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7 Business Lessons I Learned From The Grateful Dead

I’m a big fan of the Grateful Dead — I attended 100+ shows, collected 300+ bootlegs (that are in cassette form still in the hallway of my San Francisco apartment!) and I received an original signed 1968 Grateful Dead concert poster as a signing bonus when I sold the Mojam business.

In additional to bringing me a bunch of musical joy, The Dead taught me a ton about my other passion: business.

Just look at the numbers: The Dead pulled in $95 million a year at the height of their 30+ year journey (according to Booz & Co.) and was referred to by The Altantic Magazine as “one of the most profitable bands in the history of music” (see Management Secrets of The Grateful Dead article).

The De-facto Leader of The Grateful Dead Jerry Garcia

The De-facto Leader of The Grateful Dead Jerry Garcia

So allow me to elaborate on two of my favorite subjects: business…and the Grateful Dead:

7 Business Lessons I Learned From The Grateful Dead

1) Moving the “Free Line”

There’s a lot of talk in Internet business these days about “moving the free line” — in other words, providing more of your products/value available for free and make your money on the back-end.

Well the Grateful Dead were doing this 40 years ago.

The Dead made much of their product (their music) free by allowing fans to make recordings at their shows — they even set up a “taper section” dedicated to the fans who were recording so that all of their tall microphones and other equipment could be conveniently placed in one part of the concert venue.

Those recordings were of course copied and shared amongst many fans (both those who attended that particular show and those who didn’t) and acted as free viral marketing for the band (I had 50 bootlegs of the Grateful Dead before I even attended my first show!).

So, let’s take me as a customer for instance: the Grateful Dead didn’t have any of my money for the first year of my exposure to their products.

The Dead were pushing the concept of "moving the free line" 40 years before this best selling book on the subject

But by the time I attended my first show (October 12, 1983 at Madison Square Garden in New York City) I was hooked as a customer– and would invest many thousands of dollars on additional live shows, t-shirts and recordings over the next 12 years.

Think about it: Would you allow me to have some of your products for free for a year if you knew I would be a loyal customer paying you $5,000 for additional products over the following decade (and turn on a number of my friends who would also invest around the same!?).

I think so!

2) Product First, Profit Later

Sam I. Hill, Chief Marketing Officer of Booz-Allen & Company in Chicago, points out that the Grateful Dead were leaders in the “Product First/Profit Later” philosophy later executed by Nike, IAMS Pet Foods, Snap-On Tools and MTV — (e.g. Nike set out to build a better running shoe; IAMS, a high-quality pet food) in this  “How to Truck The Brand: Lessons from the Grateful Dead” article from 1997.

Hill added: These companies simply believed in what they were doing and “were smart enough to see when it worked, and to exploit it.”

One former President of the Grateful Dead, Ron Rakow (whose cool business card from the time is here) is an uncle of a friend of mine. Ron once told me a relevant story that I’ll do my best to paraphrase:

Rakow said that early on in the Spring of 1967 he asked the band (before the band was successful) what they envisioned success looking like. A few of the band members responded with such comments as:

  • “I want to have a number one record;”
  • “I want to have a number one hit;” and
  • “I want us to be famous”

But Jerry Garcia, the band’s unofficial leader, said something more to the effect of:

“That all sounds good, but I think we’d just like to have as many people as possible enjoy our music.”

Rakow told me at this point that all the band members nodded their heads in agreement with Jerry, saying “Yes, yes, …lots of people should listen to our music — that’s it!”

As Rakow tells it, the band then agreed to empty all the money out of their pockets (there was a total of $50 or so) and rent a flat-bed truck on which they would play a free live concert in the Panhandle near Golden Gate Park in San Francisco).

The band indeed put on a free show on May 28, 1967 in the Panhandle…Rakow says that initially very few people showed up but the band kept playing for a few hours and eventually many thousands of people joined in.

…and the Grateful Dead product was on its way (with profits very soon to follow).

3) Secret to Being #1: Do NOT Be The Best At What You Do…

Music Promoter Bill Graham famously described the Grateful Dead on the Marquee of the Warfield Theatre in San Francisco as:

“They’re not the best at what they do, they’re the only ones that do what they do.”

I think you get it? Focus on what is truly unique about you or your business…and then OWN that!

Examples of the uniqueness of the Grateful Dead included:

  • Making up the setlist every night — They operated without a setlist most nights
  • NOT playing their biggest hits every night — They repeated songs live (including their most popular) only once every 4+ shows
  • Creating their own music category — Because they blended so many musical styles — rock, country, bluegrass, jazz, funk, R&B, reggae and more! — The Dead were impossible to put into a category…so, guess what: the world created a new one for them: called either “Jam Bands” or just simply “Grateful Dead type music”
  • Being the first band to play at the Pyramids in Egypt — The Dead invested $500,000 to visit Egypt and play at the Pyramids and donated the proceeds to local organizations within Cairo (the final night’s performance was capped off by a full moon and total lunar eclipse)
  • Using two drummers — Hardly any top rock bands were using two drummers. One of them, Micky Hart, played an unusual 11-count measure to his drumming
  • “Spacing” Out — Every night, the band would play music with no words for about 20 minutes (this was called “Drums/Space”
  • Recording when they felt like it — They were known to go into the recording studio only when they felt like it. I’ve heard Garcia admit that they simply weren’t very good studio musicians — live music was their strength!
The Dead Were The First Band To Perform At The Pyramids in Egypt

The Dead Were The First Band To Perform At The Pyramids in Egypt

I can’t tell you how they came up with such unique approaches as above…but if I had to put money on it, I’d bet that these things happened organically, played to their uniqueness/strengths or that they did it just for the hell of it.

One thing’s for sure: they did NOT conform to the industry norms!

4) Embrace Your Community

The Dead invested a bunch in their community.

I already mentioned the taping they allowed, which helped build a massive community that they could not easily reach on their own.

Another example of community was that they allowed fans to mail in requests for tickets (as opposed to relying on buying tickets from a ticket seller like Ticketmaster) (there was also a Dead hotline).

This gave Dead fans a feeling of connection with the band (as in, we kind of know where they live).

Here’s a cool shot of some of the mail that the Grateful Dead Ticket Sales (GDTS) received in their offices (which last I heard were in Stinson Beach, California)

GDTS88.jpg

Source: Gypsy Cowgirl's Picture of Some Mail at GDTS

Other examples of the Dead’s support of community included the Parking Lot scene at shows.

The Dead allowed vending in one part of the parking lot (which Deadheads called “Shakedown Street) and many people made their living selling t-shirts, bagels, grilled cheese and pizza.

One friend of mine sold $70,000 per year in pizzas at Grateful Dead concerts! And the Dead embraced it!

The band eventually brought these vendors in as official licensees, according to Booz & Co.

The Dead also embraced fans making money from small community projects such as Deadbase, a print-out of every concert the band ever played with the setlist of songs (that some people sold (such information is now free)).

The Dead was constantly testing cool new things for its community.

I remember walking up to their sound engineer Dan Healy at a 1986 show in Pittsburgh, PA and he explained how they were testing out emitting a radio signal from their soundboard of each show — so that people could listen to the show on their radio.

I tested it out and it was amazing: I was inside a concert listening to an FM Walkman with higher-quality audio than I was hearing within the arena itself. And the fans in the parking lot (who didn’t have tickets to the show) were even more excited that they could hear the show with nothing more than a radio (for free!).

5) Organized Chaos: “Grateful Google?”

A big buzzword in business strategy these days is “Organized Chaos” — Google may be the true master of the concept.

Examples of Google’s chaos: employees can decorate their offices however they want, ride around offices on scooters and goof off on company time and the founders have a “we’ll do what we want, whenever we feel like it” attitude.

However, Google is highly organized/structured: Google breaks down most teams into small groups with two engineers co-running them; the recommended allocation of goof-off time is 10% and the entire company is behind Google’s mission of organizing the world’s information.

Talk About Organized Chaos? Here's Google's First Production Server to Organize the World's Information

Talk About Organized Chaos? Here's Google's First Production Server to Organize the World's Information

But long before Google it was the Grateful Dead who were laying down the magic formula for Organized Chaos.

I probably don’t have to spend much time explaining the chaotic part of the Dead (picture the band showing up in their t-shirts and jeans jamming out to whatever setlist they felt like that night with their avid tie-dyed clothed fans twirling around in circles (many of them under the influence of LSD).

But in actuality, there was a lot of organization to the Grateful Dead:

  • Touring — They consistently toured 50 to 100 shows per year (including a Spring & Fall Tour) in four regions with very specific dates and locations/venues.
  • Sets of Their Shows — Almost all of their shows were structured into two sets with 5 to 10 songs in each set, followed by an encore.
  • Drums/Space — The second set of almost all shows (from the mid-1970s on) included a section in the middle called “Drums/Space” in which the percussionists jammed out alone for awhile and then the rest of the band noodled around with non-song music. While Drums Space was highly chaotic at times (check out this 1987 show (with some cool visual graphics), it was predictably time in the concert with a handful of songs before and after it.
  • Distributed Management — The Dead’s band members (and some crew) rotated as CEOs on a regular basis — how’s that for sharing accountability!?

6) Co-Opetition: Grow Your “Orbit” By Inviting In Your Competition

Long before Silicon Valley coined the phrase “Co-Opetition” (the concept of cooperating with your competition), The Dead made it a key part of their movement.

  1. They invited bands who were competing for the Deadhead customer base — including Phish and The Dave Matthews Band — be their warm-up band for concerts.
  2. They openly invited competing musicians, such as Carlos Santana and Pete Townshend, to join them onstage to strutt their stuff.
  3. They played cover songs of many other bands such as The Beatles, Rolling Stones and Bob Marley) whose products were still marketed at the Deadhead demographic.

This had the effect of keeping such rival music closer within the Grateful Dead “orbit.”

Afterall, if you could get a bit of The Beatles, The Stones or The Who as part of your Grateful Dead experience, isn’t the Grateful Dead orbit even more powerful!?

7) Reinvent Yourself

While the Grateful Dead’s leader Jerry Garcia died August 9, 1995, their music and business lessons live on with members of the original Grateful Dead playing in such bands as The Dead, Phil Lesh & Friends, Bob Weir & Ratdog, Rhythm Devils and 7 Walkers.

It’s a testament to the powerful momentum of the Grateful Dead, that numerous successful bands emerged from the ashes of the death of its de-facto leader.

And the business innovations from these Grateful Dead spinoffs keep comin’.

Marcom Professional’s Marketing lessons from the Grateful Dead points to his recent experience with the spin-off band The Dead:

So, 45 years after the Grateful Dead were founded, the band’s enterprise value “keeps on truckin onnnnn, on.”

I hope you leverage these tips to design your business to last that long!

Postscript:

One more thing: After I wrote this, I got pinged by a guy named David Merman Scott who said he found this article valuable for his Marketing Lessons From The Grateful Dead book.

Here’s the Grateful Dead Marketing Lessons Book on Amazon:

18 Comments

  • janenewcomb

    Great, thoughtful segment on two seemingly disparate concepts: a free spirit hippy band and 7 smart business lessons. This one has legs…!

  • Anonymous

    Great, thoughtful segment on two seemingly disparate concepts: a free spirit hippy band and 7 smart business lessons. This one has legs…!

  • Anonymous

    Great, thoughtful segment on two seemingly disparate concepts: a free spirit hippy band and 7 smart business lessons. This one has legs…!

  • davidmeermanscott

    Excellent post. I love how you tied in so many things of what the Dead has done to what businesses can do today. And you gotta love the vintage pics (I especially love the one from the ticket office. One of my envelopes is no doubt in the stack!)

  • Anonymous

    Excellent post. I love how you tied in so many things of what the Dead has done to what businesses can do today. And you gotta love the vintage pics (I especially love the one from the ticket office. One of my envelopes is no doubt in the stack!)

  • Anonymous

    Excellent post. I love how you tied in so many things of what the Dead has done to what businesses can do today. And you gotta love the vintage pics (I especially love the one from the ticket office. One of my envelopes is no doubt in the stack!)

  • robkelly

    I love it, Dave. I was definitely in that “Stack” many a time. Thx for the kind words.

  • http://www.robdkelly.com Rob Kelly

    I love it, Dave. I was definitely in that “Stack” many a time. Thx for the kind words.

  • http://www.robdkelly.com Rob Kelly

    I love it, Dave. I was definitely in that “Stack” many a time. Thx for the kind words.

  • Alex P

    Inspirational article, Rob! I love the idea that the greatest success come from finding what you love to do and do differently and uniquely from others, and then going with it (and hoping the world will embrace it) only to in the end find a way to make a living from it.

    - (Alex from Fire Island)

  • Alex P

    Inspirational article, Rob! I love the idea that the greatest success come from finding what you love to do and do differently and uniquely from others, and then going with it (and hoping the world will embrace it) only to in the end find a way to make a living from it.

    - (Alex from Fire Island)

  • Elizabeth

    Great post rob! I love lists, and you made this so readable. Fascinating lessons!

  • Elizabeth

    Great post rob! I love lists, and you made this so readable. Fascinating lessons!

  • Elizabeth

    Great post rob! I love lists, and you made this so readable. Fascinating lessons!

  • Chris

    Having a great product is vital here because without that they may have never survived being ripped off by Ron Rakow and host of others to follow that preyed on the bands naivete. Glad to see Rakow’s back in prison for tax evasion from ponzi scheme profits!

  • http://www.robdkelly.com Rob Kelly

    Good point about having a great product, Chris; it surely helped them survive some financial predators.

  • http://www.robdkelly.com Rob Kelly

    David Meerman Scott says that in the early days of the Grateful Dead, Jerry stole ketchup from McDonalds and lived on ketchup soup while living out of his car — sounds like a co-founder of a Web startup!

  • http://www.tiedyefly.com/grateful-dead-shirts Grateful Dead Shirts

    Very nice article. The Dead were a one of a kind phenomena in the music biz. As fro the business practices being mentioned I have to agree is not likely they set out to do what they did. The recordings by the fans could not be stopped just like today’s music down loaders. But instead of suing their own fans they chose to let it happen. And because of this their popularity grew far faster than any marketing campaign would have ever accomplished.
    And it cost them nothing that is a lesson in itself for anyone in business.