Hong (@quan) and Marc (@mbrandolph) talk about Marc's newest book, how to develop effective company culture, and share some stories about the early days of Netflix. Topics include: how an editor led him to write the right book (2:30), looking back at Netflix's humble beginnings (5:29), the origins of Netflix's famous culture (6:24), how wilderness survival training shaped the culture (9:44), crazy story of how they almost got bought by Amazon (16:09), what ultimately worked for Netflix (20:30), and Netflix's IPO (21:37). Watch on YouTube: https://youtu.be/iEwajxBUJ20
Hosted by Hong Quan (https://twitter.com/quan)
Produced by Van Nguyen (https://twitter.com/thegoleffect)
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- This whole point of the book was to
- Yeah
- show what it's really like, that it's not all Shark Tank and parties. It is possible to build something with some balance in your life
- It was this very out-of-body thing to be in the cab and going, "kinda I don't need to work again" "if I don't want to."
- Hi Folks, this is Hong from Fun DMC and I'm super excited about episode three we have a huge guest today. I have thus Mark Randolph, the co-founder and CEO of Netflix, founding CEO of Netflix. Mark thank you very much for coming on.
- Oh I'm psyched, it's been a long time coming.
- Yeah I read the book recently, it's great. I think it reminds me of Phil Knight's memoir "Shoe Dog" And a lot of people read business books, like I've got all the commerce books on my beside table. But it's not really a business book, it's a memoir. It's a very personal story. I binge read it, if you will.
- Yeah.
- Which is appropriate I guess if it's a book about Netflix. No, you know that's stuff you're saying is on purpose. You know, there is way too many business books.
- Mm hmm. And originally, I was writing a self-help book. So, when I left Netflix, I spent 15 years working with early stage entrepreneurs and other people who weren't even entrepreneurs but college students who all had these ideas they wanted to try.
- Mm hmm.
- And the insight was that all the stuff that I had learned in forty years as an entrepreneur is the exact same stuff that anybody could use. Anybody who has an idea.
- Yeah.
- 'Cause a lot of these ideas aren't like "I'm gonna start a company" A lot of them start "I would love to live in "downtown, in a nice neighborhood in San Francisco "how can I figure that out?" "I'd love to get that job, I'd love to." People have things they wanna do.
- Right.
- And they get blocked.
- Just like in schools.
- Yeah, and I kinda realized, the exact same startup methodology that I use for starting companies, anybody could use. But how was it even an idea to write a self-helpy book?
- Yeah. And, with the proposal solicited, sent it off to all the publishers,
- Yeah.
- and a bunch of them were bidding for it. And this one editor, eventually is my editor, said, "Listen, I wanna do this book, but I "don't wanna do the book you're proposing. "I have a different idea."
- Huh!
- And he goes, "It'd be so much better if "it wasn't a 'you' book, 'you' should do this, 'you' should do that."
- Right.
- "Make it a 'me' book." In other words, "I do this," make it a memoir.
- Yeah.
- He goes, "Make the lessons not explicit,
- "make it implicit."
- Mm hmm, right.
- So, that was the idea was to make this a story about what really goes on in a start up
- Yeah.
- And we were talking about it a few minutes ago, it's so over glorified.
- Yeah.
- It's the cult of the entrepreneur, the CEO, who in a moment of inspiration has the whole idea come clear and laid out in front of them and that it's just a matter of doing pitch meetings and going to parties, and getting on Shark Tank.
- Yeah.
- And I'm going "No, it's not, "it's twenty years of grinding away, "disappointment, and fun, and challenge, "and excitement and puzzles." And I wanted people to see that. And the other part, which is the fact that you've got to keep your marriage together, you've got to know your kids, you've got to keep yourself healthy, you've got to recognize these other people who all have lives.
- Yeah.
- So anyway, I'm getting ahead of myself.
- I definitely wanna talk about that
- That's exactly what I was trying to create which is a long way of saying, "I don't view it as a business book, "I view it as a memoir."
- It's great, I mean I think it's much more approachable, it tells the early days which is, for a founder, those are the days we all look back on fondly, even though it's super painful and lots of problems. But nobody, like it's one of the biggest things for me, working early stage, or starting a company, versus working in a big company. You just don't have that same like, I don't know, the same feeling I guess. It's pretty good core.
- Yeah, that's what it is. And I tried to capture that too.
- I think it's also interesting cause it's not necessarily a book about you, cause you bring a lot of other players into this and I think that's really important 'cause we do have this cult of founder, or Jesus founder, that one person who can solve problems and walk on water, but the reality is you pulled a team together.
- And you need to.
- Yeah.
- And the ideas, everyone thinks it's just one idea, but it's not, it's this huge mixture. You know, one person has background in this, one person has this, one person had this problem, experienced this. It's all those pieces together, that end up solving the problem.
- Yeah.
- In fact, I think having single person doing it is the wrong way to do it. They can't. It's difficult.
- Yeah, sorry to all you sole founders out there. And honestly with Netflix now, huge, huge company, one of the few companies I think have impacted the culture of not just the US but of the world.
- Yeah.
- How did that feel? You were the guy, you came up with this thing!
- It was a carpool! It's crazy, it's like out-of-body, because when you start something, you are not ever envisioning this.
- Yeah.
- At least I wasn't. I'm mean I'm thinking about for the first six months, "how do we launch this thing?"
- Right.
- And we wanna launch just a rudimentary website you're not thinking, "okay, how am I gonna get "begin thinking about Hollywood, and about producing our own movies, and expanding into Ethiopia." You know, if you did, you'd never start, 'cause you'd go "there's no way we could do that." You go, "I'm just gonna go over the first hill,"
- Yeah
- and then we'll look around and see where we are and see where we go next.
- Yeah, that was interesting 'cause one of the questions I had was kinda a company culture and Netfix culture Patty McCord's famous in the HR recruiting world. But, you purposely kept the company in Stanfords in the early days, right?
- Tried to!
- Instead of going over the hill.
- Right.
- And that drive outta, as locals know, it's a kind of treacherous drive in bad weather but it's also just a terrible slog in traffic. So why Santa Cruz versus Sunnyvale?
- There's a couple of reasons and selfishly, cause I lived in Santa Cruz and if you're in the valley you understand, but if you're somewhere else, you have to realize that the jobs are all here in the valley, and that people don't wanna live in the valley wanna live over in the mountains or at the beach or in the woods, where I did. Have this fantasy about wouldn't it be great if I didn't need to start every day with an hour-and-fifteen minutes in traffic and end every day the same way.
- Yeah.
- And so when I had the opportunity to start another company, I said "I'm gonna do it here."
- Right.
- So there was this selfish thing. At the same time, I really wanted the personal life-flexibility that comes from having your work in the same place you live.
- Even early on?
- Especially early on.
- Huh!
- Because I knew that I'd be working like a dog and by living there I was able to, which I did, go home at six o'clock, seven o'clock. Which is early.
- Yeah.
- But I'd be able to be there and have dinner with my family, I'd put the kids to bed and then I could go back to the office.
- Wow.
- On the weekend, I could just bike over and spend half a day there.
- Yeah.
- It was the sense of being connected and if I could get up in the morning early on a Sunday, go to the office, and then if my wife calls up and goes "Hey the kids just got up, we're all gonna go." I go, "Great! I'll be home in five minutes."
- Yeah.
- And there's something to be said for that connection.
- I think it's huge, I do that with my kids, I didn't know too many people that do that so I say I work two shifts. So I do the the nine to six, and then I'll be home, I have dinner with my kids every night, and then when they go to bed at night, I start my second shift and work from like nine to two in the morning.
- Yeah.
- I don't know a lot of people that do that.
- They should!
- I agree! That's again part of what you want to illustrate. 'Cause there is again, trying to feed this myth that the successful founders are the one who is married to their job and that's all they think about and all they do.
- Me I just finished reading "Super Pumped" I mean that's pathetic,
- Yeah.
- In my opinion.
- Huh!
- For a bunch of reasons, but I mean, even earlier on this whole issue of, he used to work all the time, all the time.
- Mm hmm.
- And I kinda wanted to demonstrate that it is possible to build something with some balance in our life.
- Mm hmm.
- Yeah, let's talk about the Netflix culture, freedom, responsibility, is a big one, I think radical honesty. Everyone talks about radical candor nowadays, but it feels like it's a spinnof of radical honesty. The acronym that I came up with is freedom and responsibility is FAR. Does it come a lot from your championships? When you were younger?
- Not explicitly. I mean certainly I internalized it, from all the time that I spent in that matter. And sure, I should explain I guess.
- Yeah.
- But, you know when you're out in the woods or in the mountains especially, there's huge degrees of uncertainty and visibility. I mean the very nature of risk is not necessarily the scary dangers, but it's the risk that I don't know what's around the corner,
- Right.
- And I'm gonna find out not by sitting back and trying to figure how to see it, I'm just gonna walk the trail and see what I see.
- Mm hmm.
- And so when you're with a group, you have to be prepared, okay, there's a river, or you knew there was a river, but oh my Gosh it's in flood stage.
- You have to then improvise.
- Right.
- And so a lot of the times you count with something you'll give people independent responsibilities, and they'll say "I'll leave you there two weeks "on the top of that peak "and I want you to have all these things done."
- Mm hmm.
- And the person who has the responsibility of chairing all the gear, they've gotta make decisions on what is required, they can't cross the river easily. But people who have this different objective, they can go fast. So everyone basically solves the problem on their own.
- Mm hmm.
- That's the freedom part. But the responsibility is expected to be there.
- Right.
- And that happens all the times in the mountains. But I became used to that style of leadership and that style of group working.
- Mm hmm.
- And the cool thing is when you've got a startup, as you know, is that it's always like that.
- Yeah.
- There aren't enough people. You have ten people to do the work of a hundred. So there is not time to say, "Okay, what I want you to do is today do "this and this, and if it doesn't work "then you change to this and then in three days." No, you just go "You see that peak? "I'll meet you there in three weeks."
- Yeah.
- "And you better have the stuff." And more times than not, you'll show up on top of the peak and be bruised and bloodied, but you'll be on time, and open the bag, and all the shit's in there.
- Yeah.
- And I don't need to worry about you going "Oh the river was in flood stage, I didn't." You figured it out!
- Right.
- That's the freedom. And the responsibility is there. And all startups have that. But what happens is when they get bigger, so you go from ten to a hundred people, you make mistakes in hiring. And now someone shows up late, and you go, "Ooh, you can't let this happen. "Everybody, can we check in once a week? "Give me a status report." And then one person shows up and he goes, "Ah I had to spend all this extra money," And you go "Ooh, can't have that, "Everybody, I want approvals for any expenses "over a hundred dollars." And, what you've done is built these guard rails around the one person who doesn't have judgment.
- Right.
- And end up frustrating your ninety nine.
- Yeah.
- So the big Netflix experiment was "Is it possible to have freedom and responsibility? "like we had when we were ten people?
- Mm hmm.
- Where we have not just a hundred but a thousand Or, like now it's seven thousand.
- Yeah.
- And that's really hard. And the nature of it is that you have to hire well, more importantly, you can't hire well. You have to cut, efficiently,
- Yeah.
- 'cause not everyone's judgment can play on that. But they said "We're gonna build a company "that doesn't protect us against people without "good judgment, we're gonna build a company "for people with good judgment."
- Mm hmm.
- And you mention, I can't remember whether it was part of this or not a part, about how hard it is to recruit someone away from Netflix.
- Yeah.
- It's because we realized that the most important component in why someone wants to work someplace, is being treated like an adult.
- Mm hmm
- That the worst thing you can do is say, "You've got a fifteen million dollar a night, "but I don't trust you to make a decision "about what class of car reg you can do."
- Right.
- Or, you can't seem to decide when it's appropriate to fly to Japan on business class if you got a meeting in the morning, or whether you can go coach because your meeting is in three days.
- Right.
- I mean, that's what Netflix has done so well. Is build this culture for people with great judgment. And surprise, surprise, people love that.
- Yeah, I'm not surprised but the judgment thing comes from that you trusted them to do the right thing because to those people it's their company too.
- Absolutely!
- Yeah, so course they're gonna do the right thing.
- You know at Netflix, there's no travel policy, no expense policy, there's no litigation policy, all you see is use your best judgment.
- Right.
- Because, treat the money like it was your own.
- Yeah.
- Treat the company like it's your own.
- We should really shout out to Patty McCord because a lot of the stuff that she put in place is now standard. But back then it was really, kind of like, off-the-wall, "this is crazy!"
- I remember my first job, I had a unlimited vacation policy, I was like "That's crazy! Why are you doing this?"
- Well, we were lucky because the thing is, the things I described happening to you from ten to a hundred notch, happened to me.
- Mm hmm.
- And I let it slip. And what got us back on track is we had to do a leg off. After the dot com collapse, going through the valley of death's there, we had to lay off forty percent of the company.
- Yeah.
- And it got us back. Didn't even realize it until after the fact, back to that feeling of there's not enough people,
- Mm hmm.
- Everyone's empowered, everyone has the freedom to solve this problem as you need to the responsibility to get it done. And we went, "Wow, this feels great."
- Yeah.
- And that's when we said we can't ever lose this feeling. And that's when Patty McCord began taking it even further.
- Mm hmm.
- Like, what else are we doing which is getting in the way of someone feeling like an adult?
- Right.
- And that's what she does. Let's get rid of this!
- Yeah.
- And the lawyers, and the HR, "No!" She goes "Okay, let's just try it, "and if it doesn't work we'll put it back."
- Yeah.
- And it works.
- Yeah, so that idea of experimentation is still alive and well.
- Absolutely!
- But earlier, you actually had a meeting with Amazon.
- Mm hmm, yeah.
- Tell me about that.
- So this was early, this was probably two months after we launched. Before we raised our first venture amount.
- Mm hmm.
- So we were still running on our friends and family.
- Okay.
- And we got the call Got the call from Joy Covey who was the CFO of Amazon at the time.
- Yeah.
- And the call was basically, "Hey, Jeff "would love to meet you guys, "you come on up to Seattle." We're going like, "Yeah!" And for two reasons, 1) Jeff Bezos was like not even a God then, he was like this guy who was almost single-handedly inventing e-commerce at the time.
- Yes.
- I mean the company had gone public! It was like the most unbelievable success story.
- It went public really fast too.
- It went fast coz revenues ramped up like crazily quickly. But he was only dealing in books, but he had had this hubris to say it wasn't just a book store, it was goin to be an everything store.
- Yeah.
- And it was pretty obvious the next category would be music and video. Package, good commodity, entertainment. So, we go "Wow, he wants to buy us!" Which was unbelievable 'cause the book is called "That Will Never Work" because that is what every single person told me.
- Yes, hundreds of people told Jeff too.
- Yeah, of course! And to have Jeff Bezos, the pioneer of e-commerce, want to buy us was incredibly validating. His opinion counted more than what a hundred people would say.
- Yeah.
- And so, we fly up. But it was a really jarring experience because we were navigating by printed-out map quests I don't know if you remember, this was before before we had cell phones, before gps. We're printed out and we're in this neighborhood, and people are shooting up in a doorway and the windows are broken, there's garbage. And I'm going, "This is where the pioneer "of e-commerce has their headquarters?" And then we get up and it's a dusty, storefront window, we're looking in, and we're going upstairs, and there's boxes piled on the stairs, and pizza boxes. And finding the receptionist, and you go in and people are squeezed under the stairs. And all the desks are made of doors. They're made of old, recycled doors where they take the doorknob out and patch it with a plug of wood and put em on four legs. And he and I are looking around, "Can you believe this place?" And then we met Jeff, and I so remember it because I remember him and I were sharing these startup stories and I could almost see his whole being. His whole face changes.
- Right.
- And I think he was reliving this feeling, now it's a big company, a public company, then he was like starting up. 'Cause both of us had the ring of a bell to ring when an order came in.
- Right.
- We were sharing that. But anyway, it was great and eventually we had a great meeting, and on the way out, Joy walks us out and she goes, "Listen, this could be interesting, but "I've gotta set expectations, this is probably "gonna be maybe a low eight figure."
- That's all?
- Yeah, and that basically, you know, a low eight figure means barely eight figures, which means probably ten.
- Ten to twelve.
- Yeah, so we said, "Okay, maybe its fifteen million bucks."
- Right
- And I owned a third of the company then so that was pretty good for a year, but it was this perfect time where we'd figured out what he thought.
- Mm hmm
- All the hard things, we'd built this website. We'd gotten a single copy of every single DVD available. I'd gotten these deals with the consumer electronics companies. We had the money, we'd launched, and we hadn't yet realized how shitty the idea was. So at this time we go "We're not ready to "hand the keys to Jeff Bezos just yet."
- So that's good 'cause you believed that your company was more valuable. Or had very clear paths to much more value.
- We wanted to see where this went.
- But what ultimately, the thing that ultimately won was the no due dates, no late fees.
- Yeah.
- And that was nothing like anything anyone had ever seen in video rental before. What kind of video rental store lets you take a movie and keep it for as long as you want it? And not only that, doesn't charge you every time you exchange, but as subscription.
- Yeah.
- So we turned this whole thing upside down on its head. But it wasn't like I woke up one morning and went "No due dates, no late fees, subscription."
- Yeah.
- I certainly didn't do it back in 1997, it took two years of trial and error and experimentation.
- Mm hmm.
- And that was just one thing we tried which was as likely to work as anything else was.
- Mm hmm.
- So that's why I think what's beautiful now is that people have an idea, at least a web idea, an internet idea, you can figure out some clever way to try that doesn't involve actually building it or doing it.
- Right.
- And that's what's great about it. You find out so quickly.
- It's very cheap to test these things.
- Exactly.
- But, that kills the moment for you, with your son's on the plane with you.
- You know, it's somewhat anti-climactic in a way because you know that image of like, and there's people ringing the bell, and everyone cheering, well that's the New York stock exchange . So Nasdaq takes place in some computer server someplace, the actual opening.
- Yeah.
- But we did it on trading floor of the Merril Lynch, she was underwriting our shop. And so we were there watching them match trades, match prices, which is about as exciting as watching the inside of a server.
- I did that job .
- Yeah .
- It was because I was a market maker.
- Yeah, there you go.
- It's not exciting at all.
- And worse, I was there in New York on the trading floor and I had my ten-year-old son with me, Logan. And I was feeding a play by plan announcing to the people back in Wisconsin who'd gathered at six am, six-thirty in the morning, to hear us go public. But it was pretty cool because it happened, and then Logan and I were free for the day before we flew back to California. But I remember, I was in the taxi, and I was taking him to get a slice of french bread. He'd been hearing me mention about how bad California pizza was for eighteen months. I had to get him a slice of New York pizza. And somehow that was the perfect thing to do when all of a sudden I was pretty wealthy. It was almost immediately. But it was this very out-of-body thing, to be in the cab, and kinda going, "I don't need to work again if I don't want to."
- It's amazing.
- But I'm doing this 'cause I wanna do it.
- Yeah.
- And then rather than going out to a fancy steak dinner, he and I went and got greasy pizza on paper plates, and I can think of nothing better.
- That's such a such a great story. One day I'll take my kid to the trading floor.
- Good, I hope you do.
- Yeah.
- That's awesome.
- Great, thank you very much Marc for making the time for this.
- This was really fun I'm glad we got a chance to do it.
- Yeah, definitely pick up the book, it's definitely gonna be a best seller and I think it's one of the best startup story books out there. If you love this stuff like we do, go get it!
- See I think your next series has gotta be like a version of comedians and crisis in coffee.
- Yes!
- 'cause that's these entrepreneurs on bikes.
- That's what I'm saying
- That's what I originally pitched,
- When the two of us go, "I have to get this and it's too hard to do it "with the cameras and the sounds."
- That definitely cool.
- All right.
- You got some photos with you?
- Yeah.
- That was really good.
- That was a great podcast so, I hope hope it works for you.