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They were at a Bob Dylan concert when they made it up when they got bored, thinking of funny names for bands. Ed had a show with his previous band, but they broke up and he gave the venue the name "Barenaked Ladies", and he only told Steve about it later.


That's how they have told it in the past, at least. Haven't read the book. Later, the name did get them in trouble (forget the city), but it only increased their popularity early in their career.

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