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0:01:53 – Scott, imagine you’d built one of the most successful
0:01:54 companies in American history.
0:01:57 What would retirement look like?
0:01:58 – Checks.
0:02:06 – What would it look like?
0:02:08 It’d look like my life right now, Ed.
0:02:12 You don’t need to build one of the most successful companies
0:02:15 to have a wonderful back nine.
0:02:19 I’m doing exactly what I wanna be doing.
0:02:21 I hang out with impressive, intelligent young people,
0:02:23 such as yourself.
0:02:25 We make good money.
0:02:27 We have purpose.
0:02:31 And I get to do amazing things with my friends and family
0:02:34 that make me feel closer to them.
0:02:36 I can’t imagine doing anything differently.
0:02:40 And the only lesson in this humble brag,
0:02:41 or not so humble brag,
0:02:45 is once you get to a certain level of economic security,
0:02:47 you wanna use money as a means to an ends.
0:02:49 And that ends as great experiences
0:02:53 that make you feel closer to your friends and family
0:02:58 and recognize that you have an increasingly
0:03:00 finite amount of time here.
0:03:03 (upbeat music)
0:03:07 – Welcome to First Time Founders.
0:03:11 27 years ago, watching movies on demand
0:03:13 meant making a trip to the rental store.
0:03:16 But after a frustrating experience with a lost DVD
0:03:18 and a hefty late fee,
0:03:21 my next guest saw an opportunity for change.
0:03:23 He envisioned a world where people could enjoy movies
0:03:25 from the comfort of their homes
0:03:27 without the hassle of late fees
0:03:29 and without making a trip to the store.
0:03:31 So in 1997,
0:03:33 he launched a company with a groundbreaking idea,
0:03:36 flat rate movie rentals delivered by mail.
0:03:39 That single innovation,
0:03:40 followed by many more,
0:03:42 laid the foundation for what would become
0:03:46 the world’s leading movie and television streaming service.
0:03:49 With nearly 283 million subscribers
0:03:52 and over $28 billion in revenue this year,
0:03:55 this founder’s vision has forever changed
0:03:57 the way we consume entertainment.
0:04:00 This is my conversation with Reed Hastings,
0:04:03 co-founder and executive chairman of Netflix.
0:04:08 Welcome Reed, thank you so much for joining me.
0:04:09 – And what a treat.
0:04:12 So excited to be called a first time founder.
0:04:15 It’s like young again or something.
0:04:16 – Exactly.
0:04:18 I’m just looking at the background behind you.
0:04:19 I know that we were in talks about
0:04:21 maybe doing this in person
0:04:25 and I’m already just feeling huge amounts of regret.
0:04:27 The background looks beautiful.
0:04:28 – It’d be lovely to have you out here.
0:04:29 You gotta come see it.
0:04:32 I mean, the fall colors right now are incredible.
0:04:35 But of course we’re just waiting for the big snows to hit.
0:04:37 – So our listeners know where are you exactly?
0:04:40 – Powder Mountain Eden, Utah,
0:04:42 about an hour from Salt Lake City Airport.
0:04:45 – And that is something that we will be getting into
0:04:48 in this interview that is sort of your newest project.
0:04:51 But the title of this program is First Time Founders.
0:04:54 You are not a first time founder right now
0:04:55 but you were at one point.
0:04:57 So we’re gonna start with that.
0:04:59 We’re gonna start back in the 90s
0:05:02 right after you had served in the Peace Corps
0:05:04 and then you got your CS degree from Stanford
0:05:06 and you decided to start a company
0:05:08 but it wasn’t Netflix.
0:05:10 It was actually a company called Pure Software.
0:05:11 So let’s start there.
0:05:13 Could you tell us the story of Pure Software?
0:05:17 What led you to that venture and how it all came about?
0:05:20 – You know, I would say that starting a company
0:05:24 is like jumping out of an airplane without a parachute
0:05:27 and you just assume a bird is gonna fly by.
0:05:30 And so the people who start companies
0:05:34 are unrealistically positive and optimistic.
0:05:38 And then occasionally some of the times it works,
0:05:40 the bird flies by.
0:05:42 And if I think about my own experience,
0:05:45 I was excited about a particular product.
0:05:49 It found errors in a class of C and C++ software
0:05:52 that no one had been able to find before these memory errors.
0:05:55 And I was just hellbound on creating the product
0:05:59 and I had to do a company to see the product come to light.
0:06:02 – Was this something that you always knew you wanted to do?
0:06:04 Did you think that you were gonna be an entrepreneur?
0:06:08 – No, I did take one sort of business school-like class
0:06:12 and I had to learn how to use a spreadsheet to do that.
0:06:15 But that was like my little tiny bit.
0:06:20 And when I was a grad student, so mid-90s,
0:06:23 I got super excited about the foot mouse.
0:06:26 And you know, I was often with old hand mouse
0:06:29 and the terminal, you know,
0:06:31 it’s just slow back and forth to the keyboard.
0:06:33 And so, you know, of course,
0:06:35 I thought of the obvious solution,
0:06:36 which is you control the mouse with your foot.
0:06:38 – This is the first I’m hearing of the foot mouse.
0:06:39 I love it.
0:06:42 – Yeah, well, yeah, the foot mouse was a great idea,
0:06:46 I thought, which just shows I’m not very good
0:06:47 in the judgment category.
0:06:50 I’m good in the passion category, okay?
0:06:51 So anyway, I spent six months.
0:06:54 Luckily, I didn’t drop out of Stanford to do it.
0:06:55 And it turns out two things.
0:06:58 One is it’s a very dirty environment.
0:07:01 And so after a day or two, the foot mouse was pretty gross.
0:07:04 And then two, your leg cramps.
0:07:08 So it’s just not used to that fine dexterity control.
0:07:10 And those are both hard problems to solve,
0:07:13 which is why there’s still no foot mouse 30 years later.
0:07:17 But so I would say I’ve always had the product bug
0:07:20 or the passion product bug.
0:07:22 And then the first time I really did it,
0:07:24 which was pure, it actually worked.
0:07:27 So I spent a year at home writing the software.
0:07:29 And then I had to figure out a company to, you know,
0:07:32 figure out how to make it mainstream and distribute it.
0:07:36 The company from ’91 to ’95 doubled every year.
0:07:39 Morgan Stanley took us public in 1995.
0:07:44 And so in many ways, it was a great success of that era.
0:07:48 But I was pretty miserable for a lot of it
0:07:50 because I didn’t know how to do anything
0:07:51 in running a company.
0:07:54 And so it was just chaos and that felt bad.
0:07:56 – Yeah, so this is what’s so interesting to me
0:07:58 is that you’re not known for pure software,
0:08:01 but it was a smashing success.
0:08:03 I mean, it was your first company.
0:08:05 As you said, you took it public in ’95.
0:08:07 Later, you merged it with Atria.
0:08:11 And then in ’97, it was acquired for nearly a billion dollars.
0:08:14 And that’s roughly two billion in today’s dollars.
0:08:18 So this was like a hit hit success.
0:08:22 And it’s just so funny that you view it as kind of a,
0:08:24 one, that it’s sort of a footnote on your resume.
0:08:27 Two, that you view it as sort of a miserable time.
0:08:28 And so I’d love to just,
0:08:30 as you reflect on pure software,
0:08:33 you were a new entrepreneur as your first company.
0:08:34 It was successful.
0:08:37 What do you think you were getting right at that time?
0:08:38 – A product passion.
0:08:41 Think of one extreme, which is Elon Musk,
0:08:45 which is like all passion and vision.
0:08:49 And, you know, he manages quite successfully
0:08:52 through inspiration purely, right?
0:08:55 And then the day-to-day management of things
0:08:58 is pretty chaotic and he’s got tons of turnover.
0:09:00 And yet he still accomplishes amazing things.
0:09:03 So call that one end of the spectrum.
0:09:06 Another end of the spectrum is the really well-run,
0:09:09 you know, retail, something, I don’t know,
0:09:13 that, you know, not that inspiring, but very disciplined.
0:09:16 And so you can achieve excellence through that,
0:09:18 or you can achieve excellence at the other end.
0:09:22 And my first end was more in the Elon style.
0:09:26 It was all about a passion of, you know,
0:09:29 software quality and what that can mean for the world
0:09:31 and the problems of software errors.
0:09:35 But the day-to-day management was pretty poor on my part.
0:09:40 But we succeeded through kind of energy and passion,
0:09:43 because then people forgive you a lot of things
0:09:46 or you just make mistakes, but you, you know, you charge ahead.
0:09:49 – So we’ll fast forward to 1997.
0:09:52 You’ve just kind of scored pretty big on pure software.
0:09:54 You sold the company.
0:09:58 And I think for a lot of people at that point,
0:10:01 you start thinking about maybe early retirement,
0:10:03 maybe you moved to St. Barthes,
0:10:06 you do live a life of arrested adolescents,
0:10:10 as Scott likes to say, that’s not what you did.
0:10:12 You decided you wanted to start another company,
0:10:16 and this idea was for movie rental delivery.
0:10:19 Tell us what was going on in your head at that time,
0:10:24 and why did DVDs by mail seem like such a good idea to you?
0:10:25 – You know, it was the time when Amazon
0:10:26 was just going public.
0:10:29 E-commerce was clearly gonna be a big area.
0:10:33 And there were a lot of foolish companies just saying,
0:10:36 okay, I’m gonna sell computers or I’m gonna sell lamps,
0:10:40 and clearly Amazon was gonna crush them eventually.
0:10:43 And DVD rental, or rental generally,
0:10:46 has those two-way logistics, you had to send them back.
0:10:50 So it was very unique city-specific logistics
0:10:52 that we figured Amazon wouldn’t bother with.
0:10:55 It was too small a market, didn’t leverage all their core.
0:10:58 There weren’t five other things for them to rent.
0:11:02 So that would give us, we could ride the E-commerce explosion
0:11:04 and not have competition from Amazon,
0:11:07 only have it from the incumbents being blockbuster
0:11:09 and Hollywood video.
0:11:11 And then if we succeeded, we said, okay,
0:11:15 then we’ve got the pole position for converting to streaming.
0:11:19 Thus, we named the company Netflix and not DVD by mail.com,
0:11:21 ’cause that was always the ambition.
0:11:25 So you mentioned that Netflix was partly inspired
0:11:28 by Amazon, perhaps totally inspired by Amazon.
0:11:31 I didn’t realize this, but at one point,
0:11:35 Jeff Bezos actually offered to buy Netflix
0:11:36 and you declined it.
0:11:38 Could you take us through what happened there?
0:11:39 – Let’s think about the dates.
0:11:43 Late ’90s, and we went and talked to them.
0:11:45 It never got to like a formal offer.
0:11:48 It was sort of exploratory.
0:11:52 And they were properly interested in all businesses
0:11:54 that could show a profit.
0:11:55 And here’s the shocker, we said no,
0:11:58 and then we worked our ass off for 20 years.
0:12:01 Okay, and then if you compare the stock return,
0:12:05 if we had sold and then just ridden the Amazon stock up,
0:12:07 then the second outcome, 20 years of work.
0:12:10 And of course I’m happy to create Netflix
0:12:11 and that kind of thing.
0:12:12 – Yeah, absolutely.
0:12:17 And my favorite detail along those lines,
0:12:19 so Netflix is growing, it’s doing super well,
0:12:22 it’s on pace to go public.
0:12:23 And then the dot-com crash hits
0:12:25 and it brings down all these companies
0:12:28 and that includes Netflix.
0:12:31 And you actually tried to sell the company
0:12:36 to Blockbuster for $50 million and they rejected you.
0:12:39 So I’d love to hear the story of how that went down.
0:12:43 – Yeah, I mean, that one was more avoiding a big fight
0:12:44 with Blockbuster.
0:12:46 We realized that if we’re gonna grow really big,
0:12:48 we’re gonna have a big fight with them
0:12:50 and how about if we just give them 50%
0:12:52 and then help them profit
0:12:55 and not have that big fight with them.
0:12:57 And so we were open to that,
0:13:01 but they’re like a big, serious corporation.
0:13:04 We were a bunch of scrappy Silicon Valley kids
0:13:07 and they were like, when we wanna do online,
0:13:08 we’ll just do it.
0:13:12 And so they didn’t see any need or interest in buying us.
0:13:16 And then they did compete with us like heck
0:13:20 and luckily that didn’t start until 2004.
0:13:23 So they waited an awfully long time
0:13:25 ’cause they weren’t sure the market size,
0:13:27 but then they got quite serious
0:13:32 and it was a huge price battle in 2005 and 2006.
0:13:36 And then they ultimately bankrupted themselves
0:13:37 by 2007 or eight.
0:13:42 – I feel like in the history of video,
0:13:44 the way that Blockbuster is remembered
0:13:46 is they sort of dropped the ball.
0:13:48 They want focus,
0:13:51 they want managing themselves correctly
0:13:53 and that you came in and ate their lunch.
0:13:56 Do you think of their strategy that way?
0:13:59 Do you think that they sort of slacked off
0:14:02 and that’s where you and you’ve basically picked up the slack?
0:14:06 How do you view your takeover of Blockbuster in that story?
0:14:09 – High respect for their leadership,
0:14:11 very smart, thoughtful people.
0:14:13 They rolled up the business,
0:14:15 beat all their direct competitors
0:14:18 through kind of careful and good execution
0:14:20 of store-based video rental
0:14:22 and negotiated great deals with the studios.
0:14:26 When it came to looking forward,
0:14:27 they were very forward-looking
0:14:31 and they did a deal with a broadband company in 2000,
0:14:33 long before we were streaming, okay?
0:14:37 We didn’t start streaming till 2007, okay?
0:14:40 So in 2000, they do a deal with a broadband company
0:14:42 to be on the leading edge.
0:14:44 Unfortunately for them,
0:14:47 the name of that company was Enron, okay?
0:14:49 And it turned out to be this, you know,
0:14:51 billion-dollar loss that was a scam.
0:14:54 So they kind of learned, you know,
0:14:59 internet is a bunch of scam artists, you know?
0:15:01 And so they were more scared off.
0:15:05 So then we came in with DVD by mail
0:15:06 and it seems like, you know,
0:15:08 an interesting little business,
0:15:13 but again, they were looking for how to go direct to consumer
0:15:16 and they didn’t want to do this intermediate step.
0:15:19 It’s hard when you’ve got one business model
0:15:22 you’ve done in their case for 25, 30 years
0:15:27 and then once in a generation change, i.e. the internet,
0:15:30 you know, like Netflix hasn’t, yeah, I guess streaming.
0:15:33 I mean, we were born to do streaming
0:15:34 and thought about streaming all the time.
0:15:39 So it wasn’t hard for us to let DVD go.
0:15:42 But I think if DVD had been the vision,
0:15:44 you know, it would have been a lot harder.
0:15:45 – It was a long time
0:15:47 before you actually started streaming.
0:15:50 Were you constantly telling the team, you know,
0:15:52 ultimately this is the goal,
0:15:53 ultimately we’re gonna get into streaming.
0:15:55 This is just phase one.
0:15:56 – Yeah, for sure.
0:16:01 I mean, we launched in ’97, ’98 and 2007,
0:16:04 a decade later was our very first streaming.
0:16:07 And that was just a Windows PCs with crappy content.
0:16:13 Okay, so it wasn’t until 2009, 2010
0:16:15 that we had the Xbox deal.
0:16:17 So you could watch Netflix on your TV
0:16:18 if you had an Xbox.
0:16:20 And we had the stars online content,
0:16:22 which is like a baby HBO.
0:16:27 And so then it was like real content and on the television.
0:16:29 And then it was like another five years
0:16:33 before we were integrated into most televisions, you know,
0:16:35 and then we got our button on the remote,
0:16:36 the Netflix button.
0:16:37 And then we started, you know,
0:16:40 we did our original content first in 2012.
0:16:43 So that was house of cards.
0:16:46 So yeah, there was a lot of steps in there
0:16:48 that took to put together.
0:16:51 So, you know, it’s an unusual entry strategy
0:16:54 to build a business to be the segue, you know,
0:16:57 that is where we’re gonna build DVD rental
0:17:00 and then be in position for internet streaming.
0:17:03 But we were differentially confident
0:17:07 that DVD by mail was the best solution for a decade.
0:17:09 And then when it came in with streaming,
0:17:11 you know, we were super hungry for it.
0:17:14 And then of course, with that, we could expand globally.
0:17:18 – We’ll be right back.
0:17:20 (upbeat music)
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0:20:51 – We’re back with First Time Founders.
0:20:55 Was it difficult to convince your team of all of this?
0:20:57 I mean, it sounds obvious now.
0:20:59 Yeah, of course, people will be streaming,
0:21:02 but I feel like back then, you’re sort of making a,
0:21:05 you’re making a gamble, you’re making a bet.
0:21:07 I’m just interested, you say, you know,
0:21:08 we were confident of all of this.
0:21:10 Was it all of you or was it just you?
0:21:14 How did you convince everyone this was the right way to go?
0:21:17 – It was pretty broad that,
0:21:20 so YouTube started in 2005.
0:21:22 We could start to use streaming.
0:21:26 That was the first low quality but high scale streaming.
0:21:30 So, you know, there’s like little things like should we,
0:21:32 how much should we invest?
0:21:36 Should we invest, you know, 30 million or 300 million
0:21:38 in streaming in a given year?
0:21:42 So, you know, but I’ll call those technocratic decisions.
0:21:44 It wasn’t, nobody thought we shouldn’t invest.
0:21:49 It was just how fast, how early, those kinds of things.
0:21:53 – I feel like one of the things that makes Netflix so unique
0:21:56 is that it’s basically been on the forefront
0:22:01 of pretty much every major secular shift that we’ve seen
0:22:02 over the past several decades.
0:22:05 And it’s, you know, probably been on more of those
0:22:07 than any other company in this generation.
0:22:08 I can just go through the list.
0:22:11 I think it’s worth just listing for people.
0:22:14 You know, you had the VHS to DVD shift,
0:22:17 you had brick and mortar to delivery,
0:22:22 one time purchase to subscription based, DVDs to streaming,
0:22:25 and then more recently licensing to original content
0:22:28 and then even more recently domestic content
0:22:29 to international content.
0:22:31 – Crazy, crazy, isn’t it?
0:22:35 So it’s basically front running every single major shift
0:22:36 in the industry.
0:22:41 And that to me has been the differentiator with Netflix
0:22:42 and the trend.
0:22:44 What do you think you have done as a leader
0:22:49 that has enabled that level of innovation
0:22:51 over such a long time?
0:22:52 I mean, a lot of people innovate,
0:22:54 a lot of people do new things,
0:22:57 but you’ve been consistent in every single one.
0:23:00 What do you think you’ve gotten right?
0:23:03 – You know, I try to think through from first principles
0:23:08 why certain companies grow and thrive
0:23:11 and, you know, when they get left behind or when not.
0:23:14 So I’ve always been a fan of kind of studying,
0:23:16 you know, when I was growing up,
0:23:18 it was in the computer business,
0:23:22 it was son and, you know, microsystems and it was HP
0:23:24 and they were, and digital equipment.
0:23:27 These companies were dying right and left
0:23:31 and they were major companies initial for a while.
0:23:36 And so I early on got a very close study
0:23:40 of major companies shift with the ground,
0:23:42 shifted out from under them
0:23:47 and how unusual it was to be Microsoft or others
0:23:52 that, you know, continued to pivot with the new landscape.
0:23:56 And so I think I’ve always been a fan of that
0:24:01 strategy thinking learned mostly by watching other companies
0:24:03 ’cause if you learn it on your own companies,
0:24:04 that’s expensive.
0:24:08 So it’s better to look and see when you see a company
0:24:13 do big pivots like Microsoft has, you know, over 40 years
0:24:15 and they miss some too, right?
0:24:17 They’re not, they’re not perfect in it.
0:24:18 – One of the pivots that you may,
0:24:21 I mean, so from DVDs to streaming,
0:24:25 I was just looking back through the, through the time machine
0:24:31 you decided to rebrand the DVD business to Quickster.
0:24:34 And the streaming service was gonna remain Netflix.
0:24:38 And I just pulled some headlines from that year.
0:24:40 Quickster is dead.
0:24:41 Quickster goes quickly.
0:24:43 And here’s my favorite from the Atlantic.
0:24:47 Five reasons why Quickster is now dead star.
0:24:51 That to me is sort of like an example of where, you know,
0:24:53 a pivot could kind of go wrong,
0:24:55 but ultimately it was successful.
0:24:57 I’d love to just get your reflections
0:25:02 on pivoting to streaming, an initial failure it seemed,
0:25:05 and then it worked out big time.
0:25:08 – So we, in studying other companies,
0:25:10 we realized they’re run by good people
0:25:13 and they still miss the transition.
0:25:17 So the average smart and careful leadership team
0:25:18 is too slow.
0:25:21 And so we thought, okay, we’ve gotta go faster
0:25:23 than we’re comfortable, okay?
0:25:25 And the phrase internally was,
0:25:29 we got to be so aggressive, you know,
0:25:31 that the hair in the back of our neck, you know,
0:25:34 is raised up, you know, it’s really scary.
0:25:37 And that allowed us to say, okay,
0:25:40 let’s take all of the DVD rental business
0:25:43 and shove it to the side into Quickster.
0:25:44 And the only thing remaining,
0:25:46 and we knew it would be streaming.
0:25:50 And but at that time, 2012 streaming was still not very good
0:25:52 and still not very broad.
0:25:55 And so we were very aggressive
0:25:57 and it was too aggressive for the customers, okay?
0:25:59 We didn’t, you know, they care about the hair.
0:26:01 I mean, I’m paying you 20 bucks a month.
0:26:05 I want, you know, what I want.
0:26:08 And so we were ahead of the customers.
0:26:10 And then that cost us a lot, you know,
0:26:14 the stock shrank by a lot, customers quit us,
0:26:15 the press thought we were idiots.
0:26:18 And so it was too fast in hindsight, okay?
0:26:21 But think of it as the aggressive spirit
0:26:23 that allowed us to do all those transitions
0:26:25 you referred to a few minutes ago,
0:26:27 was the same aggressive spirit
0:26:31 that makes us go a little too fast with Quickster, okay?
0:26:33 And then ultimately, you’re right.
0:26:36 It became dvd.com and we did the thing and, you know,
0:26:39 and separated it in a more low key way.
0:26:42 And then, you know, it was just last year,
0:26:44 we finally closed dvd.com.
0:26:48 So, you know, it’s the right idea too soon.
0:26:50 But if you think about it,
0:26:51 these things are uncertain.
0:26:56 And so if you make five decisions a little bit late
0:26:58 and one a little bit early, you know,
0:27:00 you’re sort of in the same ring.
0:27:02 So we didn’t beat ourselves up too much on it
0:27:05 because we were like, look, you got to be aggressive.
0:27:08 You got to be able to recover if it’s been too fast,
0:27:11 but you can’t be afraid of moving too fast.
0:27:12 – Why is that exactly?
0:27:15 Why do you think that it’s so important to be aggressive?
0:27:18 I think that, I mean, I agree in hindsight.
0:27:21 I mean, I’m glad that you were aggressive,
0:27:24 but I feel like it’s very easy in business and in life
0:27:27 to think, well, you know, things are going well
0:27:29 and we don’t want to disappoint our shareholders
0:27:31 and we don’t want to disappoint the customers.
0:27:32 And it’s just so interesting to me
0:27:35 that you were very, very sure that no, no, no,
0:27:38 we have to move extremely quickly.
0:27:40 Why was that so important to you?
0:27:42 – So some people are tall or short.
0:27:47 Some people are risk sensitive or risk loving.
0:27:52 Okay, honestly, I think it’s built into people’s biology.
0:27:55 And I’ve always loved the fear and excitement
0:27:57 of the going fast.
0:28:00 I do think it’s helpful if you take smart risks.
0:28:04 Obviously, if four or five of the big decisions we made
0:28:06 were as bad as quickster, then there’s a problem.
0:28:09 You know, you’ve tipped into being reckless.
0:28:13 Okay, but if mostly you get it right
0:28:16 and if you can recover when you’ve been too fast,
0:28:18 then that’s just aggressive and not reckless.
0:28:22 And so then, you know, you can get great returns
0:28:23 like Netflix has been.
0:28:26 – Cultural principles and company culture
0:28:29 has been such an important part of what you built
0:28:33 at Netflix and now many companies around the world
0:28:35 have borrowed a lot of your principles.
0:28:37 I’d love to just go over a couple of them
0:28:40 and hear from you what they mean and why they’re important.
0:28:43 First one I’ve got here is farming for descent.
0:28:47 – Yeah, that’s one actually we brought in after quickster.
0:28:50 It means that descent in a management team
0:28:54 is not easy or natural, especially if the leader
0:28:57 has a strong view and has often been right.
0:29:00 And so it’s important to farm for descent
0:29:05 and to stimulate mechanisms by which contrary views
0:29:09 can be evaluated and heard.
0:29:12 We’re not trying to manufacture a consent.
0:29:16 Okay, we’re trying to stimulate descent, you know,
0:29:18 up to a point and then you make a decision
0:29:19 and then you want everybody on board
0:29:21 to execute it like heck.
0:29:23 – What is that point?
0:29:26 You said up to a point, where do you cut it off?
0:29:30 – So for big decisions, it’s a somewhat formalized process
0:29:33 where we’ll have a meeting and then everyone enters
0:29:36 their view in a Google spreadsheet, you know,
0:29:39 that’s visible to everybody and you vote on things,
0:29:43 negative 10 is like, it’s going to be a disaster.
0:29:45 To zero is like, I’m not really sure.
0:29:48 To 10 is this is the best thing we can possibly do.
0:29:50 I’m very confident.
0:29:54 And then whoever’s making the decision then writes up,
0:29:56 think of it like a Supreme Court decision.
0:29:58 I mean, it’s not as well written or formal and stuff,
0:30:01 but you know, it’s here, what I heard,
0:30:03 here are the different views.
0:30:06 And ultimately, I think the balance of risk is this.
0:30:08 And I think we should do why.
0:30:10 And then that’s the decision and then we move forward.
0:30:13 – The other one I have here is extraordinary candor.
0:30:14 What does that mean?
0:30:17 – Well, human beings, as we’ve lived in denser
0:30:20 and denser groups, have learned to be more
0:30:22 and more polite and indirect.
0:30:26 So, you know, in China or in Japan where it’s very crowded,
0:30:31 people are super polite and you know, it’s an art form.
0:30:34 The challenge in that in business is we come
0:30:37 from a lot of different cultures and we’re moving fast.
0:30:41 And so it’s better to enable people to be rude
0:30:45 by conventional standards and to be very direct,
0:30:49 at least about the workplace, not about your clothing
0:30:52 or you know, that you’re attracted to someone
0:30:54 or I don’t know, you know, but again,
0:30:57 on the work dimensions, we want high candor
0:31:02 to get people to have more clear, effective
0:31:04 and honest discussions about, you know,
0:31:08 should we cut price in France or should we do this show
0:31:11 or should we do this product feature?
0:31:13 – Just gonna move through one more cultural principle here,
0:31:15 which is the keeper test.
0:31:16 What is that?
0:31:19 – The keeper test is if someone was going to quit,
0:31:23 would you work hard to keep them, to change their mind?
0:31:28 And so it’s using that as the firing criteria
0:31:30 rather than the traditional, have they screwed up
0:31:33 so egregiously that we should fire them, okay?
0:31:36 That’s kind of the default model.
0:31:39 And we would say, no, we’d like to have a whole bunch
0:31:41 of people that you would fight hard to keep.
0:31:45 And you’re responsible to all of your direct reports
0:31:47 are people that you would fight hard to keep.
0:31:48 We’ll be right back.
0:32:05 – The Capital Ideas podcast now features a series
0:32:08 hosted by Capital Group CEO, Mike Gitlin.
0:32:10 Through the words and experiences
0:32:13 of investment professionals, you’ll discover
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0:32:18 what learnings have shifted their career trajectories
0:32:21 and how do they find their next great idea?
0:32:24 Invest 30 minutes in an episode today.
0:32:26 Subscribe wherever you get your podcasts.
0:32:29 Published by Capital Client Group, Inc.
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0:32:36 If you’re a small business owner,
0:32:38 you might have heard about a new requirement
0:32:40 called the BOI filing,
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0:32:50 if you knowingly miss file.
0:32:51 Now the goal of all of this is to help
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0:32:57 For most businesses, the deadline to complete it
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0:34:37 – We’re back with First Time Founders.
0:34:40 I’m gonna move on to Leaving Netflix.
0:34:44 In January, 2023, you stepped down as the CEO.
0:34:47 Your co-CEO Ted Serandos stuck around.
0:34:49 He remained at the helm.
0:34:51 Greg Peters was promoted.
0:34:53 And when I look at what happened here,
0:34:56 to me, this is kind of one of the greatest
0:35:00 succession stories of this decade.
0:35:05 Because I look at what happens to Disney,
0:35:07 what’s happening right now at Nike,
0:35:09 what’s been happening at Starbucks.
0:35:13 I even look at what’s happened in our government.
0:35:16 And what I’m finding is that the transition of power
0:35:18 is extremely difficult.
0:35:20 But if you look at what’s happened with Netflix,
0:35:21 Netflix has crushed it.
0:35:25 The stock has, I think, roughly doubled since you left,
0:35:27 which is actually a testament to your ability
0:35:29 to formulate a plan.
0:35:32 What makes a good succession plan?
0:35:35 How does a leader, such as yourself,
0:35:39 peacefully and successfully remove themselves from the helm?
0:35:42 – You know, it’s something that we always have concentrated on,
0:35:45 which is developing Ben Strength and Greg and Ted,
0:35:48 you know, been with me for 19 years or something.
0:35:51 So it’s like they were very ready.
0:35:54 And very excited to have the shot, you know, to lead.
0:35:57 But again, I think that’s, you know,
0:36:02 again, similar to the Andy Jassy, you know, following Bezos.
0:36:04 So I bring that up just to say, you know,
0:36:06 there are other proof points of, I mean,
0:36:09 Jassy’s been at Amazon for 20 years, you know,
0:36:10 and he’s different than Bezos,
0:36:12 but you know, he’s doing it his way.
0:36:15 And you know, there are those companies that struggle,
0:36:20 you know, where the board and the CEO either didn’t pick right,
0:36:24 or it took a long time, or, you know, a range of tricky issues.
0:36:27 – And was it hard to let go of Netflix?
0:36:31 – Yeah, you know, I’d done it for 25 years every day,
0:36:34 jump up early to check the metrics and be in charge.
0:36:39 And it, you know, was a big shock at first.
0:36:42 But, you know, I knew that this was a great time
0:36:43 for them to take over,
0:36:45 ’cause we had a great recovery path
0:36:48 that they architected, you know, for the company.
0:36:50 But on a personal basis, I missed it.
0:36:53 I missed being the center, I missed the, you know,
0:36:54 the influence, I missed the intensity,
0:36:56 missed the global travel.
0:36:58 But, you know, three months later,
0:37:01 it took over Powder Mountain,
0:37:03 and you know, that’s been an incredible adventure.
0:37:06 And then, you know, do a bunch of philanthropy
0:37:08 and, you know, more active on that side.
0:37:11 So I’ve been, you know, really blessed
0:37:13 to continue to feel very invigorated.
0:37:15 – It’s so interesting to me,
0:37:19 because who would’ve thought that the entertainment,
0:37:24 internet, software entrepreneur would decide,
0:37:28 you know what, I’m gonna go start a ski resort.
0:37:30 – My wife and I had a home here, a powder already.
0:37:32 So it’s not like I searched 50 mountains
0:37:36 and found the right one in some great strategic play.
0:37:38 We had a house here.
0:37:40 We could see the mountain was struggling.
0:37:44 The opportunity to buy out the existing owners came up.
0:37:46 – And really, most ski mountains
0:37:48 are real estate development projects.
0:37:51 So that’s the, you know, skiing itself
0:37:54 is, you know, a very tough business like restaurants,
0:37:55 that kind of thing.
0:38:00 And then it’s creating the real estate play
0:38:01 that’s been so exciting.
0:38:04 – I’d love to know if there are any similarities
0:38:09 between operating a ski resort versus a streaming service.
0:38:13 What are sort of the main differences in the experience?
0:38:15 But more importantly, what are the main similarities?
0:38:16 What’s sort of carried over?
0:38:21 – Yeah, the similarity is really the subscription orientation,
0:38:23 which is you’ve got a set of customers
0:38:26 and your job, you know, is to keep them excited.
0:38:30 And so you’re not trying to get new customers all the time,
0:38:32 like a transactional business.
0:38:35 So it’s really focused on, you know,
0:38:38 those that own real estate or have season passes.
0:38:41 And so that’s probably the biggest similarity
0:38:43 in business model.
0:38:46 Then there’s a lot of similarities in culture now,
0:38:48 where we’re, you know, building up powder mountain
0:38:52 to do keeper test and high compensation.
0:38:56 And, you know, all of the things that we’ve learned before.
0:38:57 And then we’ve shaken up the models.
0:39:00 So, you know, we’ve split the mountain in half,
0:39:02 half for private, half for public.
0:39:03 No one had done that before.
0:39:06 We did a thing a couple of days ago
0:39:09 where we said on February weekends,
0:39:11 which are the busiest times,
0:39:13 it’s a season pass only days, you know,
0:39:17 we’re continuing to find ways to innovate.
0:39:19 But I would say in the ski industry,
0:39:23 the great popularizers have been the epic and icon passes.
0:39:26 They’re the ones that roll up, you know, 50 resorts.
0:39:30 Think of them as the Costco or Amazon Prime.
0:39:32 Okay, that’s like a super high scale.
0:39:34 I mean, I would have loved to invent that business,
0:39:38 but I didn’t, you know, it’s been going on for 10 years.
0:39:42 And now we’re competing now in the irony of ironies,
0:39:44 you know, on the niche provider competing
0:39:48 with the dominant firm and trying to come up as we have
0:39:50 with something that’s counter positioned.
0:39:54 And epic and icon have made skiing more affordable,
0:39:56 but they’ve made it really crowded.
0:39:59 And so then where the counter to that were more expensive,
0:40:03 but were like beautifully pristine and open
0:40:06 and it’s, you know, more like a hella skiing.
0:40:07 It sounds absolutely incredible.
0:40:11 I mean, the real difference here is this is really
0:40:15 about bringing yourself joy, it seems.
0:40:17 You know, this is about spreading happiness
0:40:19 and having a great time.
0:40:21 It makes families happy.
0:40:22 It makes you happy.
0:40:25 And I think that’s significant that that is what you’ve decided
0:40:29 to zero in on and make a whole operation out of.
0:40:34 So I’d love to get sort of your thoughts on joy,
0:40:38 on happiness and the extent to which that’s played a role
0:40:41 in your career and the decisions you’ve made throughout it.
0:40:45 – You know, I would say finding new angles
0:40:47 on existing businesses, you know,
0:40:51 whether that’s rental or, you know, software error detection
0:40:55 or this one, you know, skiing is the exciting thing.
0:40:59 Coming up with new business models that, you know,
0:41:03 work really well in our case to have 600 families
0:41:07 have the private skiing and then use that
0:41:09 to anchor the mountain and the public side
0:41:11 with, you know, thousands of season passes.
0:41:15 And it’s got all the joy for me of Netflix,
0:41:17 even though it’s a fraction of the scale,
0:41:19 a fraction of the profitability,
0:41:23 a fraction of, you know, things that are important in many ways,
0:41:27 but it’s a fun problem to be engaged with.
0:41:30 And yes, to create, again, but the joy we create
0:41:32 for our members is it’s very visceral.
0:41:34 And, you know, we get to know them.
0:41:37 And that’s, you know, deeper than just, you know,
0:41:40 someone writing you of how important this show was
0:41:43 to see them, but that was fun too.
0:41:47 – As you look back at this very wide range in career,
0:41:50 which parts were the most rewarding in your view?
0:41:54 – I’d have to say right now, I feel most rewarding
0:41:58 because again, it’s my neighbors that are, you know,
0:42:01 that we’re saving the resort for and expanding and growing
0:42:05 and putting in, like this year, we’re putting in four new lifts.
0:42:08 And like nobody goes that aggressive all at once,
0:42:12 it’s crazy in a way, and yet we’re pulling it off.
0:42:14 Even though if I’m objective,
0:42:18 it’s not as much good in the world, you know, as say, Netflix,
0:42:21 it feels very intense because I know the people.
0:42:23 – As a community aspect, yeah.
0:42:27 – Yeah, I would say the personal satisfaction is highest now,
0:42:31 you know, probably in terms of world impact, you know,
0:42:33 that Netflix would be the highest.
0:42:35 – And what about your philanthropy
0:42:37 and your ventures and education?
0:42:40 What has that brought you on a personal level?
0:42:43 – What I found, like the year I did the politics,
0:42:46 is, you know, it’s good for the world
0:42:51 and, but I wouldn’t jump out of bed to do it, you know?
0:42:55 I jump even today with a philanthropy, I like it.
0:42:57 It’s important in doing a bunch on charter schools,
0:42:59 a bunch on AI learning,
0:43:02 a bunch on lower cost mobile phone access in Africa,
0:43:07 home solar, so I recognize it as important,
0:43:09 but like if I have an hour,
0:43:11 I jump into Powder Mountain stuff, you know,
0:43:15 ’cause it’s just, it’s such a great group of people,
0:43:18 both, you know, on the staff and then in the membership.
0:43:20 – It’s funny hearing you talk about this because
0:43:26 it’s so clear to me that you get hyper-hyper obsessive
0:43:30 and focused on very specific things.
0:43:32 And right now, you know, it’s the ski resort.
0:43:34 This is what’s dominating.
0:43:36 It feels like that sort of gives insight
0:43:38 into why you’ve been so successful in all of your ventures,
0:43:42 is that you pick a thing and that’s your thing.
0:43:44 I guess the other word for this is focus.
0:43:47 How has that played into your career
0:43:49 and do you think that’s something that other people
0:43:53 who want to be successful should be embracing more of?
0:43:55 – Well, what I realized is there’s other ways
0:43:56 to be successful, like my friends
0:43:59 who are venture capitalists, they’re the opposite.
0:44:03 You know, they’ve got 30 deals, contemplated,
0:44:05 five deals they’re in and, you know,
0:44:07 and they’re incredible at multitasking
0:44:11 and, you know, the ones who are very good at it.
0:44:15 And I realize it’s just not my personality, you know?
0:44:18 And so I think a lot of it probably
0:44:20 for the young entrepreneurs figuring out
0:44:24 what really are they differentially good at.
0:44:25 So yes, I’m a focused person,
0:44:28 but I wouldn’t say that’s the only way to be.
0:44:30 You know, I would say in the investor class,
0:44:32 they can’t jump in and try to solve
0:44:34 the problems of the company.
0:44:36 There’s different ways to contribute
0:44:38 in different parts of the ecosystem.
0:44:43 – There are a lot of young men who listen to this podcast.
0:44:46 As a businessman, as a family man,
0:44:49 and as a philanthropy man,
0:44:51 what would be your number one piece of advice
0:44:55 to a young man who’s just getting started in his career?
0:44:58 – There’s no one path to imitate.
0:45:01 And sometimes people fall on the trap
0:45:05 of like finding their role model and, you know,
0:45:08 and I would say it’s staying loose and flexible
0:45:11 in learning and trying things.
0:45:15 And it’s always challenging yourself.
0:45:18 If you’re growing in your skill set,
0:45:20 then you’re gonna have lots of opportunity,
0:45:22 but there’s no predictable path.
0:45:27 So it’s more of an emphasis on growth
0:45:32 and growth mindset than on preparation and having a plan.
0:45:33 – It’s interesting.
0:45:35 Do you feel that you embodied that
0:45:36 through your career as well?
0:45:40 – Yeah, no, it was being flexible and adaptable.
0:45:45 And it was a very, very unpredictable angles
0:45:46 and where things veered.
0:45:51 And then I was fortunate to latch into some big problems,
0:45:53 whether that’s software quality
0:45:58 and or whether that’s, you know, streaming entertainment
0:46:00 or now powder real estate.
0:46:02 – And if there’s one piece of advice
0:46:05 that you could have given yourself
0:46:07 when you were a young, young entrepreneur,
0:46:09 before you started pure software,
0:46:12 is there something that you would have told yourself
0:46:15 that you’d like to tell him now?
0:46:19 – I didn’t understand how to forgive myself
0:46:21 when I made mistakes.
0:46:25 So, you know, I was always going fast,
0:46:27 taking chances, doing things.
0:46:30 But, and now I’m able to see some mistakes
0:46:35 as part and parcel of, you know, being aggressive.
0:46:38 But at the time, anytime I made a mistake,
0:46:43 I would berate myself endlessly and unproductively.
0:46:47 So I didn’t know how to forgive myself.
0:46:50 – I mean, you said unproductively berating yourself.
0:46:53 Is there a way to think of self criticism
0:46:55 in a more productive way
0:46:58 that is actually helps you move forward?
0:47:01 – My hunch is it just comes with age
0:47:03 and that there isn’t really a shortcut.
0:47:07 So, I mean, you can understand the intellectual theory,
0:47:09 but in terms of the emotional release,
0:47:11 and, you know, when you’re younger,
0:47:14 all those emotions are so intense,
0:47:15 you know, about success and failure
0:47:18 and esteem and humiliation.
0:47:21 And, you know, our systems are keyed up for that
0:47:24 in ways that makes people very hungry.
0:47:27 But I would say as you get experience,
0:47:29 learning how to forgive yourself
0:47:31 would be the little bit
0:47:34 that I might be able to add to your audience.
0:47:37 ‘Cause I’m sure they’re quite good risk takers
0:47:38 and they’re quite aggressive
0:47:39 and they’re good about learning and growth
0:47:40 and lots of things.
0:47:41 – Absolutely.
0:47:42 I love that.
0:47:45 And I will take that moving forward for myself as well.
0:47:47 – Ed, when are we gonna get you up skiing?
0:47:49 – Oh my God, I’ll come tomorrow.
0:47:51 (laughing)
0:47:53 As soon as the ski season starts, I wanna do it.
0:47:55 – Great to get you up this winter
0:47:59 and we should do a little event maybe with you
0:48:01 and Tim Ferriss who’s local to his Park City.
0:48:04 – I would absolutely love that and I love Tim Ferriss.
0:48:06 Reed Hastings is the co-founder
0:48:07 and executive chairman of Netflix.
0:48:10 He is also a majority owner in Powder Mountain
0:48:14 and I hopefully will be skiing with him soon enough.
0:48:14 – Awesome.
0:48:16 – Reed, thank you so much for joining me on the podcast.
0:48:17 – Thanks so much, Ed.
0:48:24 – Our producer is Claire Miller,
0:48:25 our associate producer is Alison Weiss
0:48:28 and our engineer is Benjamin Spencer.
0:48:29 Thank you for listening to First Time Founders
0:48:31 from the Vox Media Podcast Network.
0:48:33 Tune in tomorrow for Proficy Markets.
0:48:36 (upbeat music)
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0:01:53 – Scott, imagine you’d built one of the most successful
0:01:54 companies in American history.
0:01:57 What would retirement look like?
0:01:58 – Checks.
0:02:06 – What would it look like?
0:02:08 It’d look like my life right now, Ed.
0:02:12 You don’t need to build one of the most successful companies
0:02:15 to have a wonderful back nine.
0:02:19 I’m doing exactly what I wanna be doing.
0:02:21 I hang out with impressive, intelligent young people,
0:02:23 such as yourself.
0:02:25 We make good money.
0:02:27 We have purpose.
0:02:31 And I get to do amazing things with my friends and family
0:02:34 that make me feel closer to them.
0:02:36 I can’t imagine doing anything differently.
0:02:40 And the only lesson in this humble brag,
0:02:41 or not so humble brag,
0:02:45 is once you get to a certain level of economic security,
0:02:47 you wanna use money as a means to an ends.
0:02:49 And that ends as great experiences
0:02:53 that make you feel closer to your friends and family
0:02:58 and recognize that you have an increasingly
0:03:00 finite amount of time here.
0:03:03 (upbeat music)
0:03:07 – Welcome to First Time Founders.
0:03:11 27 years ago, watching movies on demand
0:03:13 meant making a trip to the rental store.
0:03:16 But after a frustrating experience with a lost DVD
0:03:18 and a hefty late fee,
0:03:21 my next guest saw an opportunity for change.
0:03:23 He envisioned a world where people could enjoy movies
0:03:25 from the comfort of their homes
0:03:27 without the hassle of late fees
0:03:29 and without making a trip to the store.
0:03:31 So in 1997,
0:03:33 he launched a company with a groundbreaking idea,
0:03:36 flat rate movie rentals delivered by mail.
0:03:39 That single innovation,
0:03:40 followed by many more,
0:03:42 laid the foundation for what would become
0:03:46 the world’s leading movie and television streaming service.
0:03:49 With nearly 283 million subscribers
0:03:52 and over $28 billion in revenue this year,
0:03:55 this founder’s vision has forever changed
0:03:57 the way we consume entertainment.
0:04:00 This is my conversation with Reed Hastings,
0:04:03 co-founder and executive chairman of Netflix.
0:04:08 Welcome Reed, thank you so much for joining me.
0:04:09 – And what a treat.
0:04:12 So excited to be called a first time founder.
0:04:15 It’s like young again or something.
0:04:16 – Exactly.
0:04:18 I’m just looking at the background behind you.
0:04:19 I know that we were in talks about
0:04:21 maybe doing this in person
0:04:25 and I’m already just feeling huge amounts of regret.
0:04:27 The background looks beautiful.
0:04:28 – It’d be lovely to have you out here.
0:04:29 You gotta come see it.
0:04:32 I mean, the fall colors right now are incredible.
0:04:35 But of course we’re just waiting for the big snows to hit.
0:04:37 – So our listeners know where are you exactly?
0:04:40 – Powder Mountain Eden, Utah,
0:04:42 about an hour from Salt Lake City Airport.
0:04:45 – And that is something that we will be getting into
0:04:48 in this interview that is sort of your newest project.
0:04:51 But the title of this program is First Time Founders.
0:04:54 You are not a first time founder right now
0:04:55 but you were at one point.
0:04:57 So we’re gonna start with that.
0:04:59 We’re gonna start back in the 90s
0:05:02 right after you had served in the Peace Corps
0:05:04 and then you got your CS degree from Stanford
0:05:06 and you decided to start a company
0:05:08 but it wasn’t Netflix.
0:05:10 It was actually a company called Pure Software.
0:05:11 So let’s start there.
0:05:13 Could you tell us the story of Pure Software?
0:05:17 What led you to that venture and how it all came about?
0:05:20 – You know, I would say that starting a company
0:05:24 is like jumping out of an airplane without a parachute
0:05:27 and you just assume a bird is gonna fly by.
0:05:30 And so the people who start companies
0:05:34 are unrealistically positive and optimistic.
0:05:38 And then occasionally some of the times it works,
0:05:40 the bird flies by.
0:05:42 And if I think about my own experience,
0:05:45 I was excited about a particular product.
0:05:49 It found errors in a class of C and C++ software
0:05:52 that no one had been able to find before these memory errors.
0:05:55 And I was just hellbound on creating the product
0:05:59 and I had to do a company to see the product come to light.
0:06:02 – Was this something that you always knew you wanted to do?
0:06:04 Did you think that you were gonna be an entrepreneur?
0:06:08 – No, I did take one sort of business school-like class
0:06:12 and I had to learn how to use a spreadsheet to do that.
0:06:15 But that was like my little tiny bit.
0:06:20 And when I was a grad student, so mid-90s,
0:06:23 I got super excited about the foot mouse.
0:06:26 And you know, I was often with old hand mouse
0:06:29 and the terminal, you know,
0:06:31 it’s just slow back and forth to the keyboard.
0:06:33 And so, you know, of course,
0:06:35 I thought of the obvious solution,
0:06:36 which is you control the mouse with your foot.
0:06:38 – This is the first I’m hearing of the foot mouse.
0:06:39 I love it.
0:06:42 – Yeah, well, yeah, the foot mouse was a great idea,
0:06:46 I thought, which just shows I’m not very good
0:06:47 in the judgment category.
0:06:50 I’m good in the passion category, okay?
0:06:51 So anyway, I spent six months.
0:06:54 Luckily, I didn’t drop out of Stanford to do it.
0:06:55 And it turns out two things.
0:06:58 One is it’s a very dirty environment.
0:07:01 And so after a day or two, the foot mouse was pretty gross.
0:07:04 And then two, your leg cramps.
0:07:08 So it’s just not used to that fine dexterity control.
0:07:10 And those are both hard problems to solve,
0:07:13 which is why there’s still no foot mouse 30 years later.
0:07:17 But so I would say I’ve always had the product bug
0:07:20 or the passion product bug.
0:07:22 And then the first time I really did it,
0:07:24 which was pure, it actually worked.
0:07:27 So I spent a year at home writing the software.
0:07:29 And then I had to figure out a company to, you know,
0:07:32 figure out how to make it mainstream and distribute it.
0:07:36 The company from ’91 to ’95 doubled every year.
0:07:39 Morgan Stanley took us public in 1995.
0:07:44 And so in many ways, it was a great success of that era.
0:07:48 But I was pretty miserable for a lot of it
0:07:50 because I didn’t know how to do anything
0:07:51 in running a company.
0:07:54 And so it was just chaos and that felt bad.
0:07:56 – Yeah, so this is what’s so interesting to me
0:07:58 is that you’re not known for pure software,
0:08:01 but it was a smashing success.
0:08:03 I mean, it was your first company.
0:08:05 As you said, you took it public in ’95.
0:08:07 Later, you merged it with Atria.
0:08:11 And then in ’97, it was acquired for nearly a billion dollars.
0:08:14 And that’s roughly two billion in today’s dollars.
0:08:18 So this was like a hit hit success.
0:08:22 And it’s just so funny that you view it as kind of a,
0:08:24 one, that it’s sort of a footnote on your resume.
0:08:27 Two, that you view it as sort of a miserable time.
0:08:28 And so I’d love to just,
0:08:30 as you reflect on pure software,
0:08:33 you were a new entrepreneur as your first company.
0:08:34 It was successful.
0:08:37 What do you think you were getting right at that time?
0:08:38 – A product passion.
0:08:41 Think of one extreme, which is Elon Musk,
0:08:45 which is like all passion and vision.
0:08:49 And, you know, he manages quite successfully
0:08:52 through inspiration purely, right?
0:08:55 And then the day-to-day management of things
0:08:58 is pretty chaotic and he’s got tons of turnover.
0:09:00 And yet he still accomplishes amazing things.
0:09:03 So call that one end of the spectrum.
0:09:06 Another end of the spectrum is the really well-run,
0:09:09 you know, retail, something, I don’t know,
0:09:13 that, you know, not that inspiring, but very disciplined.
0:09:16 And so you can achieve excellence through that,
0:09:18 or you can achieve excellence at the other end.
0:09:22 And my first end was more in the Elon style.
0:09:26 It was all about a passion of, you know,
0:09:29 software quality and what that can mean for the world
0:09:31 and the problems of software errors.
0:09:35 But the day-to-day management was pretty poor on my part.
0:09:40 But we succeeded through kind of energy and passion,
0:09:43 because then people forgive you a lot of things
0:09:46 or you just make mistakes, but you, you know, you charge ahead.
0:09:49 – So we’ll fast forward to 1997.
0:09:52 You’ve just kind of scored pretty big on pure software.
0:09:54 You sold the company.
0:09:58 And I think for a lot of people at that point,
0:10:01 you start thinking about maybe early retirement,
0:10:03 maybe you moved to St. Barthes,
0:10:06 you do live a life of arrested adolescents,
0:10:10 as Scott likes to say, that’s not what you did.
0:10:12 You decided you wanted to start another company,
0:10:16 and this idea was for movie rental delivery.
0:10:19 Tell us what was going on in your head at that time,
0:10:24 and why did DVDs by mail seem like such a good idea to you?
0:10:25 – You know, it was the time when Amazon
0:10:26 was just going public.
0:10:29 E-commerce was clearly gonna be a big area.
0:10:33 And there were a lot of foolish companies just saying,
0:10:36 okay, I’m gonna sell computers or I’m gonna sell lamps,
0:10:40 and clearly Amazon was gonna crush them eventually.
0:10:43 And DVD rental, or rental generally,
0:10:46 has those two-way logistics, you had to send them back.
0:10:50 So it was very unique city-specific logistics
0:10:52 that we figured Amazon wouldn’t bother with.
0:10:55 It was too small a market, didn’t leverage all their core.
0:10:58 There weren’t five other things for them to rent.
0:11:02 So that would give us, we could ride the E-commerce explosion
0:11:04 and not have competition from Amazon,
0:11:07 only have it from the incumbents being blockbuster
0:11:09 and Hollywood video.
0:11:11 And then if we succeeded, we said, okay,
0:11:15 then we’ve got the pole position for converting to streaming.
0:11:19 Thus, we named the company Netflix and not DVD by mail.com,
0:11:21 ’cause that was always the ambition.
0:11:25 So you mentioned that Netflix was partly inspired
0:11:28 by Amazon, perhaps totally inspired by Amazon.
0:11:31 I didn’t realize this, but at one point,
0:11:35 Jeff Bezos actually offered to buy Netflix
0:11:36 and you declined it.
0:11:38 Could you take us through what happened there?
0:11:39 – Let’s think about the dates.
0:11:43 Late ’90s, and we went and talked to them.
0:11:45 It never got to like a formal offer.
0:11:48 It was sort of exploratory.
0:11:52 And they were properly interested in all businesses
0:11:54 that could show a profit.
0:11:55 And here’s the shocker, we said no,
0:11:58 and then we worked our ass off for 20 years.
0:12:01 Okay, and then if you compare the stock return,
0:12:05 if we had sold and then just ridden the Amazon stock up,
0:12:07 then the second outcome, 20 years of work.
0:12:10 And of course I’m happy to create Netflix
0:12:11 and that kind of thing.
0:12:12 – Yeah, absolutely.
0:12:17 And my favorite detail along those lines,
0:12:19 so Netflix is growing, it’s doing super well,
0:12:22 it’s on pace to go public.
0:12:23 And then the dot-com crash hits
0:12:25 and it brings down all these companies
0:12:28 and that includes Netflix.
0:12:31 And you actually tried to sell the company
0:12:36 to Blockbuster for $50 million and they rejected you.
0:12:39 So I’d love to hear the story of how that went down.
0:12:43 – Yeah, I mean, that one was more avoiding a big fight
0:12:44 with Blockbuster.
0:12:46 We realized that if we’re gonna grow really big,
0:12:48 we’re gonna have a big fight with them
0:12:50 and how about if we just give them 50%
0:12:52 and then help them profit
0:12:55 and not have that big fight with them.
0:12:57 And so we were open to that,
0:13:01 but they’re like a big, serious corporation.
0:13:04 We were a bunch of scrappy Silicon Valley kids
0:13:07 and they were like, when we wanna do online,
0:13:08 we’ll just do it.
0:13:12 And so they didn’t see any need or interest in buying us.
0:13:16 And then they did compete with us like heck
0:13:20 and luckily that didn’t start until 2004.
0:13:23 So they waited an awfully long time
0:13:25 ’cause they weren’t sure the market size,
0:13:27 but then they got quite serious
0:13:32 and it was a huge price battle in 2005 and 2006.
0:13:36 And then they ultimately bankrupted themselves
0:13:37 by 2007 or eight.
0:13:42 – I feel like in the history of video,
0:13:44 the way that Blockbuster is remembered
0:13:46 is they sort of dropped the ball.
0:13:48 They want focus,
0:13:51 they want managing themselves correctly
0:13:53 and that you came in and ate their lunch.
0:13:56 Do you think of their strategy that way?
0:13:59 Do you think that they sort of slacked off
0:14:02 and that’s where you and you’ve basically picked up the slack?
0:14:06 How do you view your takeover of Blockbuster in that story?
0:14:09 – High respect for their leadership,
0:14:11 very smart, thoughtful people.
0:14:13 They rolled up the business,
0:14:15 beat all their direct competitors
0:14:18 through kind of careful and good execution
0:14:20 of store-based video rental
0:14:22 and negotiated great deals with the studios.
0:14:26 When it came to looking forward,
0:14:27 they were very forward-looking
0:14:31 and they did a deal with a broadband company in 2000,
0:14:33 long before we were streaming, okay?
0:14:37 We didn’t start streaming till 2007, okay?
0:14:40 So in 2000, they do a deal with a broadband company
0:14:42 to be on the leading edge.
0:14:44 Unfortunately for them,
0:14:47 the name of that company was Enron, okay?
0:14:49 And it turned out to be this, you know,
0:14:51 billion-dollar loss that was a scam.
0:14:54 So they kind of learned, you know,
0:14:59 internet is a bunch of scam artists, you know?
0:15:01 And so they were more scared off.
0:15:05 So then we came in with DVD by mail
0:15:06 and it seems like, you know,
0:15:08 an interesting little business,
0:15:13 but again, they were looking for how to go direct to consumer
0:15:16 and they didn’t want to do this intermediate step.
0:15:19 It’s hard when you’ve got one business model
0:15:22 you’ve done in their case for 25, 30 years
0:15:27 and then once in a generation change, i.e. the internet,
0:15:30 you know, like Netflix hasn’t, yeah, I guess streaming.
0:15:33 I mean, we were born to do streaming
0:15:34 and thought about streaming all the time.
0:15:39 So it wasn’t hard for us to let DVD go.
0:15:42 But I think if DVD had been the vision,
0:15:44 you know, it would have been a lot harder.
0:15:45 – It was a long time
0:15:47 before you actually started streaming.
0:15:50 Were you constantly telling the team, you know,
0:15:52 ultimately this is the goal,
0:15:53 ultimately we’re gonna get into streaming.
0:15:55 This is just phase one.
0:15:56 – Yeah, for sure.
0:16:01 I mean, we launched in ’97, ’98 and 2007,
0:16:04 a decade later was our very first streaming.
0:16:07 And that was just a Windows PCs with crappy content.
0:16:13 Okay, so it wasn’t until 2009, 2010
0:16:15 that we had the Xbox deal.
0:16:17 So you could watch Netflix on your TV
0:16:18 if you had an Xbox.
0:16:20 And we had the stars online content,
0:16:22 which is like a baby HBO.
0:16:27 And so then it was like real content and on the television.
0:16:29 And then it was like another five years
0:16:33 before we were integrated into most televisions, you know,
0:16:35 and then we got our button on the remote,
0:16:36 the Netflix button.
0:16:37 And then we started, you know,
0:16:40 we did our original content first in 2012.
0:16:43 So that was house of cards.
0:16:46 So yeah, there was a lot of steps in there
0:16:48 that took to put together.
0:16:51 So, you know, it’s an unusual entry strategy
0:16:54 to build a business to be the segue, you know,
0:16:57 that is where we’re gonna build DVD rental
0:17:00 and then be in position for internet streaming.
0:17:03 But we were differentially confident
0:17:07 that DVD by mail was the best solution for a decade.
0:17:09 And then when it came in with streaming,
0:17:11 you know, we were super hungry for it.
0:17:14 And then of course, with that, we could expand globally.
0:17:18 – We’ll be right back.
0:17:20 (upbeat music)
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0:20:51 – We’re back with First Time Founders.
0:20:55 Was it difficult to convince your team of all of this?
0:20:57 I mean, it sounds obvious now.
0:20:59 Yeah, of course, people will be streaming,
0:21:02 but I feel like back then, you’re sort of making a,
0:21:05 you’re making a gamble, you’re making a bet.
0:21:07 I’m just interested, you say, you know,
0:21:08 we were confident of all of this.
0:21:10 Was it all of you or was it just you?
0:21:14 How did you convince everyone this was the right way to go?
0:21:17 – It was pretty broad that,
0:21:20 so YouTube started in 2005.
0:21:22 We could start to use streaming.
0:21:26 That was the first low quality but high scale streaming.
0:21:30 So, you know, there’s like little things like should we,
0:21:32 how much should we invest?
0:21:36 Should we invest, you know, 30 million or 300 million
0:21:38 in streaming in a given year?
0:21:42 So, you know, but I’ll call those technocratic decisions.
0:21:44 It wasn’t, nobody thought we shouldn’t invest.
0:21:49 It was just how fast, how early, those kinds of things.
0:21:53 – I feel like one of the things that makes Netflix so unique
0:21:56 is that it’s basically been on the forefront
0:22:01 of pretty much every major secular shift that we’ve seen
0:22:02 over the past several decades.
0:22:05 And it’s, you know, probably been on more of those
0:22:07 than any other company in this generation.
0:22:08 I can just go through the list.
0:22:11 I think it’s worth just listing for people.
0:22:14 You know, you had the VHS to DVD shift,
0:22:17 you had brick and mortar to delivery,
0:22:22 one time purchase to subscription based, DVDs to streaming,
0:22:25 and then more recently licensing to original content
0:22:28 and then even more recently domestic content
0:22:29 to international content.
0:22:31 – Crazy, crazy, isn’t it?
0:22:35 So it’s basically front running every single major shift
0:22:36 in the industry.
0:22:41 And that to me has been the differentiator with Netflix
0:22:42 and the trend.
0:22:44 What do you think you have done as a leader
0:22:49 that has enabled that level of innovation
0:22:51 over such a long time?
0:22:52 I mean, a lot of people innovate,
0:22:54 a lot of people do new things,
0:22:57 but you’ve been consistent in every single one.
0:23:00 What do you think you’ve gotten right?
0:23:03 – You know, I try to think through from first principles
0:23:08 why certain companies grow and thrive
0:23:11 and, you know, when they get left behind or when not.
0:23:14 So I’ve always been a fan of kind of studying,
0:23:16 you know, when I was growing up,
0:23:18 it was in the computer business,
0:23:22 it was son and, you know, microsystems and it was HP
0:23:24 and they were, and digital equipment.
0:23:27 These companies were dying right and left
0:23:31 and they were major companies initial for a while.
0:23:36 And so I early on got a very close study
0:23:40 of major companies shift with the ground,
0:23:42 shifted out from under them
0:23:47 and how unusual it was to be Microsoft or others
0:23:52 that, you know, continued to pivot with the new landscape.
0:23:56 And so I think I’ve always been a fan of that
0:24:01 strategy thinking learned mostly by watching other companies
0:24:03 ’cause if you learn it on your own companies,
0:24:04 that’s expensive.
0:24:08 So it’s better to look and see when you see a company
0:24:13 do big pivots like Microsoft has, you know, over 40 years
0:24:15 and they miss some too, right?
0:24:17 They’re not, they’re not perfect in it.
0:24:18 – One of the pivots that you may,
0:24:21 I mean, so from DVDs to streaming,
0:24:25 I was just looking back through the, through the time machine
0:24:31 you decided to rebrand the DVD business to Quickster.
0:24:34 And the streaming service was gonna remain Netflix.
0:24:38 And I just pulled some headlines from that year.
0:24:40 Quickster is dead.
0:24:41 Quickster goes quickly.
0:24:43 And here’s my favorite from the Atlantic.
0:24:47 Five reasons why Quickster is now dead star.
0:24:51 That to me is sort of like an example of where, you know,
0:24:53 a pivot could kind of go wrong,
0:24:55 but ultimately it was successful.
0:24:57 I’d love to just get your reflections
0:25:02 on pivoting to streaming, an initial failure it seemed,
0:25:05 and then it worked out big time.
0:25:08 – So we, in studying other companies,
0:25:10 we realized they’re run by good people
0:25:13 and they still miss the transition.
0:25:17 So the average smart and careful leadership team
0:25:18 is too slow.
0:25:21 And so we thought, okay, we’ve gotta go faster
0:25:23 than we’re comfortable, okay?
0:25:25 And the phrase internally was,
0:25:29 we got to be so aggressive, you know,
0:25:31 that the hair in the back of our neck, you know,
0:25:34 is raised up, you know, it’s really scary.
0:25:37 And that allowed us to say, okay,
0:25:40 let’s take all of the DVD rental business
0:25:43 and shove it to the side into Quickster.
0:25:44 And the only thing remaining,
0:25:46 and we knew it would be streaming.
0:25:50 And but at that time, 2012 streaming was still not very good
0:25:52 and still not very broad.
0:25:55 And so we were very aggressive
0:25:57 and it was too aggressive for the customers, okay?
0:25:59 We didn’t, you know, they care about the hair.
0:26:01 I mean, I’m paying you 20 bucks a month.
0:26:05 I want, you know, what I want.
0:26:08 And so we were ahead of the customers.
0:26:10 And then that cost us a lot, you know,
0:26:14 the stock shrank by a lot, customers quit us,
0:26:15 the press thought we were idiots.
0:26:18 And so it was too fast in hindsight, okay?
0:26:21 But think of it as the aggressive spirit
0:26:23 that allowed us to do all those transitions
0:26:25 you referred to a few minutes ago,
0:26:27 was the same aggressive spirit
0:26:31 that makes us go a little too fast with Quickster, okay?
0:26:33 And then ultimately, you’re right.
0:26:36 It became dvd.com and we did the thing and, you know,
0:26:39 and separated it in a more low key way.
0:26:42 And then, you know, it was just last year,
0:26:44 we finally closed dvd.com.
0:26:48 So, you know, it’s the right idea too soon.
0:26:50 But if you think about it,
0:26:51 these things are uncertain.
0:26:56 And so if you make five decisions a little bit late
0:26:58 and one a little bit early, you know,
0:27:00 you’re sort of in the same ring.
0:27:02 So we didn’t beat ourselves up too much on it
0:27:05 because we were like, look, you got to be aggressive.
0:27:08 You got to be able to recover if it’s been too fast,
0:27:11 but you can’t be afraid of moving too fast.
0:27:12 – Why is that exactly?
0:27:15 Why do you think that it’s so important to be aggressive?
0:27:18 I think that, I mean, I agree in hindsight.
0:27:21 I mean, I’m glad that you were aggressive,
0:27:24 but I feel like it’s very easy in business and in life
0:27:27 to think, well, you know, things are going well
0:27:29 and we don’t want to disappoint our shareholders
0:27:31 and we don’t want to disappoint the customers.
0:27:32 And it’s just so interesting to me
0:27:35 that you were very, very sure that no, no, no,
0:27:38 we have to move extremely quickly.
0:27:40 Why was that so important to you?
0:27:42 – So some people are tall or short.
0:27:47 Some people are risk sensitive or risk loving.
0:27:52 Okay, honestly, I think it’s built into people’s biology.
0:27:55 And I’ve always loved the fear and excitement
0:27:57 of the going fast.
0:28:00 I do think it’s helpful if you take smart risks.
0:28:04 Obviously, if four or five of the big decisions we made
0:28:06 were as bad as quickster, then there’s a problem.
0:28:09 You know, you’ve tipped into being reckless.
0:28:13 Okay, but if mostly you get it right
0:28:16 and if you can recover when you’ve been too fast,
0:28:18 then that’s just aggressive and not reckless.
0:28:22 And so then, you know, you can get great returns
0:28:23 like Netflix has been.
0:28:26 – Cultural principles and company culture
0:28:29 has been such an important part of what you built
0:28:33 at Netflix and now many companies around the world
0:28:35 have borrowed a lot of your principles.
0:28:37 I’d love to just go over a couple of them
0:28:40 and hear from you what they mean and why they’re important.
0:28:43 First one I’ve got here is farming for descent.
0:28:47 – Yeah, that’s one actually we brought in after quickster.
0:28:50 It means that descent in a management team
0:28:54 is not easy or natural, especially if the leader
0:28:57 has a strong view and has often been right.
0:29:00 And so it’s important to farm for descent
0:29:05 and to stimulate mechanisms by which contrary views
0:29:09 can be evaluated and heard.
0:29:12 We’re not trying to manufacture a consent.
0:29:16 Okay, we’re trying to stimulate descent, you know,
0:29:18 up to a point and then you make a decision
0:29:19 and then you want everybody on board
0:29:21 to execute it like heck.
0:29:23 – What is that point?
0:29:26 You said up to a point, where do you cut it off?
0:29:30 – So for big decisions, it’s a somewhat formalized process
0:29:33 where we’ll have a meeting and then everyone enters
0:29:36 their view in a Google spreadsheet, you know,
0:29:39 that’s visible to everybody and you vote on things,
0:29:43 negative 10 is like, it’s going to be a disaster.
0:29:45 To zero is like, I’m not really sure.
0:29:48 To 10 is this is the best thing we can possibly do.
0:29:50 I’m very confident.
0:29:54 And then whoever’s making the decision then writes up,
0:29:56 think of it like a Supreme Court decision.
0:29:58 I mean, it’s not as well written or formal and stuff,
0:30:01 but you know, it’s here, what I heard,
0:30:03 here are the different views.
0:30:06 And ultimately, I think the balance of risk is this.
0:30:08 And I think we should do why.
0:30:10 And then that’s the decision and then we move forward.
0:30:13 – The other one I have here is extraordinary candor.
0:30:14 What does that mean?
0:30:17 – Well, human beings, as we’ve lived in denser
0:30:20 and denser groups, have learned to be more
0:30:22 and more polite and indirect.
0:30:26 So, you know, in China or in Japan where it’s very crowded,
0:30:31 people are super polite and you know, it’s an art form.
0:30:34 The challenge in that in business is we come
0:30:37 from a lot of different cultures and we’re moving fast.
0:30:41 And so it’s better to enable people to be rude
0:30:45 by conventional standards and to be very direct,
0:30:49 at least about the workplace, not about your clothing
0:30:52 or you know, that you’re attracted to someone
0:30:54 or I don’t know, you know, but again,
0:30:57 on the work dimensions, we want high candor
0:31:02 to get people to have more clear, effective
0:31:04 and honest discussions about, you know,
0:31:08 should we cut price in France or should we do this show
0:31:11 or should we do this product feature?
0:31:13 – Just gonna move through one more cultural principle here,
0:31:15 which is the keeper test.
0:31:16 What is that?
0:31:19 – The keeper test is if someone was going to quit,
0:31:23 would you work hard to keep them, to change their mind?
0:31:28 And so it’s using that as the firing criteria
0:31:30 rather than the traditional, have they screwed up
0:31:33 so egregiously that we should fire them, okay?
0:31:36 That’s kind of the default model.
0:31:39 And we would say, no, we’d like to have a whole bunch
0:31:41 of people that you would fight hard to keep.
0:31:45 And you’re responsible to all of your direct reports
0:31:47 are people that you would fight hard to keep.
0:31:48 We’ll be right back.
0:32:05 – The Capital Ideas podcast now features a series
0:32:08 hosted by Capital Group CEO, Mike Gitlin.
0:32:10 Through the words and experiences
0:32:13 of investment professionals, you’ll discover
0:32:15 what differentiates their investment approach,
0:32:18 what learnings have shifted their career trajectories
0:32:21 and how do they find their next great idea?
0:32:24 Invest 30 minutes in an episode today.
0:32:26 Subscribe wherever you get your podcasts.
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0:34:37 – We’re back with First Time Founders.
0:34:40 I’m gonna move on to Leaving Netflix.
0:34:44 In January, 2023, you stepped down as the CEO.
0:34:47 Your co-CEO Ted Serandos stuck around.
0:34:49 He remained at the helm.
0:34:51 Greg Peters was promoted.
0:34:53 And when I look at what happened here,
0:34:56 to me, this is kind of one of the greatest
0:35:00 succession stories of this decade.
0:35:05 Because I look at what happens to Disney,
0:35:07 what’s happening right now at Nike,
0:35:09 what’s been happening at Starbucks.
0:35:13 I even look at what’s happened in our government.
0:35:16 And what I’m finding is that the transition of power
0:35:18 is extremely difficult.
0:35:20 But if you look at what’s happened with Netflix,
0:35:21 Netflix has crushed it.
0:35:25 The stock has, I think, roughly doubled since you left,
0:35:27 which is actually a testament to your ability
0:35:29 to formulate a plan.
0:35:32 What makes a good succession plan?
0:35:35 How does a leader, such as yourself,
0:35:39 peacefully and successfully remove themselves from the helm?
0:35:42 – You know, it’s something that we always have concentrated on,
0:35:45 which is developing Ben Strength and Greg and Ted,
0:35:48 you know, been with me for 19 years or something.
0:35:51 So it’s like they were very ready.
0:35:54 And very excited to have the shot, you know, to lead.
0:35:57 But again, I think that’s, you know,
0:36:02 again, similar to the Andy Jassy, you know, following Bezos.
0:36:04 So I bring that up just to say, you know,
0:36:06 there are other proof points of, I mean,
0:36:09 Jassy’s been at Amazon for 20 years, you know,
0:36:10 and he’s different than Bezos,
0:36:12 but you know, he’s doing it his way.
0:36:15 And you know, there are those companies that struggle,
0:36:20 you know, where the board and the CEO either didn’t pick right,
0:36:24 or it took a long time, or, you know, a range of tricky issues.
0:36:27 – And was it hard to let go of Netflix?
0:36:31 – Yeah, you know, I’d done it for 25 years every day,
0:36:34 jump up early to check the metrics and be in charge.
0:36:39 And it, you know, was a big shock at first.
0:36:42 But, you know, I knew that this was a great time
0:36:43 for them to take over,
0:36:45 ’cause we had a great recovery path
0:36:48 that they architected, you know, for the company.
0:36:50 But on a personal basis, I missed it.
0:36:53 I missed being the center, I missed the, you know,
0:36:54 the influence, I missed the intensity,
0:36:56 missed the global travel.
0:36:58 But, you know, three months later,
0:37:01 it took over Powder Mountain,
0:37:03 and you know, that’s been an incredible adventure.
0:37:06 And then, you know, do a bunch of philanthropy
0:37:08 and, you know, more active on that side.
0:37:11 So I’ve been, you know, really blessed
0:37:13 to continue to feel very invigorated.
0:37:15 – It’s so interesting to me,
0:37:19 because who would’ve thought that the entertainment,
0:37:24 internet, software entrepreneur would decide,
0:37:28 you know what, I’m gonna go start a ski resort.
0:37:30 – My wife and I had a home here, a powder already.
0:37:32 So it’s not like I searched 50 mountains
0:37:36 and found the right one in some great strategic play.
0:37:38 We had a house here.
0:37:40 We could see the mountain was struggling.
0:37:44 The opportunity to buy out the existing owners came up.
0:37:46 – And really, most ski mountains
0:37:48 are real estate development projects.
0:37:51 So that’s the, you know, skiing itself
0:37:54 is, you know, a very tough business like restaurants,
0:37:55 that kind of thing.
0:38:00 And then it’s creating the real estate play
0:38:01 that’s been so exciting.
0:38:04 – I’d love to know if there are any similarities
0:38:09 between operating a ski resort versus a streaming service.
0:38:13 What are sort of the main differences in the experience?
0:38:15 But more importantly, what are the main similarities?
0:38:16 What’s sort of carried over?
0:38:21 – Yeah, the similarity is really the subscription orientation,
0:38:23 which is you’ve got a set of customers
0:38:26 and your job, you know, is to keep them excited.
0:38:30 And so you’re not trying to get new customers all the time,
0:38:32 like a transactional business.
0:38:35 So it’s really focused on, you know,
0:38:38 those that own real estate or have season passes.
0:38:41 And so that’s probably the biggest similarity
0:38:43 in business model.
0:38:46 Then there’s a lot of similarities in culture now,
0:38:48 where we’re, you know, building up powder mountain
0:38:52 to do keeper test and high compensation.
0:38:56 And, you know, all of the things that we’ve learned before.
0:38:57 And then we’ve shaken up the models.
0:39:00 So, you know, we’ve split the mountain in half,
0:39:02 half for private, half for public.
0:39:03 No one had done that before.
0:39:06 We did a thing a couple of days ago
0:39:09 where we said on February weekends,
0:39:11 which are the busiest times,
0:39:13 it’s a season pass only days, you know,
0:39:17 we’re continuing to find ways to innovate.
0:39:19 But I would say in the ski industry,
0:39:23 the great popularizers have been the epic and icon passes.
0:39:26 They’re the ones that roll up, you know, 50 resorts.
0:39:30 Think of them as the Costco or Amazon Prime.
0:39:32 Okay, that’s like a super high scale.
0:39:34 I mean, I would have loved to invent that business,
0:39:38 but I didn’t, you know, it’s been going on for 10 years.
0:39:42 And now we’re competing now in the irony of ironies,
0:39:44 you know, on the niche provider competing
0:39:48 with the dominant firm and trying to come up as we have
0:39:50 with something that’s counter positioned.
0:39:54 And epic and icon have made skiing more affordable,
0:39:56 but they’ve made it really crowded.
0:39:59 And so then where the counter to that were more expensive,
0:40:03 but were like beautifully pristine and open
0:40:06 and it’s, you know, more like a hella skiing.
0:40:07 It sounds absolutely incredible.
0:40:11 I mean, the real difference here is this is really
0:40:15 about bringing yourself joy, it seems.
0:40:17 You know, this is about spreading happiness
0:40:19 and having a great time.
0:40:21 It makes families happy.
0:40:22 It makes you happy.
0:40:25 And I think that’s significant that that is what you’ve decided
0:40:29 to zero in on and make a whole operation out of.
0:40:34 So I’d love to get sort of your thoughts on joy,
0:40:38 on happiness and the extent to which that’s played a role
0:40:41 in your career and the decisions you’ve made throughout it.
0:40:45 – You know, I would say finding new angles
0:40:47 on existing businesses, you know,
0:40:51 whether that’s rental or, you know, software error detection
0:40:55 or this one, you know, skiing is the exciting thing.
0:40:59 Coming up with new business models that, you know,
0:41:03 work really well in our case to have 600 families
0:41:07 have the private skiing and then use that
0:41:09 to anchor the mountain and the public side
0:41:11 with, you know, thousands of season passes.
0:41:15 And it’s got all the joy for me of Netflix,
0:41:17 even though it’s a fraction of the scale,
0:41:19 a fraction of the profitability,
0:41:23 a fraction of, you know, things that are important in many ways,
0:41:27 but it’s a fun problem to be engaged with.
0:41:30 And yes, to create, again, but the joy we create
0:41:32 for our members is it’s very visceral.
0:41:34 And, you know, we get to know them.
0:41:37 And that’s, you know, deeper than just, you know,
0:41:40 someone writing you of how important this show was
0:41:43 to see them, but that was fun too.
0:41:47 – As you look back at this very wide range in career,
0:41:50 which parts were the most rewarding in your view?
0:41:54 – I’d have to say right now, I feel most rewarding
0:41:58 because again, it’s my neighbors that are, you know,
0:42:01 that we’re saving the resort for and expanding and growing
0:42:05 and putting in, like this year, we’re putting in four new lifts.
0:42:08 And like nobody goes that aggressive all at once,
0:42:12 it’s crazy in a way, and yet we’re pulling it off.
0:42:14 Even though if I’m objective,
0:42:18 it’s not as much good in the world, you know, as say, Netflix,
0:42:21 it feels very intense because I know the people.
0:42:23 – As a community aspect, yeah.
0:42:27 – Yeah, I would say the personal satisfaction is highest now,
0:42:31 you know, probably in terms of world impact, you know,
0:42:33 that Netflix would be the highest.
0:42:35 – And what about your philanthropy
0:42:37 and your ventures and education?
0:42:40 What has that brought you on a personal level?
0:42:43 – What I found, like the year I did the politics,
0:42:46 is, you know, it’s good for the world
0:42:51 and, but I wouldn’t jump out of bed to do it, you know?
0:42:55 I jump even today with a philanthropy, I like it.
0:42:57 It’s important in doing a bunch on charter schools,
0:42:59 a bunch on AI learning,
0:43:02 a bunch on lower cost mobile phone access in Africa,
0:43:07 home solar, so I recognize it as important,
0:43:09 but like if I have an hour,
0:43:11 I jump into Powder Mountain stuff, you know,
0:43:15 ’cause it’s just, it’s such a great group of people,
0:43:18 both, you know, on the staff and then in the membership.
0:43:20 – It’s funny hearing you talk about this because
0:43:26 it’s so clear to me that you get hyper-hyper obsessive
0:43:30 and focused on very specific things.
0:43:32 And right now, you know, it’s the ski resort.
0:43:34 This is what’s dominating.
0:43:36 It feels like that sort of gives insight
0:43:38 into why you’ve been so successful in all of your ventures,
0:43:42 is that you pick a thing and that’s your thing.
0:43:44 I guess the other word for this is focus.
0:43:47 How has that played into your career
0:43:49 and do you think that’s something that other people
0:43:53 who want to be successful should be embracing more of?
0:43:55 – Well, what I realized is there’s other ways
0:43:56 to be successful, like my friends
0:43:59 who are venture capitalists, they’re the opposite.
0:44:03 You know, they’ve got 30 deals, contemplated,
0:44:05 five deals they’re in and, you know,
0:44:07 and they’re incredible at multitasking
0:44:11 and, you know, the ones who are very good at it.
0:44:15 And I realize it’s just not my personality, you know?
0:44:18 And so I think a lot of it probably
0:44:20 for the young entrepreneurs figuring out
0:44:24 what really are they differentially good at.
0:44:25 So yes, I’m a focused person,
0:44:28 but I wouldn’t say that’s the only way to be.
0:44:30 You know, I would say in the investor class,
0:44:32 they can’t jump in and try to solve
0:44:34 the problems of the company.
0:44:36 There’s different ways to contribute
0:44:38 in different parts of the ecosystem.
0:44:43 – There are a lot of young men who listen to this podcast.
0:44:46 As a businessman, as a family man,
0:44:49 and as a philanthropy man,
0:44:51 what would be your number one piece of advice
0:44:55 to a young man who’s just getting started in his career?
0:44:58 – There’s no one path to imitate.
0:45:01 And sometimes people fall on the trap
0:45:05 of like finding their role model and, you know,
0:45:08 and I would say it’s staying loose and flexible
0:45:11 in learning and trying things.
0:45:15 And it’s always challenging yourself.
0:45:18 If you’re growing in your skill set,
0:45:20 then you’re gonna have lots of opportunity,
0:45:22 but there’s no predictable path.
0:45:27 So it’s more of an emphasis on growth
0:45:32 and growth mindset than on preparation and having a plan.
0:45:33 – It’s interesting.
0:45:35 Do you feel that you embodied that
0:45:36 through your career as well?
0:45:40 – Yeah, no, it was being flexible and adaptable.
0:45:45 And it was a very, very unpredictable angles
0:45:46 and where things veered.
0:45:51 And then I was fortunate to latch into some big problems,
0:45:53 whether that’s software quality
0:45:58 and or whether that’s, you know, streaming entertainment
0:46:00 or now powder real estate.
0:46:02 – And if there’s one piece of advice
0:46:05 that you could have given yourself
0:46:07 when you were a young, young entrepreneur,
0:46:09 before you started pure software,
0:46:12 is there something that you would have told yourself
0:46:15 that you’d like to tell him now?
0:46:19 – I didn’t understand how to forgive myself
0:46:21 when I made mistakes.
0:46:25 So, you know, I was always going fast,
0:46:27 taking chances, doing things.
0:46:30 But, and now I’m able to see some mistakes
0:46:35 as part and parcel of, you know, being aggressive.
0:46:38 But at the time, anytime I made a mistake,
0:46:43 I would berate myself endlessly and unproductively.
0:46:47 So I didn’t know how to forgive myself.
0:46:50 – I mean, you said unproductively berating yourself.
0:46:53 Is there a way to think of self criticism
0:46:55 in a more productive way
0:46:58 that is actually helps you move forward?
0:47:01 – My hunch is it just comes with age
0:47:03 and that there isn’t really a shortcut.
0:47:07 So, I mean, you can understand the intellectual theory,
0:47:09 but in terms of the emotional release,
0:47:11 and, you know, when you’re younger,
0:47:14 all those emotions are so intense,
0:47:15 you know, about success and failure
0:47:18 and esteem and humiliation.
0:47:21 And, you know, our systems are keyed up for that
0:47:24 in ways that makes people very hungry.
0:47:27 But I would say as you get experience,
0:47:29 learning how to forgive yourself
0:47:31 would be the little bit
0:47:34 that I might be able to add to your audience.
0:47:37 ‘Cause I’m sure they’re quite good risk takers
0:47:38 and they’re quite aggressive
0:47:39 and they’re good about learning and growth
0:47:40 and lots of things.
0:47:41 – Absolutely.
0:47:42 I love that.
0:47:45 And I will take that moving forward for myself as well.
0:47:47 – Ed, when are we gonna get you up skiing?
0:47:49 – Oh my God, I’ll come tomorrow.
0:47:51 (laughing)
0:47:53 As soon as the ski season starts, I wanna do it.
0:47:55 – Great to get you up this winter
0:47:59 and we should do a little event maybe with you
0:48:01 and Tim Ferriss who’s local to his Park City.
0:48:04 – I would absolutely love that and I love Tim Ferriss.
0:48:06 Reed Hastings is the co-founder
0:48:07 and executive chairman of Netflix.
0:48:10 He is also a majority owner in Powder Mountain
0:48:14 and I hopefully will be skiing with him soon enough.
0:48:14 – Awesome.
0:48:16 – Reed, thank you so much for joining me on the podcast.
0:48:17 – Thanks so much, Ed.
0:48:24 – Our producer is Claire Miller,
0:48:25 our associate producer is Alison Weiss
0:48:28 and our engineer is Benjamin Spencer.
0:48:29 Thank you for listening to First Time Founders
0:48:31 from the Vox Media Podcast Network.
0:48:33 Tune in tomorrow for Proficy Markets.
0:48:36 (upbeat music)
0:48:49 Support for this show comes from Seven Rooms.
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0:48:53 who wanna create more regulars on the regular,
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0:49:17 and not your workload.
0:49:20 Learn more at SevenRooms.com.
0:49:23 Seven Rooms, make magic, make money.
0:49:27 – Support for this episode comes from AWS.
0:49:29 AWS Generative AI gives you the tools
0:49:31 to power your business forward
0:49:34 with the security and speed of the world’s most experienced cloud.
0:49:37 (upbeat music)
Ed speaks with Reed Hastings, co-founder and executive chairman of Netflix. They discuss the company’s path from dvd rental to streaming, the importance of company culture, what it was like to leave Netflix, and the challenges and joys of Reed’s newest venture: a ski resort in Utah.
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