You’ve got no hope if you try to pretend to be Reed Hastings or Mark Zuckerberg or Bill Gates.
Life’s short. I mean, you know, why or what are we doing this where we like, won’t have a difference?
We think of ourself like like alchemists. We take in money and out comes joy.
“I would say I’ve always believed that a strong mission statement’s really important and I have to say we’ve never succeeded at it.” – Reed Hastings
Evan: He’s an American entrepreneur and philanthropist.
He’s the co-founder and CEO of Netflix and he serves on the board of directors of Facebook and a number of other non-profit organizations.
He has an estimated net worth of over a billion dollars.
He’s Reed Hastings and here is my take on his top ten rules to success.
Rule number one is my personal favorite and make sure to stick around all the way to the end for some special bonus clips. And as always, if Reed says something that really resonates with you, please leave in the comments below and put quotes around it so other people can be inspired, as well. Enjoy!
Rule #1: Be Authentic
You have to be authentic. I mean, you’ve got no hope if you try to pretend to be Reed Hastings, or Mark Zuckerberg, or Bill Gates, or whoever you want to think your CEOs are that you’ve met. You know, that is crazy. And you got to really get comfortable with yourself, your strengths, and weaknesses.
“You have to be authentic.” – Reed Hastings
People are inspired by authenticity and I’m just surprised how many people feel like they’re acting and/or try to act. And you may be a really quiet person and that’s fine. But if you have that fierce will, that desire, for the institution, the company to be great, and your own role in that is secondary, and you authentically express that in whatever ways you do, then you’ll be greatly accepted, okay?
And so, that’s all it takes, is to be authentic and not try to be something else and to fundamentally care at your core about what’s good for the company. And if everybody knows and you act in the notion of what’s good as best as your judgement can tell, what’s good for the company, they will see that and people will follow you and they won’t be cynical. It’s when you hide things, it’s when you pretend.
Rule #2: Be At The Edges Of Chaos
If we don’t, if we’re not creative enough, if we don’t push it hard enough, we’ve got to have some failures and so, we don’t really want to have all hits. I’m clearly glad the first ones are hits. But, you know, the sign that you’re right at the edge of chaos, the edge of creativity, is that some stuff doesn’t work.
Interviewer: And why do you want to be there? ‘Cause networks don’t want to be there.
Life’s short. I mean, you know, why or what are we doing this where we like, won’t have a difference?
“If we’re not creative enough, if we don’t push it hard enough, we’ve got to have some failures and so, we don’t really want to have all hits.” – Reed Hastings
You know? And so it’s an aid. It’s wanting to push the edge, to create something that really, the people are proud of and that they enjoy.
Rule #3: Create Joy
We collect this year about eight billion dollars of customers’ money. So, thank you all of you, for giving us your money. And what we do is we say,
“That money’s in trust to create joy. “We have to turn that in to the most joy possible.”
And so, we look and we say for every show, if a show cost a hundred million dollars, how much joy, how much viewing did it create amongst all of you?
If it cost fifty million, or two hundred million, of course, you want different amounts of joy.
And so, we look at as how much joy can we create of your money?
And if we turn it into joy effectively, then you’re happy and you tell your friends, and we grow. And then, we have more money next year to turn into more joy. So, we think of ourself like alchemists. We take in money and out comes joy.
Rule #4: Known Your Mission
I would say I’ve always believed that a strong mission statement’s really important and I have to say we’ve never succeeded at it. It’s like this odd thing. We’ve had them every year for 15 years and they’re constantly different and now we’re all so cynical.
We’re like, “Come on, we’re trying to make people happy.” I mean, that’s the fundamental thing in consumer service. We’re trying to be better and us and Disney and Mission aren’t that different. There’s a bunch of different tactics at it but we’re an emotional product.
We cater to the things that are important, but not necessary and I love that part about it ’cause like, when you you’re selling milk or penicillin, you’re selling something that somebody needs. And we get to sell something you want, okay, that you choose to do because it’s really cool. It’s human to be entertained and to connect to people over entertainment. And so, we celebrate that a lot and we want to change the industry.
“I’ve always believed that a strong mission statement’s really important and I have to say we’ve never succeeded at it.” – Reed Hastings
But in terms of, like a mission statement like so many companies have, Facebook talks about a more connected and open world. And then, you see that phrase again and again and again. And it’s a powerful mantra. We don’t have an equivalent. And I think we probably would’ve been stronger if we do. In the early days, it was to connect people with movies they’ll love. And it’s okay, but it’s kind of like the long, kind of awkward phrase.
Connect people with movies they’ll love. It’s just not punchy. And then, so like, we used it, we had t-shirts, you know. And then, it didn’t really motivate anyone, didn’t really stick. But we knew we were trying to make people happy with DVDs. And then, eventually it was dreaming and original content. So it didn’t hold us back much.
Rule #5: Be Honest
Interviewer: What I find interesting about you, the way you conduct your business is that when stuff doesn’t work out, you apologize. You go out and say, “I made a mistake,” and all that. What was that the first time you had to go out there and say, “Sorry, this was wrong.” And I remember the increase, the rate increased, right? And then you were like, “Well, forget about it.” Like, what was that experience like for you as a boss when you’re like, “I have to go and own this.”
“The value of honesty is that people can take honesty, even if it’s not necessarily what they want to hear, if it’s really sincere.” – Reed Hastings
Going through marriage counseling 20 years ago…was really how I moved to become a better manager and leader.
And yeah, you know, this marriage counselor was able to get me to see that I was often lying to myself and to my wife. You know, saying, “Oh family is the most important thing.” And then I’d stay at work all night. And that the value of honesty is that people can take honesty, even if it’s not necessarily what they want to hear, if it’s really sincere.
Rule #6: Always Keep Improving
Interviewer: So then the question is Reed, what do you do to not lose the culture if you believe you’ve got a great one, early on?
Yeah, I mean one of the most common questions new employee ask is, “How do we preserve the culture?” And I say, “Well to preserve something, “to pickle it, is the wrong solution. “We’re not trying to preserve the culture, “we’re trying to make it better. “And it’s materially better than it was five years ago,” and I’ll cite a couple of specific examples. And then say, “Well, your job, “in addition to doing your role, “is to figure out how do we get even better.” Cause it’s only when you struggle to get better, that you really keep it vital and alive. So, you always have to be saying, “Yeah it’s pretty good culture, “but I’m sure it can be better. “How can we be better?” And so, it’s that struggle to improve that keeps it fresh.
Rule #7: Think Long Term
You know, we’re pretty good at movies and TV shows. And so, the competition that we worry about is the substitution. Again, when people are spending time on Snapchat, or Facebook video, or YouTube, it’s not Netflix, or some new app that isn’t yet invented.
And so, in the long-term, you have to believe that movies and TV shows will be sort of like the opera and the novel. Pretty nichey businesses and human entertainment will have moved on to something new. So, yeah, we’re gettin’ really good at movies and TV shows, we’re in the beginning of a great run on that.
But in the long-term, there’ll be substitutes. There’s substitutes for everything that come up and then, the ultimate challenge for us is can we figure out that or what that new form of entertainment is? Is that VR, is it gaming, is it AR.
Rule #8: Focus
In ’03 and ’04 we’re growing really fast. ’05, Blockbuster attacks. And so, we thought we were very clever. We came up with a number of ways to counterattack. And remember that everybody’s got every DVD so you’ve got basically the same.
Blockbuster and us had the same content offering, ’cause it’s non-exclusive licensing to get DVDs. So, we could differentiate on our service. Fulfillment levels were 99% and theirs were 89. But that’s like a really abstract for a customer, you know, thinking of signing up doesn’t mean anything, right? And then, they discounted massively so it’s like half our price. And so we were losing share. So, we were struggling what to do about it so we did three or four big efforts.
One is in the end of ’05, we added Netflix Friends, which was our own social network. And remember in ’05, Facebook’s just on a few universities, okay. So our own social network amongst our members and if you enabled each other, you could see what each other were renting and rating.
And we thought, “Wow, the viral effects of this “would be really powerful,” et cetera. We added ad sales. Back in the day, it was like Yahoo-type banners and you could have, we could have, we sold banners, you know, above the choosing interface. We added used DVD sales on our site to consumers.
So, you know, of course we had some excess DVDs from four years ago, so we added an operation to sell ’em for four bucks a pop. And, it’s a different logistics but we added all that. And we added Red Envelope Entertainment, which was a group that we brought in to buy DVDs, buy films out of Sundance and similar festivals to then, publish them on DVDs, so getting into content. So, we did these four efforts and each one was a dozen people, 15 people and made us feel great.
I mean, the employees loved ’em because you know, here was a tangible thing that was not just 98% versus 89%. Here was a thing that they couldn’t do or weren’t doing and was a differentiator, right? And wasn’t management so clever? And we went through these waves of battles in ’06 and ’07 and in the end, we won. They ended up closing down the their online thing and two years later, going completely bankrupt. But we looked back and none of those four efforts made any contribution to our victory.
And one by one, we had closed them down along the way. Every single one of those four. And so, in hindsight, we realized, when attacked, we should retreat to do the core better and not try to broaden the surface of attack, essentially. And it was a great lesson for us of focus.
And so now when people say, “Aren’t you getting into news or sports?” We’re like, “Absolutely not!” You know, and we’re really confident of our answer. Like, movies and TV shows on a global basis, enormous market. And so, we’re much less subject to being prone to go off and chase the shiny object to try to have something on a checklist to differentiate. And to trust, and in hindsight if we had just gone from like, 98% perfect to 99.9, we would’ve done a lot more for the business.
And you know, and it’s hard work. It’s operational, logistics, how to get DVDs not to break. I mean, the amount of polycarbonate analysis we had to do. It’s all this stuff. We would’ve beaten Blockbuster sooner than we did.
Rule #9: Have A Strong Values
Interviewer: But let’s talk about values. High performance, freedom and responsibility, context not control. These are obviously not mouthed. It seems like that if you want to do well at Netflix, you have to subscribe to the values and if you don’t, you’re out.
Yeah, and the reason that we publish our culture deck is so that people can figure out before they come to Netflix, is this the right fit for them?
“There’s a lot of heart and passion that goes in it that doesn’t come across in the words. It’s the execution, it’s the people at Netflix.” – Reed Hastings
Interviewer: But what’s intriguing for me, ’cause you’re a competitive guy is, I looked at everything that you sent out in the last five years and I would like to think that you’ve told me enough to replicate Netflix, but no one can. Why is that?
You know, it’s probably a little like Starbucks. Doesn’t seem that hard to make coffee and yet, one coffee chain is amazing around the world. So, there’s a lot of heart and passion that goes in it that doesn’t come across in the words. It’s the execution, it’s the people at Netflix.
Rule #10: Be Patience
You know, China’s a very special place and if you look at the big tech companies, Apple’s done very well, Microsoft hasn’t lost too much, and Google’s, you know, lost a lot. So, there’s quite a bit of variation despite all three of those being talented long-termed oriented companies.
And when you look at Apple, one of the amazing things is when they did the iPhone, they negotiated and talked and built relationships for six years before the iPhone was allowed to come to China. So from 2005 to 2011. And that took a lot of patience.
And now, that’s one their largest markets in the world for the iPhone. And so, what we take away from that is a sense of great patience. So, it may be soon that we have a license in China or it may take a couple years, but we’re going to be very patient. And we’re looking forward to a time, a decade or two decades from now when the Chinese middle class will want and embrace the kind of content that we have.
Evan: Thank you guys so much for watching. I made this video because Luke asked me too. So, if there’s a famous entrepreneur that you want me too profile next, leave it in the comments below and I’ll see what I can do.
I’d also love to know which of the 10 rules had the biggest impact on you and why? What change are you going to make to your life or your business after watching this video? Leave it in the comments and I’m going to join in the discussion.
Finally, I want to give a quick shout out to one of my TDS instructors here, Felipe. Felipe, thank you so much for picking up a copy of my book. I hope you enjoy. I love the picture that you posted on Facebook and yeah, enjoy the reading over the holiday break, man.
So thank you guys so much again for watching. I believe in you. I hope you continue to believe in yourself and whatever your one word is. Much love, I’ll see you soon.
Learned How To Lead
Up till 2002, all we focused on was survival. And then, once we got public and were profitable we started thinking, “Wow, this thing might last.” And the cruelest irony would be to not want to work there, to let become a place we didn’t want to be. And so, we tried to think through, what do we really care about? And we realized what we really care about is working with incredible people on hard problems and that that was the essence.
So we should organize everything around supporting that, of working with just incredibly talented people. And so, that led us to freedom and responsibility, because incredible people don’t want to be micromanaged. And the idea is that we manage through setting context and letting people run. You got to have the right people, you got to reinforce that with values, setting context about what the company is trying to achieve.
“Incredible people don’t want to be micromanaged” – Reed Hastings
But the idea is to build a system where amazing amounts of service improvement happen, in the marketing, in the content, in the technology, in the user interface, without direct intervention of me. And so, some companies operate by the product genius at the top and we all know these companies. And this whole motif of, to be a great CEO you’ve got to be the great product person who really, you know, and it’s intoxicating and fun.
But you’re building incredible amounts of dependence on yourself and eventually, how well I know how Turkish consumers consume Netflix is not that well. And so your much stronger, obviously, building a distributed set of great thinkers. People know that but in the past what they’ve done is try to make everything a process.
They said, “Okay, I don’t want it to be a genius, “so we’re going to organize a process for everything.” And at least once in a while you heard, “We’re going to dummyproof it. “It’s going to be such a good process that anybody,” this was the IBM thing.
And then, if you dummyproof the process, you only get dummies to work there to do the process. And so, that’s why we’re so opposed to that, instead, so focused on giving people great freedom. Realizing there’ll be mistakes, but there’ll be a lot of positive achievement, too.
Interviewer: So can you give some examples of that? You talk about it generically and it sounds great but what are some specific examples.
“It’s creating a sense of, I want to make a difference and I can make a difference.” – Reed Hastings
So, I take pride in making as few decisions as possible, as opposed to as many as possible. And so, when something significant changes in the content or The House of Cards purchase. Ted explained it. It was a huge purchase at that time.
It was a half an hour conversation, you know, we went back and forth. I said, “Are you really sure?” “It’s a great bet.” “Yes, let’s do it.” It wasn’t like me reading the script, and me meeting with Kevin Spacey, and you know. Or equivalent examples on the marketing, or equivalent examples on the product and the evolution there. So, it’s creating a sense of, I want to make a difference and I can make a difference.
And if that’s what the leader gets excited about, is that other people are making a difference, and you’ve got the right people, you got to be super demanding. So, the one part is freedom and responsibility, the other part is a high-performance culture where we say adequate performance gets a generous severance package.
And so, we look at, we say, we want to be like a Major League baseball team. And you know, you’ve only got so many positions on the field and if everyone is not incredible at what they do, then you’re not going to win.
Interviewer: So you turn over a lot of people.
And so we turn over a lot of people. We feel like we give people a fair shot and you know, we hire pretty openly and they know what they’re getting into, but we’re looking for people who, for whom freedom and responsibility works, ’cause they do incredible work.
Find The Right People
Interviewer: Is part of the interviewing process, do you have essentially a culture check?
Yes, but not like a checklist. Culture’s always something that we interview for, of kind of curiosity. It’s easy to find people who say, “Oh, I read the Netflix culture deck. “I can love it, I really want to be there.”
“We’re looking for people who are curious, typically self-confident, and they’re not, they’re questioning everything around them.” – Reed Hastings
What’s harder is what are the main things you disagree with and why? And when we get a blank stare we’re like, “Okay, not really a first principle thinker.” And when they say, “Well, I thought the way “that you didn’t talk about how to acculturate.” And you know, “If I’m not great on day three, am I out? “Or is there, do you look at it like a athlete “where it’s over some time period to prove yourself? “And if so, what’s that time period “and why haven’t you clarified that?” Then we’re like, “Oh yeah, that’s a good insight.” First principle thinker. So, we’re looking for people who are curious, typically self-confident, and they’re not, they’re questioning everything around them.
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