That Will Never Work

by Marc Randolph

  Copyright © 2019 by Marc Randolph

  Cover design by Julianna Lee

  Cover © 2019 Hachette Book Group, Inc.

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  First ebook edition: September 2019

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  ISBN 978-0-316-53021-7

  E3-20190808-NF-DA-ORI

  Contents

  Cover

  Title Page

  Copyright

  Dedication

  Author’s Note

  1. Against Epiphanies

  2. “That Will Never Work”

  3. Please, Mr. Postman

  4. Getting the Band Together

  5. Show Me the Money

  6. How It Feels to Deposit a Check for Almost $2 Million

  7. We Were Almost CinemaCenter

  8. Ready for Launch

  9. A Day in the Post-Launch Life

  10. Halcyon Days

  11. Two Cents for Bill Clinton

  12. “I’m Losing Faith in You”

  13. Over the Hill

  14. Nobody Knows Anything

  15. Drowning in Our Own Success

  16. Crash

  17. The Belt Tightens

  18. Going Public

  Epilogue: Randolph’s Rules for Success

  Acknowledgements

  Discover More

  About the Author

  For Lorraine—the one who thought it would never work. Although you didn’t believe in the idea, I knew that you always believed in me.

  I love you.

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  Author’s Note

  This book is a memoir, not a documentary. It’s based on my recollection of events that happened twenty years ago, so most of the conversations in this story have been reconstructed. What mattered to me, as I wrote, was rendering the personalities of Netflix’s founding team as vividly and as accurately as possible. I wanted to show them as they were, to capture the mood of the time. Most importantly, I wanted to illustrate what we at Netflix were up against—and what it felt like to somehow, despite all the odds against us, succeed.

  1.

  Against Epiphanies

  (January 1997: fifteen months before launch)

  I’M LATE, AS USUAL. It’s only a three-minute drive to the parking lot where I meet Reed Hastings to carpool to work, but when your son throws up on you at breakfast, and you can’t find your keys, and it’s raining, and you realize at the last minute that you don’t have enough gas in your car to get you over the Santa Cruz Mountains into Sunnyvale—good luck with making a 7:00 a.m. meet-up time.

  Reed runs a company called Pure Atria that makes software development tools—and that recently acquired a startup I helped found, Integrity QA. After Reed bought our company, he kept me on as his VP of corporate marketing. We take turns driving.

  We usually get to the office on time, but the way we get there changes, depending on who’s driving. When it’s Reed’s turn, we leave on time, in an immaculate Toyota Avalon. We drive the speed limit. Sometimes there’s a driver, a kid from Stanford who has been instructed to navigate the twisting, mountainous turns of Highway 17 with care and precision. “Drive like there’s a full cup of coffee on the dashboard,” I’ve heard Reed tell him. And the poor kid does.

  Me? I drive a beat-up Volvo with two car seats in the back. A kind description of my driving would be impatient. But maybe aggressive is more accurate. I take turns fast. And when I get excited about something, I go even faster.

  On this day, it’s my turn to drive. As I pull into the parking lot, Reed’s already waiting, huddled beneath an umbrella, leaning on his car. He looks annoyed.

  “You’re late,” he says, shaking off his umbrella as he slips into my car, picking a crumpled Diet Coke can and two packages of diapers off the front seat and tossing them into the back. “Traffic’s going to be terrible with all the rain.”

  It is. There’s a wreck at Laurel Curve, a stalled semi at the Summit. And then the usual Silicon Valley traffic, coders and executives in long lines on the highway, like ants returning to an anthill.

  “Okay,” I say. “But I’ve got a new one. Customized baseball bats. Totally personalized and unique. Users fill out their information online, then we use a computer-controlled milling machine to craft a bat to their exact specs: length, handle thickness, size of the barrel. All one-of-a-kind. Or not. If you want an exact re-creation of Hank Aaron’s bat, we could do that, too.”

  Reed’s face goes blank. It’s an expression I know well. To an outside observer, it would look like he’s just staring out the dirty windshield at the redwoods whizzing by, or the Subaru going a little too slowly in front of us. But I know what’s behind that look: a rapid-fire evaluation of pros and cons, a high-speed cost-benefit analysis, a near-instantaneous predictive model about possible risks and scalability.

  Five seconds go by, then ten, then fifteen. After about thirty seconds he turns to me and says, “That will never work.”

  We’ve been doing this for a few weeks. Reed has been working overtime finalizing a huge merger that will put us both out of a job, and once the dust settles from that, I’m planning to start my own company. Every day in the car, I pitch ideas to Reed. I’m trying to convince him to come on board as an advisor or investor, and I can tell he’s intrigued. He’s not shy about giving me feedback. He knows a good thing when he sees it. He also knows a bad thing when he hears it.

  And my morning-drive ideas? They’re mostly bad ideas.

  Reed swats this one away just like he did the others. It’s impractical. It’s unoriginal. It will never work.

  “Also, baseball’s popularity is waning with younger people,” he says, as we roll to a stop behind a sand truck. The sand is on its way to San Jose, where it will eventually be turned into concrete for roads and buildings in booming Silicon Valley. “Don’t want to be tied to a declining user base from the start.”

  “You’re wrong,” I say, and I tell him why. I’ve done my research, too. I know the numbers for sporting goods sales. I’ve looked into baseball bat production—how much the raw materials cost, how expensive it is to buy and operate the milling machine. And, okay, I might have a personal connection to this idea: my oldest son just finished his rookie Little League season.

  For every one of my points, Reed has an answer. He’s analytical, rational, and doesn’t waste time with niceties. I don’t, either. Our voices are raised, but we’re not angry. It’s an argument, but it’s a productive one. Each of us understands the other. Each of us knows that the other is going to offer stiff, uncompromising resistance.
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  “Your attachment to this idea isn’t strictly rational,” he says, and I almost laugh. Behind his back, I’ve heard people compare Reed to Spock. I don’t think they mean it as a compliment, but they should. In Star Trek, Spock is almost always right. And Reed is, too. If he thinks something won’t work, it probably won’t.

  The first time I met Reed, we were taking a cross-country plane trip from San Francisco to Boston. Reed had just acquired my company, but we’d never spent any meaningful time alone together. I’d been sitting at the gate, waiting to board, reading through a binder of materials on memory leak detectors and software version management, when someone tapped my shoulder. It was Reed. “Where are you sitting?” he’d asked, frowning at my paper ticket.

  When I told him, he took my ticket, marched to the counter, and upgraded me to first class.

  That was nice, I thought. I’ll get a chance to read, relax a little, maybe even get a little sleep.

  But that was my first lesson about Reed. When the flight attendant came, he’d waved away the free mimosas, turned his body ninety degrees, and locked eyes with me. Then, for the next five and a half hours, he’d given an exhaustive overview of the state of our business, barely pausing to take a sip of sparkling water. I’d hardly gotten a word in edgewise, but I didn’t care. It was one of the most brilliant business analyses I’d ever heard—like being hooked up to a supercomputer.

  We’re not in first class anymore. We’re in a Volvo that could use a wash. But I still find Reed’s mind fascinating and his demeanor refreshing. I’m grateful for his advice, for the consulting I’m getting for free on these rides “over the hill” into Silicon Valley and back. By total luck, I’ve ended up in the same company—and the same town—with someone who understands my vision and can provide invaluable help, not to mention savings on gas. But it’s still frustrating to hear that an idea I’ve spent a week researching is totally unfeasible. A part of me is starting to wonder if all of my business ideas are built on a foundation as unsteady and shifty as the sand loaded into the truck ahead of us.

  That truck, by the way, is still in the left lane, moving slowly, holding everybody up. I’m frustrated. I flash my lights. The truck driver looks at me in the rearview mirror, doesn’t even react. I mutter a few irrational obscenities.

  “You need to relax,” Reed says, gesturing to the traffic ahead of us. He’s already told me—twice—that my habit of constantly changing lanes is, in the end, counterproductive and inefficient. My driving makes him insane—and a little carsick. “We’ll get there when we get there.”

  “I’m gonna pull my hair out,” I say, “and I don’t have much left.” I run my hand through the remnants of my curls, and then it happens: I have one of those all-too-rare epiphany moments. It seems like everything happens at once: The sun comes out of the clouds, and it stops drizzling. The sand truck wheezes to life and merges into the proper lane, and traffic starts to move. It feels like I can see for miles, down into the clogged heart of San Jose: houses, office buildings, treetops waving in the breeze. We pick up speed, and the redwoods fall away behind us, and in the distance I see Mount Hamilton, its crest sparkling with fresh snow. And then it comes to me. The idea that will finally work.

  “Personalized shampoo by mail,” I say.

  Silicon Valley loves a good origin story. The idea that changed everything, the middle-of-the-night lightbulb moment, the what if we could do this differently? conversation.

  Origin stories often hinge on epiphanies. The stories told to skeptical investors, wary board members, inquisitive reporters, and—eventually—the public usually highlight a specific moment: the moment it all became clear. Brian Chesky and Joe Gebbia can’t afford their San Francisco rent, then realize that they can blow up an air mattress and charge people to sleep on it—that’s Airbnb. Travis Kalanick spends $800 on a private driver on New Year’s Eve and thinks there has to be a cheaper way—that’s Uber.

  There’s a popular story about Netflix that says the idea came to Reed after he’d rung up a $40 late fee on Apollo 13 at Blockbuster. He thought, What if there were no late fees? And BOOM! The idea for Netflix was born.

  That story is beautiful. It’s useful. It is, as we say in marketing, emotionally true.

  But as you’ll see in this book, it’s not the whole story. Yes, there was an overdue copy of Apollo 13 involved, but the idea for Netflix had nothing to do with late fees—in fact, at the beginning, we even charged them. More importantly, the idea for Netflix didn’t appear in a moment of divine inspiration—it didn’t come to us in a flash, perfect and useful and obviously right.

  Epiphanies are rare. And when they appear in origin stories, they’re often oversimplified or just plain false. We like these tales because they align with a romantic idea about inspiration and genius. We want our Isaac Newtons to be sitting under the apple tree when the apple falls. We want Archimedes in his bathtub.

  But the truth is usually more complicated than that.

  The truth is that for every good idea, there are a thousand bad ones. And sometimes it can be hard to tell the difference.

  Customized sporting goods. Personalized surfboards. Dog food individually formulated for your dog. These were all ideas I pitched to Reed. Ideas I spent hours working on. Ideas I thought were better than the idea that eventually—after months of research, hundreds of hours of discussion, and marathon meetings in a family restaurant—became Netflix.

  I had no idea what would work and what wouldn’t. In 1997, all I knew was that I wanted to start my own company, and that I wanted it to involve selling things on the internet. That was it.

  It seems absurd that one of the largest media companies in the world could come from those two desires. But it did.

  This is a story about how we went from personalized shampoo to Netflix. But it’s also a story about the amazing life of an idea: from dream to concept to shared reality. And about how the things we learned on that journey—which took us from two guys throwing ideas around in a car, to a dozen people at computers in a former bank, to hundreds of employees watching our company’s letters scroll across a stock ticker—changed our lives.

  One of my goals in telling this story is to puncture some of the myths that attach themselves to narratives like ours. But it’s equally important to me to show how and why some of the things we did at the beginning—often unwittingly—worked. It’s been over twenty years since those first car rides with Reed, and in that time, I’ve come to realize that there are things we discovered that, applied broadly, can influence a project’s success. Not exactly laws, not even principles, but hard-won truths.

  Truths like: Distrust epiphanies.

  The best ideas rarely come on a mountaintop in a flash of lightning. They don’t even come to you on the side of a mountain, when you’re stuck in traffic behind a sand truck. They make themselves apparent more slowly, gradually, over weeks and months. And in fact, when you finally have one, you might not realize it for a long time.

  2.

  “That Will Never Work”

  (spring 1997: one year before launch)

  AS A KID, ONE of my strongest memories is of my father building miniature steam-powered trains. They weren’t the tiny electric models you buy as a kit, the pieces all built to fit together, matched to a track that you just have to plug in. No, these were for the real fanatics: fully functional miniature trains, their steel wheels powered by steam. Every component—wheels, pistons, cylinders, boilers, cranks, rods, ladders, even the miniature shovels the miniature engineer would use to shovel miniature pieces of coal—had to be built by hand. About the only pieces you didn’t build yourself were the screws that held everything together.

  That was fine with my father. He was a nuclear engineer who had found that his skill set was much more lucrative as a financial advisor to major firms who were investing in nuclear power and weapons development. His work allowed my family to live in comfort out in the New York City suburbs, but he missed the lab. He missed the in
struments, the calculations, the sense of pride in building something. After a long day on Wall Street, he’d come home, take off his tie, and change into one-piece work overalls, the kind that real train engineers wore. (He collected engineer uniforms from around the world.) Then he’d head to the basement. It was time to build.

  I grew up in a pretty normal, upper-middle-class household. The fathers of Chappaqua took the train into the city for work; the mothers took care of the kids in beautiful houses that were a little too big; the kids got into trouble while their parents went to school board meetings and cocktail parties.

  When the youngest of us finally began school, my mother started her own real estate firm. Our house was built on a hill flanked by apple orchards, with a big pond in the back. I spent much of my childhood outside, roaming through the acres of woods that surrounded our house. But I also spent a fair amount of time indoors, reading in my parents’ well-stocked library. Two large portraits of Sigmund Freud hung there. In one of them, he was alone; in the other, he was posed next to his wife, Martha Bernays. These were surrounded by a half-dozen smaller photographs and renderings, framed and signed correspondence, and shelves filled with his books: Civilization and Its Discontents, Beyond the Pleasure Principle, The Interpretation of Dreams.

  It was the sixties. Freudian analysis wasn’t exactly uncommon. But we didn’t have a miniature Freud museum in the library because anybody in the house was spending time on a therapist’s couch. It was because he was family. He was Uncle Siggy.

  It’s a little more complicated than that. Freud was in fact my father’s great-uncle, making him my great-grand-uncle.

  Still, no matter how convoluted the chain of connection, my parents were proud of the family association with Freud. He was a success, a giant of twentieth-century thought, as important an intellectual figure as had existed in their lifetime. It was like being related to Einstein: proof that the family had excelled on both sides of the Atlantic.