Sauce and Godiva (E)

0:00There I was just walking down the street singing do-a-de-de-de-de-de-de-de-de-de. Hey, it's Ajay, and this is a special archived episode of Akimbo.

0:17In the year 2000, Sony had a problem. The problem was that the patents that they owned with Philips for the CD format were running out. And those patents had been very, very good to them. Every year, they made between$60 and$80 million in profit because every CD, every CD player, every CD mastering machine had to pay them a royalty. But the patents were running out. Also, there were problems with the CD format that the people at Sony and the music industry could see coming. First of all, CDs didn't sound nearly as good. as the industry had promised everyone they actually sounded. Second, digital was coming.

1:10The CD didn't hold that much data, actually, and it was pretty easy to rip it. And once you ripped it, it was really easy to share the files. The music industry hated this idea. So Sony, working overtime, created a new format, a format they called S-A-C-D. And what they tried to do was something that would be good for everyone. Good for Sony, because they'd have a new patent, and they'd be able to charge everyone in the industry a tax every day for the next 17 years. And good for the music industry, because it would give them a chance to sell all the music lovers yet another format. Maybe it might be good for some listeners, because it would hold four times or more as much data as a regular CD.

2:05That meant if you could hear the difference, an SACD would make you happier.

2:23You keep saying you got something for me Something you call love but confess You've been messing where you shouldn't be messing Now someone else is getting all your best In all the rush to make the new SACD format, to have it come out just at the right moment, Sony forgot to manufacture very many of the recording devices. Yes, you could take a master tape and transfer it to the new SACD format, but everything would sound better if you recorded it to DSD, which was the format native to the SACD. Unfortunately, they only made a half a dozen of these recording devices, mostly by hand, and they reserved them for Sony-owned labels.

3:24Well, as we know from chicken-and-egg situations, you really don't want to buy a player unless there's music for it, and you don't want to buy music for it unless you have a player. And certainly the industry isn't going to make music for it if they don't have a device to record with. Well, I saw all of this swirling around and I love new media and I love music. So I thought, wow, what can I do about this? Turned out some guy in the UK was making these recording devices as well. They were only$5 ,000 each, so I bought one. I had, I believe, the first one he shipped to the United States. Got myself a couple fancy microphones, and I started a record label.

4:05A place where we can get together. Love song, yeah, yeah.

4:18And the idea of the record label was not to make average stuff for average people, nor was it to figure out how to get my songs on the radio. The idea of the record label was to put some of my ideas in practice. And one of them was to revisit the Book of the Month Club, revisit the idea of subscription. So the idea behind this label, which I called Zoom Tone, was this. You would get four or five SACDs a year in the mail. At the time, SACDs were scarce. They cost about$30 each at retail, when a typical CD cost about$12. It turns out making one of these SACDs didn't cost that much, about$3. So clearly, people in the record industry were cleaning up, selling these to people who were into high-end audio.

5:14And the players, a CD player at that time, cost about$199. An SACD player costs$5 ,000. What kind of person buys an SACD player for$5 ,000? I'll tell you what kind. The kind of person who has$30 ,000 speakers. The kind of person who has a$4 ,000 amplifier. The kind of person who reads Stereophile Magazine. So I knew that there were 100 ,000 people who were paying every month to read a magazine about stuff that was new in high-end audio. I knew those people were sort of interested in SACD. I knew some of them already had a player. And I guessed that most of them weren't happy about paying 30 bucks to rebuy music they already owned.

6:06So my idea was simple. You'll get four or five of these a year for$20 each,$15 each, because you'll subscribe. Give us a subscription. Instead of finding listeners for our music, we'll find music for our listeners. And the math for me was simple. If I could get 5 ,000 people to subscribe, I'd be making, I don't know,$10 a copy that I sold. That's$50 ,000 every time I made one. And my plan was, because this was an experiment, to give the artist all of the money that we were collecting because I wanted to see how I could build a catalog, how I could take these ideas and bring them to the world. We did all of the recordings in one day, a single session, live to two-track, no compression.

6:59I rented a church for 500 bucks. We'd go to the church and we'd spend the day and then we'd be done. So for the musicians, it was a great deal. For me, it was a fun project. So what happened? I ran a full-page ad in Stereophile Magazine, and I was astonished to discover what happened. What the ad said was, here's my project, here's what I'm doing, and if you send me five bucks for postage and handling, I'll send you the first SACD we produce. Well, it turns out, at$3 to duplicate it and$2 to mail it, $5 actually was break-even for me. So I was happy to have as many people as I could sign up for this free trial.

7:44I was amazed when I went to the post office box. Because of the 100 ,000 people who saw that full page ad, 3 ,000 of them sent me$5. A 3 % response rate from an unknown company running an ad one time. That's unbelievable. That's off the charts. filled with excitement. I contacted two people in town and Beth and Michael and I went to the church and recorded Waiting for Godiva and we named their group Sauce.

8:30I was really pleased with the way the record came out. You can hear the whole thing for free at akimbo.link. Just click on the show notes. So we mailed it out, and it came with a letter. And the letter said, here's the first one. We'd love it if you'd subscribe. Here's how much it costs. Here's how to sign up. Well, we sent out 3 ,000 of them. We sent out the 3 ,000 letters. Three people signed up. Three. Not 3 ,000, not 300, not 30, three. Well, as you can guess, I finished recording the other two albums and then I folded my tent because I had done something fundamentally wrong. I completely misunderstood something about the culture of the people I was trying to sell to.

9:24Curious, I sent an email. I had email addresses of about 1 ,000 of the 3 ,000 people they'd filled out on the form. And I said, look, I'm not trying to upsell you. We're done. We didn't do it right. We lose. But tell me if you don't mind, why didn't you sign up? And the responses were astonishing. Because let's go over the bidding here. The people I was selling to had an SACD player. The people I was selling to were paying$30 to buy SACDs, and I was selling it to them for half that amount. It was easy, and it worked. So why didn't they sign up? Well, some people said the music was too raucous.

10:04Some people said the music wasn't raucous enough. Some people said there were too many covers. Some people said there weren't enough covers. Some people said it was too jazzy. Some people said it wasn't jazzy enough. So what I learned from my survey is people didn't like it. But that's all I learned. And then I dug a little deeper and I understood what was happening. The kind of person who is interested in new stereo equipment, the kind of person who wants an ever fancier amplifier or absurd speaker cables, doesn't want new music. They want old music. They want the music they are used to. They want the regular kind.

10:50because the regular kind doesn't stretch them to consider whether they actually like it or not because the regular kind doesn't exert any cognitive load on the listener. You can spend all your time listening to the stereo. You don't have to spend a lot of your time listening to the music. And when people come over, which is the highlight of the day for someone with a fancy stereo, When people come over, you can put on the Rolling Stones, you can put on Roxy Music, you can put on Patricia Barber, and you can say, how does that sound? Because it's the regular kind. It's the music you are used to.

11:35And so for me to show up with new music, for people who are looking for new music, there might have been a market for that, but not among people who want a$5 ,000 SACD player. It was a great lesson to learn. Sort of expensive, but not too expensive. A great lesson to learn. And the lesson was, in many markets, the regular kind is the kind that people choose. And that you have to work very hard to find pockets of people who don't want the regular kind, who want the new kind, the challenging kind, the experimental kind. So if we look at a site like Kickstarter, what we see is that Kickstarter has the potential to be a breeding ground for the avant-garde, for really fringe works.

12:31If there's six or seven billion people on the planet and two billion people have access to Kickstarter, if even 0.01 % back an obscure Latin stand-up poetry slam, it's going to work. But they don't. And they don't because most people, even when they seek the new, don't want things that are that new. Most people, when they are asked to buy something, are afraid. They're afraid it might not work. They're afraid of what other people will say. They are afraid of feeling stupid because they wasted their time or their money. Or just consider something as simple as the podcasting world. Some people, brave people, good-looking, smart people, experiment with new podcasts.

13:26I don't know, like this one. But most people, most of the time, are listening to the regular kind. And so it's not an accident that most podcasts sound like the best of NPR or the best of an audiobook because it's the regular way to do it. Eventually, the culture moves. It moves from one place to another. We go from listening to the weavers to listening to rap. But we didn't get there in one year or 10 years. We got there in 50 years. Because the ballast, the weight at the center of the culture is that people like us do things like this. And so if our job is to change the culture, we've got to make sure we know who the people like us are.

14:18And in my case, with Zoom tone. I was wrong. I thought the people like us were people who listened to fancy stereos. All I had to do was show them that now the people like us are listening to things like this. And if I had persisted, if I had stuck with it for five years, shown up and shown up and shown up ever more generously, I probably would have been able to make a dent because it was only 100 ,000 people. I only had 3 ,000 I had to persuade, but I didn't have the patience for that. I was too busy looking for a shortcut, a different way of changing a hundred-year-old industry. That's on me, because the culture is the culture.

15:01It does what it does, and we don't get to decide how and when it will change. What we can do is find little pockets of the culture, truly people like us, little tiny pockets, the smallest viable audience, and embrace them and see them for who they are and give them what they dream of. Not specifically, because they can't dream of exactly what you are dreaming of, but give them the emotions and the feelings and the status that they seek and then make it easy for them to tell their friends. we'll be back in a second with answers to your questions from last time but first here's a message from our sponsor lenovo and before that one last little bit of juiciness from michael and beth thanks for listening we'll see you next time she got the urge for going

16:02And I let her go And she got the urge for going When the meadow grass was turning brown Summertime was falling down Hey Seth, it's Maria. Hey Seth, my name's Kyle. Greetings, Seth. This is Stephen out in Madison, Wisconsin. Hi Seth, Alicia from Charleston here. Hi Seth, this is Anupam. Hi, this is Caitlin. Hi, Seth. Warm greetings from Curacao. Hey, Seth. My name is Nick Ryan from Pittsburgh, Pennsylvania. Hey, Seth. This is Rex. Hey, Seth. Hi, this is Vasilis from Greece. Hi, this is Roberta Perry. My question is... And that completes my question. Happy New Year, everyone. If you're listening to this when it's fresh and new, if you've got questions, we love to hear them, and I'll try to answer them here on the podcast.

16:54visit akimbo.link. That's A-K-I-M-B-O dot L-I-N-K. Hi, Seth. It's Dane from Southern California. You've encouraged listeners and readers like us to look for useful insights, skills, trust, attention, access, good ladders to help us level up as opposed to trying to scale a cliff with no tools. My question is about the other side of that encouragement, namely the temptation to chase mirage shortcuts to get ahead. A ladder's efficiency, shrinking the distance between the ground and new heights, sure feels like a shortcut. Might you have any personal rules to tell the difference between a good ladder and a hack, only sooner?

17:35I get the irony that I'm asking for a shortcut to discern if something is a shortcut, but I thought I'd ask anyways. This is a great question, Dane, and I know it comes from the best possible place. Your book, Fast Track Photographer, is all about the best kind of shortcuts. the shortcut that doesn't necessarily feel like a shortcut when someone goes on it because it's difficult it's the long way until it works growing up there was a shortcut to school we walked to school every day i was super lucky we called the shortcut odin's way that's because it went along a fence and on the other side of the fence was a really mean angry german shepherd this was the meanest German shepherd in history.

18:21So to walk along the Odin Way shortcut meant risking your life. And so for a lot of people, it was easier to walk around the block. Let me try to propose four kinds of ladders, four ways that we can think about whether a shortcut is simply a hack that makes no sense, that hurts other people, that gets us in trouble, or if it's in fact a new way of being, a better way to get our job done. The first question I would ask is, is it repeatable? Meaning, do I only get to do this one time and then it's broken for me? Because non-repeatable shortcuts are certainly interesting to look at, but you can't build a life or a future around it.

19:08And a lot of crash diets work exactly this way. Number two, is it non-harmful. What are the downstream effects of this shortcut? Because if I'm going to do a shortcut, if I'm going to build my work around it, I want to know it's not going to hurt me or hurt the people I care about. I want to know it's not going to break our culture. The third one is, is it additive? Meaning, if I get to do it again, does it get better over time? So when I think about the shortcut by Odin, it was repeatable because every day I could take it to school. It didn't hurt anybody because that dog wasn't getting out anytime soon.

19:55And it was additive because every time I took that shortcut, I felt a little bit more secure and confident. And then the fourth one that I'll throw out there is, can it survive the crowd? Does it have to be a secret? So I remember years ago, soon after I sold my company, I got a call from one of the three or four biggest accounting firms in America. And they said, we have a way that you can pay no taxes, but you're going to have to sign a nondisclosure agreement before we tell you what it is. And I said back to them, look, I like paying taxes, but beyond that, if it's so secret that you can't tell me what it is until I sign an agreement keeping it a secret, my guess is it's not repeatable, it has a harmful downstream, and I'm probably not going to be comfortable doing it again and again.

20:51Well, my instincts were right, and 10 years later, a whole bunch of people got indicted for supposedly legal advice. My point is that the internet offers all of these short-term hacks, all of these things that might make you feel like you're winning in the short run. But often, they don't hold up to the light of day. They hurt you or other people. You can only do them once, and they're not aligned with where you're going or how you want to get there. I compare all of that to the approach that you talk about in Fast Track Photographer. And what I feel about it is that these are the long shortcuts, which are the best possible kind of shortcuts.

21:34Hi, Seth. This is Richard from Krakow in Poland. In the last episode on dignity, you answered a question from PJ Horan about the value of MBA education. And you talked about how you thought business schools were going to be much challenged by self-organized community education groups, self-study groups, and the like. I'm an entrepreneur, but I've recently started teaching entrepreneurship in both business school and undergraduate settings. And I'm very interested in the idea of study groups. Are there any examples of self-study groups, for example, based around your content or other thought leaders operating outside the conventional education space that you can point me to.

22:24I'm potentially thinking of trying one of these in 2019 and would love to get your feedback on examples of good practice or best practice. Thank you very much and thank you for all your work. Thanks, Richard. And you're bringing up a powerful point here, which is that we know peer support works. We know it is possible to learn an enormous amount from one another. people holding each other accountable. And we also know it's really difficult. A bunch of years ago, I put together a team of people and we built something called Krypton Community College. It wasn't a business. It was a process, a program, something we put in the world for free.

23:02And at the beginning, tens of thousands of people signed up to try it. But what we found, our key mistake was that we didn't have built into it a process to hold each group accountable. So plenty of people were interested in starting, but it didn't build up enough credibility among the circles of six or eight that they could keep it going without us. We see the same thing with book groups. Lots of people start a book group. Most book groups don't last. And so when we look around at the Lions Club or the Rotary or Alcoholics Anonymous, when we look around at successful mastermind groups, what we see that they have in common is that they become culturally sticky.

23:49And part of my commitment for 2019 is to help people build those sorts of circles. That's what we do at the Alt-MBA. That's what we do at the marketing seminar. I think, I know it works better than sitting by yourself and reading a book. that if you can be surrounded by other people who are going where you are going and who want to challenge you to level up, it will bring your best work to the fore. So yes, go make that ruckus. Do it without me, do it without other people. We need each person to stand up, invite a few others into the circle and stick with it long enough to create that cultural stickiness.

24:34Thanks for listening. Have a wonderful, healthy, happy new year. And we'll see you next time.