Latest / Broken Record with Rick Rubin, Malcolm Gladwell, Bruce Headlam and Justin Richmond / Business of Art: The Entrepreneurial Mindset & Music

Transcript

Business of Art: The Entrepreneurial Mindset & Music · Broken Record with Rick Rubin, Malcolm Gladwell, Bruce Headlam and Justin Richmond

• 0:15
  Speaker 1: Pushkin.
• 0:18
  Speaker 2: This is Justin Richmond here with the bonus episode of
• 0:21
  Speaker 2: Broken Record. It's a little bit of a different episode
• 0:24
  Speaker 2: than we typically air, but I think it's one that
• 0:27
  Speaker 2: the musicians that listen to the show will be excited
• 0:32
  Speaker 2: to learn from. This is one where it's like, you know,
• 0:36
  Speaker 2: you'll get some joy out of this too, I imagine,
• 0:37
  Speaker 2: but also put on your thinking cap and think about
• 0:39
  Speaker 2: how some of this relates to you and how you
• 0:41
  Speaker 2: can use some of this. It's a conversation about finding
• 0:44
  Speaker 2: success in the music industry through non traditional means.
• 0:48
  Speaker 1: You know. It's about artists and.
• 0:50
  Speaker 2: Independent labels who found ways to forge their own paths
• 0:53
  Speaker 2: to success outside of massive record.
• 0:56
  Speaker 1: Sales, big ticket tours.
• 0:58
  Speaker 2: Thinking the Taylor Swifts here of course, right, and how
• 1:01
  Speaker 2: you can innovate within the music industry giving indie artists
• 1:04
  Speaker 2: a way to thrive. This episode is sponsored by Chase
• 1:08
  Speaker 2: for Business and I'm joined by Ben Walter, who is
• 1:11
  Speaker 2: the CEO of Chase for Business in the host of
• 1:13
  Speaker 2: his own brilliant podcast, The Unshakables. Ben, thanks for joining
• 1:17
  Speaker 2: us for this episode.
• 1:19
  Speaker 3: Justin Thanks for having me. I love all things music,
• 1:22
  Speaker 3: so this is this is an exciting moment for me,
• 1:24
  Speaker 3: I'm really glad to be with.
• 1:25
  Speaker 1: You, good man.
• 1:27
  Speaker 2: This is like a really you know, as media continues
• 1:30
  Speaker 2: to evolve, this is something that I think is front
• 1:32
  Speaker 2: of mine for everybody, and in this creative spaces, like
• 1:35
  Speaker 2: like a broken record, we don't often have these kinds
• 1:39
  Speaker 2: of conversations about business, and I think they can be
• 1:41
  Speaker 2: really insightful for creatives and for artists and musicians. So
• 1:45
  Speaker 2: thank you, I hope so so, Ben, I'm so for
• 1:49
  Speaker 2: those reasons.
• 1:50
  Speaker 1: I'm happy to have you on to talk about this.
• 1:51
  Speaker 1: You know, I think most people think about.
• 1:53
  Speaker 2: The artists they love, you know, we just had like
• 1:55
  Speaker 2: a Will Smith on right, you know, even Billy Corgan
• 1:59
  Speaker 2: on right. They're more often than not a part of
• 2:01
  Speaker 2: a larger system like a major label, a major label group,
• 2:05
  Speaker 2: Universal Music, or Sony. But when you learn more about
• 2:08
  Speaker 2: the industry and smaller artists, you realize there's a lot
• 2:11
  Speaker 2: of other ways to make money and be successful in
• 2:14
  Speaker 2: the industry, to make money on what you're doing and
• 2:16
  Speaker 2: provide a living for yourself. People always think about the
• 2:20
  Speaker 2: art of business, right, but we don't spend as much
• 2:22
  Speaker 2: time I think thinking about the business of art, you know.
• 2:26
  Speaker 3: And I think that's a great line. Yeah, it's true,
• 2:28
  Speaker 3: but you cannot sustainably have one without the other.
• 2:31
  Speaker 1: Absolutely not.
• 2:33
  Speaker 2: There's a label called Excel Recordings out of England and
• 2:37
  Speaker 2: we had its founder, Richard Russell on the podcast in
• 2:41
  Speaker 2: its early days. One of the problems that Richard Russell
• 2:44
  Speaker 2: felt he was solving when he started Excel Recordings was
• 2:47
  Speaker 2: he looked at independence and he realized, well, you know,
• 2:51
  Speaker 2: the people running these labels, they have a lot of
• 2:54
  Speaker 2: heart and soul and they really want to see their
• 2:56
  Speaker 2: artists succeed and they're identifying unique talent. But where he
• 3:01
  Speaker 2: realized major labels for succeeding was obviously having the budget,
• 3:04
  Speaker 2: being able to drive distribution and marketing, and he thought,
• 3:08
  Speaker 2: well those are you know, I guess there's a natural
• 3:11
  Speaker 2: tension between those two things, but maybe there's a way
• 3:12
  Speaker 2: to solve this. And the way he thought that if
• 3:14
  Speaker 2: I sort an indie, the way he would solve it
• 3:17
  Speaker 2: was just to sign less artists. That way he'd have
• 3:19
  Speaker 2: a bigger pot of money to distribute amongst a smaller
• 3:22
  Speaker 2: number of artists and be able to grow sustainably. Does
• 3:25
  Speaker 2: that seem like a sound first principles for starting a
• 3:28
  Speaker 2: business of that sort.
• 3:29
  Speaker 3: Yeah. I think look in any business, when you think
• 3:32
  Speaker 3: about the top line of the business, you know the
• 3:35
  Speaker 3: revenue coming in. You always got this issue between product
• 3:39
  Speaker 3: and distribution. In the case of music, content and distribution.
• 3:42
  Speaker 3: But content is the product, So you pick your wording,
• 3:45
  Speaker 3: but you know you have stuff to get to market,
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  Speaker 3: and then you have pipes that get it to the market.
• 3:49
  Speaker 3: And in different industries at different times, at different points,
• 3:53
  Speaker 3: different parts of that value chain have more and less
• 3:56
  Speaker 3: leverage over one another. So I think you know, in
• 4:00
  Speaker 3: the case of Excel, what they did that was smart
• 4:02
  Speaker 3: is they realized they had great product but limited leverage
• 4:06
  Speaker 3: on the distribution side. And so what they really did
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  Speaker 3: in essence by cutting it down is said, I am
• 4:13
  Speaker 3: willing to take a bet on my product, and by
• 4:16
  Speaker 3: limiting the product, I will maximize the number of resources
• 4:20
  Speaker 3: I can throw my real challenge, which is distribution. And
• 4:23
  Speaker 3: so that's a really smart way in their case. Now
• 4:27
  Speaker 3: they were betting big, right, because if the talent wasn't
• 4:30
  Speaker 3: as good as they thought, they wouldn't be where they
• 4:32
  Speaker 3: are today because they basically went all in on product.
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  Speaker 1: Yeah.
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  Speaker 3: Now you can do that when you're just starting out
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  Speaker 3: because you have very little to lose.
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  Speaker 2: Yeah, and it's funny, I mean, to your point, when
• 4:41
  Speaker 2: you're that small and just starting out, you don't have
• 4:43
  Speaker 2: a ton to lose, but it's still risky. But you know,
• 4:45
  Speaker 2: adjusted for adjusted for the amount of money you're kind
• 4:48
  Speaker 2: of making, and that you know, it's that risk can
• 4:51
  Speaker 2: feel big.
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  Speaker 1: And they really were niche.
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  Speaker 2: To start, like they were a rave and dance label
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  Speaker 2: right as that stuff was starting to kind of come
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  Speaker 2: out of clubs and maybe just touch the mainstream a bit.
• 5:02
  Speaker 2: But one of their early artists was the group Prodigy,
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  Speaker 2: and you know, and then the label starts in nineteen
• 5:08
  Speaker 2: eighty nine and by nineteen ninety four they have a
• 5:11
  Speaker 2: you know, the Prodigy, you have a number one album
• 5:13
  Speaker 2: in the UK. By nineteen ninety seven they have a
• 5:15
  Speaker 2: number one album in the UK and the US, right,
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  Speaker 2: And so that pot of money I think starts to
• 5:20
  Speaker 2: get bigger at the label and then they are What
• 5:22
  Speaker 2: they did was reinvest back again, same principle, thinking let's
• 5:27
  Speaker 2: take the money we have invested into a small number
• 5:30
  Speaker 2: of artists. They just took that money, reinvested into the
• 5:32
  Speaker 2: artists and eventually they grow that to you know, like
• 5:35
  Speaker 2: until they're releasing Adell's album twenty one and Vampire Weekend
• 5:39
  Speaker 2: Records and White Stripes Records, and Radiohead and Tyler the Creator,
• 5:42
  Speaker 2: you know, like artists who are really shaping modern culture.
• 5:45
  Speaker 3: Oh the White Stripes. Yes. Well, look, I think a
• 5:48
  Speaker 3: few things. One is it's always good to know where
• 5:52
  Speaker 3: you think you have an unfair advantage. And by unfair
• 5:54
  Speaker 3: I don't mean a monopoly. I mean in this case,
• 5:57
  Speaker 3: their unfair advantage is they could pick talent better. Yeah,
• 6:00
  Speaker 3: that was like clearly they had an eye for it
• 6:03
  Speaker 3: that the market didn't have because they could bet on
• 6:06
  Speaker 3: a few artists who were better. But that is a
• 6:08
  Speaker 3: concentrated risk. And so what I tell many new business
• 6:12
  Speaker 3: owners is it's easy to forget this, but ultimately, managing
• 6:17
  Speaker 3: a business is primarily about managing risk, even when you're
• 6:21
  Speaker 3: in the growth phase. It's not like only big companies
• 6:23
  Speaker 3: that have something to lose have risk, because even small companies,
• 6:27
  Speaker 3: as you said, starting out, you know, if they only
• 6:28
  Speaker 3: got so much money in the bank, they have risk too,
• 6:31
  Speaker 3: And so I encourage them to think of a triangle.
• 6:33
  Speaker 3: You know, whatever you're doing doesn't matter I'm promoting a
• 6:36
  Speaker 3: new artist or I'm doubling down on my existing artist,
• 6:39
  Speaker 3: or I'm launching a new label, or I'm promoting a
• 6:42
  Speaker 3: new album. Whatever you're doing, you're trying to balance a
• 6:45
  Speaker 3: three legged stool, because everything you do has some level
• 6:47
  Speaker 3: of financial risk, some level of brand and reputational risk,
• 6:51
  Speaker 3: and some level of operational risk. Right, Because even you
• 6:54
  Speaker 3: might say, well, there's financial risk if I take this
• 6:56
  Speaker 3: bet and it goes bad, but there might be operational
• 6:58
  Speaker 3: risk if I take the bet and it goes really
• 7:00
  Speaker 3: well and I don't have the resources to fulfill on
• 7:02
  Speaker 3: what I just sold, or both of those things go
• 7:05
  Speaker 3: really well, but then you know the way it's received
• 7:07
  Speaker 3: taints my brand in a way that I'm on come.
• 7:09
  Speaker 3: You're always balancing sort of those three legs of the
• 7:11
  Speaker 3: stool and trying to manage those. So that's one is
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  Speaker 3: to really think of when you're running a business. You're
• 7:17
  Speaker 3: taking bets, and you've got to manage the risk around
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  Speaker 3: all of those things. And I would say the second
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  Speaker 3: one is know when you're playing to win versus playing
• 7:24
  Speaker 3: not to lose. You know, as a small brand, they
• 7:27
  Speaker 3: were playing to win, right, they were going to bet
• 7:29
  Speaker 3: on a few artists. You know, they were betting the farm,
• 7:32
  Speaker 3: and they were playing to win when they got bigger.
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  Speaker 3: My guess is now often they don't put quite as
• 7:37
  Speaker 3: many eggs in one basket because there's a few places
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  Speaker 3: where they think they can bet big and play to win,
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  Speaker 3: and some other places they'll take a smaller bet not
• 7:44
  Speaker 3: to lose. I don't know their strategies per se, but
• 7:47
  Speaker 3: as companies get bigger, they start to think in those terms.
• 7:49
  Speaker 3: Because you're making resource trade offs and investment tradeoffs all
• 7:52
  Speaker 3: the time.
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  Speaker 2: That's interesting, so you start to think of the certain
• 7:56
  Speaker 2: big bets as possibly subsidizing the riskier bets.
• 8:01
  Speaker 3: That's right, because you because one of the obligations you
• 8:03
  Speaker 3: always have, you have to make money today and tomorrow.
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  Speaker 3: You can't. You can't just say well, I'll bet it
• 8:09
  Speaker 3: all for tomorrow, because then you don't eat dinner. And
• 8:12
  Speaker 3: you can't just you know, take all the profits today
• 8:15
  Speaker 3: because then there'll be nothing paying you a dividend in
• 8:17
  Speaker 3: the future. So you owe it to your business, your investors,
• 8:19
  Speaker 3: and yourself to make money for today and for tomorrow.
• 8:23
  Speaker 2: Speaking of unfair advantage, this next one I want to
• 8:25
  Speaker 2: talk about beats by Dre, which of course is started
• 8:29
  Speaker 2: by Jimmy Ivan and doctor Dre. I mean, the unique
• 8:32
  Speaker 2: advantage is the unfair advantage here is fairly obviously.
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  Speaker 1: There are two guys who.
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  Speaker 3: He's doctor Drey, He's doctor Dre.
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  Speaker 2: I mean, yeah, it's like, you know, in terms of
• 8:41
  Speaker 2: sound and audio quality and production and Jimmy Ivy and
• 8:45
  Speaker 2: the same, you know, working on John Lennon records and
• 8:47
  Speaker 2: the Tom Petty records and then starting Innerscope. It's like,
• 8:50
  Speaker 2: these are two guys that know music, they know quality sound,
• 8:54
  Speaker 2: you know, and they start in two thousand and six,
• 8:56
  Speaker 2: so you you know, even though they're d eightying around
• 8:59
  Speaker 2: two thousand and four, two thousand and five, not too
• 9:01
  Speaker 2: long after Napster's kind of up. Napster up ends and
• 9:04
  Speaker 2: peer to peer file sharing and iTunes kinds of kind.
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  Speaker 3: Of secord business overnight.
• 9:10
  Speaker 1: Yeah, there it.
• 9:10
  Speaker 2: Goes, right, And so Jimmy and Drey start to think, well,
• 9:14
  Speaker 2: what are ways other ways we can make money still
• 9:18
  Speaker 2: in music, and they realize, well, not only are people
• 9:21
  Speaker 2: stealing music, but like the quality of the music they're
• 9:25
  Speaker 2: stealing is terrible. We should give them headphones so they
• 9:28
  Speaker 2: can actually hear what you're playing is terrible, and start
• 9:30
  Speaker 2: to train train the audience to recognize good quality and
• 9:35
  Speaker 2: so they start beats by Dre.
• 9:37
  Speaker 3: I'll tell you what's really interesting about that, justin look,
• 9:40
  Speaker 3: it's not quite a complete analogy, because no one's worried
• 9:43
  Speaker 3: about either of those two guys. Next meal, however, we
• 9:47
  Speaker 3: see typically in economic downturns, when there's a recession, new
• 9:52
  Speaker 3: business formation goes up, not down. It's countercyclical. Why because
• 9:58
  Speaker 3: people lose their jobs. And when they lose their jobs,
• 10:01
  Speaker 3: they say, hmm, I can't seem to find a job
• 10:03
  Speaker 3: I want. I'm going to go start a business and
• 10:05
  Speaker 3: I'm going to do that idea that I always came
• 10:07
  Speaker 3: up with, or I'm gonna I'm a going to take
• 10:09
  Speaker 3: the plunge and see what I can do. And so
• 10:12
  Speaker 3: a huge number of the entrepreneurs that we see on
• 10:17
  Speaker 3: our show In My Business are people who you know,
• 10:20
  Speaker 3: something went wrong, something went in a way they didn't expect,
• 10:24
  Speaker 3: and the next thing they know, they're starting a business.
• 10:27
  Speaker 3: That is not uncommon.
• 10:29
  Speaker 2: Yeah, I think this is a question a lot of
• 10:30
  Speaker 2: people find themselves running into, and especially artists too, is
• 10:34
  Speaker 2: the idea of needing to take on a lot of
• 10:38
  Speaker 2: roles or jobs or gigs in order to make you
• 10:42
  Speaker 2: know the income necessary to satisfy your lifestyle. Oh yeah,
• 10:46
  Speaker 2: when you're talking to small business owners, how do you
• 10:49
  Speaker 2: help them navigate? Well, you know, yes, you can take
• 10:52
  Speaker 2: these ten things and all ten things will let you
• 10:55
  Speaker 2: x amount.
• 10:56
  Speaker 1: But maybe that's not a good thing.
• 10:58
  Speaker 2: Ultimately, you know, how do you know where to really
• 11:00
  Speaker 2: reinvest your time?
• 11:01
  Speaker 3: Yeah, I would say a few things. One is you
• 11:03
  Speaker 3: have to take the first do no harm view, which
• 11:06
  Speaker 3: is you know, and if I take that to a
• 11:08
  Speaker 3: music artist, you know, if doing anything else is going
• 11:11
  Speaker 3: to is going to degrade the quality of your music,
• 11:13
  Speaker 3: your music, whether you're a singer songwriter, you know, you
• 11:17
  Speaker 3: write your own material or you're just a performer of
• 11:19
  Speaker 3: other people's material. Either way, if it's going to take
• 11:22
  Speaker 3: away from that, then you're you're eroding your core activity
• 11:25
  Speaker 3: for something else. And you better have awful conviction, an
• 11:29
  Speaker 3: awful lot of conviction. And what that other thing is
• 11:31
  Speaker 3: if you're going to undermine that, you know, So imagine
• 11:33
  Speaker 3: you know, if you're a sports star and you start
• 11:36
  Speaker 3: a brand, a clothing brand, and in the process of
• 11:39
  Speaker 3: focusing on that clothing brand, you become a much worse athlete.
• 11:44
  Speaker 3: That's probably going to have not just an impact on
• 11:46
  Speaker 3: your athletic career. It's going to have an impact on
• 11:48
  Speaker 3: your brand. So you might have just released a great
• 11:51
  Speaker 3: album and you think, you know what, I can trade
• 11:53
  Speaker 3: on this album for a year, and I've got more
• 11:54
  Speaker 3: content in the waiting, and so I can go focus
• 11:56
  Speaker 3: on some other things because I feel good about where
• 11:59
  Speaker 3: the music is for a period of time, and I
• 12:00
  Speaker 3: commit to coming back to it in this time so
• 12:02
  Speaker 3: that I don't let an atrophy. You know, you can
• 12:04
  Speaker 3: make decisions like that, but ultimately, if you're going to
• 12:06
  Speaker 3: take you know you you are going to be distracted
• 12:09
  Speaker 3: no matter what you do, and so you really need
• 12:11
  Speaker 3: to think about, of all the activities I have, which
• 12:14
  Speaker 3: one is gonna protect my interests and which one's going
• 12:17
  Speaker 3: to grow my interest and how can I split my
• 12:18
  Speaker 3: time between those things.
• 12:21
  Speaker 1: That's that's sage advice. That's sage advice.
• 12:23
  Speaker 3: I mean, it's easier. Look, it's easier said than done.
• 12:25
  Speaker 3: I wish, I wish I could tell you there's a
• 12:26
  Speaker 3: mathematical formula for it. There's not. I'm afraid even a
• 12:29
  Speaker 3: banker will tell you. Judgment wins the day.
• 12:32
  Speaker 1: You know, judgment wins the day.
• 12:33
  Speaker 2: I mean, probably everyone should trust their judgment but artists
• 12:35
  Speaker 2: are people who are who work on their judgment every day.
• 12:38
  Speaker 2: That's what they're doing, you know, They're creating things and
• 12:40
  Speaker 2: trusting their gut. And so hopefully we can, you know,
• 12:43
  Speaker 2: those of us who don't have business degrees, we can
• 12:46
  Speaker 2: still figure out how to make how to make things
• 12:48
  Speaker 2: work for us.
• 12:48
  Speaker 3: I agree with you justin no one ever made a
• 12:50
  Speaker 3: great piece of music by you know, just repeating someone
• 12:53
  Speaker 3: else's music. People make a great piece of music because
• 12:55
  Speaker 3: they have the guts to do something original.
• 12:57
  Speaker 1: Yeah, absolutely, well, Ben, thank you so much.
• 12:59
  Speaker 2: This is you know again, I don't spend a lot
• 13:02
  Speaker 2: of time thinking about the business of music, but it's
• 13:06
  Speaker 2: it's really instructive, you know. I mean, frankly, I'm even
• 13:09
  Speaker 2: thought I spent a ton of time thinking about it.
• 13:10
  Speaker 2: I'm doing it every day, you know, and so it's
• 13:12
  Speaker 2: nice to actually spend some time prioritizing the business side
• 13:16
  Speaker 2: of things.
• 13:17
  Speaker 3: Well, look, I appreciate you having me on. I think,
• 13:19
  Speaker 3: you know, I don't know a single person who doesn't
• 13:21
  Speaker 3: love music, and music makes our lives richer, and music
• 13:24
  Speaker 3: can't thrive without a successful business model underlying it. We
• 13:28
  Speaker 3: need sustainable business models to help great artists make great music,
• 13:31
  Speaker 3: so the more we can encourage and support artists having
• 13:35
  Speaker 3: really sustainable, good business models, the more we all get
• 13:37
  Speaker 3: to enjoy the richness of that music.
• 13:39
  Speaker 2: Well, Ben Walter, CEO of Chase for Business, thanks so
• 13:41
  Speaker 2: much for doing this.
• 13:43
  Speaker 1: I really really appreciate.
• 13:44
  Speaker 3: You justin this is a lot of fun. Thanks a
• 13:46
  Speaker 3: lot