Young and Profiting with Hala Taha - Marc Randolph: How Netflix Disrupted The Entertainment Industry | E116

Episode Date: May 31, 2021

Ever wonder how Netflix became the giant it is today?   In this episode, we are chatting with Marc Randolph, co-founder and first CEO of Netflix. Marc is a veteran Silicon Valley entrepreneur, advisor, and investor. As founding CEO of Netflix, he laid much of the groundwork for a service that’s grown to 150 million subscribers and fundamentally altered how the world experiences media.   Marc’s career as an entrepreneur spans four decades. He’s founded or co-founded six other successful startups, mentored hundreds of early-stage entrepreneurs, and as an investor has helped seed dozens of successful tech ventures. Most recently, he co-founded analytics software company Looker Data Sciences, where he now serves as director. Outside of the tech and startup world, Marc sits on numerous other company boards and is an outdoors enthusiast.   In this episode, we discuss how Marc started his career, his wilderness experiences that shaped his leadership style, and the importance of experimentation. We’ll also talk about why there’s no such thing as a ‘perfect’ idea, how Netflix rose to dominance, and Marc’s perspective on the importance of culture.  Sponsored by -    Restream. Sign up and stream live on Restream - https://restream.grsm.io/yap    Olay Body. Fearless In My Skin.   Social Media:    Follow YAP on IG: www.instagram.com/youngandprofiting Reach out to Hala directly at [e-mail] Follow Hala on Linkedin: www.linkedin.com/in/htaha/ Follow Hala on Instagram: www.instagram.com/yapwithhala Follow Hala on ClubHouse: @halataha Check out our website to meet the team, view show notes and transcripts: www.youngandprofiting.com   Timestamps:   00:51 - Marc’s Childhood  03:51 - How a Wilderness Organization Shaped Marc 8:25 - Marc’s Advice for Recent Graduates and The Beginnings of His Career 14:35 - The Importance of Experimentation  17: 25 - Why There’s No “Perfect” Idea 20:58 - Marc’s Experience with Panhandling  28:46 - Netflix’s Pitch To Blockbuster and What Went Wrong  34:08 - How Blockbuster Was Disruptable and How Netflix Won 38:38 - The Hardest Situation in Marc’s Career 41:40 - Why Marc Doesn’t Like Performance Plans 44:12 - How Netflix’s Culture Developed 52:34 - Marc’s Secret to Profiting in Life   Mentioned in the Episode:   Marc’s Website: https://marcrandolph.com/ Marc’s Podcast: https://marcrandolph.com/podcasts/ Marc’s Book, That Will Never Work: https://marcrandolph.com/the-book/ Learn more about your ad choices. Visit megaphone.fm/adchoices

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Ole Body, Fear fearless in my skin. You're listening to YAP, Young and Profiting Podcast, a place where you can listen, learn and profit. Welcome to the show. I'm your host, Halataha, and on Young and Profiting Podcast, we investigate a new topic each week and interview some of the brightest minds in the world. My goal is to turn their wisdom into actionable advice that you can use in your everyday life,

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If you're smart and like to continually improve yourself, hit the subscribe button because you'll love it here at Young & Profiting Podcast. This week on YAP, we're chatting with Mark Randolph, a veteran Silicon Valley entrepreneur investor and advisor. He is a co-founder and first CEO of Netflix and before retiring from the company in 2003, he served on the company's Board of Directors. Mark's career as an entrepreneur spans four decades. He founded or co-founded six other successful startups, mentored hundreds of early-stage entrepreneurs, and as an investor has helped see dozens of successful tech ventures. Mark sits on numerous company boards and is an outdoor enthusiast.

Mark's best-selling book that will never work, the birth of Netflix and the amazing life of an idea, was released in 2019 and he recently just launched a podcast that will never work earlier this year. In this episode, we discuss how Mark's early career experiences gave him the foundation he needed to start Netflix later on. We also talk about his wilderness experiences that shaped his leadership style and the importance of experimentation. We'll then go into why there's no such thing as a perfect idea, how Netflix rose to dominance, and Mark's perspective on the importance of company culture.

Welcome to the show, Mark. Thanks, Hala. It is a pleasure to be with you, and thanks for having me. Of course, so I can't wait to dive in to everything you have to share with us today. But first, I want to start way, way back in the beginning, in your childhood. I know that you grew up in New York. I think you were the oldest son in your family. Not necessarily humble beginnings, but not like now, you know. And so I would love to hear what it was like for you growing up and how you gain that entrepreneurial spirit that you have.

Well, since you kind of brought it up, I'm not sure I'd call it humble beginnings. You know, I think one of the things I've certainly recognized over the last bunch of years is how much privilege I've had. And in terms, I grew up in an upper middle class or maybe even a wealthy community. You know, I went to a great school. I had a lot of breaks, but certainly you're great. It wasn't not like it is now. Now things are a little bit easier for me.

But in terms of realizing whether you're going to be an entrepreneur or not, that's not something that would have happened back then. This was back in the early 60s. And being an entrepreneur wasn't really a thing. There certainly were entrepreneurs, but no one used the word. It wasn't glorified. You didn't really read about it.

And so, and I'm going to say fortunately, which meant that I did it for what I'm going to consider the right reasons. I was never doing these things because I thought, one of these days, I'm going to be wealthy or famous or any of that stuff. It was more of a compulsion. Even at the very beginning, I must have been six or seven years old and I got this job selling seeds for a vegetable garden or flowers. It basically meant going door to door and knocking on the door and trying to sell them seed packets. And it was pretty close to being some kind of child labor law being violated because if you sold 100,000 packets, you'd earn a whistle or a cheap stopwatch or something.

But nevertheless, I'd imagine that most people, especially young kids, go up and knock and get the door slammed in their face and go back to watching cartoons, but it triggered something in me because I said, I'm going to figure this out. I'm going to figure out what can I say to get them to open the door and keep the door open. And then once I've got the door open, what can I say to actually get them to buy my seeds? And wow, I can get them to buy a pack. How are we getting to buy three packs or five packs? It was the beginning of kind of that problem solving that seeing obstacles not as something to get frustrated about, but as an obstacle to be overcome. I was going to figure it out. And fundamentally, that is what I spent pretty much the rest

of my life doing is bumping into things and rather than saying, oh my gosh, that is what I spent pretty much the rest of my life doing is bumping into things and rather than saying, oh my gosh, that's so frustrating, I would say, there's got to be a way to do this better. Yeah, so I love that. So from early on, six years old, you were already knocking on doors, experimenting, seeing what works, what doesn't work, understanding human psychology, most likely when it comes to sales and things like that, super interesting. I know another pivotal piece of your childhood was participating in a wilderness organization. I would love for you to tell us about that

and some of the experiences that you had and how it taught you about leadership because it's really funny to think that somebody who invented the biggest tech giant in the world or one of them actually is really, you know, an environmental advocate and really into the wilderness. It's very unique. Yeah, that's really been something that's been part of my life ever since again. I was very, very young. You know, my parents would always take me camping. But it was more, I think, I grew up in this household that encouraged risk-taking. I remember one time, for example, I wanted to learn how to repel,

which is that process where you slide backwards down a rope. You see it in the movies or people coming out of helicopters. And I go, I want to learn how to do that. And I got a book and I went to my dad and said, I want to try this repelling thing out of the tree in the backyard. And I think most parents would have said, you know, you're out of your mind, you're gonna break your arm or something.

And my dad just said, come on, score the garage, I have a rope. So I'm saying that to go, I was always into the outdoors. But perhaps the biggest break was that, when I was maybe 13 or 14, my parents packed me off to Wyoming to attend this organization called

the National Outdoor Leadership School. A big name, but basically what they would do is take groups of people, maybe 12 or 13 young people, and drop us off at a trailhead in the mountains and come back and pick us up a month later. So these long, month-long expeditions in the mountains. But what they would do is almost immediately break you into small groups of four or five and say, okay, Mark, you're a leader of the day for your group.

And one of the instructors, of course, would follow behind silently, but almost immediately you were plunged into, all right, I've got to figure out where we're gonna go. I've got to figure out how long we're gonna hike before we take a break. I've got to figure out how long our breaks are gonna be. I've got to figure out what we're going to go. I've got to figure out how long we're going to hike before we take a break. I've got to figure out how long our breaks are going to be. I've got to figure out what to do if someone says, my feet are hurting or I'm tired or

I'm hungry. And three or four hours later, you get to camp or six or eight hours later, you get to camp. And the instructor would kind of debrief you on how you did. But the thing that was happening is you are being forced to make decisions about things which you really weren't entirely confident about. You are forced to communicate these decisions to your group with clarity and confidence, even if you weren't perhaps clear or confident about them. You are made decisions about the strength of your group, their capabilities. And I was

doing this when I was 13 or 14 years old. I was making decisions with real consequences and finding out the results of those leadership decisions just a few hours later. And then after everyone else in the group had their day, maybe four or five days later, I'd do it again. And I came back and did that another summer, and then another summer after that, and then I began working for the school. And I'm still associated with them. But the point is, I learned leadership

not by reading about it in a book or taking a principles of leadership course someplace. I learned leadership by doing it. And I've come to so firmly believe that if people have these aspirations to lead, and I don't mean being an entrepreneur, leadership takes place in any form, whether that's in business, where you're leading a group, or you're leading an apartment, or whether you're leading a nonprofit, or whether you're just doing things with your friends, the way you get to be a better leader is by starting and by practicing and doing it in low-consequence circumstances,

which I had the opportunity to do. And that meant that after some or after some or of increasingly complicated leadership circumstances, but the time I did it for real in a business scenario, I'd already been doing it for years and years and years. It's really interesting. And I love that you say, you learned by doing, you didn't get this fancy degree. I mean, I looked up like what you studied.

It was geology, right? And I don't even think you've got an MBA. And look, you found it like one of the biggest companies in the world, and you learned from hands on experience. And I always talk about this on my podcast, get as much experience as you can because that's how you learn in skill stack and put it all together so that one day you can come up with a brilliant idea. So I'd love to, since we brought it up and you know, you went to school for geology, how

the heck did you get your first job? Because that must have been really tough to kind of enter the job market and try to land a job with that kind of a degree in business. Well, certainly it would have been easy to land a job in geology. But that was the last thing on my mind. I never majored in geology because I had any aspirations of being a petroleum geologist. I did it because I thought it was interesting, and I saw that all the other geology majors were all coming back from field trips in the mountains.

And I said, wow, that's your beats hanging out in the library. So geology was for me, but I had no intention. It was purely an curiosity. And I will talk about getting that first job, but pardon me, I have to segue for a second and say the lesson I would take away from this is for people who are young, right young, who are still in school, or have just graduated, relax. Yes, I accomplished these things in business

which were pretty significant, but I didn't know what I wanted to do when I graduated. I didn't know what I wanted to do for years graduated. I didn't know what I wanted to do for years after that. I had this incredible string of unrelated experiences that I was pursuing because they were interesting to me. And it's amazing where that lives. So listen, if you grew up when you were seven years old and you said, I want to be a veterinarian

and that stuck with you for your whole life, well, you're lucky. Congratulations, you found your passion early. But if you're lucky. Congratulations. You found your passion early. But if you're still going, I don't know what I want to do, don't worry about it. It'll come to you. And it came to me. But the quick answer to that is that I did a lot of crazy things.

My first job out of college, I managed a ski shop of an in Memphis, Tennessee of all places. And then a few months later, when the person won the ski shop, bought another property, I went out and managed a ghost town, bar, restaurant, and saloon, and guest cabins in the mountains in Colorado. And I did that, and then I came back to New York,

and I was probably the worst realtor in the history of New York State. And then probably the job which did actually lead to something commercially interesting was I got a job as, I guess now it has a glorified title now they call it chief of staff, but fundamentally it means you're a gofer. And what I was, I was the gofer for the CEO

of a music publishing company. And I basically, my job was to follow him around all day with a pad and sit in meetings with him. And if he said, okay, so I need those numbers by Wednesday. I didn't make sure they get lower than the numbers by Wednesday. Or if he committed, I'll make sure that I'd follow through on those things. But the value was, I got a chance that I'd follow through on those things. But the value was, I got a chance to firsthand see what a CEO of business does, how they deal

with problems, how they prioritize their day, how they deal with people who work for them with customers, with clients. But the amazing breakthrough for me is that this was a music publishing with a lot of different divisions. And what is a music publishing with a lot of different divisions. And what I say, music publishing, this is a company which did sheet music. So, for example, if you wanted to go, I want to buy Led Zeppelin for harmonica, you'd buy the sheet music from them. And one of their divisions was a mail order division, which is also kind of this overstating what it really

was, because basically every music book had this little line in the back that said, for a list of more great cherry-length songbooks, send in a self-addressed stamp down below to someone so. And I saw that, and for some ridiculous unexplained reason, thought that was fascinating, I told my boss, I want that job. I want to run the mail- letter division. And he goes, if this sucker is willing to do that, he's welcome to it. And I, my job was I'd take those self-addressed envelopes and make a Xerox copy of the list of more great charling songbooks and mail it out. And when the order came in, I would go to the warehouse and I'd pick and pack and ship the order. And I love that job because I began experimenting.

I began doing, well, I do four pages of lists of great trailing songbooks. I began doing little brochures, I experimented with different envelopes with catalogs. I began doing outbound mailing the list. I figured I'd had to build mail order fulfillment software. I mean, I taught myself basically direct response marketing. And this is the point. And I was, you know, in my mid-twenties, 25, 26, 27 then, when I finally discovered what I loved, which was direct response marketing, this blend of data and creativity. And that became the passion.

And in some ways, built, my first startup was building this mail-order company into something. And then when someone offered a job helping to start a magazine, I said, I'm part of the founding team of the magazine. And we sold the magazine. And then I got to be a founding, the founding person for a mail at our company. So all these things lead in directions you really never expect. There's a long answer to a short question. Sorry about that. I mean, it was amazing. I mean, I want the audience to understand your background and how

everything led up to meeting, read, hasting, starting Netflix. And obviously this mail order business taught you something that you then took to Netflix later on. So I heard you talking about experiments that you guys would do at Netflix and how you never really knew if an experiment would work or not. The ones that you thought would be really good ended up usually failing, right?

So is there any overarching rules that you learned in the mail order business? Like this definitely works, and maybe even still stands today. Like, are there any rules to this, or is it always like you need to just experiment, and then you're going to figure out what works, what does, and you can never really assume anything is going to work, or did you learn anything concrete that works all the time? No, of course not. Yeah, the things that you know work all the time, everyone else is already doing. So what fun is that? The fun thing is what you like about direct response

is that you're always experimenting. Experimenting is one of the wonderful things about direct marketing. And direct marketing is basically doing sales where you're designed to get a direct response back. And what's beautiful about that is it's measurable that you could say, I wonder if a blue envelope works better than a red envelope? Well, you could spend 50 hours arguing with your friends or whether the blue envelope is going to work better

than the red envelope. But with direct response, you just mail out a thousand with a blue envelope and a thousand with a red envelope and But with direct response, you just mail out a thousand with a blue envelope and a thousand with a red envelope and you see which one gets more orders. And two or three weeks later, you know to the seventh or eighth decimal point that blue beats red for reasons that who knows, but it does. But that scientific approach doesn't tell you anything about what should I try next. In fact, I didn't even tell you whether to do blue or red or what of the other 17,000 possible colors. So you've got to be able to have this creativity

of what might work. What should I try? Coupled with this willingness to suspend belief, no matter how you're always being surprised, no matter how confident you are,'s gonna work things go a different direction So I think if I learned anything it's really that nobody knows anything that no matter how much Arguing goes into is this one gonna work is this better as that better? No one knows but luckily if you have set things up properly

You'll find out after the fact exactly which one worked better. And once you realize that, how democratizing that process is, that no one's opinion is any better than anybody else's, that you can't tell in advance, it leads you to some very, very basic and important principles about starting companies or trying anything new, which is you don't know anything until you start. And the more time you spend thinking about it, studying the problem, consulting with people, writing a business plan, you're just wasting time because you're really not gonna learn

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This is possibility powered by Shopify. 100% just taking action, getting started, not procrastinating. Totally agree. And I know you always say that there's no such thing as a good idea, right, or a perfect idea. Can you give some color in terms of what you mean by that? Yeah, and listen, anybody who's sat in a conference room has had that experience where we're going to do some brainstorming today, everybody. And so I want to start off with the most important principle, which is there's no such thing

as a bad idea. And I call bullshit on that. There is absolutely such a thing as a bad idea. In fact, I will go out in the limon and say there's no a thing as a bad idea. In fact, I will go out in the limon and say, there's no such thing as a good idea. There's no such thing as someone having an idea which is absolutely going to work as promised. You always, always, always get surprised. And you have to realize that every single idea you come up with is going to have some kind of flaw. They are all bad. But that's okay because our job as innovators or people who are going to try something is not to come up with

the foolproof idea. Our job is to figure out why our ideas are bad idea. Because what happens when you take that idea, that bad idea, you know in advance it's not going to work and you figure out a quick and cheap and easy way to try it. That's when the learning begins because the results will always, always, always surprise you. But there's almost always a glimmer of something and you go, oh, that's interesting. Let's try this next. Let's try this next.

And not only is that the only way to make progress, it turns out at least for me, that's the wonderful fun thing about being an entrepreneur or a puppy about someone who's starting anything new is you're on this journey of discovery and it is like entering this entirely new part of the world you've ever seen before. You're learning something with every step. It is so energizing. And I had used to have to comment for just a second on what the reverse is. That if you get stuck up in this idea of we're looking for a good idea, then you do the worst of all possible things, which is you wait.

You go, let's see. Let's see if I can, I want more confidence. This is going to work. And I get it. I promise. I understand why that comes from because nobody wants to do something that isn't going to work. No one wants to look foolish or bad. No one wants to fail. And so we study the problem. We're afraid to start down the path because we can't see around the corner. But if you are always waiting trying to get a better look, and if I could only tell, I guarantee you, someone will be there before you. Or even worse, you'll never start. Or worst of all, you'll take that simple idea and let it live and grow in your head. We're, of course, it's safe and wonderful and beautiful and has a million users and just imagine how amazing

this will be when everyone in the world is using my idea. Well, a to break it to you. Yeah, 100%. I always say that do it messy. Don't worry about it. Don't be a perfectionist. Just go for it. Even if there's typos and mistakes, as long as you get it to market and test it and see what works, you can keep pivoting and pivoting until you find something that actually works. So I completely agree there. There's one story that I really, really want you to tell my listeners and I think it's so funny. You are actually panhandling in Connecticut and urban Connecticut.

When you were 21 years old, you were begging for money, you know, as an assignment, not that you had to, but I'm sure he taught you a lot of lessons. And I'd love to hear that story. If you could take us back to when you were 21 years old, begging for money and learning this big life lesson. Yeah, and you're correct. This was not because I was homeless and living on the street or something like that.

And it's kind of an offshoot of those, that national outdoor leadership school experience I had. So eventually I began working for them in the summer. And I'd spent two months a year in the mountains of Wyoming working with largely privileged kids taking them out in the woods. But then one month a year I wanted to do something a little differently. And I worked for a school in Connecticut called the wilderness school, which took disadvantaged kids, or I guess the official term, they were adjudicated youth. And you were really trying to put them

in uncomfortable circumstances, which since most of them had barely stepped off a sidewalk, taping them into the mountains and having them canoe rivers and carry a backpack and sleep in the ground and repel off cliffs, made them very, very uncomfortable. And our job was to try and translate that to say, you know, listen, you were so sure you couldn't do this.

But what a surprise, you did it. Now how does that apply to other things in your life where you said, I can't do this. And to make us more effective leaders in that circumstance, they wanted us to experience a little bit of what they were going through. They wanted to put us in uncomfortable circumstances. And of course, they couldn't do that in the woods. That was second nature to all of us. So what they did was do this urban immersion, which eventually led to a van pulling up on a street corner in Hartford, Connecticut, the door opening and me jumping out with no wallet,

no watch, no ID, no money, pretty much just the clothes on my back and a promise from the van driver that he'd see me in three days. And I was on my own. And I had a figure out, basically, had a survive in what was for me a very unfamiliar environment. And it was quite an adventure, and I could certainly have spent the entire podcast telling you things that happened here. But one of the interesting things that actually did have legs for me later on was that being a 21-year-old male, it didn't take long for me to get really hungry.

And I got some food. And at first, I came up with what I thought was a pretty clever way to solve the problem Which is I found a food court at a mall and I basically would hover off to the side And if I saw someone stand up from their plate and leave it behind in the table with some half-eaten food on it I would swoop in and finish their meal. Oh the days of pre-COVID, right? Couldn't have read that now. Yeah, I'm not sure I'd want to do that now either, but I don't have any circumstance. But anyway, listen, desperate times call for desperate measures. But after a while, I realized this is pretty disgusting. I kind

of would love to buy my own food. I need money. And I said, I'm just going to try pin handling. I mean, how hard could that be? And the answer, of course, is really hard. There is something about going up to a stranger and making this naked ask, which is, I want you to give me something, and I'm giving you nothing in return. And for someone who has this sense of pride and worth and it's remarkably difficult to humble yourself like that.

It took me hours to get up the nerve to actually put my hand out. And then probably an hour more before somebody eventually put something in it. But it was the exact same experience as it was being a six-year-old selling seeds door to door, that I saw this as a problem. How do I change? How do I change my story? How do I change the way I stand? What do I use as my opening line? And I iterated, iterated, iterated, and the remarkable thing that I learned.

Because eventually, of course, I got reasonably good at it enough to feed myself was that the trick was honesty. The trick was going up to someone and looking them the eye and explaining, could you spare any change because I'm really hungry because they can see that in my face. They can see that in my eyes that, yes, I was hungry. And in many ways, as an entrepreneur, you never stop pant handling. I mean, you're no longer on the streets in Hartford, Connecticut, asking for 25 cents. You might be on Sandhill Road in Silicon Valley, asking for $2.5 million, but you're still

asking for something in some ways for nothing. But you do have to be honest. You have to explain, I'm hungry. And what I've often said is that once you have panhandled for 25 cents on the streets, that asking for 25,000 or $250,000 is nothing. I love that. Oh my gosh. I have so many questions after that story that I could go to, but I'll go to this one. You mentioned that you love, you have a passion for solving problems. And I've heard you say before that,

like, we need to focus on the problem, not the idea when we're thinking of a business idea. Why is that important? Why do we need to focus on the problem and not get so infatuated with the actual idea? Well, that goes back to something we said just a few minutes ago, is because that idea you have,

that idea you're in love with, that idea you're sure is going to change the world? Well, surprise, it's wrong. It is not. It's a bad idea. I haven't even heard it yet. I know it's a bad idea, because again, you know, I think all ideas are bad ideas. But your problem that you're trying to solve, ooh, that's a good problem. And what I advise people to do is to fall in love with the problem, don't fall in love with the idea. Because the idea is gonna go away. I can't tell you how many ideas I've had that you try them and you realize that's no good,

but if you have the right problem, the problem stays with you forever. If you look at all, there's this glorification of ideas. There's this myth about the Eureka moment, the moment where it all becomes clear. There's that the story is, you know, there's the two guys who can't pay their rent and let's put an air mattress in a spare bedroom and boom You know, there's Airbnb or someone's stuck on nearest even can't get a cab and boom. There is Uber Or even boom, you know

We can late fee in a movie and boom. There's Netflix, but no, that's just not the way it works It's these random meandering path No, that's just not the way it works. It's this random meandering path. But the problems don't go away. The more you learn, each failed experiment makes the problem richer and more complex. So on love of the problem, don't fall in love with the idea.

I love that, I love that. Okay, so like you said, you were on the streets begging for money for this project, and it ended up helping you on later on as an entrepreneur when you're pitching investors to either buy your companies or help you fundraise for your companies. So there's this popular meme that everybody has seen in terms of Netflix and Blockbuster. If you missed an opportunity, don't feel bad because Blockbuster could have bought Netflix for 50 million. And now it's worth, you know, 230 or 250 million whatever it is today, right? And so there's always that popular meme going on. And so I want

to dissect that because I think there's two sides to that story. There's what happened in the pitch because it should have been a slam dunk. I would think that blockbuster would want to buy a company like Netflix. And then so what happened with the pitch, like did something go wrong with the pitch? And then for the other flip side, what was Blockbuster thinking? How come they couldn't see the opportunity that was at hand? So I'd love to hear your perspective on that. What do you mean was there's something wrong with the pitch? Come on.

Give me some credit. It was the work of art. It was masterful. No, and listen, just to give people the context here, Netflix, despite how excited everyone is about Netflix, Netflix is actually becoming a reasonably old company. I mean, I think we had our 23rd anniversary in April of this year. So it's been around a long time. And although Netflix seems ubiquitous and makes its own movies and its own television shows it was very small for a long time and

The story that we're talking about here took place two and a half years in and Even then two and a half years in Netflix probably had less than a hundred employees and Netflix was probably on track that year to earn about $5 million in revenue. But and here's the kicker. Netflix was on track to lose about $50 million that year. And so the interesting fact is we were ready to give it up. We decided it was time to sell. Or as we say, the euphemism is, we're going to pursue strategic

alternatives. But that just means basically we've got to get the hell out of this one. And our obvious strategic alternative back then, and this was in the year 2000, was Blockbuster, which you may remember, was at one point a monster, you know, 60,000 employees and 9,000 stores and $6 billion in revenue. And they were the obvious people for us to sell the company to. But we were nothing to them, and that. And so when we tried getting this meeting, nothing happened. And the weird funny story about it is that the time they actually finally called, we were on this corporate retreat in Santa Barbara at this dude ranch out in the mountains.

And I was all ahead with me with shorts and t-shirts and flip-flops. And that's when Blockbuster calls and says, we'll see you tomorrow in Dallas. Oh gosh. And we're going, this is ridiculous. It's impossible. There's no way to get from here to Dallas. By tomorrow, this meeting we've tried to get from months. We've screwed it up.

And so my business partner and co-founder Reed Hastings, he had a solution. And so we chartered a corporate jet, which we listen, if you're $50 million in the whole surrounding air, flew to Dallas and all of a sudden find ourselves on the 37th floor of this beautiful glass and steel skyscraper in this cavernous conference room, and picture this, because I'm standing there in T-shirt and shorts. And remember, I was kind of jealous because Reed is wearing a Hawaiian shirt. Yes, buttons. One step up.

One step up. But then the blockbuster folks come in and they've got their fancy suits. So, but we did make the pitch. And the pitch was really, I thought, very compelling because what had scared us for a while was blockbuster getting in the business and doing a blended model. Because back then, for those of you who are new to the Netflix game, back in 1998 when we launched, all the way through 2007, if you wanted a movie, you couldn't stream it.

We had to mail it to you on a DVD in an envelope. And we were scared that Blockbuster would do a version of having this internet rental and stores. And so that's what we pitched them, that we would join forces, they'd buy us, that they'd run the stores, we'd run the online business, we'd find all these synergies, and it would create a monster. And it was going great.

You know, they were asking good questions and leaning in until they asked the big question, which is how much and we had rehearsed this on the plane, decided what were $50 million in debt. It would be wonderful if we could pay back our investors and at least be clean. So Reed, you know, Leans Ford goes, $50 million and you're right, they laughed at us at the hubris that in the depths

of the .com meltdown, a company that was $50 million in debt in this ridiculous new internet thing would dare to ask $50 million. And, you know, the memes are right because it was a huge missed opportunity because, like you said, the company that they could have bought for $50 million is now worth $250 billion. And the company that had the 9,000 stores has one left. But it's a lesson. If you're not willing to disrupt yourself, I guarantee you someone will come along and disrupt your business for you. Yeah, and I'd love to hear like, why and how Blockbuster was disruptable?

So for example, I know you say, they didn't put customers first and you guys really had a customer first mindset. So like, what were the areas that you felt like, well, we can poke holes in this and we can kind of win? So as a quick, as you can tell, I always have to start from a walking start where it can get into these stories.

So I imagine that if you're familiar with my book, which is called That Will Never Work, and my podcast is called That Will Never Work, and pretty much at my Instagram handle is That Will Never Work, and it's because that's what every single person told me when I pitched them the idea of Netflix. That'll never work. And they had two reasons for saying that will never work. And one of them was, just a matter of time, where everyone's streaming, who's going to use DVDs? But the other reason, of course, was Blockbuster, who was apparently invincible. But there were a couple of flaws that we saw

on blockbusters business that we thought would give us a chance. And the first was the fact that as you alluded to, people hated blockbuster. In fact, blockbuster had, as this core principle of its business model, this thing called managed dissatisfaction. And you love to compete with someone whose core principle is called managed dissatisfaction.

So we go, we can certainly beat them on that. But there was another more technical reason we thought they were vulnerable, which is that they were bricks and mortar. So each store served a certain number of households. And DVD was brand new. So if I'm going to make the numbers up, let's say a single blockbuster store served 5,000 houses, they might have three DVD players amongst those 5,000 houses. There is no way a blockbuster store is going to

invest all the money to fill out their inventory with DVDs, at least for years until there was enough players in the neighborhood, but because we were one store serving the entire country, we could make that work. So we thought we'd have a two or three year head start. And fundamentally, going back to out of my direct marketing days, I said, I bet you we can make this a personalized experience. Right now, if you're going to look for a movie in a video store, and again, those are people who have heads that look

like mine, and for those of you who can't see it, it is glistening in the morning late. In other words, people are a little bit older. Remember that experience of going to a video rental store, and you walk in, and you basically, you're wondering in the desert looking for food. There's just nothing to eat. Video after video and you go, and you just end up with a new release wall and everything you want set of stock. We go, we can do better than that. We can help connect people with stories they love and we can use technology to do that.

And that's the things that we're pretty sure that we could win on. This episode of YAP is sponsored by Restream. I just switched to an awesome new live streaming platform called Restream. Restream is an OG in the live streaming world, and they've been around since 2014 and continue to innovate and dominate in this space. They have the most advanced features when it comes to live streaming. Restream allows you to live stream your video to LinkedIn, Facebook, YouTube, Twitter, and over 30 social channels at the same time.

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I'm going to be surprised too because I can't see the comments because my screen is split. The hardest situation in your career. Yeah, gosh, there's a lot. I mean, certainly, I've done now seven companies, and not everything works all the time. And even Netflix, we talked about, it took us a year and a half, a year and a half of one failed test after another before we finally found the business model that worked. But let's see, what is the hardest situation? Hardest situation is laying people off, which is always hard because it's impacting people's lives. And if you're an empathetic leader, meaning that you can, this is going to sound corny,

that you can know how people are going to react to things before you say it, saying something to someone which you know is going to hurt them is the most painful thing in the world. But it's especially hard at a startup because usually when you're doing a layoff, the people that you've hired, you've convinced them to come and join this crazy irrational quest. They've almost universally left better,

higher paying jobs with greater benefits, all the common help you follow this dream. And they've done everything you've asked. They've worked nights and weekends and given up time to try and make this dream come true. But your ultimate responsibility is to the company. And sometimes you have to sit someone down and say, you've done nothing wrong, but I'm afraid you can't come with us on this next part of the journey. And I just, I mean, right now I'm having like a PTSD. It makes my heart hurt even to say the words

and to say it to someone who you've considered a great friend who has just worked so hard on your behalf, that's the worst thing you have to do. And I'm a person who always insists on firing people face to face, eye to eye, personally. I owe it to owe that to them. And I cry a lot. But sometimes this is not an easy job. And that's one of the hard parts. Yeah, bam. If you're ready to take your business to New Heights, break through to the six or seven-figure mark or learn from the world's most successful people, look no further because

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Yet media blew up so fast, it was really hard to keep everything under control, but things have settled a bit, and I'm really focused on revamping and improving our company culture. I have 16 employees, so it's a lot of people to try to rally and motivate, and I recently had best selling author Kim Scott on the show. And after previewing her content in our conversation, I just knew I had to take her class on master class, tackle the hard conversations with radical candor to really absorb all she has to offer. And now I'm using her Radical Cander method every day with my team to give in solicit feedback, to cultivate a more inclusive culture, and to empower them with my honesty.

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I totally agree. I'm a new entrepreneur. I have 40 employees, you know, have to let people go sometimes. And it is the worst feeling about being an entrepreneur because you just want everybody to be happy and like just always want to do the right thing by people. And sometimes people just don't get it, and just can't keep up or whatever it is. It's not a good fit and they'll be better off quickly leaving and finding some place where they do fit in, where they can succeed.

And so I totally agree. And I also agree that you should be kind of quick to, like as soon as you feel like it's not a fit, don't let it linger. And I think you agree, like you don't do performance plans or you're not really an advocate for performance plans, right? That's the understatement of the year. I think that is the most cruel and unusual punishment

I can imagine. At me cut, listen, okay, now you triggered me here. We're going to talk about performance. These are called, for those of you who don't that aren't in a corporate environment, it's usually called a PIP, or I think it's a performance improvement plan. That's where I sit you down and I go, okay,

there's some issues of concern with your performance, but let's make a little list of the things you have to work on and what you're going to have to achieve in the next six months, then we'll read, oh my God, because what that really is, if you strip away the nice nodding and smiling, is I'm going, listen, I know I have to fire you. And you know, of course, that I'm going to fire you. But we kind of have to go now through this six months of pretend. So I can write up all the official reasons that I can fire you. It's so much better just to be honest and go,

you know, it's not working. I know it's not working. Everyone in the company knows it's not working. It is not you. I did a bad job matching you. This wasn't through your skill set. You're a talented person. Let's find some place where you're going to do a great job where you. This wasn't through your skill set. You're a talented person. Let's find some place where you're going to do a great job, where you can go home at night and be happy about what you've accomplished. I'll help you find the new job, but it can't be here. And people appreciate that. Sorry about that. I rambled on here.

No, that was great, but I totally, I just have so much to say about that too, because also when you let somebody stay in the company who's sort of isn't performing, it makes you look bad. It also hurts the culture. It's like the bad apple kind of spoils the bunch and it just hurts the overall culture, which is the topic I would love to get into next because I know that Netflix is so known for their amazing company culture. I used to work at Disney streaming services and I wanted to work at Netflix,

honestly, but I ended up landing a job at Disney. And one of the reasons why I was because of the company culture. Now, I've grown my company in the past year to like 40 employees. And from what I hear, Netflix has a really organic company culture. And we do too. My company started as volunteers for my podcast in a Slack channel. And I just started this Slack channel of 10 volunteers. And then that just blew up into this whole marketing agency podcast production agency. And very organic. Everyone is so happy and enthusiastic because the leaders started as podcast fans who literally just wanted to work for me for free.

So I'd left to hear how did the culture at Netflix develop? So I'm a big believer that culture is not something that you make up. That's not something you design because culture is not what you say. It's what you do. I don't care what you put in your culture deck or put in your break room posters. Fundamentally, your culture is how you behave. Because how you behave, how you treat your employees, how you treat your co-founder, how you treat your employees and your customers, that's what the rest of the company culture eventually becomes. So, the culture has to be true to you.

And Netflix was no different. It sprang from the way that Reed and I were and the way we treat each other. And there were certain aspects of that that came from our past. And one of them is one of the things that when I met Reed Hastings, that immediately drew us to each other was we shared this incredible belief in direct honesty. I've never been someone who liked shading the truth or avoiding saying something unpleasant to avoid hurting someone's feelings or it's so much cleaner to rip the bandage off and say what you think and read felt exactly the same way. And what that led to was an amazing problem solving mechanism or we could argue like cats

and dogs about something, but it was never personal because as soon as one of us, the other made it clear, became clear, oh, that is the right answer. You instantly forget who was dug in on what side or the other and you immediately get excited about moving forward. So that radical honesty pervades Netflix. And the other one though, I'm gonna say perhaps it came a little bit from all my

mountain experience because in the mountains, you don't have time to tell everyone exactly how to do things. You kind of have these shared goals. You go see that mountain peak over there. We're all going to, we're climbing the peak or even worse, it's an expedition and you go, we're going to meet in that location in three days. And I expect you to get there with this, you to get there with this. And everyone's got to figure out in their own that people who have to get there quickly go one route. People who are caring stuff go a different route. People who have the boats go a third route. And I'm not answering all their problems. You're figuring it on their own. And I think the same thing in a business is the

case. You just have to tell people, be really clear, here's what our objectives are. Here's what I expect from you, but then leave it to them to figure it all out. And what's amazing is it turns out that's an incredibly attractive thing for people. Fundamentally, what's important to employees in my opinion, because again, culture is personal, is not snacks and kombucha on tap and nap pods and firements, pole and all that bullshit. What's important to people is being given the opportunity to make real decisions, being given the freedom to solve things on their own, coupled with the responsibility to accomplish the things they're expected to accomplish.

And that Netflix is called the Freedom Responsibility aspect of it. And that combination of things, of radical honesty and freedom and responsibility is an amazingly powerful force for moving quickly, for being able to attract and retain really great people. And just for those of you who are listening, I'll give you some really quick examples of what, how these things work. And again, this

is complicated. It's taken Netflix 23 years to finesse these, but I don't know if people are familiar with our vacation policy. There isn't one. If you need time, take time, whenever. At our expense policy, there isn't one. Our travel policy, there isn't one. There aren't policies. All the policies are the same, is use your best judgment. And because what most companies do is build these guardrails for people

who don't have good judgment. They go, we don't trust you. We don't even charge of a million dollar of year sales account, but I don't trust you to make a good decision about what class airplane you should take when you're flying to your meeting or what level hotel you can stay in. Or I want you to pre-approved your expenses. You've built these guardrails to protect yourself from the people who don't have good enough judgment to make those calls. But what that does is drive the people with good judgment nuts, treat some like kids. And so Netflix experiment was what happens if you build a company not for the people with

bad judgment, but you build it with no guardrails because you're assuming all the people have a good enough judgment to not need them. And that's really interesting. Make your own decision. Listen, okay, let's give a specific example. And the problem is I could speak about culture forever too. So I'll give you one quick example. So I had an employee, he was an engineering manager.

In other words, he had a number of engineers reporting to him. Engineers, of course, the people who were doing the software programming. And a great thing happened to him. He fell in love with a young woman and she happened to live in San Diego. And this is up in Northern California. And he came to me and goes, Mark, great news, I'm in love.

And I wanted, here's what I'd like to do, which lives in San Diego. So what I propose is this, I will fly down at San Diego every Thursday afternoon and then I will work from there on Friday and say the weekend, I'll work from there Monday and I'll fly back Tuesday morning. And I said, well, let me make sure I understand what you're asking me. If you're asking me if it's okay to work from San Diego, I could care less where you

work from. Work from the moon. Work half a day a week if you want. I don't care. I trust you. But if you're asking me, is it okay if you're asking me to expect less from you in exchange for this, then the answer of course is no. You're an engineering manager. You have people who report to you who need access to you. And so you, you're a judgment. Can you work from San Diego on that schedule? You decide and you decide it. And that's what I mean by, I don't care.

I don't care whether you work four hours a day or 40 hours a day. I don't care whether you do it from home or do it from the office or do it from the park. It's freedom, but that doesn't take away the responsibility to accomplish the things you're expected to accomplish. And not because of me, because of your team. If you think about these as sports metaphor, Netflix never describes themselves as a family. You don't fire your family. And what we call ourselves a team,

and not a little league team, where one plays and gets a trophy, a professional team, where the manager's job is to put the very best players in every position. Because your responsibility in Omnies Sports Metaphor, I apologize, and responsibility to the shortstop is to put the very, very best player they can at second base. Not, oh, he's a good guy. No, I want to play for a team that wins, and your job is

put the best people over. Please, you can't. Amazing. I love that. Honestly, Mark, I could talk, I feel like I have 30 questions I didn't get to answer. So I hope I get to have you again. Maybe on Clubhouse, I'm one of the creators first programs on Clubhouse, so maybe we can coordinate something. But I do want to respect your time. And so the last question that I ask all my guests, and this is your opportunity to give any piece of advice that you didn't get a chance to yet, is what is your secret to profiting in life?

So before I even get my success to profiting in life, I've got to say, we got cut off here because we could have talked forever about it. I do have to say I do have a podcast as well. It is called That Will Never Work. It is where I spend my time answering these exact questions in specific contexts by interviewing not celebrity entrepreneurs, but people who are really in the trenches doing it and actually doing live mentoring.

But the question was what is what is success? What is your secret to profiting in life? And then after that, we're going to talk about all the places where people can find you, don't worry, I wasn't going to cut you off without doing that, of course. It sounds great. The profiting in life is balance. You know, you've got to do the things that make you happy in life because believe I tell you the answer isn't necessarily money or fame or any of that stuff. You have to say what's important to you and make sure you construct a life that gives you that.

And if you don't know what you want, the odds of you actually getting it are extremely remote. And for me, I've always had these three pieces to it. I love being an entrepreneur. I do have to do that. But it's not everything. I've also got a wife and I have three kids and I want to know them and I want to have a relationship with them and I've got to make sure I carve out the time to make sure that's

important. And as you've also heard, I love being outdoors. And unfortunately, although being outdoors is incredibly rewarding, it usually is not the kind of thing you can squeeze in between an 11 o'clock meeting and a two o'clock call. You've got to plan and build the life that allows you to get away and do those things. So, if you can put together the things like that, if you can have that balance in your life, you can have the relationships, the personal fulfillment, and of course, the things that make you intellectually engaged,

you are a rich person indeed. I think that is a beautiful message, making sure that you have time for family, for your hobbies, for your passions. Don't just be so obsessed with work. I know everybody at Younger Profiting are overachievers and anybody who listens to the show, but make sure you take time for yourself, for your family, for your passions. And Mark, where can everybody go to learn more about you and everything that you do? So certainly the hub for all things Mark Randolph is markrandolph.com, which provides all the access to the writing I do in my blog, provides access to all the handles for all the short form content.

The thing that I'm perhaps most excited about now is the podcast where really are these live sessions with early stage entrepreneurs, with me providing the type of advice that I've been doing for 20 years. These are real live calls where I spend time coaching people through, helping them turn their idea into reality or taking a side hustle and making it into a real business or taking a real business and hopefully getting to the next level. But it's really, I think, interesting, fun, entertaining. And it's a great way to pick up on the things we talked about which were more generalities and say, but wait a minute, how do I apply that to the problem that I'm wrestling with? And that's my shot at that.

Yeah, and it's called this will never work, right? Correct? That will never work. That will never work. Awesome. So that's the name of your book. That's the name of your podcast. And as a special thank you for coming on the show, what I'll do if you give me permission as I'll play a clip from one of your episodes, you could let me know which one. And I can close out the show playing a clip with that episode so that people get a taste of what your podcast is like. I love that idea. That would be fantastic. And I'd really appreciate that. I would love to do that. Thank you so much, Mark, for your time. I hope we meet again. And for everybody tuning in, you're listening to a live episode of Young and Profiting Podcasts.

We're going to put this up on the podcast channels in a couple of weeks. So if you missed it, make sure you go subscribe to Young and Profiting Podcasts so you can get the link. This is Mark Randolph. He is the co-founder and first CEO of Netflix, also a serial entrepreneur, a very, very smart man. He's got a podcast. Make sure you follow that.

And this episode is sponsored by Restream. And with that, this is Hala and Mark signing off. Thanks guys. Thanks very much, everybody. Thanks for listening to young and profiting podcasts with Mark Randolph. I hope Mark's experience with co-founding Netflix has inspired you to give life to your next idea. Stop overthinking and just give it a try. Because like Mark mentioned, some ideas are bad, and the only way to know for certain if an idea is good or bad is by putting that idea out in the world. So let me take you back to how Netflix got thought of. So Mark and his future Netflix co-founder

Reed Hastings cycled through hundreds of ideas while carpooling to work each morning. Some ideas stuck, but most of them were disregarded. And even though so many ideas failed, Mark and Reed kept working towards finding an idea finally worth pursuing. And they did. On April 14, 1998, they found that idea called Netflix, and it started as a video rental service before it moved into streaming, and all of you guys know how big Netflix is now. So remember, when you have an idea, you have to recognize that nobody can tell in advance whether it's a good idea or a bad idea.

So stop spending a lot of time trying to validate an idea. Doing so much research or planning, it's all a waste of time. You need to immediately collide your ideas with reality. You have to take that risk. You have to do something to start something, build something, make something, test something, try something. And as Mark says, you'll learn more in an hour of trying something than in six months of thinking about it or building a business plan about it. So that was my big takeaway. There's no such thing as a perfect idea and you're not going to know if an idea is good or bad if you don't go out and test it. The other big takeaway. There's no such thing as a perfect idea, and you're not going to know if an idea is good or bad if you don't go out and test it.

The other big takeaway I had in this episode is that anything is possible, but nothing is an overnight success. Just a handful of people was zero experience in the video industry, took down Blockbuster, a billion dollars, 60,000 employee company. But it didn't happen overnight. You know, Mark told us a story about him getting rejected by Blockbuster in terms of them buying him, same thing with Amazon, they rejected Netflix,

and it took 10 years, but eventually they drove Blockbuster to bankruptcy. So it wasn't an overnight success, but it was worth the wait. And I don't know about you guys, but I feel really inspired, and I don't know how you could leave this episode without feeling expired and ready to tackle your next big idea. If you love this episode of Young and Profiting and are interested to learn more from another tech billionaire, why don't you check out my episode number 69, the innovation stack with Jim McElvy. He's the co-founder of Square,

the super successful point of sales company. Here's a clip from that episode. a super successful point of sales company. Here's a clip from that episode. So what I recommend is that people find something that appeals to them. Here's the problem, Hala. Entrepreneurship in its current definition, this just start a business, it's like starting a business ship,

is super popular, it's cool these days. And because it's cool, a lot of people are going into it just because that's the way they want to make money. And in those cases, I think those people would be well served by just copying an existing business. Find something that's working in Cincinnati and move it to Des Moines, or find something that works in San Francisco and copy it in New York. That's a good formula for making money.

I am not the right guy to talk to about that stuff. I believe if you wanna be an entrepreneur, you're probably not gonna succeed, but if you succeed, your success will be 100 or 1000X what a normal business person would be. Think about the problems that you're gonna encounter and understand that money is a very weak motivator. The difference between being a middle class person

in the United States and being a billionaire is not that great. And I'm just telling you, like there's not anything really that money makes that much of a difference. Like if you're basically in the middle class, it doesn't get much better than that. You know, you're still gonna sleep indoors, you're still gonna have Netflix,

you're still gonna, like just all the stuff is pretty much the same. Like maybe you'll have a fancy or a car, but you know what, who cares? Maybe you'll fly in a private plane as opposed to a regular plane, and you know what, who cares? There's no big difference.

So money's a very weak motivator if you get into real problems. So pick a problem you care about. So I'm not interested in talking to people who want to start a business. I want to start a business. Well, I don't care. But somebody who comes to me and says,

hey, Jim, I want to fix this problem that I care deeply about. So look, I mean, just look at your window. Look at the issues we have in society, okay? The terrible problem's going on right now. I spend every morning working out with a guy, he's a 76 year old African American. Like, he was been through the civil rights movement. He's been through all these situations.

Like, he and I talk every morning for an hour and a half about what's going on. And he's telling me all these things that there should be solutions for. Now, are those gonna be good businesses? Well, some of them will be. Some of them will be great businesses because what I talk about in the innovation stack is the massive power of serving the unserved.

Again, that's number 69, the innovation stack with Jim McElvy. And if you haven't subscribed to Young and Profiting Podcast yet, please take a moment to do so so that you can be alerted every time we drop a new episode. And as always, I want to give a quick shout out to one of our recent Apple Podcast reviews, or Cast Box, Podbean, wherever you listen to the show, make sure you drop a review. And the review I'm going to read today is from Stefan and Atte from Canada. Much love for this podcast. Excellent topics covered every time. The positivity is contagious and it's all relevant in the business world to help you succeed. The speakers are well chosen and provide a wealth of insight. Happy listening. Stefan and Atte.

Thank you so much Stefan for your amazing, and if you're out there listening and found value in today's show, please take a few minutes to write a review on Apple Podcast, Castbox, Podbean, Podcast Republic, wherever you listen to the show, drop us a review. It is the number one way to thank us. And you can find me on Instagram at YappwithHala or LinkedIn, just search for my name. It's HalaTaha. And now I'm on Clubhouse.

I'm hosting rooms in there almost every day. Make sure you follow me on Clubhouse. And tag us on LinkedIn, tag us on Instagram. I love to see our stuff on social media. Big thanks to the Yap team, as always. You guys rock. This is Hala, signing off. Are you looking for ways to be happier, healthier,

more productive and more creative? I'm Gretchen Ruben, the number one best-selling author of the Happiness Project. And every week, we share ideas and practical solutions on the Happier with Gretchen Ruben Podcast. My co-host and Happiness Guinea Pig is my sister Elizabeth Kraft. That's me, Elizabeth Kraft, a TV writer and producer in Hollywood. Join us as we explore fresh insights from cutting-edge science, ancient wisdom, pop culture, and our own experiences about cultivating

happiness and good habits. Every week we offer a try this at home tip you can use to boost your happiness without spending a lot of time energy or money. Suggestions such as follow the one-minute rule. Choose a one-word theme for the year or design your summer. We also feature segments like Know Yourself better where we discuss questions like, are you an over buyer or an under buyer? Morning person or night person, abundance lever or simplicity lever? And every episode includes a happiness hack, a quick, easy shortcut to more happy. Listen and follow the podcast Happier with Gretchen Rubin.

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