all unnecessary metrics.
They’ll try to push you to optimize your business even if it’s already making money. They’ll say you’re leaving money on the table. But never forget: Are you helping people? Are they happy? Are you happy? Are you profitable? Isn’t that enough?
Given the story behind the “I miss the mob.” is long, I decided not to include it here.
20. How do you grade yourself?
We all grade ourselves by different measures:
- For some people, it’s as simple as how much money they make. When their net worth is going up, they know they’re doing well.
- For others, it’s how much money they give.
- For some, it’s how many people’s lives they can influence for the better.
For Derek, it’s how many useful things he creates. Songs, companies, articles, websites, or anything else.
How do you grade yourself? It’s important to know in advance, to make sure you’re staying focused on what’s honestly important to you, instead of doing what others think you should.
21. Care about your customers more than about yourself
One day, someone from the audience asked Derek: “In the future, when artists can spin up their own online store, what would happen to CDBaby?”. To which Derek responded: “Honestly, I don’t care about CDBaby. I only care about the musicians. If CDBaby is not needed in the future, I’ll shut it down and get back to making music.”
He was shocked. This is the first time a business owner says he didn’t care about the survival of his company. But that was common sense to Derek.
A business is started to solve a problem. But if the problem were truly solved, that business would no longer be needed! So the business accidentally or unconsciously keeps the problem around so that they can keep solving it for a fee.
This is also true for pharmaceutical companies or online productivity subscription tools. Any business that’s in business to sell you a cure is motivated not to focus on prevention.
That’s why, if the problem isn’t around anymore, your company should be willing to die for customers. Care about your customers more than about yourself, and you’ll do well.
22. Act like you don’t need the money
Banks love to lend money to those who don’t need it. Record labels love to sign musicians who don’t need their help. People fall in love with people who won’t give them the time of day. It’s a strange law of human behavior. It’s pretty universal.
If you set up your business like you don’t need the money, people are happier to pay you. When someone’s doing something for the money, people can sense it, like they sense a desperate lover. When someone’s doing something for love, being generous instead of stingy, trusting instead of fearful, it trigger this law. We want to give to those who give.
23. Don’t punish everyone for one person’s mistake
Several years ago, one guy tried to light his shoes on fire on a plane. Now, and for all future time, millions of people a day have to queue up to take their shoes off at the airport – because of that one dumb moment.
As a business owner, when you get screwed by someone, you might be tempted to make a big grand policy that you think will prevent you ever getting screwed again. One employee can’t focus and spends his time surfing the Web. Instead of firing or reassigning that person to more challenging work, the company installs an expensive content-approving firewall so that nobody can go to unapproved sites ever again.
When one customer wrongs you, remember the hundred thousand who did not. Resist the urge to punish everyone for one person’s mistake.
24. A real person, a lot like you
When we yell at our car or our coffee machine, it’s fine because they’re just mechanical appliances. So when we yell at a website or a company, using our computer or phone, we forget that it’s not an appliance but a person that’s affected.
It’s too overwhelming to remember that at the end of every computer is a real person, a lot like you, whose birthday was last week, who has three best friends but nobody to spoon at night, and who is personally affected by what you say.
Even if you remember it right now, will you remember it next time you’re overwhelmed, or perhaps never forget it again?
25. You should feel pain when you’re unclear
CDBaby had about two million customers.
When writing an email to everyone, if it wasn’t perfectly clear, at least twenty thousand confused replies will get back to CDBaby. Which will take staff at least a week to reply to, costing at least 5,000$ plus lost morale.
Unfortunately, people writing websites don’t get this king of feedback. Instead, if they’re not clear, they just get silence. Lots of hits but no action.
A lot of new websites are trying to look impressive, filled with hundreds of puffy, unnecessary sentences. The people creating these website haven’t felt the pain of trying to email something to thousands of people, to directly see how misunderstood or ignored it is.
26. The most successful email I ever wrote
When you make a business, you’re making a little world where you control the laws. It doesn’t matter how things are done everywhere else. In your little world, you can make it like it should be.
When starting CDBaby, Derek wrote an automated email that goes after each shipping: “Your order has shipped today. Please let us know if it doesn’t arrive. Thank you for your business”
One day, Derek felt the email is too serious and wanted to make it more fun. He took twenty minute, and came up with:
Your CD has been gently taken from our CDBaby shelves with sterilized contamination-free gloves and place onto a satin pillow.
A team of 50 employees inspected your CD 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 put your CD into the finest gold-lined box that money can buy.
Our packing specialist from Japan lit a candle and a hush fell over the crowd as he put your CD into the finest gold-lined box that money can buy.
We all had a wonderful celebration afterwards and the whole party marched down the street to the post office where the entire town of Portland waved “Bon Voyage!” to your package on its way to you, in our private CDBaby jet on this day. Friday, June 6th.
I hope you had a wonderful time shopping at CDBaby. We sure did. Your picture is on our wall as “Customer of the Year”. We’re all exhausted but can’t wait for you to come back to CDBABY.COM!!
That one email, sent out with every order, was loved that if you search Google for “private CD Baby jet”, you’ll get almost twenty thousand results. Each from somebody who got the email, loved it, and posted it to his website and told all his friends.
When you’re thinking of how to make your business bigger, it’s tempting to try to think about big changes and projects. But please know that it’s often the tiny details that really thrill people enough to make them tell their friends about you.
27. Little things make all the difference
If you find even the smallest way to make people smile, they’ll remember you more for that smile that for all your other fancy business-model stuff.
An example of small things, is the outgoing emails from CD Baby. Every outgoing email has a “From:” name you can adapt. With one line of code, it was “From: CD Baby loves [first name]”. Customers loved this.
Even if you want to be big someday, remember that you never need to act like a big boring company.
28. It’s OK to be casual
When hiring new people, Derek’s method was unusual. He’ll go to his staff and ask: “Anyone have a friend who’s good with Linux? Yeah? Is he cool? OK, tell him to start tomorrow”. The thought was that it’s almost impossible to tell what someone’s going to be like on the job until he’s actually on the job for a few weeks.
Don’t try to impress an invisible jury of MBA professors. It’s OK to be casual.
29. Naive quitting
One day at his first job, Derek decided to quit in order to focus on being a full-time musician. But given this was his first and only job, he didn’t know what to do. So he did what seemed to be respectful and considerate thing to do; He found and trained his replacement.
When the days came, Derek walked into his boss’s office and said: “I need to quit now, but I’ve already trained my replacement. She’s great.”. His boss looked a little stunned, then said: “Uh. Well. OK. We’ll miss you”.
Ten years later, when Derek was running CD Baby, and for the first time, an employee told him he needed to quit. “Drag. Well. OK. I wish you the best! Who’s your replacement?” said Derek. The employee looked confused and said: “I think that’s your job.”.
Derek asked a few friends and found out he was right. People can just quit a job without finding and training their replacements. All these years, he just assumed what he did was normal.
There’s a benefit to being naive. Deciding from scratch what seems like the right thing to do, instead of just doing what others do.
30. Prepare to double
Given CD Baby needed warehouses for the CDs, Derek had to buy more shelving few times each year. Instead of trying to predicate how many shelves they needed, he buys the double each time. When they filled a 5,000-square-foot warehouse, he rented a 10,000 square feet one. etc…
Never be the typical tragic small business that get frazzled and freaked out hen business is doing well. It sends a repulsive “I can’t handle this!” message to everyone. Instead, if your internal processes are always designed to handle twice your existing load, it sends an attractive “come on in, we’ve got plenty of room” message.
31. It’s about being, not having
When you want to learn how to do something yourself, most people won’t understand. They’ll assume the only reason we do anything is to get it done, and doing it yourself is not the most efficient way.
But that’s forgetting about the joy of learning and doing. Yes, it may take longer. Yes, it may be inefficient. Yes, it may even cost you millions as your business will grow slower. But the whole point of doing anything is because it makes you happy! That’s it!
You might get bigger faster and make millions if you outsource everything to the experts. But what’s the point of getting bigger? To be happy, right?
When you sign up to run a marathon, you don’t want a taxi to take you to the finish line.
32. The day Steve Jobs dissed me in a keynote
I left this intentionally as couldn’t find a way to summarize the story without writing all of it 😦
33. My $3.3 million mistake
Four years before starting CD Baby, Derek wanted to borrow some money to buy studio equipment. His dad said “Instead of me lending you money, start a corporation. Then the family business can buy shares in your corporation”. And that’s what Derek did.
Four years later, he got the first check addressed to “CD Baby”, but there was no company called “CD Baby” at the time. So he went to the band and told the teller “I need to set this up as a new business, so let’s open a new business account”. But she told him “Oh you don’t need to do that. You can just make it an alias on your Hit Media account”. It seemed a little strange because CD Baby was an independent business, but it saved ten minutes and 100$, so he said OK.
Four year later, CD Baby was doing really well: a few million dollars in sales, half a million in net profits, and Derek paid his dad back the money he borrowed.
Derek called up his accountant in January to ask if they can file the taxes early that year. “Oh, you don’t need to file. CD Baby is just a line item on your dad’s company’s tax return.” said the accountant. “What?”. “You didn’t know that your dad’s company owns ninety percent of CD Baby?”. “Uh… What?”.
Yes, it looks like the money Derek borrowed eight years earlier was done by selling 90% of his company to his dad’s company. And all these years, CD Baby wasn’t his company. He only owned 10%.
What made it even worse is that he couldn’t just buy the business back for the original 20,000$. The only way was to pay full market value, as determined by an outside valuation company. Which ended to be $3.3 million dollars.
34. Delegate or die: The self-employment trap
Most self-employed people get caught in the delegation trap. You’re so busy, doing everything yourself. You know you need help, but to find and train someone would take more time than you have. So you keep working harder, until you break.
The same went with Derek when working with CD Baby. In 2001, he had eight employees, but he was still doing everything else. Working 7AM to 10PM, seven days a week.
Every five minutes, an employee got a question for Derek. It was hard to get anything done while answering questions all day.
After hitting his breaking point, he took some time to think and decided he should make himself unnecessary to the running of his company.
Now whenever he got a question, he stopped everything, called everyone, repeated the question, and then provided an answer. But more importantly, he explained the thought process and philosophy behind the answer.
He asks if everyone understood and then asks someone to take a note in a newly created manual for these questions.
After two months of this, there were no more questions. Now he was totally unnecessary.
There’s a big difference between being self-employed and being a business owner. Being self-employed feels like freedom until you realize that if you take time off, your business crumbles. To be true business owner, make it so that you could leave for a year, and when you came back, your business would be doing better than when you left.
35. Make it anything you want
After your business has been up and running awhile, you’ll hit an interesting crossroads. Everyone assumes that as the owner of the company, you’ll be the traditional CEO, having high-powered lunches with other high-powered CEOS and doing all the business deals. But what if you don’t like doing that? What if what you love the most is the solitude of the craft? Or talking to customers?
Never forget that you can make your role anything you want it to be. Anything you hate to do, someone else loves. So find that person and let her do it.
If you do this, you’ll encounter a lot of pushback and misunderstanding, but who cares? You have to just do whatever you love the most, or you’ll lose interest in the whole thing.
36. Trust, but verify
In 2005, CD Baby’s main business was doing digital delivery music to all the digital music retailers: iTunes, Amazon, Napster… This role was life-or-death important to the company and was the main reason most of the new clients signed up.
Derek built a system that did most of the work, but it sill required someone to connect the drives, and ship them to retailers. And he hired a guy to do just this.
He explained how this mission is critical and that the job requirement was: Every album, to every company, every week, not matter what. The guy signed on the contract and started working.
A few months later, lot of complaints were falling on CD Baby. It appears the music wasn’t sent to the digital music retailers in months!
Derek called the guy in charge to ask what’s happening. He said, “Yeah, I’ve been really backed up. It’s been really busy”. Derek flew to Portland and let him go as this was an extreme matter. He then decided to do the job himself for some time to catch up on things.
The lesson in this story is to trust, but verify. Remember it when delegating. You have to do both.
37. Delegate, but don’t abdicate
Delegation doesn’t come naturally to any of us. But Derek was trying hard to be good at it. When the employees asked how they should organize the rooms in the new office?, Derek said “Any way you want”. When they asked, which health-care plan should we go with?, “You decide” said Derek.
Six months later, the accountant called Derek and said: “Did you know that your employees et up a profit-sharing program?”. “Yeah, why?” said Derek. “Did you know that they’re giving all of the profits of the company back to themselves?”. Oups.
Derek canceled the profit-sharing program, and became the very unpopular guy. In the weekly company meetings, the general message from the employees was “We need to get Derek out of here, so he stops telling us what to do. We don’t need to answer to him! He needs to answer to us”.
That’s when Derek realized there’s such a thing as over-delegation. Derek considered firing everyone and hiring a whole new crew. He also considered shutting down the company since he wasn’t enjoying this anymore.
In the end, he did what was best for the customers: He retreated into solitude and focused on programming some major new software features. He never saw or spoke to his employees again, never saw the office.
During this, Derek learned an important word: abdicate. To abdicate means to surrender or relinquish power or responsibility; this word is usually used when a king abdicates the throne or crown. Lesson learned too late: Delegate, but don’t abdicate.
38. You make your perfect world
Business is as creative as the fine arts. You can be as unconventional, unique, and quirky as you want. A business is a reflection of the creator.
- Some people want to be billionaires with thousands of employees. Some people want to work alone
- Some want as much profit as possible. Some want as little profit as possible.
- Some want to be in Silicon Valley with Fortune 500 customers. Some want to be anonymous.
No matter which goal you choose, there will be lots of people telling you you’re wrong. Just pay close attention to what excites you and what drains you.
39 and 40: Selling CD Baby and donating everything
Derek never thought he would sell CD Baby but in 2008, he was trying to plan for the years ahead. Every plan needed a huge effort for little reward, but all required for future growth. He broke the work into about twenty project of two to twelve weeks each, and he wasn’t excited about any of them. Derek took CD Baby far beyond his goals, and he realized he had no vision for it being much else.
That’s when Derek started thinking about the idea of selling. After talking with some of his friends and mentors, he was encouraged to sell.
Before selling CD Baby, Derek created a charitable trust and transferred all CD Baby assets to the trust. When Disk Maker bought CD Baby, they bought it from the trust and not from Derek, turning $22 million cash to benefit music education.
If you liked this article, there are other extended book resumes in the books category.
Do not miss my next post! Drop your email in the box below and get it straight to your inbox: