Dane Madsen grew up in a small farm town in Idaho, on the lower income side of the equation, but was trained to problem solve and fix things from a young age. His upbringing forced him to be nimble and creative in the solutions he brought forward and this core way of being was at the source of his ability to uncover a huge opportunity in the market when he built Yellowpages.com, which he later sold to what is known today as AT&T, for $100 Million. In this Unmessable episode, Dane shares his internal struggles as he built and sold his company, and more importantly what he learned from his fascinating journey.

In this episode you will learn about:

• • • Leadership
    • Building a company
    • Raising capital
    • Exiting a business
    • Post-exit journey

 

About Dane Madsen:

Dane Madsen is a Seattle-based corporate strategy consultant who has worked with more than 35 startups as an angel and venture investor, Founder, Co-Founder, CEO, Director, advisor, or consultant after nearly 20 years in financial services. He was the founder of YellowPages.com, acquired by AT&T in 2004. He has worked in innovation on three continents and is active in B2B technology-based companies solving big issues and, after over a decade of leading an industrial and fresh water process and product research and development company, is passionate about water-technology innovation.

Connect with Dane Madsen:

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Full Transcription:

Dane:  I listen to a lot of discussion about entrepreneurship and I hear people talk about, oh, it’s my DNA, or it’s in my blood. To me, it’s like come on.  No, it’s not.

Tanya:  That’s Dane Madsen, one of the founders of YellowPages.com, a well-known brand that he founded in 1996 and sold 8 years later in 2004 for $100 million to what is now AT&T.

Dane:  It’s very, very much environmental. The environment that I grew up in was essentially on a farm in a small town in Idaho that my dad grew up in, and the major difference was that it was smaller when I grew up than when he did so losing population in that. You end up having to train your mind around problem solving. Problem solving can be a number of things. It can be an event that you need to solve. In my case, we grew up on a farm. If your choices were fix something clear out in the field or walk clear back to the house to find something to fix it, you figured out how to figure it out in the field. Being able to contain the panic of, oh, my goodness, something’s wrong. Then you start tweaking in your mind going, oh, I like to fix things. I wonder how this works, and it just builds a curiosity.

My entrepreneurship was really a curiosity. There’s economics that were involved because we were in the – it was a small family farm. My dad had a fulltime job. He was a general manager of a farm equipment dealership. My mom worked there with the farm. We were poor, but I never knew that. We didn’t know that growing up. You’re always looking for angles, and so you pick fruit, and you haul the hay. You do the things like that and then just one thing after another. You’re just rolling from one idea to the next realizing that solving problems is a skillset that a lot of people just never develop.

Tanya:  Yeah, I would totally agree with that. I mean, it’s a – sitting and running your company, you are the last spot on the train where you have to problem solve anything and everything that shows up, and if you can’t solve it, there’s a problem. Not solving it is not an option. Within that mentality, you get really creative, and anything is really possible.

Dane:  As you go up, I mean, there’s people who – I have heard it described it’s the pairing between chaos and control. If you’re driving down a freeway and on one side is chaos and the other side is control, an entrepreneur, unfortunately, eventually starts steering to the chaos side because it’s pretty exciting. I did almost 20 years in financial services. I was with Shearson Lehman Brothers and Merrill Lynch, and these are people who are big into control. We had a degree of entrepreneurship available to us. We got to build our own businesses to some degree, but there was high, bright barriers in control. That’s not generally my strongest environment. I like the idea it’s Davy Crockett, Kit Carson, Ponce de León, Cook. Let’s go out and explore stuff, and we’re going to run into things that people have never seen. The control people all go and they do best practices, which makes you perfectly optimized to the past.

Being and running a startup is going I don’t know what I’m going to run into, but it’s going to be fun. You get addicted to it so there’s that. The downside in that is that you got to be able to keep the entity off the guardrail. You can get close to chaos, but you can’t allow it to go into chaos and so problem solving. Then it eats inside of you. If you don’t have the leadership side of it where it just – one my guiding principles as a leader for 30 years has been panic in private.

Tanya:  Oh, interesting.

Dane:  When things are the darkest, you can’t let people know that so that they panic. You’re not allowed. You entire role is to keep that from happening so anyway.

Tanya:  Okay, we have to get into that a little bit later because that is super interesting. Was YellowPages your first business, or was that off the shoulder, or something multiple?

Dane:  It was probably my first major business. In fact, it was my first major business. I had been doing things, side hustles while I had real jobs. I had all of that growing up, but YellowPages was the first major company that – I guess a number of those could’ve been major companies. They just never became that, so it was the first one that became something.

Tanya:  Just for the people that don’t know what it is – I mean, I’d be shocked if nobody knows what it is, but what did YellowPages do?

Dane:  YellowPages was the digital embodiment of the Yellow Pages book. By that, I mean, it didn’t look like the Yellow Pages book. You didn’t open up, and for a lot of your listeners, they probably don’t even know what that is. I mean, it’s something you go to the museum to see, but it was the most successful ad medium ever. It was a book of ads thrown on every door step in not just America but in 40 countries.

Tanya:  Yeah, no, I mean, I grew up in Canada. I very well remember we used to get a new Yellow Page book every year, and I remember looking up some of my classmate’s number in there. I mean, it was a real thing. It was so useful back then.

Dane:  It was useful on a number of different things, not only from vendor discovery and all that. In some respects, it was almost like a credit reference. If somebody was checking out a new business in a new town, or a larger town, or whatever and they didn’t – they could look them up in the Yellow Pages and if they looked in the Yellow Pages, it’s like, oh, well, you’re real. That drives it. Obviously, the downside was that the medium of print thrown on your doorstep once a year was always going to be an issue. In that industry, 10% – by the time the book showed up on your doorstep, 10% of the data was out of date. The business is closed. They had moved. Things had changed. By the time the next year came about, 25 to 30% of the data was out of date, and we said welcome to the world of digital.

We started the company actually in 1996. It was a month after Yahoo went public, and it was born out of that frustration that a print medium had a print cycle and an ad drop date and a blah, blah, blah, blah, blah. We’re going but we have the internet, and we should be able to do this every day. We should be able to publish every day and update every day and do all of those things, and it was a frustration. I mean, I was very comfortable around tech. It wasn’t a big deal on that front. My co-founder was very comfortable around tech. It wasn’t a big deal on that front.

We both had computers, even though we were clearly not – we weren’t the people buying Ataris and playing games and coding. That wasn’t what we did, but we were very comfortable around those. We said you know what? This is our opportunity.

Tanya:  This is it.

Dane:  We built this thing. For the first couple of years, we bootstrapped it, and we did very classic bootstrapping. We both kept our day jobs, and then rushed home in excitement to start doing YellowPages. We were building databases, and we were testing. We would engage people to build search processes for us, and then we would realize that wasn’t working. Then the luxury of what we loved to do was to answer user email. We were so addicted to the feedback, and by paying attention to them, we were able to build a business that then in 1998 attracted some significant capital for the time. Then there was a side trip on that, but we really built this with a customer first thought process, and to us, the customers were the users.

Tanya:  You were ahead of your game in thinking about the customers first. I mean, now people that build any product, if you’re not doing that – like when you launch a product, you should be sitting in whatever ticket system or email system you’re using. Whoever’s building the product should personally be answering those emails and answering those tickets and answering those bugs so that they actually know what the issue is. Now it’s been written about. Anybody that’s developing product knows that you have to stay close to your customers, but that was very insightful of you to know that in 1996 when you were building that. There really wasn’t a roadmap on how to do that well.

Dane:  It was a different day and age. We had email. Our emails, my co-founder, my email, all of our leadership team, until we exited the company, you could find our emails on the website. I didn’t hide behind CEO at YellowPages.com, and then let somebody filter it. They came to me. I engaged. Every one of the customer service emails was distributed also to the entire leadership team.

Tanya:  That’s brilliant.

Dane:  Everybody knew what was going on. Tanya, this is the important – I get excited about it still because I go into the throwback. You have to appreciate that YellowPages was surreal to me. We started in ’96. We were out in just before the end of 2004, which means I’ve been gone from there twice as long as I was involved, but some of the stuff that we got to deal with was quite interesting. We tried to get with the telcos at the time, and there was the seven Bell companies. Every one of them had this answer to us. A), the internet is not important and will not be important, and B), if we’re wrong, we have our own brand. Their brands were SWBYB’S, the Real Yellow Pages, just all these goofy names. You don’t even understand what the users, the buyers, and the sellers even call this medium.

We had this great domain, but the issue with that is that it was the greatest domain in local advertising ever and maybe ever. The problem was that only got us one visit, maybe two. If we screwed up and the advertisers and the users did not have a good experience, they weren’t coming back. We had to obsess on those people.

Tanya:  That’s so brilliant. At its peak, how many employees were at YellowPages?

Dane:  We had 175 of which 100 of them were in a call center one floor above me, and they were calling everybody who was a high-profile YellowPages advertiser nationwide and trying to sell them advertising. Another one of the clichés out of the YellowPages is nobody every buys YellowPages. It’s always sold, so it wasn’t going to happen. We had self-service. We had all of that, but the reality is we knew that we had to build a business model based on a cost of acquisition where we could get live bodies on. Again, we’re talking call it 1999, 2000 when we were able to really start that process. We had cash to do it. You still have to explain to people what the internet was and why it was going to be important.

Tanya:  Yeah, absolutely. How much capital did you raise?

Dane:  We raised officially 32½ million. We deployed 27 of that. We had closed around just before we were acquired.

Tanya:  Oh, wow, interesting! What did you do with the rest of the capital? Was that returned to investors or booked as assets on the books?

Dane:  No, it was returned to the investors in the end. We had a couple of challenges in the business environment that hit us, one, the meltdown of the dotcoms in 2000. In fact, I had sold a controlling – my co-founder and I had sold a controlling interest in the company to a group, a platform company that was being constructed out of New Jersey where they were going to take YellowPages as the icon and then add services. We were doing Alibaba before there was Alibaba. We were doing marketplace before we knew that’s what it was called. The problem was that, in 2000, they couldn’t get any further cash because they were tapping everybody that everybody else was tapping. I was sitting over there with that company as the head of corporate development, so I was doing M&A work and blah, blah, blah. When it became apparent they weren’t going to be able to get funding, we renegotiated the deal with my original investor who stepped up, recapitalized the company, and stayed committed to it until the exit. Had we been financed by VCs out of Silicon Valley, we would’ve been shut down and sold for scrap.

Tanya:  Wow! I mean, obviously, you didn’t know that at the time when you were looking for funding. Did you try to pitch VCs and weren’t able to secure? How did you end up with that investor, luckily, in the end?

Dane:  The answer is we did both. The minute we were able to register the domain which is always part of the fun story is the domain had been previously registered by a person back when it didn’t cost anything to do that, and then he defaulted on it. We picked it up the day it was free to trade. We were now in business for 2 years for $130. We immediately went to all the telcos, and they gave us the answer I gave you before. We went over to Silicon Valley, and Silicon Valley was now becoming who they were. The answers we got was no. Yahoo’s going to put you out of business. No, there’s this big company called BigBook, which had been – some media guy had tried to do a version of YellowPages and had raised $30 million and burned through it so fast it made your head swim.

We had significant interest at Kleiner Perkins with John Doerr. I got to touch greatness. John Doerr and I had a wonderful conversation. Bill Gurley and I had a wonderful conversation. Unfortunately, the New Jersey group blocked any of that interest. We fell back to the very high net worth individual who was responsible for our original funding and then stayed with us.

Tanya:  You raised close to 30 – you said 32 million through this individual.

Dane:  Right.

Tanya:  Wow! You were lucky, Dane.

Dane:  It’s a fun story. This guy was a billionaire before I knew what a billionaire was, and I knew that actually from my other life because of the investment banking side. It wasn’t significant money for him, but it was important money for him. He believed in our story because ironically he came from very, very, very humble beginnings, and he didn’t have an attitude. You would never had known this guy had that kind of net worth.

Tanya:  I’m always impressed when people with that level of funding are just so humble. It just so makes a statement and really is inspiring. What prompted the sale of YellowPages?

Dane:  We knew we needed to raise a significant round. We needed to up our game and the size. We needed to take our sales team from 100 people to larger. We were incredibly aggressive under the covers. We were building storefronts. We had branched out. We actually were booking more hotel rooms than any other property except Travelocity because we had broken down all of these into the verticals, and we had a number of initiatives where we had significant traction. We said it’s great. We just got $5 million. We really need to be prepared for this to go onslaught.

Then add on top of that we had been contacted through channels by the Ministry of Information in Beijing who asked us to come over and talk to them about doing YellowPages, and so we did. We in 14 months put together a deal where we were building and deploying the Chinese Yellow Pages for all of China. It was owned by one of the state organizations, China Unicom.

Tanya:  I mean, this might seem like a really stupid question, but how do you do that in Chinese?

Dane:  This is how you do it. You have eight of your core developers from Mainland China living in Vancouver. We would’ve never even tried it had we not had that. [00:19:01] was our lead in Vancouver. He was with us on every trip, my CTO, [00:19:08], me, my COO, as we put this thing together. It’s, again, one of those surreal, lovely stories of meeting in the dingiest government offices you could imagine in a time where China was just barely out of the Cultural Revolution. It’s not the robust country that it is now GDP-wise. What they really wanted was they wanted access to the US, and so our technology, our co-brands, this is where our store builders – why I say we were building Alibaba before there was an Alibaba. You’ll find this funny. Jack Ma, founder of Alibaba was one of the high execs. I don’t recall ever meeting him but at China Yellow Pages.

Tanya:  Oh, my God!

Dane:  He also started in the same business. It was fun. We knew that we needed to do that. We had gotten past the dotcom meltdown. We’d gotten past people flying airplanes into buildings, which caused an entire contraction in the market, and now we were sitting there with all this opportunity. We knew that we needed to raise capital to do it because we weren’t going to be able to do it with 175 people. We were going to have to really up our game.

We went to the marketplace. We were ready to raise $30 million at $100 million valuation, and we hit a wall. This little company that we had met – not little company. I’m being facetious. A month before we started the roadshow we got a call from Mountain View, and that was Google. We were so excited, God. Three of us, my head of sales and marketing, my CTO, and I, gosh, we go into Google. We’re in our suits and blah, blah, blah, and it couldn’t have been a more awkward meeting.  A month later, they launched Google local.

What we think was going on was they just wanted to know if we could give them anymore information that they hadn’t thought in. Google wasn’t interested in YellowPages. They were interested in local. When you start seeing all that, what we hit the wall on was, oh, well, instead of Yahoo taking your business it’s going to be Google. Nobody’s going to do YellowPages anymore, and YellowPages is so old fashioned and blah, blah, blah, blah, blah. We all looked at ourselves. At the same time, the continued incumbent leaders, what became AT&T and R.H. Donnelley and Dex all started knocking on our door saying, by the way, would you like to sell it?

What we had in value to them was our traffic. We were doing 25 million searches a month for 12 million people so an average of 2. Over 10% of our traffic was mobile, and this was in the day when mobile was a flip phone. We were doing it on a shoestring budget. We never had enough money to buy traffic, but we were getting more traffic than they were getting, and they were paying between 25 and 30 million a year for it. This goes back to the – and why could we do this? We were absolutely rabid about defending the customer experience. We gave people what they wanted, and that was I need an answer.

I don’t need you to sell me an ad for somebody. I need a plumber, or I’m trying to get somewhere. Give me the closest one I can get to and understanding those use cases. They all showed up at the same time. The board and my co-founder and I went through a process and said we could raise the money but the terms would be so punitive because of the Google. Yahoo was still a player in those days, and God knows what was going on behind the scenes. We just said this is probably time to find a different way out of this.

We had a bit of a beauty contest and what is now AT&T was – or what was then – which is BellSouth and Southwest Bell were the – they prevailed with the price at $100 million.

Tanya:  I mean, that’s such an incredible accomplishment, and that was eight years after you created the business, which is an unbelievable run on a shoestring budget. Now, let me ask you this. Throughout your whole life – not specifically to YellowPages, but throughout your whole life, what has been the biggest challenge you ever dealt with in your life?

Dane:  There’s always imposter syndrome. You wake up in the morning hoping this is the day they didn’t figure out you didn’t know what you were doing. I never went to college. Particularly when I’m doing the Wall Street thing, I’m around people with these blue ribbon college educations who are all off to three martini – I wasn’t somebody that they gave – that wasn’t people that hung out with me. There was always this overshadowing of saying – the voice that’s sitting on one of your shoulders saying you’re such a fool. You can’t do this. You are so, so over your head. Then sitting on the other shoulder going you know what? Hold my beer and watch this.

This is certainly self-aggrandizing. I’ve never failed because of my definition of failure. Failure is screwing up for the same reason twice. I go back to the great explorer side, and the great explorer side is you sail a ship clear across the ocean. You’re in some bay, and you get attacked. If you go back to that same bay and get attacked, that’s a failure. Getting attacked the first time, yeah, you didn’t know that. I think the biggest issue was I didn’t go to the right school, so I didn’t go to the right – I didn’t have the right friends. What I had, though, was an incredible work ethic that just said failure’s not an option, so let’s figure it out.

Tanya:  Let me see if I understand this. When you say the biggest challenge for you was battling your internal voice of you’re going to fail. You’re not good enough, or you don’t have this. Then the other part of you that’s like you know what? Wait a minute, proving yourself – almost proving yourself wrong. What was a situation in your life that really had those two dynamics at play, one of the most challenging moments of your life that you really had to push yourself unlike other ones?

Dane:  This really comes after YellowPages. It’s something that I got into every day. I loved it. I couldn’t wait to get to the office. I hated to go home. I was on email all the time. Not because I had this work ethic, but it’s because I just loved what I did. It was a discovery every day. Then one day it wasn’t, so it was the most important thing I did until it wasn’t.

When AT&T acquired us, they didn’t invite any of the management team to come along. We laugh and say they figured that if we were very smart we would already been working for them, so now you’ve defined yourself. It wasn’t just YellowPages, but it was Shearson Lehman Brothers and all of that before. You say you define yourself by what you do, and now you don’t do that.

Tanya:  It’s like a loss of identity, really. I mean, a loss of identity and also – I actually have a lot of founders that go through this, really. They sell their business, or their business closes. They exit the business in some fashion, and their entire identity, who they were, their self-worth, their purpose for living is now gone.

Dane:  Tanya, that is such a large club. We would have to have lots of support groups around that. Yet, the antithesis of that – going back to the panic in private concept, the antithesis is you’re not allowed to say that. It was really waking up and going, okay, now I don’t have this. It wasn’t financially rich. Because of the way that my investor had kept us alive through times when he should’ve just bailed on us, the vast majority of the proceeds went to him. It was a very comfortable number, and I didn’t have one level of resentment that he got what he got and I got what I got. What I really got, I got a $32 million higher education. What I knew that people didn’t know – those people that I always felt second best to, the Harvard guys, the Columbia guys, the NYU guys, all these people, they didn’t know what I knew.

Tanya:  Of course not.

Dane:  This becomes this issue – when you talk about – I hear this all the time. Oh, we’re going to reinvent ourselves. You know what? Screw that. In order to reinvent yourself, you actually need to know who yourself is. This is the process that I needed to go through as that emotional bubble deflated, hopefully didn’t pop. It needed to go down at a measured rate and not just explode. We see that. I was listening to an interview with one – a founder, and it was gut-wrenching to me to hear. He had a couple of exits, and then ten years home, had a heroine – and I’m just going, oh, my goodness, and I thought self-doubt was a big issue.

Tanya:  Yeah, I mean, really, it’s such a big thing. I think until you actually go through this, people don’t have – cannot understand the level at which the founders put themselves in the business. It is like there’s no separation between that person and the business. They are the business. What was your journey in recalibrating yourself and really getting to know who you really are and then reinventing yourself?

Dane:  The first thing I did was something really stupid and took a role as a CEO in a business that was somewhat adjacent to that, and I did it within three months of selling YellowPages. Instead of sitting down and saying, huh, let’s think about this and take a little time and think this through, what I did was fairly natural, and I listen to it all the time. Somebody sells a company. Three months later they’ve got another one started, or they’ve started a venture fund, or they’ve done – depending on the quality of their exit, they’re doing something because it still goes back to that same issue of how do I define myself? I don’t play golf. I think golf is the most annoying thing on the planet.

Tanya:  I do too. I hate golf, by the way, yeah.

Dane:  I ski. I dive, but there’s a limit of stuff that you can do there. I learned to fly, lots of fun there, but once you learn to fly, it’s kind of over because then it’s pretty boring. I got into a business and both good and bad. I shouldn’t have done it so soon, but what I started finding out – and it was close. It was still based on local directory, and it was a hardware-based business that brought local content and stuff into a fixed-based phone for residents so long story there. Some guy named Steve Jobs comes out with the iPhone, blows everybody’s models up.

Anyway, what I learned was that I could adapt my skills as I had. I had adapted my skills from being on a farm, from being a side hustle [00:31:32] entrepreneur to building a serious B2B revenue stream for a heavy-duty truck organization in Alaska, to being a stockbroker, to then being in technology, then being in the YellowPages. Now I’m in the telco business, and I’m going, oh, wait. Maybe it’s not domain expertise. Maybe it’s a skillset. That’s when the light started going on saying, all right, why don’t I figure out what I really – I’m good at that I really like to do? That’s been the journey since then.

I’ve now got over 35 startups on my mythical CV, either as the founder, the CEO, or the co-founder, or director, or an angel investor, or a direct investor, a VC, which I did for that couple of years, as an advisor, and what I love about them all is I love the enthusiasm. I love these startup people, and yet, what I can bring to them is different than what they’re going to normally find. Frighteningly, in this lull period, I got pulled in. I was consulting. I was a local ad medium expert out of a couple of the expert consulting groups. I was talking to Goldman and Morgan and telling them that this is how Google was going to work. This is how it’s on local and blah, blah, blah, blah, blah. It was the same tape. I was punching the same tape. I could play the same tape. Charge them 500 bucks, and I’d get paid $500 many, many, many times and never have to chase one moment of content.

Some people I knew in Las Vegas where I was at the time had been investing in a startup, and they had invested in 2000 with a guy. They were all in real estate. This guy was in real estate. It was a technology related to water and water chemistry. The basic story was that, for 200 grand, in 2 years they’d be gazillionaires. The bad news is most of them were gazillionaires already, Las Vegas real estate, hello, and now they were almost eight years in, $9 million dollars down. They were no closer to success than they had before. They contact me and say we need to figure out how to structure this company in a way that’ll make it attractive for outside investors. It started the deep dive for me. What should’ve been six months ended up being two years because the stuff I started uncovering – one of my annoying habits according to wife is I’m always asking why. If I know why, how is easy.

We uncovered some things that ended with some litigation, blah, blah, blah, but in the meantime, Tanya, I fell in love with water. This is the way I looked at it. When I left Wall Street, there were 50,000 people that wanted my job. Me leaving, nobody missed me. When I left YellowPages, there was nobody out there saying, hey, I want some more of those digital ads. There were zillions of AdTech and MarTech companies that are out there. Nobody was going to miss me, so these things weren’t really important. There were tons of people. Water is the second most important thing in your life.

Tanya:  Yes, it is. We are made up mostly of water.

Dane:  I go more fundamental. You can live four minutes without air. You can live four days without water, four weeks without food. What I didn’t know and this is another – a cross to bear is I am obsessive about learning. What I dug in and learned about water scared me, and I thought I was fairly intelligent about stuff like this. What the majority of people don’t understand, it is – it’s astonishing how close we are to ending this because of how we treat water.

Tanya:  Yeah, no, I mean, the whole environmental issue is really a concern for me since – especially since I’ve had kids. I think about will I be okay in my lifetime, probably? Will my kids be okay, and will their kids be okay is really something that keeps me up at night. One thing I wanted to ask, I heard and I don’t know if this is true that most bottled water is a total scam.

Dane:  Oh, absolutely.

Tanya:  It’s just like a marketing thing. There’s no major filtration, or cleaning, or whatever the process is, but it’s a total scam.

Dane:  It all depends on what you think scam is. FIJI Water is the real deal. It’s special water shipped in. That’s why it’s so expensive. They got to bring it in on boats. You’re shipping something that weighs 8.34 pounds per gallon, so there’s that. Poland water, Deer Park, blah, blah, blah, these are – they’re bottled a lot of times off municipal water, and this is where it just gets crazy. In the water business, you get all these guys who have been doing water and serving hundreds of billions of gallons a year to a small city, and they’re going and people still drink water. What they miss about bottled water, it isn’t the quality the people are buying. It’s the portability. Do you carry a phone around?

Tanya:  Yes.

Dane:  Because there’s some ephemeral thought process that says it adds to my life? You carry it around for convenience. It’s portable. I look up and say, yes, the answer is that most of the bottled water you buy is just simply either unfiltered tap water or water that might’ve been re-filtered in some fashion or another. Scary is how much microplastic is in them. There was a whale that was beached I think in South Africa in the last couple of days. They found 50 pounds of plastic in his gut, and yet, when I think about that – people read that, and I’m going, okay, I wonder how much microplastic’s in your blood. The stuff that’s coming out is just scary.

Tanya:  Yeah, no, absolutely.

Dane:  Yeah, bottled water is portability. People go I can do it with my own YETI jug. I’m going, yeah, but you can’t throw that YETI jug away and go get a new one.

Tanya:  I mean, it seems like, obviously, whatever you do, you get so into it and so immersed, and you figured out that your hunger for learning has really been one of your greatest assets where you just are able to dive deep and quick into things in multiple businesses and multiple different industries and verticals where others wouldn’t be able to do. I’m curious to see what is your take on what makes a great leader?

Dane:  There’s two answers. We talk a lot about self-awareness, and that’s like perfection, or diffusion energy, or efficient – the perpetual motion machine. Nobody ever gets self-aware. However, a great leader should be aware that they’re not self-aware and seek self-awareness. It’s a path. It’s not a destination.

Tanya:  I see, so it’s like a mountain with no top. In other words, you’re always on that path. There’s no endpoint.

Dane:  Yeah, the day that you think you’re the master of the universe is the day you start to die.

Tanya:  Yes, so it’s interesting because one of the reasons why I love this topic of leadership so much is because there are so many schools of thought on it and so many misconceptions about it yet. You walk into a bookstore, and the amount of stuff on leadership is so – I mean, there’s thousands and thousands, hundreds of thousands of books on leadership. Yet, somehow we still have this leadership concept as something illusive, and we really don’t have a grasp on it. We really have so much to learn about it. If you look back on your path, how have you evolved as a leader, like the Dane that was leading in YellowPages in the early days versus you as a leader now?

Dane:  I’d like to say that I’m more the same person I was 40 years ago now, but it was not a direct path. It’s the boomerang path. My successes in sales and then marketing and all that were when I understood that it’s a team sport, and the team isn’t you and five other people. It’s you and the people you need to convince, so you’ve got to know the people. When I was doing financial planning, I could sit with people. Hypothetical, I could have twin brothers married to twin sisters who both have two sets of twins. All of them do the same job, but they would have incredibly different goals, fears, all of that, and you had to sit and ask them.

More so now than ever, I think the process of asking why, which is a radical self-awareness. Unfortunately, in the CEO world, you’re not supposed to ask why. You’re supposed to be able to go – to your point, go pick up another book. Let’s go get Covey’s 7 Habits of Highly Effective People, which is a good book. I don’t dismiss it, but you can’t read a book, and you’ll be done. What you got to know is people. I was telling someone the other day the most valuable business book that I have read recently – there’s actually my two favorite recent ones was The Hard Thing About Hard Things with Ben Horowitz because it’s fricking hard. Leadership is hard.

Tanya:  It is.

Dane:  You don’t know. Every decision you could flip the coin, but you’ve got to make a decision. Not making a decision is in fact a decision. The second one is off subject but important was Yuval Harari, Sapiens.

Tanya:  Oh, I’ve heard about that one. That’s actually on my list of next to read. What was interesting about Sapiens?

Dane:  Sapiens talks about the myths, the myths of all humans from the get-go, the myths of village, the myths of clan, the myths of religion, the myths of politics. The other people are offended at the concept of the myth, but it’s a construct. We have certain things about us that are genetic, and then we have a certain relationship to those who are genetically related to us. What we don’t have is a reason for us to hang out with people who are not related to us unless we create a construct that causes that to happen and so the construct of safety, the construct of food, the construct of security, of common belief, of common fears.

Tanya:  Shared experiences.

Dane:  Exactly, and so if you rip everything apart, it goes back to the first part where I say I listen to people who talk about, oh, DNA. Being an entrepreneur, which I hate that term anymore, it’s so overplayed. It’s in my DNA, or it’s in my blood. No, that’s not true. It’s a myth but understand the myth. If you understand the construct of something, then it’s less shocking to you. It also requires or it gives you the ability to process differences.

When we were going to China, I don’t speak on Chinese. I work on English as a second language, as a first language. My COO didn’t, and my CTO didn’t, but our most incredible software guy did being raised on Mainland China. What I knew is they were having conversations that I had no idea what was going on. I could read body language and I could read things like that, which you had to do in order to survive and get through what we got there was you had to appreciate the differences.

Tanya:  What differences?

Dane:  The differences culturally, for example. We are in a very loose, open society. We revel in the US about democracy, and we can have all these opinions. You go to China, it’s command and control. There is a lot you can get done in command and control, but there’s a lot of things that people there don’t get because of command and control. Now you say, oh, but don’t they want what we have? I’ve been going to China for 20 years. No, they don’t because it’s different.

Tanya:  I guess, when you think about leadership then, for you, it’s really a play on how culture comes out, what type of individual and the background. Have you thought about the actual construct of leadership?

Dane:  A couple of thoughts, we use leadership like we use entrepreneur. It’s a title conferred on people who have other people who report to them, but that’s not what it is. People want to be led. They don’t want to be managed.

Tanya:  Absolutely, in fact, people that – so you were pointing to people that are in a position of power so like a hierarchy in a company or that have been appointed to do a particular task, but I’ve seen people that have no authority whatsoever and are incredible leaders.

Dane:  Think of Gandhi.

Tanya:  Yeah, exactly.

Dane:  Leadership is how you do something. It’s not what you do. It’s understanding certain things. Another one of my clichés, you have to be rigidly flexible. I was listening to a CEO of a company a couple of days ago who is also a physicist. He talks about the interface between states of matter, and he uses something simple. At 33 degrees, you’ve got liquid water. At 32 degrees, you’ve got solid water. Your job as a CEO is to make sure that the liquidity and the solidity all are there and the interfaces, which you’re the most concerned about. He uses that as the illustration between the creative side of your company and the execution side of your company.

Again, it goes back to the chaos and the control. If you’re rigidly flexible, you let these people do it, and you just lead that process of discovery. It’s never going to happen for people who are not insatiably curious, though.

Tanya:  You mean leadership, like being able to lead? It requires some deep curiosity engrained in that person?

Dane:  Insatiably curious. The role of leader isn’t to be the top of the pyramid. It’s an inverted  pyramid. It’s all on you. The pressure is all on you. If you walk in with this masters of the universe process and you beat your chest, it’s – you go into the, I don’t know, the auto shop, the car dealer. You go to the service desk and the guy that has the shirt on that says manager. Do you have any confidence that because he has manager on his shirt, embroidered on that shirt, that they actually know anything?

Tanya:  No.

Dane:  No, it’s going to be about how they deal with you and how they work through and if they’re dismissive. The titles don’t mean anything. It’s really how you act. I think that we’ve got to focus more on what I call exception-based awareness society. We’re not aware of anything until something goes wrong. People go out every day.

They start their car. They drive to work. They drive to grandma’s house. They go, whatever they do. They don’t know how many times that started and done perfectly and that have been no problems, but they remember 100% of the time it didn’t. We’ve got to appreciate that with people.

Tanya:  Actually, I mean, it’s really interesting you say that because one thing that I’ve become acutely aware of is human beings learn with pain, unfortunately. It’s like when I – when something happens in my life, I’m like I don’t feel good. I have something in my stomach. I’m mulling over a discussion. This person said this. I said this. I responded this. I emailed this, but I did this. I know that there’s something I need to learn from it.

Dane:  Right, it goes back to my failure is only screwing up for the same reason twice. If you do it again, it’s the, oh, I’m going to put my hand back on that stove and see what that was. Radical transparency and I don’t mean transparency in the terms of this is my real way to – this is the real color of my hair and all that routine. It’s radical transparency and what makes you as a leader tick, and that’s pretty crucial.

Tanya:  This is why I wanted to come back to what you said about panicking in private. This is always the balance between radical transparency and then when shit’s hitting the fan and panic privately. At what point do you let people in, do you consult people to really gain people on your team to resolve this? What is the line of radical transparency with regards to panic in private or that philosophy?

Dane:  Don’t lie. Don’t cheat. Don’t steal. Don’t tell all you know. If you are the leader, your people must have abject trust in you. If you tell them this is the way I work and it’s not the way you work, you’ve done two things to harm that leadership. One, you’ve made yourself a liar to them, and second is they’ll never trust you.

One of the things that the majority of people who aren’t leaders are at companies for – these are certain things they don’t want to worry about. I look at it – and again, going back to the way I was raised – and again, we were raised poor, but we never knew that. We knew the term we can’t afford that when my friends from grade school were going to Disney Land and we were going camping in Snake River Valley. It was real apparent. I never knew, and so those were things that you have to have an innate understanding of what you can’t be transparent about.

You asked a question about did I ever run out of money? Yeah, we were out of money, but I never told anybody that. I put on my armor. I went down to the end of the street where my investor was, and he committed more capital. I never walked in and asked for more capital than I needed. I knew that capital is his, not mine. I couldn’t look at my team and say, look, we’ve got enough cash in the bank to get here through 9 months. Our current operating [00:52:18] doesn’t have us profitable for 15, and so for 6 months, I don’t know what we’re going to do. They trusted that we weren’t going to run out of money because they that’s what they trusted me to do.

There is a fine line. I mean, radical transparency I think is – there’s a point of sharing too much, and that’s one of those things you don’t share. You bring in the members of your team that it’s crucial or part of the solution so my CFO, my head of sales, my head of tech. You always are planning for running out of money, particularly in this rocky, who knows economy on a global basis we’re faced with now. If a startup CEO doesn’t have a get to break even plan sitting on their desk right now, they are stupid.

Tanya:  Yeah, I agree. I mean, especially with – there’s been an influx of capital with the soft banks and just an amazing amount of money going into all stages of businesses, actually. It has rendered people lazy to get to break even, and when the music stops and the funding stops, which happened in a massive way in the dotcom boom, bust, they’re going to wake up. They are going to wake up in a big way.

Dane:  When you think of them as being particularly funded out of Silicon Valley, these people have never seen a down time, not as adults. There are reams of data around most successful CEOs in startups are 45 years old when they start. There’s a reason for that. We actually have scars, blood on our hands, huge mistakes. We understand what a flip phone was. We understand that it’s not all about building more content. I just laugh when somebody’s – when I hear of a new technology and I ask them how they’re going to monetize it, oh, we’ll sell ads, really? There is a business that’s on its way out.

When Murdoch sells the core of Fox and AT&T acquires more content, you know the ad business is ready to implode. Murdoch ain’t stupid, and AT&T is never been particularly smart. They’ve been one of the most efficient destroyers of capital in the world.

Tanya:  Who’s they, AT&T?

Dane:  AT&T, yeah.

Tanya:  Yet, they charge me a ridiculous amount every month. It’s just so crazy. Where does all that…

Dane:  You have no choice.

Tanya:  Yeah, exactly, that’s another business opportunity. Okay, so if you were to speak to – rewind back ten years and give yourself one piece of advice, what would it be?

Dane:  I have a strong suit. It’s tenacity. I have [00:55:32] failing, and it’s tenacity. This goes to the self-awareness issue. Now I’m aware of the fact that I’m tenacious. Sometimes I could just overcome commonsense. When I was in the water company, what we should’ve done – our business model at the time that we put the company together – we sewed it together from four different companies. We were selling to the public drinking water systems in the US. There’s 55,000 of them. There’s 90% of the people are on a city drinking water. That’s a huge addressable market.

It is such a dysfunctional market. Today, when I advise water related companies that if your business model is to sell things to cities, you need another business model, but I stuck with it too long. We had a fabulous B2B industrial cooling process water solution, and it was the same product. I was so hell-bent on proving people wrong that you couldn’t sell to cities at scale that I stuck with it too long. When we pivoted, it was – the relationship between me and the investors had soured to a point to where it was time for both of us to not do that anymore.

Tanya:  The lesson is to really safeguard one of your strong suits, which is your ambition and your determination, but know when there’s a floor on the negative side.

Dane:  Yeah, it’s the willingness to be wrong and to be wrong publically. The minute you pivot a company, you just admitted that you were wrong, that your original model was wrong. It was flawed, and so everybody knows. Being tenacious is great. We always said at YellowPages the only reason we succeeded is because we were so stupid. We didn’t know we were going to fail. All right, that’s tenacity, but at the end of the day, you can’t do that in this day and age.

It’s the willingness to be wrong, willingness to be wrong publically, and understanding tenacity is only going to get you so far. You’ve got to be able to take in the information that you’re getting from the outside sources. That’s not necessarily going to be your management team. They may be just as blind as you are.

Tanya:  Also, it seems to me that you were – and I’ve seen this in founders more often than I’d like to admit. That they are so hell-bent on not publically showing that they were wrong that they continue and continue and continue and that’s really an ego playing. If they actually listen to what is happening in the moment, the answer is more than not pretty clear. Because they’re so worried about their image and what people are going to think of them and plan B, like if this doesn’t work, then what, they just keep going for way longer. In that process of safeguarding your image versus doing what’s right for the company, a whole package of shit comes up. It destroys relationships, and it kills businesses. That’s a painful lesson for somebody to go through.

Dane:  Tanya, I just want to correct one thing you just said. It’s doing what’s right for the company. That’s really secondary. It’s doing what’s right for you. If you continue to row the boat toward the falls, the company will continue. It’s you that’s going to die, particularly when you’re talking large companies.

Tanya:  Yes, no, you’re right. I can’t even tell you how many friends that I have, founders that have continued to their own mental well-being. You can continue, and you can hold down the fort and panic in private for a period, but when that period extends for a very long period, your health begins to really go down, mental health and physical health. You’re right.

Dane:  This again goes back to the I’m not aware but I’m not – I’m self-aware that I’m not very self-aware, and so it’s the going back and asking why. Why is this happening? Why is this happening and being willing to strip away more layers? You wake up in the morning. Like you were saying earlier, you wake up, and you’re like I’m not feeling well. Maybe I’ll just ignore that because that’s a very good plan, isn’t it? No, you wake up and you find – in personal relationship, you wake up and say, listen, I’m not – I really have no interest in talking to this person the rest of my life. Oh, let’s call them. Dumb stuff like that.

We’ve got to be aware that we’re not very self-aware and so self-discovery. It goes back rewinding again to what was the biggest challenge? My biggest challenge was I woke up one morning, and I didn’t have a company that I wanted to – that I defined myself by for years and it was the one – and I didn’t know what I actually did. You’ve got to dig in and figure what you did. It’s very great piece of the hike on this path.

Tanya:  What have you learned having gone on that hike?

Dane:  I’ve learned that there are a shit-ton more people like me than are not. I know that aggregation and mindshare happens best on a shared experience.

Tanya:  A hundred percent, yes.

Dane:  I’m advising a company in the water space, and I’m willing to tell them what I know, and what I watch is this huge sigh because they’ve been having to fake it by not admitting some of the stuff that we talk about. I can get a little direct and almost flawed on my directness. I’ll look at them and just go I’ll bet that really hurts when you do that. They go, oh, my God, yes. When you can break through that, it builds bonds between me and companies that go on for years.

Tanya:  Yeah, no, absolutely. Dane, thank you so much for being on the Unmessable show. Your life journey and just your brain works in unbelievable ways, and it was an absolute pleasure.

Dane:  Thanks, Tanya, I really appreciate it. I’m humbled to be on there.