Former Netflix CEO: “Hard Work Does Not Matter!” A $278 Billion Company Wasn’t Built On Hard Work!

we were in deep trouble at Netflix and. we had losses of about $50 million we. have got to sell this sucker fast Mark. Randol is an American Tech entrepreneur. the co-founder and first CEO of Netflix. with a career panning numerous startups. and Ventures marks expertise and. Innovation leadership and business. strategy is unparalleled August 1997. Netflix was founded yes and the reality. is the idea was ridiculous it didn't. work nobody would rent DVDs by mail but. with over 40 years of being an.

entrepreneur I've learned every idea is. bad we just don't know why they're bad. yet the important thing is how clever. can you be to come up with a quick and. cheap way to test it for example we. thought let's just have a subscription. and no late fees it was a ridiculous. idea but when we tested it people loved. it the Netflix DVD service has changed. the world you explored selling Netflix. to Amazon 2 years after you'd launched. for probably 10 to15 million that's not. a bad return for 12 to 18 months work.

but I thought it was much more. interesting to take the shot and see. what Netflix could become but all of a. sudden in a matter of a week or two in. Spring of 2000 we were going to go broke. being successful we tried going to. Blockbuster for months but they weren't. going to save us they were going to. compete with us Netflix wouldn't have. survived but there's a story which has. not really been told which took one of. Netflix's biggest impediments and turned. it into one of its biggest assets so.

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Mark in this season of your life if you. could consolidate your mission and the. work that you're doing across the. content you produce the people you speak. to your professional Endeavors if if you. could consolidate that into a singular. focused Mission what exactly would that. mission be in this season of your life. for me at this point in my life it's all. about. mentorship um you know I've done seven. startups I kind of recognized quite a. while go I do not have uh the appetite.

to do another one uh it's that 7 by. 24 Focus that I don't want to do anymore. I have other things that I would love to. have uh spending time on but you can't. turn it off uh I've also realized that. over 40 years of being an entrepreneur. I've learned a few things about how to. actually play this game and so my. mission now is how do I pay that forward. how do I help other people um either.

have a shot at it like I did or if. they're already playing the game how do. I try and increase their odds of success. you wrote this book called that will. never work why books are painful and. hard to write what is it that you want. someone who gets to the end of this book. to walk away with I've come to believe. that almost all of the information that. people receive from the General Media. about entrepreneurship is wrong um it.

glorifies entrepreneurship in what I. think is a damaging way you watch these. movies that are about entrepreneurship. and it's all about driving around in the. fast cars and having the parties and. that's not it it's a very lonely. profession so in a simple answer the. reason I wrote the book is I wanted to. give people a true story of what it. really means to come up with a crazy. idea that everyone thinks is never going. to work and the struggle to make it real.

and if someone reads that book and gets. to the end and goes this sounds great. then that's the exactly the right person. who should be an entrepreneur if someone. goes this sounds a lot harder than I. expected well then I've done a a service. in that way as well which is I've kept. someone from getting into this for all. the wrong. reasons when you when you look back on. your your journey to. Netflix do you you know I remember. hearing in Steve Jobs speak about the.

decisions he made in. hindsight that in when he reflects on. his life resulted in him starting apple. and the decisions he made within Apple. so obviously you know things he's famous. for saying is that he went to a. typography class he dropped in and he. started learning about design and. typography and that shaped him what are. those early sort of experiences that in. hindsight fed into the creation of. Netflix probably the meta thing was the. fact that most of these Endeavors were.

entrepreneurial so for example initially. my first foray into direct response. marketing was when uh. I asked if I could run the mail order. division of this sheet music company. that I was working for and so what it. meant to run the mail order division was. every day you got the mail and if you. found someone's asking for a list of. great song books you'd make a copy and. you'd mail it out and then if an order. came in you'd go to the warehouse and.

pick pack and ship it and that spoke to. me and I began experimenting and said. okay now what happens if I do two pages. or do it in color what happens if I mail. it out and I built this mail order. division into a real mail order company. so it was this combination of direct. response but more importantly it was. building something it was creating a. company inside a company so there are. certainly those preparations from the.

direct response side hugely formative. for at least. Netflix uh because if you think about it. what direct response marketing is about. is all about testing it's all about. analytics um and when the internet came. along and I saw what the internet was. what immediately popped into my head was. oh my gosh this would is the power to do. direct marketing but on steroids this is. so much more positive I'm doing this.

personalization but it's very Brute. Force personalization I mean it's it's. dear Steven wouldn't your friends at 17. Crescent cir it's like this ridiculous. personalization what the internet let me. do is personalize every web page for one. person but one of the direct response. Endeavors that I did was I was a. circulation director for a magazine we. we launched a magazine and that's. subscription and so you go okay well. look at this you have someone who's. doing Direct marketing and there's.

someone who's doing subscription and. then all of a sudden they're trying to. figure out how to do video rental better. it's not that big of a leap to say okay. it was subscription and it was direct. response on the internet so yeah these. things were pretty formative so. interesting so you on one hand you had. this business where you were physically. sending things in the post and then you. got involved in another business where. you were doing subscriptions and these. kind of I guess plant these sort of. seeds in your brain to IND industries. that you start to understand and it's. funny because when people think about.

creativity I heard someone say before. that creativity is essentially. collecting lots of different clouds and. then connecting them in new new ways so. getting lots of different points of. inspiration in life and then connecting. them in new ways which create a new. thing and that kind of sounds like what. you're describing there it is and the. thing is at the time you don't. necessarily know um you're in the right. place at the right time because I. certainly wasn't the only person who. said wow the internet could be a. powerful force for selling things uh. Jeff Bezos was.

one of the first people to recognize the. power could have to sell things when did. Amazon which at the time was only books. but there were a lot of different models. we could have looked at and so in terms. of Netflix going into video rental and. doing video rental by mail that was. entirely driven by the fact that I had. worked for so long in a catalog business. where I had mailed things in boxes and I. had seen I knew a lot about all the. shippers and I knew a lot about.

fast shipping I mean I had this huge. repository of of information and. experience and I didn't know how it be. used but all of a sudden you're looking. at a problem and you're kind of in your. mind going through how could I possibly. solve this in different ways and one of. the things that comes up is something. you've experienced in the past you. launched this company Integrity QA. between sort of 96 and seven and that's. ultimately acquired by Reed Hastings by. pure by Reed Hastings company yes and. that's where you and re Hastings met yes.

correct who's the other co-founder of. Netflix what was that like that first. meeting with Reed Hastings meeting Reed. was like this instant Junction of two. like. Minds uh we both recognize something in. each other one is that we both approach. problems very differently I was very. emotional about it I don't mean. emotional like I'm running crying from. the room I mean empathy that I'm a. marketing person.

uh when I put something out there I can. almost intuitively sense how someone's. going to respond Reed his background is. mathematics and computer science much. more logical much more methodical and we. kind of realized as we begin solving. problems together how well those two. integrated but at the same time as. having these differences and approaches. we were very similar and that we both. shared this commitment to honest y not.

because we both swore an oath just was. our nature that life was too short to. shade the truth that if you had. something to say you say it and you say. it in a respectful way in an empathetic. way and you don't have ulterior motives. um and we both were like that and it. allowed us to have these really intense. interesting conversations where we were. trying to find the truth out of. something but pushing each other and. challenging each each other and it ended.

up being a very very powerful way to. solve problems and we were only at pure. Atria together for seven or eight months. and then lightning happened to struck. again where pure Atria was now being. acquired uh and this time um both Reed. and I were going to lose our jobs they. already had a CEO they already had a. senior VP of worldwide marketing so we. were going to be out of a job uh we had.

six months and Reed was going to go back. to school get a higher degree in. education I was going to start my next. company and Reed wanted to keep a finger. in the pie here and we came to an. agreement that I would start the company. uh he would be my angel investor and. he'd be my board chair and all we needed. was the business. idea uh and all you needed was a. business idea exactly and only that yeah. just this that small manner of of.

needing something to do and thus began. this process which went on for months of. Reed and I kind of searching for a. business idea and we we had a. methodology so don't uh don't think this. is. random um and Reed and I happened to. live in the same town we lived in Santa. Cruz California together and we had. gotten in the habit many months earlier. of commuting to work together and so. once we knew we were selling the company. once we were were losing our jobs we.

still were commuting to work but now the. conversation in the car shifted and what. would happen is Reed would pick me up at. my house and we'd barely B my driveway. and I get okay Reed I've got one for you. personalized. shampoo you're going to cut off a lock. of your hair you're going to mail it to. us and we're going to have a team of. hair scientists who are going to. formulate a custom blend and people are. going to subscribe to it.

and the same thing would happen no. matter what I pitched is there'd be. silence re would be staring out the. window just steering the car and you'd. think he hadn't even heard me but I knew. that kind of behind that stoic face all. the calculations were taking place like. you know the risk and reward and the. costs and the benefits and it might take. five minutes 10 minutes of silence but. then eventually he would turn to me and. go that will never work and he would lay. into me with all the reasons such a bad.

idea but of course I could come prepared. and I'd come right back in him with all. the research I had done all the reasons. I was sure it was a good idea and we. would do one of these arguments all the. way to the office and if need be all the. way home and until we either decided. there was promise or no promise and. almost all of the time there was very. very little promise in these. ideas but next day I'd have another one. I could read personalized pet food. Uh custom Sporting Goods vitamins I mean.

I pitched all those. ideas I pitched them on video rental by. mail people are going to come to the. website they're going to pick out a. movie we're going to mail them the movie. and they'll keep it for a week and then. they'll mail it back and at the time. though this was. 1996 97 uh video rental you may remember. it was on VHS cassettes so there were. too big and too heavy and too expensive.

and so that idea got trashed the exactly. the same way that the dog food and the. personalized shampoo did and kept on. searching and then the Breakthrough if. there was one came one morning or Reed. picked me up and I'm on my way out the. door out at the driveway I got one for. you and he stops me and goes I got to. tell you about something I read about. there's this technology that came out. it's called the DVD it's this little. disc that holds a movie. and it's thin and it's light and we.

brainstormed that a little bit and. realized this could be the unlock for. that old video rental by mail idea we. had talked about six or eight weeks ago. and then we did this quintessentially. entrepreneurial thing which is midc. commute we turned the car around and. drove the car back into Santa Cruz to. try and validate this idea we did not go. to the office and do a business plan we.

did not work on a pitch deck we tried to. collide the idea with real people that. day that day midc commute turned the car. around went down into Santa Cruz tried. to buy a DVD couldn't find one settled. for buying a used music CD same size. same weight then went two doors down and. bought a little envelope like you'd put. a greeting card in and put this CD in. the envelope addressed it to Reed's. house bought a stamp and dropped it in. the mail and went to work and that very.

next morning when Reed picked me up he. held up a little pink envelope with an. unbroken CD in it that had got into his. house in less than 24 hours for the. price of a stamp and that was probably. the moment we said this actually might. work we can use the post office um and. that shifted everything and that's the. point we began saying this could be the. idea that we do together so many.

entrepreneurs and aspiring entrepreneurs. are at that exact phase where they want. to leave their corporate job their brain. everywhere they go now because they W. they've wired themselves to be looking. for an idea is finding lots of random. ideas their dog or like throw up and. they'll be like oh new dog food or. whatever and they're going through that. process and I I think it's so important. to just pause there and try and. interrogate what the framework is for. knowing if you if you've got a winner or. not like how how did you CU presumably. you had got yourself passionate about.

the um shampoo idea so like how do you. know when to drop an idea and how do you. know when to commit to an idea what was. the framework you're using the framework. is that every idea is stupid there is. everyone you know listen you probably. haven't had a corporate job yet in your. no thank God yes thank God is right. because there's this thing in corporate. uh I say Corporate America corporate. world and it's the brainstorming session. and they put everyone in a conference. room and they go we're going to.

brainstorm and try to come up with an. idea for whatever it is and he goes but. first some ground rules for the. brainstorming rule number one there is. no such thing as a bad. idea and I call there's plenty. of bad ideas in fact there's no such. thing as a good idea every idea is bad. we just don't know why they're bad yet. and so the framework I approach I assume. all these ideas are ridiculous I assume.

none of them are going to work but. here's the difference the reason I start. from that that uh position is I don't. want to commit the single worst thing. you can do as an entrepreneur which is. fall in love with your. idea and you talk about the person who. sees the dog throwing up and they go. I've got a great idea and then what. happens nothing they go home and they go. this is a great idea and they tell their. partner and their partner goes oh that's. brilliant I'd buy that. and so they go okay and they begin.

working on a business plan and they. write this 10-page business plan and. they're dreaming about how they go. They're how amazing it's going to be. just think about we have this line of we. can do cats too and then giraffes you. know they've they've built this. incredibly ornate business in their head. all based on this feeling that this must. be a good idea and you've got to nip. that in the bud and the way you nip it. in the bud is you try rather than. dreaming how amazing this idea is the.

first thing you think about the only. thing you think about is how can I. quickly cheaply and easily Collide this. idea with a real person and find out is. it in fact a good idea or a bad idea how. can I do some kind of hack that will. allow me to quickly find out whether. customers actually would want this or. not and almost always you build this. quick cheap down and dirty I don't mean. minimal viable product I mean.

unviable something you can quickly do. like turn the car around and mail a CD. to yourself just to find out the the. basic premise of can I actually use the. US mail to send movies back and forth. because if that had failed well great on. to the next one and that's such a. critical critical step that's the. framework that everyone has to to have. it is not about having a good idea.

having ideas is easy and trivial the. important thing is how clever can you be. to come up with a quick and cheap and. easy way to test it why because I know. you and me understand this but I didn't. understand this when I started my career. so I know that there's a lot of people. listening right now that are probably. right in the moment you've described. they've spent a year building up this. thing in their bedroom for anyone that. can't see he's got his head in his hands. um they' spent a year in their bedroom. building and working on this project why.

is that a terrible idea it's such a. waste of time because what happens is. two things happen one is this or idea. becomes so large and ornate and. complicated in your head that you go. okay Mark I need to get started I need. to raise $5 million because it's going. to have to hire all these people to to. build this thing and they're probably. building the absolutely the wrong thing. uh you you can't you you can't just go. ahead and based on what you think is.

going to happen you've got to start from. a position of real information listen. perhaps the cleanest way since we have a. bit of time is to give you an example I. do a lot of work with University. students and uh I was meeting with a. young woman who uh at the University and. she goes okay Mark I've got this idea um. what I want to do is peer-to-peer. clothing sharing in other words I've got. all this clothing in my closet that I.

never wear or I don't wear very often. and I know my friends have a lot of. clothing in their closet and other. friends have clothes in their closet it'. be great if we had this website and we. could all post what we have and we could. borrow each other's clothes and and I'm. going okay that's interesting what can I. help you with she goes I'm trying to. figure out should I drop out of college. to do this uh how do I raise the money. to hire a team to build this for me and. I went whoa you know slow down here okay.

interesting idea but let's figure out if. we can come up with a quick and cheap. and easy way to collide this idea with. the reality I said do you have a piece. of paper she goes yes smartass I'm a. college student I have a piece of paper. I go great all right do you have a magic. a marker she goes I have a marker do you. have a piece of tape she goes got a. piece of tape I go all right I want you. to write on the piece of paper would you. like to borrow my clothes. knock and I want you to tape that to the. outside of your dormatory room and we're.

going to find out in the next 24 hours. whether the very very first principle. behind your idea is real is anyone going. to knock because if nobody knocks well. you've learned something very important. right there this thing you think is so. attractive might not be but let's let's. be optimistic let's assume a bunch of. people knock great you've learned. something but you're also going to learn. the next thing which is are there. problems with fit are there problems.

with style are the people who knock and. look at your clothes actually going to. want any of them all right let's be even. more optimistic let's say they do find. out ones they want to borrow well you're. going to find out the next piece how do. you feel when your favorite blouse comes. back stained or torn you're going to. find out about the cost of doing dry. cleaning you're going to find out all of. these things and you're going to find. about all this for a piece with a piece. of paper a tape and a marker none of. this raising money dropping at a school.

and doing any coding you're going to do. something very simple now is this. scalable no is this repeatable no but. that's fine you're going to do it all. with 3x5 cards or on a pad you're going. to do it manually and you're going to. start losing your mind but when you. finally get to the point where you are. ready to go and maybe raise money or. drop out of school you're going to know. what you're dropping at a school for.

you're going to know what you're raising. money for you're going to be able to. tell someone here's my acquisition cost. here's my lifetime value here's my CAC. here's my you're going to know all of. these metrics you're going to know the. complexity you're going to a tried all. these different things you're going to. know what demographic and you found out. all of that for nothing except for your. time that's what I mean by figure out. some way to validation hack and that is. the key to being an entrepreneur you.

have an idea quickly cheap and easy test. it find out it's ridiculous abandon it. go on to the next one it's funny because. uh obviously I'm a dragon on Dragon Den. which is basically a show like Shark. Tank where we see 100 pitches a year. from entrepreneurs and what I observe in. some of those pitches especially when. they're a little bit early on and they. haven't got product Market fit quite yet. there hasn't been evidence that the. market actually cares is a huge amount. of delusion to the point that you could. give someone some feedback but because. they've spent one two years of their.

life and maybe mortgaged their house and. invested it into this. business they're they're now in the sunk. cost fallacy which is that sort of. cognitive bias where you've invested so. much in something that you're basically. Defending Your bad decision at all cost. and you can't see the light of day and. um and that you know my first business. was the death of my first business but. for many entrepreneurs that I meet it's. quite clearly the death of them because. if they don't have that humility if. they've got romantic they can't take any. feedback which is a con conflict with.

what they want to believe it's it's. you're Stephen you're absolutely right. it is the single biggest reason that. either they don't start because they've. built this thing up in their head and. it's so big and complex that to get. started is almost impossible or they are. so far along they can't stop it's it's. tragic in in a lot of ways that which is. why you have to start from the belief. that your idea is a bad one uh because. that makes it easier to walk away from.

it as soon as you realize you are right. um but what happens if you can get this. discipline of taking your idea and. immediately trying it is almost always. takes you in a New Direction yes your. original idea was terrible but oh my. gosh did you see how this person did. let's try this oh that doesn't work. let's try this and that is. entrepreneurship it is just leaping from. the back of one uh alligator to the next. and there those alligators just H long.

enough to before they sink or before. they bite you and you jump to the next. one I I I think I found two sort of. species of entrepreneur and the real. distinction between them is how long. they've been doing it and one species of. entrepreneur that I know they care. entirely about being right which is. their initial hypothesis being correct. and that's typically the young. entrepreneur and then the the more. seasoned entrepreneur cares entire. entirely. about being successful regardless of. whether it's via their initial.

hypothesis or not they care entirely. about like saving time and being. successful not being right and I think. it's interesting that tenure as an. entrepreneur seems to determine which. Camp you sit in it's also your. personality jumping back to our. conversation earlier about What. attracted Reed and I to each other was. that both of us were in that camp that. said we don't care whose idea it was we. just care about getting to the right. answer and part of this culture that we. had with each other and we built with.

other people was you could argue like. cats and dogs and eventually you'll. arrive at what you think is the right. way to go and as soon as that happens. you all fall in behind and no one says I. was right I was wrong and you don't even. remember who was right and who was wrong. it's a big piece August 29 1997 Netflix. was founded by yourself in Reed. Hastings from from that day onwards did. did you know at the moment that Netflix. was going to ever become what it went on. to be what were you thinking it was.

going to. be I am completely astounded and amazed. at the direction that Netflix has gone. never in a million years could I have. dreamed of the company that exists now. being the same one that we were thinking. about in in August of 1997 it's. astounding to me what's happened U and. it's the nature of Entrepreneurship you. can't predict where these things are.

going to go uh that wasn't the point. though it wasn't like Reed and I were in. the car going uh okay when do we enter. the streaming war and when how do we. deal with ch no this was a very very. simple straightforward problem a video. rental in the United States is8 billion. a year um it's very unpleasant that the. P the company who has the The Lion Share. of that market is doing things which.

customers hate there has to be. Blockbuster there has to be a better way. that's where it starts from that's the. problem you're trying to solve and. trying to solve the problem is this dual. thing which is how do you do something. that a customer might want solve the. problem for the customer but also how do. you make a business out of that and. that's all. consuming uh I remember we had a company. meeting early on maybe were two or three.

months in and I remember getting up in. front of the uh company and laying out. what I thought was going to be this big. hairy audacious goal for us someday. we're going to be one of the top 10. largest video chains in the United. States which in retrospect was a. ridiculously trivial but from where we. stood then it may as well have been. saying we're going to ride our bicycles. up Mount Everest uh what.

hubris uh because even the 10th largest. chain was many many many millions of. dollars a year bigger than we were at. the time but something to aim for and we. actually passed that one way faster than. we thought and then you set your goal. you know eventually we're going to be as. big as. Blockbuster in other. words if you were to set your goals to. be what Netflix is now I would be. locked up I would have been this most.

ridiculous flight of fancy hallucination. you can imagine they would have thought. you were Psy gone psychotic or something. if you had ever done a presentation. saying Netflix would be as big as it is. now you um for people that don't know. because the world has moved on so much. and there's a generation of people that. are listening to this conversation right. now that probably don't even know what a. like a vcr and a cassette player is but. you launched the business at a time when. Blockbuster was the big incumbent and. Blockbuster was was a store where you. went to a physical location you rented a.

like cassette VCR what do they call it. like a VCR v VHS VHS tape you took it. home and then you brought it back the. next day and your real Innovation was. that you were going to send these DVDs. to people in the post on a rental. basis that was the that was the Crux of. the business right that was the Crux of. the business and in fact when we. originally started there was not a lot. of business model Innovation there. either you know there was due dates and. there was late fees the Innovation was. it was one centralized store on the.

internet that served the entire country. so that we could have every single movie. that was available on DVD we had perfect. inventory uh and unlike a video rental. store where you can picture it in like a. supermarket with rows of shelves each. movie could be placed in one place you. could either put it in the mystery aisle. or in the Alfred Hitchcock aisle. or in the new Rel you had to pick where.

it was whereas on the internet you could. have that same movie listed in 30. different places based on finding movies. we thought finding movies would be. easier too we had a bunch of things we. thought would allow us to take on this. incumbent this huge huge huge company. but yes it was very very focused there. was no streaming if you wanted a movie. we mailed it to you we mailed it to you. on a little plastic disc it's funny cuz. in hindsight when I think about a lot of. these big breakthrough ideas that ended.

up changing their industry you you you. learn in hindsight that there was some. big macro factors that caused the timing. to be right and I think about in the. case of your business Netflix there's a. bunch of big macro things that you've. already described things like DVDs the. internet is there is there any other. sort of big macro factors that made the. timing right for Netflix those were the. two big ones right is that the internet. was certainly the big one was that all.

of a sudden there was this way to have a. single store which served the entire. country before for a bricks and mortar. as we call it business you want to serve. the entire country you've got to build. 9,000 different stores and Blockbuster. did just that they had 9,000 different. stores and then you have to staff those. stores and they had 60,000. employees and we served the entire. country with one inventory and with a. group of 12 to 15 people so that was.

certainly one big shift uh the DVD was a. bet which was at the time DVD was just. getting started and if the DVD had not. worked if it had not reached a full. household penetration this whole thing. never would have worked how many people. were watching DVDs at the time when you. launched Netflix there was fewer than. 200 50,000 DVD players sold that was the.

total addressable Market was. 250,000 DVD players so is that like 1%. of America or something yeah there's 130. million households in the United States. so and of those 130 million households. movie uh but it was Tiny there it was.

really it created all kinds of. interesting marketing challenges of how. do you launch a company when there's so. few eligible customers in September 99. you explored selling Netflix to Amazon. which is which is shy of two years after. you'd launched. um what was was that the first time you. met Jeff Bezos yes and how does that. come to be you know because he's he at. the time I guess was was fairly early in. the Amazon jour as well but yeah he was. and at the time to show you how early.

Amazon was in its Journey they were only. a book seller so they sold nothing else. they were a bookstore but Jeff had made. no secret of the fact that his. aspirations went way beyond that that he. was going to be the everything store. that the things they had found about how. powerful it was selling books in the. internet applied to everything else and. it was pretty clear his next two. categories we're going to be music and.

movies and we got a call from uh the CFO. at Amazon basically saying hey Jeff we'd. love to uh meet with you how about. coming on up to up to Seattle and having. a little sit down and Reed and I didn't. need to think too long to understand why. they might want to meet with us uh it. was pretty clear they were going to be. entering video and this was going to be. a make versus buy analysis would buying. Netflix accelerate their entry into.

video cuz we had done a tremendous. amount of work about building out the. content and making those things work so. there was some value there not to. mention the people um and so we all flew. up to Amazon and were ushered into this. building which was pretty hard to. imagine that this was the headquarters. of this world changing e-commerce. company because it was a mess you know. people were jammed in under stairs and. in closets and there was pizza boxes.

every place and dogs running around and. the desks were all the same they were. all made from doors that had been laid. supported by four wooden posts at Each. corner that everyone sat at these doors. and uh and in comes Jeff Bezos and we. begin to have this conversation about. what is Netflix and what's it all about. and uh it went went pretty well. and as the CFO is showing us to the door.

at the end of the meeting um she Saidi. just want to set your. expectations that in the event we decide. to do something our offer is probably. going to be in the low eight. figures and and we guessed that was. probably going to be1 to15. million and at the time we had launched. in April of. 98 and so. we were still pretty young and I.

remember Reed and I kind of looking at. each other and going that's not a bad. return for 12 to 18 months. work but at the same time we felt we had. already solved the big problems we had. built a functioning e-commerce website. we had managed to Source every single. DVD that was available we had figured. out how to make movies go out to. customers and bring them back and we. weren't quite ready to let Jeff Bezos.

take over and so in some ways it was. less about us going up and deciding. whether to sell or not it really ended. up being kind of like a commitment. ceremony where Reed and I looked at each. other in the eyes and said we can get. out if we want and I think both of us. decided no let's uh let's go for this. would that money have changed your life. at that. point 1999 you know $400. million that's a hard to say it this is.

not like I was uh you know living in a. trailer uh and deeply in debt and you. know I I'd been working I was in my late. 30s I'd been working in Silicon Valley. for a while and I'd had a number of. startups you know I had G through IPOs. before um so I I had I was comfortable. don't get me wrong this would have been. nice but I'm not sure this would have. dramatically changed my life in some.

profound way I thought it was much more. interesting to take the shot and see. what Netflix could become than to walk. away what was Jeff like what you. remember in. 1999 uh extremely unpolished really if. you see him now I mean he's really buff. and he's really thoughtful and someone. has definitely worked on his laugh it's. it's now very. controlled uh back then it was this.

almost hysterical hyena like bark and. you could hear it from all over the. building I'm not going to try and. imitate it um but he was tremendously. enthusiastic like this bundle of energy. and I remember that um the two of us. were just going back and forth on all. this early startup stuff uh and one. thing I remember we had in common is. that um uh at our launch we had rigged. up a bell to ring every time an order.

came in and I was telling him that he. was going ah we too we had a bell that. was ringing and we had we shared those. things and then we were also talking. about names and Netflix had started out. with a strange name which was kibble. kibble and he was saying oh yeah we. originally were called. Kadabra which he meant to sound like. Abracadabra like magic but their lawyer. said that Kadabra sounds a little bit. too much like kadaver and so therefore.

Amazon but in other words it was this. really interesting us going back and. forth and I know Reed was very impatient. he just kind of wanted to get down to. business so finally I go okay Reed Reed. let's talk to the what we're really. talking about here enough enough startup. is the next big milestone in the Netflix. Journey the dot. crash for you. uh because there's a there's a problem. prob a more profound moment for me that.

happened um before. that uh and that was this trans that was. this leadership transition at. Netflix uh and that was because the do. crash was in the spring of. 2000 and this was probably in late. 1999. um and Netflix was still young uh and as. I mentioned at the beginning the.

arrangement that Reed and I had was that. he'd be the angel investor he'd be the. chair uh I'd be the CEO I'd start and. run the company um and I did that and. Reed had a day job somewhere. else um and one afternoon uh late that. year Reed poke his Pok his head in my. office uh late afternoon and said Mark. we have to. talk uh and as you probably can imagine. that never bodess well when someone says.

we have to talk and it was right and he. came in and he had a PowerPoint. slideshow and he sat across my desk and. spun his computer around and began. walking me through a slideshow about how. he felt that I was doing as. CEO strengths but perhaps a little bit. disproportionately. weaknesses and I was a little taken back. by this and I I I kind of stopped him. and go re. I am not going to sit here and let you.

pitch me on how much I. suck um and I think he was taken back by. that as well and so he closed the. computer but then proceeded to lay out. that he was. concerned that he had seen minor errors. in my judgment that he questioned some. of the hires I had made I mean he had. seen a lot of the other things i' had. done that were good but his point was. that we have to execute lawlessly and. we're at a point now where things are. beginning to accelerate and if there's.

smoke at this level he was worried there. was going to be fire later on and uh. eventually he got to his point which is. that uh he wanted to come back to the. company fulltime and be. CEO and for a moment I thought he was. firing me uh CU Reed had more Equity. than I did since he was the uh uh. original. investor and but as I understood what he.

was proposing it wasn't that he was. proposing that he come in as CEO that I. stay as coo and that we essentially run. the company. together and I remember as he finally he. left the office and he quietly closed. the door and I was so shocked that even. though the sun was going down I sat. there in the dark like without the. strength to the lights on and just kind.

of crushed and all I could think at the. time was this is so unfair this is my. company you know I started this it was. my idea I hired the people I got us. going and how dare you you know all of a. sudden take this from. me but as I thought more about it I kind. of realized that there was another. Dynamic at work. here and like most. entrepreneurs when we started Netflix I.

had this dream of being a successful CEO. of this big successful. company and I think as I sat there I. began to realize that maybe this wasn't. one dream maybe this was two different. dreams and that the dream of the big. successful company might be a different. dream than the one of me being CEO and I. had to really say to myself does Reed. coming in full-time as CEO increase our. chances of that happening and it was.

really hard for me to argue with myself. otherwise and I'm not saying this was an. easy decision and I you know I went home. that night and sat outside in the porch. with my wife and we finished a bottle of. wine and I think by the time I went to. bed that night I kind of concluded that. he was right that if we really wanted to. give ourselves the best chances of being. successful that I should move over. I should step down as CEO and let Reed. come in as CEO and we should run the uh.

the company. together. and looking back now this was 20 some. odd years. ago that decision to kind of put my ego. aside for a bit was probably the. smartest decision I ever made the entire. time I was at. Netflix because those years after that. when Reed and I did it together that was. the Renaissance at Netflix so many of.

the things that shaped what the company. became over the next bunch of years came. during those years and certainly looking. at what Reed has done with the company. since then since I left the company was. uh even more. astounding and it's funny because one of. the roles of a CEO is you've got to make. sure the best people are in the right. seats which means say goodbye to a lot. of people you'll have someone You Who. Came at when you started the company and.

they were your head of marketing and. they worked tirelessly they worked. weekend they work nights they did. everything you asked but as you get to a. different scale you recognize that. person is not the right person for what. we have to do next but you never think. you're going to have to turn that lens. onto. yourself um and I think a lot. of Founders need to ask themselves that. question question all the time I'm the. right person for yesterday I might even.

be the right person for today but am I. the right person for tomorrow and the. number of Founders that I can think of. and I'll bet you you will Echo this when. you think about all the founders you've. spoken to who are great early stage. entrepreneurs and great late stage. entrepreneurs it's a very very small set. um and in my case uh I was very very. comfortable recognizing that this was.

the right thing to do for the company. when you when you think back to that. moment and that conversation with Reed. where he comes into your office with. your hindsight and wisdom now do you. think there's a better way that he could. have approached the. situation of course Reed as I mentioned. before what made Reed and I work so well. together as we were left brain and right. brain and that's not Reed's strong suit. um that's my strong suit you know I.

pitch I know how to frame things in the. right way I know how to deliver bad news. I know how to uh communicate effectively. and I can intuitively know what's going. to upset someone or not upset someone. that's not what Reed's great at but what. Reed has and what we share is he cares. Reed was doing. this not with some ulterior motive this. was not I want to push Mark out and. become CEO this was he genuinely.

believed this was the right thing for. the company and because we had this. extremely strong relationship based on. trust I heard him that way and. fundamentally that's way more important. than the style in which the message was. delivered what was it that he thought he. had that would suit the company in the. next phase of the company's Journey that. he felt you didn't have he had already. taken a company through an IPO he had.

already scaled a company from two. employees up to a thousand employees. from a local company to a multinational. company uh he had he had already shown. that he could hire extremely talented. people to work for him he wasn't saying. that he didn't think I it was impossible. for me to do this. and who knows would have happened this. was all about what increases our odds.

for success and then perhaps if you want. to drill down to something which in the. big scheme of things is small but in the. time was large is we had to raise. money uh Netflix was a very very. expensive company to get started we. required large amounts of venture money. and Reed had this reputation of someone. who would already made a ton of money. for some VCS because of taking his prior.

company public and they would bet on him. whereas I was a little bit more of an. unknown one of the things you talk about. in your book that he said to you in that. conversation is you don't appear tough. and candid enough to hold strong. people's. respect yeah it's um I'm better at that. now does that count uh it is the empathy. um. I as I said what makes direct marketing.

Marketing in general is an interesting. discipline because it requires you to. send something out and you're not going. to ever see the person's face as they. react to it you're not going to be there. as they're reading this and either. getting confused or. excited you have to imagine those things. and as you're writing a direct response. letter you're picturing how is someone. going to react when they read these. things how are they going to react when. they're watching this direct response. television.

commercial that's a it's it's a gift in. some ways and it's also a gift when it. comes to salesmanship and negotiation is. before I say something I know how it's. they're going to react and I can cater. that but what it does mean is that when. something's going to really hurt. somebody it's really hard for me it's. very painful for me to deliver very bad. news I've never considered that before. but it does appear to be completely true.

that people who are great. marketeers um have therefore have. empathy and therefore struggle more with. delivering bad news because they just. have a better ability of putting. themselves in the other person's shoes. you feel it you feel it you know I've. and as I said I've gotten way better at. it um I'd say I'm good at it now um I'm. I can be a complete ass when I how does. someone train that muscle is there a way. to go you know if you think about how. you went from where you were with that.

to where you are now is there anything. that's helped you stop being I guess a. bit of a people pleaser or caring a. little bit about people's feelings when. there's a big I've stopped searching for. a way to do it that doesn't. hurt and as as with most decisions a lot. of times people get caught in this. paralysis where they're trying to come. up with some Solution that's an Optimum. solution and this is one more example of. that is that you go this is going to.

hurt it's going to hurt me I have to. just do it anyway there's no way to. avoid this and for example you know. jumping way ahead there was T after this. doc layoff which we'll talk about in. just I mean doc com crash which we'll. talk about maybe in a moment we had to. lay people off and I cry with every. single one of them but I bring them in. and I gotten very very good at telling. people uh it's time to go. but doesn't mean that I don't. hurt hardest.

thing let's hope that if you're a. manager that's the hardest thing you. ever have to. do have you forgiven Reed. for that that moment that day the way he. delivered what he said. 100% uh this is going to sound silly but. it came from love it didn't come from. Madness or jealousy or.

anger it as much as it was possible for. something to hurt Reed in delivering bad. news that's got to have been one of. the toughest things he's had to do is. have that conversation with me and I. have so much respect for the fact that. he had the courage and discipline to say. I've thought of something I could I've. thought of a way to mail the DVDs more. inexpensively I've thought of a way to. the no he goes I've thought of a way to. make the company more successful but.

it's really going to. hurt what is it about Reed then that. makes Reed successful because I asked. you the question about yourself but now. to turn that on Reed what is it that. makes him so unique see you used the. analogy for creativity earlier in our. conversation about having all these. clouds of information these clouds of. connections and seeing that there are. these interconnectivities between. them Reed sees that stuff so well I.

consider myself really good at that he's. even better than I am he will have a. very complicated problem with many. moving pieces and he'll jump immediately. to we can do this and I won't see that. until a little bit later and then even. everyone else sees it it's just an. amazing ability to see how things might. shape about and which one is the right. path to take uh extremely.

analytical um extremely. non emotionally driven can make very. very hard decisions because uh. less driven by that by the emotional. piece of it he's he's a he's he's. remarkable what about hard work does it. matter.

well since you ask it so simply I'd say. no or it certainly is not the most. important thing in fact I think hard. work leading to success is a. myth that and let me let me give you two. examples. okay um the first is to qualify what I. mean um I work with a lot of as he spoke. earlier before we actually began the.

session um about how younger people are. different places in their life than. older people especially with career and. how they think about it and um earlier. in my life I used to do triathlons you. know the races that combin swimming and. then biking and then. running and back when I used to do them. they don't do it quite the same way. anymore it would be a mass water start. you have four or 500 people who with the. gunun sounds and all 500 of them plow.

into the water. simultaneously not a phase start and as. you can imagine it is a show you. mean you're getting kicked and your. goggles are being knocked off and you're. being held underwater and you quickly. realize that if you want to be able to. survive in this Mass Dart you're going. to Sprint for those first four five 600. yards to get yourself far enough in the. front of the pack that you have open. water and in my opinion work life is.

kind of like that when you're younger. when you don't really know what you're. doing when you have to go down a lot of. false ends because you're not just. productive you better work your ass off. you better Sprint you better work three. times harder than everybody else in the. company so it's. essential but. ideally you get yourself far enough. ahead that you recognize I can't can't. go at this pace for the entire te of the.

triathlon I needed to to get myself some. breathing room but now I can back off so. yeah at certain points in your career. you need hard work at certain points in. the trajectory of your business you need. hard work your. fundraising you can't say oh we're. closing around I'm taking vacation for. two weeks uh we're doing m&a I'm going. to be uh I'm only going to work a couple. hour no you're going to have to grind it. but that's not the answer all right one. more little story which is part two to. this which is why I say that it's a myth.

for hard work um so during one part of. my career I lived in Europe uh I was. doing International marketing for a big. software company we had an office in. Paris uh I lived in Paris and but I was. meeting every week with the marketing. people in our other branches so probably. four days out of five I was flying fly. to Copenhagen one day then I'd fly down. to Milan then I might fly to London then.

I might fly to Madrid in one week so I. spent a lot of time at the airport and. um because I'm sometimes not that. organized uh I'd be late and you would. find me just sprinting Down The. Concourse in my uh in my Blazer and my. wool coat trying to desperately make the. plane and what I found out. was that probably 49% of the time I'd.

pull up to the gate and the plane was. delayed and i' have to wander onto the. plane no problem at all I could have. made it on crutches and instead I'd sit. there marinating in my sweat for another. hour before the plane took off or the. other 49% of the time I'd come sprinting. Down The Concourse and you'd see the. plane halfway out in the runway about to. take off and what I realized is didn't. make a difference whether you ran for a. plane or not that you're either going to.

make it or you weren't going to make it. and that running didn't make the. difference and I vowed then and there. I'd never run for a plane again and I. never have and I'm telling you that. story because it's a metaphor in that so. many entrepreneurs spend all this time. running for planes they are up all night. polishing their deck they're reviewing. the work of people to make sure the. spelling is correct they're. double-checking every detail they are. working so hard but I know from.

experience that it's like running for. the. plane most of the time doesn't make a. difference you don't lose the deal at 2. o'cl that morning because you didn't. check the fonts you lost that deal four. weeks ago when you didn't have some. fundamentals right or you just weren't. the right company to begin with no. matter how hard you worked you weren't. going to change the. outcome. and that is the key to having some. balance in your life as an entrepreneur.

is this recognition that if you're smart. about the things that you choose to. focus on you make 99% of the difference. and that all that extra work does not. really change the outcome. any and in that analogy of running for. the plane is the is the key thing to. have just better prepared further. Upstream I you know if we stick to the. analogy just have made a better decision. to leave the house at a better time. yes it does absolutely I mean if you. want to make the plane you you know you.

leave earlier and again it's not. sometime listen you're going to scroll. down The Concourse you not don't need to. run and if if the plane left on time. running's not going to make the. difference if the plane's late running. didn't make the difference either way. you made it or didn't make it the amount. of times that running for it was the. gating item between whether you made it. or not is like infantes so what's the. point of running and that's and I really. fundamentally believe that is that. if I can be really smart about my which.

problems I choose to focus on I'll make. the difference I do not need to get. everything right because most things. don't make a difference some things do. some things do and some of the the small. things that made a difference to your. business seem to have been discovered. through a process of sort of. experimentation and failure when I look. back through your story at you trying to. get sort of Netflix to work and get. product Market fit you referenced it a. second ago this idea of no late fees. seem to be quite pivotal an idea you had. to remove the late fees I I find this.

interesting because there's going to be. entrepreneurs that build their idea and. then bang their head against the wall. and it doesn't work and then I hear so. often whether it's from Brian chesky at. Airbnb or from someone else Daniel at. Spotify that there seemed to be this one. change that was quite pivotal to their. business at some point so my question. becomes like how do I know how do I find. the thing so can you explain to me why. this no late fees thing and and any of. these other small changes that change. the game and how what was the system.

that led you to. them you know we're talking about really. finding product Market fit product. Market fit if I have to give a. definition is when you recognize you. finally have something that customers. actually do want and it's recognized. because all of a sudden the momentum of. your business dramatically shifts all of. a sudden things go into high gear all of. a sudden iring customers is so much. easier all of a sudden they're sticking. around it's just this instantaneous oh.

my God we found it and up until that. point it is this constant struggle of. trying one thing after another trying to. increment your way closer and closer and. closer you know when I mentioned that um. you know at the beginning there wasn't a. lot of business model Innovation with. Netflix we if you ordered a disc we. mailed it to you we charge you a due. give you a due date if you missed the. due date we had late fees and the. reality is the idea was ridiculous it.

didn't work um nobody would rent from us. and if you did rent from us once you. didn't rent from us again um and we kind. of had this realization that okay we got. to begin figuring things out and thus. began this year and a half long process. of trying to figure out some way to get. people to rent DVDs by mail from us and. and we tried almost everything you could. think of um hundreds of things and um I.

kind of talk about this a bunch. that I had no shortage of ideas I mean I. had lots of things I wanted to try and. if there was any if there was a problem. that I had it was that I was a bit of a. perfectionist back then and so all these. tests that I'd want to run I'd want them. to be perfect so we would you know. lovingly argue over every word of copy. and we would do custom photography and. we would check every link and we'd.

stress test the site and it might take. us three weeks or a month to prepare for. this test and we' test this new idea and. then it would not work wouldn't do. anything and we'd kind of look at each. other and go we just wasted a month so. okay faster and then we do a test in two. weeks and it would still fail okay okay. faster and we do it in a week and faster. we eventually started getting to the. point we could do do a test every day or. multiple tests every day and it turns.

out that um once you go that fast things. get very very sloppy so we would have. the wrong image or it would have the. watermark on it or the pages we had. greed would still be greeked you know. not uh we'd have bad links we'd crash. the site and then but that was such an. incredibly big insight for us because it. turns out that it didn't make a. difference that if it was a bad idea.

even spending a month crafting this. perfect test wasn't going to make it a. good idea but if it had even an inkling. of being a good idea no matter how bad. the test was it shown through customers. would immediately perk their head up. they'd raise their hand they fight to do. it they'd call us they'd reboot the site. it was this incredibly loud signal that. there was something there and it goes. back to what we said before which is. that it's not about having a good idea.

it's about building this whole process. and this culture and this system to try. lots of bad ideas and we got really. really good at trying lots of bad ideas. one after another hundreds of them each. one informing us to some little some. little bit about what to try next and. eventually we got to this point where we. had these two big Ideas left and one of. them was uh at that point uh Netflix was.

pretty big we had probably in our. warehouse several hundred thousand DVDs. and I remember one day we were Reed and. I were in the warehouse and looking at. all these DVDs and going it's such a. shame that all these DVDs are here in. the warehouse where they're not doing. anyone any good I wonder if there's a. way to store them at our customers. houses let them keep them and then when. they're done they mail it back we'll. just replace. it and rather than having them have to.

pay each time they replace it let's just. have a monthly fee a subscription and. they can rent as often as they want. there's no due dates and no late fees. and it was a ridiculous idea but when we. tested it it was that mythical product. Market fit it it worked people loved it. they couldn't get enough of it they told. their friends they did not cancel their. subscriptions what part of it worked and.

why did it work God knows yeah but in in. retrospect what it did was it. took one of Netflix's. biggest impediments and turned it into. one of its biggest. assets you know we referred to my book. it's called that will never work and. there was two reasons it's called that's. will never work work it it's because. that's what every single person told me. when I pitched the idea and they had two.

reasons why they said it um and one of. course was uh streaming they said oh. it's a digital medium it's just a matter. of days before everyone's streaming. these who needs DVDs and we realized. that was not the case it was inevitable. but it could be years but the other. reason was was Blockbuster why on Earth. would anybody want to order a movie have. it mailed to them get it 3 days later uh. and then keep it a week and mail it back.

when you can drive to a Blockbuster in. 20 minutes and have the movie immediate. gratification and what happened when we. did the no due dates no late fees is it. shifted because before with an all a. cart system you would order it yeah you. get it three days later or you drive to. Blockbuster in 20 minutes but now when. it was no due dates no late fees you. could order your movies they'd sit on. top of your TV you keep them as long as. you want when you want to watch a movie.

this lag time is. zero compared to 20 minutes to go to. Blockbuster because you could order a. couple I imagine three you could order. three okay and so you always had. something to watch when you're done you. put it in the mail and instantly you. know two days later another one replaces. it so all of a sudden we weren't two and. a half days slower than Blockbuster we. were faster faster than. Blockbuster and I think that was the.

convenience and the thing is that when. we did the analysis at the beginning. about Blockbusters Achilles heel it was. the late fees everyone hated them uh. that was the single biggest thing that. people would say about Blockbuster I. hate the late fees and by being able to. get rid of that it was a huge. competitive advantage and it was baked. into the Blockbuster business model they. couldn't easily. get out of it again so for someone that. might not be aware of Blockbuster the. late fees are if I didn't bring back.

this tape of this movie I would get. charged per hour or per day or something. yeah it's usually three or four dollars. a day okay which is a lot of money for a. DVD it's a huge amount of money for for. that but it was also this feeling of uh. I was okay paying the initial fee to. rent the movie because I want but now. I've watched the movie and I just. couldn't get it back in time and now oh. my God now I got to pay more just to. return it it just felt like this. unwarranted unpleasant punishment for.

the customer I was thinking about. something that Daniel conman the famous. sort of psychologist um talked about in. his paper when he wrote about loss. aversion and the tldr of it the too long. didn't read part of this is that Daniel. Carman discovered that people have a. real disdain for feeling like they've. lost something and in his studies he. shows that if you drop $10 on the floor. you don't need to find $10 to make up. for the pain of losing 10 you'd actually. need to find 20 or 30 and and so he has. this wonderful graph where he talks.

about that we just loss to us is so much. more painful than a gain so in the case. of Blockbuster a late fee is is is money. I literally lost for nothing right so. it's not losing $4 in in the context of. it's actually losing like $12 it's that. painful exactly it was it was a really. really hated aspect of the video rental. experience back then and also it made me. think about the peak and which is you. remember the uh which Uber discovered in. their Labs where they say that people. remember the peak in the end of an.

experience and so if my end of an. experience with Blockbuster is getting. charged getting punished that's really. interesting I've never heard that before. but that fits entirely it was the. perfect denoma to having an experience. with Blockbuster is to go in and have. someone say thanks for returning your. movie now you owe us $8 or $12 just like. a horrible end experience custom and. that's why I think a no no due dates no. late fees. was so profoundly game-changing for us. and it marked the beginning of that that.

was it that's what the company became. for the next five or six seven years and. it was more than just no duties late. fees but the transition to a. subscription business was huge and this. is you know now everything's a. subscription business every piece of. software you buy is a subscription every. everything subscription back then that. was not the case uh there was book clubs.

which were subscription there was record. and tape clubs of subscription there was. magazines and that's all and in some. ways when you look back at what some of. the huge Netflix Innovations were one of. them was demonstrating you could apply. subscription to something which is. reasonably. unintuitive and it came from this fact. again this disconnected little piece of. my past that I happen to had a year and. a half of experience really.

understanding subscription economics. when you were looking forward so I I'm. so fascinated by this test that you did. which which changed Netflix's fortunes. there's a couple of them that you've. described but when you did you know. looking forward that it would have that. much of an impact and I'm saying this. because that helps me to understand. whether I should just conduct a a lot. more tests or I should do what I think. most companies do where we sit in a. boardroom and we spend hours and hours. trying to find the perfect test is the. game just conduct more tests if I didn't.

have to sit by the microphone I'd get up. and hit you upside the head for that. comment God no you should not be sitting. in the boardroom debating what to do you. should be running more tests you should. always be running more tests you don't. know you don't know I mean you. don't your customers do but they even. they don't know what they want and the. only way to figure it out is to throw. all kinds of things at them and see what. direction. they're interested in but so did I have. any idea subscription was a big thing.

absolutely not and once it began to work. and it worked like crazy we still had no. idea how to optimize it and we Netflix. still 20 plus years later spends ungodly. amounts of time on testing all kinds of. things about subscription Dynamics what. does it take to get someone to do it. what does it take to get someone to stay. what influence is these it's. unbelievably complex but it's. unbelievably important but subscriptions.

there's a reason why it's it's eating. the world it's an incredibly compelling. business model and uh the fact that we. stumbled onto it and that it worked so. well just was a very very positive uh. thing you know it's interesting on the. testing point just to close off there I. embodying the position of most companies. or employees or Founders listening to. this the reason why they don't want to. run tests or don't have a culture of it. is because it involves failure and. failure then in most companies results. in blame and blame makes people feel bad. so it disincentivizes them but creating.

a culture where failing is a positive. and it's celebrated is quite a challenge. I guess oh it certainly is it's it's a. career for me I mean I uh I do a lot of. public speaking keynote speaking all. over the world and a lot of them are big. companies who are going our whole. world's being turned upside down our. whole Workforce is risk of. Mark get in here and help us figure out. how to make everyone a bit more risk. tolerant but you know what do they do uh.

they'll go okay Mark your theme today is. we're trying to get everyone to be. bigger Risk Takers to take chances we. want to celebrate. risk uh so but before you go on we're. going to celebrate the sales leaders and. bring them up and reward them for the. trips to Hawaii it it's like you said. you have to let people know that. failling is not not only okay it's. expected and it's a good thing and we. found we we learn from it and I don't.

even cons listen I don't even consider. it failures they're not failures they're. tests that didn't necessarily work but. they worked in the sense that you learn. something from them and you just keep. doing those over and over again and. again if you go back to this my first. principle is how do you learn how to do. tests which are quick cheap and easy you. can do tons of them talking about giving. speeches there just a week before the do. com Bubble Burst you gave a speech in um.

New York City and your dad was there. yeah my dad was the anti-. entrepreneur uh he was extremely risk. averse uh he was an investment adviser. he worked for a uh managing money for. people in a company whose whole. principle was fundamentals long. long-term value he had no clue. whatsoever about why I was doing what I.

was doing and this whole Venture world. it was just completely made no sense to. him um but that speech in New York City. was actually. fairly interesting because what I was. doing was speaking to the DVD. manufacturers Association I think it was. about what we' learned about more. effective ways to expand their. business and on one hand I think my dad. was extreme ex proud to see that all the. stuff that I'd been saying which he. thought was all a bunch of.

hooie was actually important and. interesting to people but unfortunately. it was also um he happened to be in New. York that time to get treatment for a. brain tumor which he had just realized. he had and um so it kind of was this. beginning of this my dad understanding. for the first. time what I was good at. and at the same time the end.

of not of our relationship but it marked. the beginning of this saying goodbye to. him so it was kind of this very very. Bittersweet uh Bittersweet. time in 2000 at 42 years old when you. were 42 years old um he just just one. week before the dot crash your father. passes away right I mean the timing is. is. um is is extremely unfortunate but also. just the impact that must have on one's. perspective to lose their father at that.

that in that season of Life yeah I guess. it's part of you go well what else can. go wrong and you find out. plenty. but the tragic this is going to sound. tried I suppose but one of the tragic. things about my father dying before the. dot collapse is he missed seeing that he. was. right he missed seeing that in fact this. was a lot of hooie that this apparent.

defying of Gravity by all of those do. companies commanding these ridiculous. valuations with no revenues and even. even less profit um which he thought he. could not understand how this could. possibly be real well as we all found. out a week later it wasn't real. and I think he would have really loved. seeing that in fact he was. right.

um but it was kind of this double hit. for me you know reeling in fact from the. death of my dad and then all of a sudden. having to worry now about the death of. my. company did it change your perspective. losing your father on what matters in. life. I'm gonna say no.

because what was great about my father. was that he was very true to. himself he was very comfortable being an. iconic clast about holding different. opinions uh even as we just mentioned. with the do. bubble when everyone else was saying. this was the next big thing and he's. going this makes no sense whatsoever and. he held to it and he lived his whole. life that.

way and so in some ways when he died. there was this sense that it is possible. to. be true to yourself and um and be. fulfilled that you do not need to chase. the trends was reminding me that. that can. happen when I started my first job when. I was like um and I was probably. 22 my first real job where I actually.

had to go sit in an office uh my dad. called me into the. den um and tore a page off of a yellow. pad and on the page he had written in. pencil the Randolph rules of. success and he goes this these are the. things that I have learned over my. career as a business person and I think. I want you to see these as you start. your career as a business person and I. wasn't quite sure what to expect as I.

was looking at them and what was. interesting was that these were not. business rules this wasn't like you know. Buy Low and sell high or happiness is. positive cash flow or anything like that. these were basically rules that said. it's possible to be a decent person and. still be successful I mean it was simple. things like you know do 10% more than. you're asked it was um. be. prompt it was um don't knock don't. complain stick to constructive serious.

criticism it was don't express opinions. about things that you don't have the. facts. for I. mean that's who my dad was that he um. felt that those were the important. things to communicate to me which is. Mark be a mench. then the dotom bubble happens most of us. can't remember I think I was how old was.

I must have been seven or seven or so. seven years old so I can't really. remember what happened yeah but I know. it was. bad well it was especially bad for us I. we were talking a moment ago about. subscriptions and how subscription. economics are amazing and what makes. them amazing is that you acquire your. customer and then that customer gives. you money for months after afterwards. ideally for years. afterwards but because a subscription.

customer is willing to give you money. for years afterwards you can invest more. in acquiring that customer you can spend. $100 to bring that customer on board. with the confidence they're going to. give you $10 a month month after month. after month after month but it means in. month one you spent 100 and you made. 10 so when you have a subscription. business which is booming which is going. crazy when customers are flooding in the. door well money is flooding out the door.

the cash required to service those bring. those customers in for their first month. huge the revenue from them not so much. not to mention we had a first month free. policy and that wasn't a problem in uh. March of. 2000 that was the era of irrational. exuberance that was where you had these. companies where had no Revenue no real. business model worth hundreds of. millions of dollars where I could go out.

on the highway with a green flag and. wave it and a dump truck of money would. pull off and back up to my driveway and. I just need to come out with the. wheelbarrows and bring the money in it. was ridiculous until the dotom crash and. all of a sudden in a matter of a week or. two completely dried up and all of a. sudden having a.com on your name was no. longer the road to riches it was The. Scarlet. Letter um and we were in deep trouble we.

were basically going to go broke being. successful and when that happens as. you've seen with other entrepreneurs you. do something called pursue strategic. Alternatives which is code for we have. got to sell this sucker. fast and we had an obvious strategic. alternative which was Blockbuster how. you losing money at that point oh my God. yes how much roughly uh at that point we.

had accumulated losses of about $50. million and what were your revenues $5. million and you you you accumulated. losses what was your sort of annual. yearly burn rate how much money were you. burning every year uh well there we were. only in business for we'd only been in. business for 2 and a half years so it. most of that 50 had been in the previous. 12 months I mean that's I mean on paper. that's not a good business well not just. on yeah it's a terrible business you.

know they they say that one of the goals. of any startup is to receive a. repeatable scalable business model that. is not what we mean by repeatable. scalable business model um it's. disastrous and you have lots of. businesses which go we're going to make. it up in volume or once we just get the. get the eyeballs then we'll monetize it. later so it's it when all of a sudden. the opportunity for all those things. goes away it's disastrous we're just. completely upside down our economics did.

you go to Blockbuster or did they come. to you no we tried going to Blockbuster. for months we tried reaching out to them. but this was this ultimate listen we. were doing five million a year they were. doing $6 billion dollar a year okay so. you we had 150 employees they had. 60,000 that we were like a gat you know. to them to an elephant they you know. their tail flipped around what's this. thing Buzz. no interest in US whatsoever it took. months and finally we got the.

call and as luck would have it we got. the call we were at a corporate retreat. uh at a place called The alisol Ranch. there's a a a city called Santa Barbara. on the coast of California pretty rural. alisol Ranch is way back in the. mountains it's a dude ranch you know. horses so we're on Retreat and you also. know that in silic and Valley that we're. pretty casual and when you're on Retreat. you have to work at it to be even more. casual so all I had with me was shorts.

uh t-shirts uh thong sandals you know. that's that's all I had with me and. that's when Blockbuster calls goes we'll. like to see you tomorrow in. Dallas and I remember turning to Reed. and going there's no way uh we can't fly. non-stop out of Santa Barbara uh the. time zones are different we can't. possibly get to Dallas by tomorrow and. so we did the prudent thing you do when. you're $50 million in the hole and we. chartered a corporate. jet uh a rounding error I think they.

call that uh we fly to Dallas um go up. to in the 27th 28th floor of this. massive glass and steel skyscraper into. this huge cavernous conference room. there's a big hardwood table made of I'm. sure out of some endangered Amazonian. hardwood or something it was horrendous. the whole thing and I'm there in shorts. and a t-shirt and your thong sandals and. and the sandals and Reed I was jealous.

he had a Hawaiian shirt he had buttons. anyway in come the Blockbuster guys and. we make our pitch we go we'll combine. forces um you'll run the stores we'll. run the online business we'll build a. blended model which our research has. shown is a. GameChanger and everything will work out. and it was going good you know they were. asking good questions they're leaning in. they're and we're going okay this is. this is rolling and then they asked the. big question you know how much and of.

course we'd rehearsed on the plane we. figured we're $50 million in the hole so. $50. million and there's this silence in the. room and I'm looking at uh Blockbuster. exec trying to piece together what the. reaction is and it finally Dawns on me. they're trying to suppress. laughter they're trying trying to keep a. straight face at the hubris that this.

little company $50 million in debt at. the trough of the Meltdown could. possibly be worth $50 million so as you. can imagine meeting goes downhill pretty. quickly after that long quiet ride in. the cab back to the airport even quieter. ride on the jet back to Santa. Barbara and I I so profoundly remember. sitting there on the plane just my head. down like not. talking just thinking ah I I was so.

confident that if we just got the. meeting that this Blended model was so. self-evidently great that they'd save. us but now they weren't going to save us. they were going to compete with us and. we were in trouble did they make you an. offer uh no they just rejected the $50. million offer. and you know my Dad one of the things he.

sometimes to say to me is like you know. when I was struggling with some. particularly nasty problem and came to. him for the solution he' go you know. sometimes the only way out is through. that you got to take these problems and. just go right at them there's no no way. around and this was such a classic case. of that there was no easy way out of. this the only way we were going to. survive was be to compete with them that. and we had a put ourself in a position. we could do that when we laid people off. we dropped entire lines of uh adjunct.

little businesses completely focused it. in and and survived and eventually you. know as eventually um passed Blockbuster. and eventually um Blockbuster went into. bankruptcy I don't know how Blockbuster. couldn't have just looked over and seen. your business succeeding at some point. and gone okay we've got 6 billion. Revenue a year which will just destroy. them will'll just you know overpower. them with advertising or something it's. a big piece of innovators dilemma um in.

their case uh a couple things going on. um number one imagine you are the CEO of. Blockbuster okay called John wasn't it. John antioco so you've got6 billion. dollar coming in through your standard. business model which is serving these. bricks and mortar stores all over the. world $6 billion. and someone comes to you and goes we. need to build an online component and. John goes well what do you think that.

could do in Revenue the first year and. you go $2. million so would you say okay take our. very best. Engineers let's put them on this. project no you go okay figure here's a. hand figure it out and you could put the. the B team is on it and of course it. doesn't Netflix wasn't a movie company. company it was a software company I mean. we had Silicon Valley we had people who. had spent their whole life building.

software you can't compete with that. even with their a team it would have. been challenging but they put the B and. the C team on it and they did that a. second time and then a third time and. finally each time we're stronger and. stronger and stronger and eventually. they go we got to fix this and they pick. a team they resource it adequately they. say get out of the. building go across town. set up here's the money come after these. guys and it's one of it's a story which. has not really been told very well but.

they came really really close to taking. down um Netflix they were in a they that. Blended model which we knew was a. killer which a blended model means you. can rent from Blockbuster and you can. either return it in the mail or you can. return it at the store or you can go. pick it up at the store or you can have. it mailed to you. and we couldn't compete with that we. didn't know the. stores and it really really came close.

to taking Netflix down until all of a. sudden they had all kinds of unrelated. corporate. shenanigans that made them decide change. CEOs we're going to dource this online. business and walked away from it what. was I saw you talk about this on your. Instagram recently um when John quit the. business so John was the CEO of. Blockbuster. and him quitting the bussiness for a. variety of reasons is much of the reason. that you think Netflix actually ended up.

not getting killed by Blockbuster. correct can you explain that so and I'm. not going to get this entirely right but. there basically were people who are. corporate Raiders who would buy large. amounts of a company's stock and take. seats on the. board um take multiple seats on the. board and begin to try and dictate. things to make a company more short. short term profitable that happened to. Blockbuster and one of the acts they did.

was deny John ano's bonus he was the CEO. of Blockbuster. yep and he said you can't do that and. they go well we need to we're g to no. we're not going to pay you the bonus. that we you were promised in your. previous agreement and so he goes well. in that case I. quit and then they went to find a. replacement and they brought in a person. who had all of their experience at. retail stores at convenience. stores and his vision was we have 9,000.

stores in almost every community in the. country in the world why aren't we. selling gum and clothing and and what. are we wasting money on this digital. stuff and there's a this is super movie. geeky so pardon me for the. segue um Step Spielberg who I'm sure. you're familiar with his film school.

project was a movie about a. robot and the robot operates kind of on. a cost benefit analysis and there's the. penultimate scene in the movie where the. robot is chasing somebody and he's. getting closer and closer and closer and. he's just about the obot to reach up and. grab the person's ankle and you see the. sunk cost of the robot's time get to. break even and he stops and walks away.

an instant before he grabs the person. that's what blockbuster did they were. within seconds of grabbing Us by the. ankle and yanking us off the ladder when. something happened unrelated to that and. they just turned and walked away and we. just scampered to safety they lost. Focus yep so that's there's a lot of. reasons Netflix Blockbuster didn't go. down because of Netflix only. but Blockbuster went down because they. had a business model which was very very.

difficult to change and they didn't have. the courage and the persistence to be. willing to do the things that would have. made it change perfect Ted has quite. frankly taken the nation by storm a. small green energy drink that you've. probably seen popping up to a Tesco or. to a weight Ros they've grown by almost. 10,000% in a very short period of time. because people are sick and tired of the. typical unhealthy energy drinks and. they've been looking for an alternative.

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anybody about this and you can only get. this online for a limited time so make. sure you don't miss out you left the day. after the IPO in May. 2002 the IPO happens the company is. valued at a big number um I guess your. life has changed indefinitely from that. point because it's a lot of money for. someone to have um and you go on you. know leave the company for the reasons. you expressed earlier and you go on and.

do other things and I think at that. point really the streaming War has been. has been now won by by Netflix and now. many others as we sit here in 2024 but. at that point was really when you know. Blockbuster are effectively dead I think. they went oh they went bankrupt what. eight years after the I didn't they was. those Wars raged for a while okay so you. you go public in 2002 right they. continue pursuing you y um but. ultimately they they ran out of steam. eight years later and go bankrupt in. 2010 you leave Netflix you leave Netflix.

you're a wealthy man you've achieved. success. that almost everybody on planet Earth. will never see in terms of. business at that. point what. matters what matters in. life uh the day of the IPO I remember we. left the trading floor where we had gone. public New York City my young my son uh. who actually with me today uh oh yeah in. the back was was with me he was a young. much younger man and uh I remember the.

two of us sitting in the in the taxi. going downtown in New York we were going. to get pizza because I figured he's a. California Kid he'd better experience. New York Pizza uh and I was sitting. there going my life has changed you know. I I do have the option if I want to to. not have to work again and I be in the. cab seeing all these people who were. going about their lives and going am I. different or not and part of it you then. you realize I like what I do I I'll take.

the day take a day or two but I'm going. to be going back to work I still have. problems to solve we still have to make. this company successful and I did I went. back to work and it was not uh it wasn't. as profound that my life changed like. the IPO is held up as this be all end. all but it's just one more. Milestone along the way you know Netflix. still had a lot to do and it it still. has a lot to do.

um the the more profound thing was was. actually leaving and realizing that I. could be as I mentioned before could now. begin spending my days doing the things. that I really loved doing and I have. I've been incredibly lucky able to do. that you know since leaving Netflix I do. get to spend every day working with. other early stage companies I did start. another company after uh Netflix which. did really really well um I have a great. life and I still get a chance to spend. time with my family and I still get a.

chance to get out and do all the. outdoors things that make me whole was. there grief associated with leaving and. and that's sort of the months after you. leave is there a grieving process. because. you're surprisingly no there's. uncertainty you know I I I've spent most. of my professional career in Silicon. Valley and as most people there do I. know dozens if not hundreds of people. who have economic outcomes there that.

would allow them to not work another day. in their life if they wanted to but it. if you do a simple survey of the friends. of yours who've been put in that. position the vast majority of them go. back to work they start another. company and you realize that we are. entrepreneurs not because we have to do. it to earn a living. we do it because we love that process of. solving problems we love that process of. making and building a company we love.

that process as I described earlier of. sitting around the table with really. smart people solving really interesting. problems and if success is nothing else. it's the ability to be able to do the. kind of things you want to spend your. time doing and doing another company is. the most thrilling thing in the world. and if I get a chance to do that why. wouldn't I want to do that so in that. period after. leaving I didn't say I'm retiring I. didn't say I'm starting another company.

I said I'm going to take some time and. think about it and in my case I decided. I didn't think I had enemy to start. another company um I was going to spend. my time helping other people do it it. turns out that I was wrong I got sucked. into starting another company that's a. whole another podcast but uh this whole. thing is not about the IPO it's not. about success uccess it's not about. money the thing that makes this the best. job in the world is how cool it is to.

take something which hasn't been done. before and figure out how to do it and I. just feel blessed and I imagine you do. too and the people you speak to are all. blessed that we are allowed to spend our. days doing that one of the things that. always inspired me and that I've mowed. over for many years is the culture that. was created in Netflix because it was so. pioneering and it's so sort of spad in. the face of the way that we were told. things were supposed to be done you know. cuz when we when I started my first. business it was all about family and all.

of this stuff and then I remember that. day that I read Netflix's sort of. culture handbook which is quite famous. and viral now called freedom and. responsibility and it was. everything that I it was the opposite of. everything that I thought a business was. supposed to be you know it was this. radical Freedom that people were given. but then there was a really high bar and. I want I've always been curious like. a where did that come from B is that for. every company is that the right way of. company.

culture um and I guess see what is the. the unknown part because we all saw the. deck but we don't get to see the actual. Implement so I'll take your middle part. first which is this for everybody and. the answer is no um culture as I often. say is not. aspirational culture is. observational culture is not something. that you dream up what you want it to be. that you aspire to it to be it's not. brainstorming what our culture should be.

and now let's print up 40 posters and. put them in the. breakroom that is not what culture is. culture is how you as the founders. behave it's how you as the senior. Executives behave people are watching. you and they're modeling off of you that. is what culture is that's where culture. comes from so if you aren't a certain. way you can't have your culture be that. way and it's perfectly okay to say that.

we're a family if that's really the way. you behave and want. to build your company it's entirely. appropriate that's not the way I wanted. to behave or build my company so I never. said that but I'll get to that in just a. minute but it comes from this so this. whole radical honesty thing at Netflix. that just came from the way Reed and I. always treated each other and the way we. treated our employees the way we wanted. held them accountable to treat their.

employees um so it has to come from how. you genuinely are um you can police that. you can hold each other accountable you. can say we want to hear from everybody. and then have your HR person pull you. aside after the meeting and go Mark Reed. you were always saying you really want. to hear from everyone of those meetings. what percentage of the words do you. think came out of your mouths then and. go be right Patty we'll do better next.

time I you want you want your actions to. match your words so that's the core. thing of culture is it can't be. something alien it means you have to be. accountable to it because it spreads. Beyond you that the culture of the first. 10 people is modeled off first two of. you the next 90 is off the first 10 the. next 900 is off that first 100 and so on. so if you let it slip if you say our.

most one of our principles is no. unless they're our best. salesperson or the Irreplaceable CFO. well then then it's different no you've. got to be consistent because everyone. sees that anyone with kids knows kids. don't model what you say they model what. you do the other piece this whole. freedom and responsibility thing is not. novel it's almost every early stage. company has this because there's just. aren't the resources to do otherwise you. have let's say 10 people but you have.

the work of a hundred there is not time. to say okay Stephen here's what you have. to do and here's here's what you have to. do and check you can't do that you just. go all right here's what I need you see. that mountain over there I'll meet you. there in two weeks and I need you to. have this finished here's what you need. two weeks meet you there and then I'm. not going to talk to you for two weeks. and you're going to have to struggle and. figure things out and overcome obstacles. based on what you have to accomplish.

it'll be different things and this. person has to. accomplish but I trust that you're going. to get to that Mountaintop with the. stuff done in two weeks that's the. responsibility part but I'm giving you. the complete Freedom how to get there so. that's an easy thing when you have 10. people it's a little harder when you. have a hundred it's really hard when you. have a thousand and the reason is that. there's an innocent thing that. happens so get to a point and you're at. the mountain and someone shows up like.

three or four days late and you go oh. this isn't good I can't have this okay. from now on I need everyone to give me a. daily status report so I know in advance. if this problems and every person goes. oh status. reports okay and now everyone shows up. on time but then someone shows up and. they spent too much money and you go oh. I can't have this okay everyone I need. to pre-approve all expenses over. $5,000 and all these people who you're.

counting on to be responsible you're. treating them like an infant you're. going I'm giving you this you have a $10. million quarterly sales nut but I don't. trust you to make a decision about what. type of Hotel you can stay in or what. money you can spend to achieve come on. treat me like an adult that's free and. responsibility is I I'm going to treat. you like an adult but most companies do. is they put these guard rails in place.

to keep people from making errors of. judgment and the Netflix experiment is. simply is rather than building guard. rails to protect ourselves from people. with bad judgment let's build a. culture where there are no guard rails. and only hire people with good. judgment and that's sit in a nutshell. and you know I'm sure you you've seen. the deck but you know you know what the. travel policy is there there isn't one.

you know the expense policy is there. isn't one you know what the vacation. policy is you know there isn't there. aren't any policies the policies are all. summed up as use your best. judgment that's freedom and. responsibility now that only works if. someone has the judgment to be treated. that way so you have to to be diligent. about saying if you don't have the. judgment to be able to make decisions. effectively you shouldn't be here but it.

turns out there's a magic to this I. worked for a big multinational software. company back when I was doing direct. response marketing and um we had a big. competitor with like Microsoft and we. had a big corporate campus and it was. beautiful had tennis courts had squash. courts it had a big Health Club really. wonderful Cafe an Olympic swimming pool. and a hot. tub and one day myself and Patty McCord.

who was the HR person at Netflix we were. walking back from lunch and we saw some. of the engineers in the Hut tub and we. swung by to say hello and as we got. close to the hot tub we could tell they. were all bitching about the. company and we thought it was pretty. funny that here they are sitting in this. magnificent hot tub at the the company. complaining about it but it triggered. this conversation which is if it's not. the amenities that make people want to.

work someplace what is it and the answer. is it's not the fireman pole and the nap. pods and the kombucha on tap or any of. the other ridiculous thing that people. throw at it's they want to be treated. like adults they want to have agency in. their life and in their jobs they don't. want to be told what they can and can't. do they want to be given a. clear responsibility and given the. freedom to achieve it and that is such a.

huge unlock for Netflix it's more. important than how much you pay someone. it's more important than almost anything. I have been through this so I my first. business started with the same set of. polic policies and rules especially as. it relates like holiday so we've always. had unlimited holiday even in the. company that you're in you you're part. of now the 40 people that work for the. ders now we have un limited holiday what. I came to learn interestingly over time. is that the reason you end up changing. these rules is because 5% of people it's.

really like just a few people that don't. exercise the Judgment you're talking. about so what you end up doing is going. okay well I have to change a rule for. everybody because of this small group. maybe three or four people that can't. seem to execute really great judgment. and and it's funny cuz I found myself at. one point several times over my career. going right okay we have to get rid of. the unlimited holiday because Tom and. Dave and Nigel of 200 people in an. office can't make fair and responsible.

judgment and it's kind of just dawned on. me as you speaking what what I actually. need to do is just address the three. people you need to fire those people. you're going to you're going to go the. opposite way you're going to start. looking at all the other policies you. have and go I'm going to take get rid of. those too I'm going to get rid of and. little by little but again it's only if. that's you. it has to match how you want the company. to feel it can't be artificial no it is. it's always been because I've the reason.

why I'm an entrepreneur is because I'm. impossible to employ because I'm I hate. jobs so I tried to create a company. where I would want to work in which. means that if you show up late good. because I'm probably going to be late. too and but the maybe the reason I was. late is because I was working late on. something and that actually doesn't. matter so what time you arrive doesn't. matter it's you know cuz responsible. people someone like Jack you haven't got. to tell Jack when to work Jack is so. focused on the mission Jack will figure. out when he needs to get how and when he.

needs to get his job done um and you. don't end up making the rules for people. like Jack job at Netflix for you no but. he's one of those people because he's. like a Founder here he like founded this. thing with me so we have that kind of. mentality but yeah you're right you end. up making it's so interesting it is it's. it's it's all about taking down the. guard rails and and what happens. is taking the guard rails down great. means those three people can't work here. but it makes the other 97 really want to. work there it makes other people because.

most places don't do that it's like uh. doesn't make it I don't care when you. work I don't care what hours you work I. don't care whether you're home or in the. office I do care that once we've agreed. what responsibilities you have that you. achieve get those things done and if you. can do it in six hours a week because. you're so smart and. talented all power to you the last thing. I wanted to talk to you about is. actually something that I read on on. LinkedIn which went viral which was you. talking about your relationship with.

your wife and your commitment to date. night on Tuesdays right the post went. viral because I think it struck a cord. with a lot of people who have really. burnt themselves out because of their. job what is that principle you have with. your wife and how long have you kept it. for so right when I was you know in my. late 20s I was working like a dog I was. working all the time nights weekends and. not cuz I had a slave dropper boss but. because I CU I loved what I was doing. I just was totally into it and I was in. a relationship at the time with the. woman who's now my wife and it kind of.

slowly dawned on me perhaps with a. little bit of help from her that this. wasn't as satisfactory for her as it was. for me and it kind of made me realize. that if I really wanted to have a. sustainable long-term relationship I had. to. uh figure something out and. that I realized that I had to have more. balance in my life uh and we began this.

policy of saying I'm not I'm going to. prioritize my relationship with my. girlfriend and who's now my wife and. that has taken a lot of forms but the. one that I referred to was I had this. policy at Netflix before Netflix after. Netflix that every. Tuesday uh I'd leave work at 5:00 sharp. my wife would get a sitter or before we. had kids we' just go out and we'd spend. the evening together had a date night. and this was.

sacren that I don't care what's going on. I'm leaving at 5 um if there's a crisis. we're going to wrap it up by five if you. have to talk to me well we're going to. talk in the way to the car but I'm. leaving at 5: and um it was kind of. remarkable because after a while uh. crisis stopped happening after o00 on. Tuesday and all of a sudden people were. able to solve their own problems uh. after 5:00 on Tuesday but there was a. secondary benefit which is that I did.

talk a lot about the importance of. balance that I didn't want this to be. all encompassing that there were other. aspects to what was important everyone's. lives and by modeling this I was walking. the walk I was showing that in fact. um you could run a company and have a. relationship and it wasn't easy this is. a startup so a lot of times you know i'. have date night we get back late and I'd. have to go back and into the office at.

10 o'clock or uh a lot of times I'd come. home have dinner with my kids go back. and work for a couple hours but I carved. out the time to be present and do those. things and in my life um it's maybe even. a bit more challenging a startups are. hard and I have a family but I also have. this passion for outdoor stuff you know. I love Backcountry skiing and climbing. and kaying and mountaineering all this. stuff that's really hard to do between.

your five o'clock call and your 7. o'clock meeting so I had a really. structure my life in a way that I could. have meaningful time in all three of. these areas of my life and it's been. really really hard was there a risk of. losing the relationship at some point. yeah probably when I was in the my right. that that point when I was 2930 where am. I I was becoming clear she was going I'm. not going to put up with this you know. if you're not going to be here for me.

what's the point how did you take that. at. first very sobering I mean it really. makes you think how important is this to. me um and I know some people might say. it's not that important my what my work. is the most important thing it's the. only thing that's important to me I. decided otherwise. that um that having a relationship was. important to me and more importantly. that I thought it was probably possible. that I could do.

both um again it's part of the running. not running for planes it's saying I. don't need to be there all the time I. can prioritize well I can. um uh distribute work to other people I. can make this work and not only that not. only can I do the work and have the. relationship with my wife and my family. I can get out and do outdoor stuff which. is what I need to make myself. whole and listen this is a great way for. me to wrap this in a way but you know.

I've had a amazing entrepreneurial. career as I you know I've had six seven. companies depending upon how you count. it I've had a three IPOs you know two. multi-billion dollar companies so proud. of that but um way more proud of the. fact that I managed to do all that while. staying married to the same woman while. having my kids grow up knowing me and as. best I can tell liking me um and still. getting out to Backcountry ski mountain.

bike uh and all the things that I need. to make me whole and that I'm proud of. in the grand scheme of your. happiness you've got your business. Endeavors you've got your fantastic. relationships with your wife and your. family what does matter more oh it's a. trick question I mean it's so I guess. I'll answer in the counterintuitive way. way you need all. three you know I I think had I said had. my wife said some ultimatum like I need. to quit and you know you were going to.

move to Montana and you're going to be a. mailman and and we'll have a great I. would have been unhappy and I mean I've. had a great relationship but she knows. that she knows I can't turn this off I. can't turn it off there's something. about seeing problems and wanting to fix. them and having to pick one and say. that's all I'm going to do that's no. life either um that's why I think you. know again before we started you said. what do you what's your big focus and I.

said. balance uh I think about it every day I. think about it every week they're all. important and I do what I have to do to. make that happen Mark we have a closing. tradition on the podcast where the last. guest leaves a question for the next. guest not knowing who they're leaving it. for and the question that was left for. you is what in your life were you most. wrong about and what did you learn from. it uh. so one of my big regrets is I mentioned. before that I had all this Magazine. subscription.

experience uh I knew circulation I knew. the subscription business and it took me. more than almost two years to figure out. that maybe we could use this stupid. thing for Netflix and I think of all the. time and all the money that we wasted. because I never even occurred to me to. try that and God I wish I could kick. myself and go back and say for God's. sake try this sooner try this sooner. hindsight's a wonderful thing it is. isn't it and it fills you with wonderful.

lessons and wisdom and all of that. wisdom has been encapsulated in this. wonderful book that will never work in. various ways as you go through the. Journey of founding Netflix but also the. life that's lived in amongst those pages. it's one of the most interesting. fascinating Timeless books I've read. because it's about true principles the. true principles from your father from. your journey and from everything you've. learned along the way so thank you so. much for writing such an incredible book. Mark um I'll link it down below it's. called that will never work the birth of. Netflix and the amazing life of an idea. and thank you so much for the work you. do for entrepreneurs across all your.

social channels across your your work. and your mentorship because it really is. um looking back down the ladder and. helping pull other people up with your. wisdom and that's an incredibly. incredibly generous thing for you to do. so thank you so much Mark thanks Stephen. [Music]. oh.

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