That Will Never Work

by Marc Randolph

  My mother, though scrupulous with money, enjoyed a splurge now and then. Plus, she was an entrepreneur herself. When I was in high school, she had started her own real estate firm, it had prospered, and now she had money of her own. In fact, she’d put both me and my siblings through college with it.

  She was on the East Coast, so I couldn’t ask her in person. I dreaded that phone conversation. Sales is theater: every pitch, every call, every interaction in which you, the businessperson, are trying to convince someone else—the customer, the client, the potential investor, you name it—is a little performance, in which each side plays a role. But a son calling his mother to ask for money? That isn’t just theater. It’s Kabuki theater. Everything is ritual and prescribed.

  Both of us knew that she would eventually say yes—she was my mother, the money wasn’t completely unreasonable, and she had always supported me and my career. She had confidence in me. In fact, one of the reasons I was asking was that I knew she’d invest. What’s more, I knew that she knew that I knew.

  We both understood that her thought process would go something like this:

  A) I have no idea what he’s talking about.

  B) Wait a minute, what?

  C) Oh, for crying out loud.

  D) I guess I’ll do it. I’m his mother, after all.

  In other words, I knew that I would play the somewhat indulged son. She’d play the skeptical but generous mother. Both of us would be acting out age-old roles, cemented by decades of family dynamics. And that was alright for both of us.

  How’s that for making Uncle Siggy proud?

  I don’t remember much about that awful phone call. I wasn’t as practiced in the “art of the ask” then as I am now. I’m sure I let slip some truly heinous salesmanship clichés: I’m calling today to give you the “opportunity” to invest in my company, etc. If I’d been at home back in Chappaqua, I probably would have retired with her to the library to discuss the investment over brandy.

  Even now, I cringe thinking of that phone call.

  I’m sure my mom asked polite, curious questions. I’m sure I gave polite, enthusiastic answers. The only thing I really remember—and I thought this was the epitome of grace, when she said it—was that she knew that her investment would bear fruit in the long term. “I’m sure in fifteen years I can use this money to buy an apartment in the city,” she said, laughing.

  She wanted to prove to me that the money she was investing wasn’t just a gift—that it was a real investment, even though she knew and I knew that the reasons she was investing had nothing to do with my pros and cons and my projections, and everything to do with the fact that she was my mother and I was her son.

  I almost wished she had said no. Because now I had to actually do it.

  6.

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

  (fall/winter 1997: half a year until launch)

  AFTER WEEKS OF HOUNDING him (for whatever reason, Reed seemed reluctant to actually sign and date the check), your first investor finally hands you the check that will let you rent an office, hire employees, and buy a few folding tables.

  It’s more than that, of course. The check represents the ability to start. It’s the difference between an idea in your head and a company in the world. It’s the difference between nothing and something.

  It’s everything. It’s also quite a bit of money.

  You scrutinize the check, looking again and again at the dollar amount. You make sure there are enough commas. That the date is correct. That the signature resembles the one you know.

  A part of you wants to drive all the way down to Santa Cruz, to the bank with the recessed lighting, the gleaming tile, the golden safe door half-open behind the counter, gleaming from the darkness like a yacht’s steering wheel. To change your shirt into something with a collar, maybe wear a tie—to dress up for the occasion.

  One point nine million dollars is a lot of money. You feel nervous handling it, like you’ve robbed it off someone else. Better to go to the closest bank you can find. Who cares if it’s in a strip mall in Los Gatos? You need to get this thing out of your hands, fast.

  You begin to feel like a fugitive.

  In line at the bank, you touch the check with your sweaty hands, again and again, until it’s damp in your pocket. To anyone else it might look like you’re getting away with something.

  You’ve handled money before, of course. And you’ve worked for companies that threw around amounts considerably larger than this.

  But you’ve never held it in your hands.

  The line moves slowly, but eventually you reach the teller. You think: this will make her day.

  You think: I bet she’ll be impressed. I bet she’ll discreetly signal to the manager, and he’ll usher me into a back office, where there will be antique furniture and a Persian carpet. He’ll pour me some champagne and make polite conversation while an underling handles all the details.

  One million nine hundred thousand and 00/100 dollars.

  You hand it over and there’s nothing. No glimmer of recognition, no hint of surprise on the teller’s face. Business as usual.

  “You want any cash back?” she asks.

  With Reed’s money in the bank—and with the Pure Atria merger a done deal—we could finally move out of the Best Western. But we didn’t have to move far: I found a place just across the street, in a nondescript office park in Scotts Valley. The lease seemed exorbitantly expensive to me. It was also multiyear, which introduced a note of optimism into the proceedings that I hoped wasn’t entirely foolish.

  It was a far cry from the glittering corporate campus I’d known at Borland—or the gleaming blond-wood-and-succulents open-plan monstrosities currently in vogue, which all seem to include fireman poles and beanbag chairs. Our office park was completely anonymous. It looked like the kind of place where a dentist might have his office, or a tax attorney. In fact, there were a few psychiatrists there, and an optometrist. Mostly, though, the office park had been taken over by small startups, which entered and exited leases in a revolving door of boom and bust.

  There was a flower bed out front next to the flagpole, and in it were planted perpetually fresh flowers and plants. Nothing really grew there, or was tended to, exactly. Instead, adult, in-bloom flowers were planted into the soil, and when they died they were dug up and replaced with a new round of in-bloom tulips or pansies or daffodils. Cost was no object, as long as the flowers were in bloom. Passing a gardener with a wagon of fully bloomed tulips to be hastily inserted into the earth, it was hard not to see the garden as a particularly perverse metaphor for the life cycle of a startup. Plant, bloom, die…and be replaced.

  Our office was a big, open room with a hideous green carpet. It had once housed a small bank, and in fact the walk-in safe was still accessible, its door left unlocked. There were a few offices on a long wall, a conference room, and an office in the corner with views of the parking lot and the Wendy’s across the street. As the CEO, I claimed it. And then had nothing to put in it.

  This was not a luxurious space. We spent less than a thousand dollars furnishing it. There were no Aeron chairs, no Ping-Pong tables, no refrigerator full of LaCroix. There were six or seven folding tables, the cheap ones that caterers use. There was a mismatched set of dining room chairs I’d scavenged from my storage unit. If you wanted more than that, you had to bring it from home. I distinctly remember several employees dragging beach chairs into the space, the seats and legs still covered in sand. The first time Lorraine came to the offices, she pointed at our conference table and asked, “Are those our old dining room chairs?”

  Instead of furniture, we spent money on technology. We bought dozens of Dells online and had them shipped to the office. We bought our own servers—in 1997, there was no shared cloud—and installed them in the corner. We bought miles of cable, and wired the office after-hours, ourselves. Extension cords and ethernet cables twisted through the office like orange and black snakes. Wires
hung down from the ceiling like vines.

  I don’t remember our move-in day. We might have ordered some pizzas and made a few Costco runs. But more likely, people just trickled in, bringing with them whatever they needed to do their work. If you stood in the first Netflix office sometime in the fall of 1997, you would have seen a room that resembled some unholy cross between a computer geek’s basement and a politician’s on-the-road campaign war center. And that’s just the way we liked it.

  Our office sent a clear message: This isn’t about us, it’s about the customers. The reasons for working there weren’t exotic perks or free food. It was the camaraderie and the challenge, the opportunity to spend your time solving hard, interesting problems with smart people.

  You didn’t work for us because you wanted a beautiful office. You worked for us because you wanted the chance to do something meaningful.

  At the same time that we were moving into our offices in Scotts Valley, I was contemplating—and ultimately preparing for—a move of my own.

  For the first few months of the Netflix experiment, I was living a five-minute walk away, in a tiny rental house. Lorraine and I had moved there in 1995, after years of living up in the mountains. Tired of the thirty-minute drive into Santa Cruz—and my hour-and-a-half trek over the hill to work each day—we’d sold our house in the mountains and moved into a small rental in Scotts Valley, putting away money for the future.

  I enjoyed walking to and from work. Being so close to home made it easy for me to leave at dinnertime, rush home to be with my family for a few hours, and then return to the office to finish up the day’s work. But it wasn’t a sustainable solution for the future. I wanted a yard that was larger than a postage stamp, and Lorraine wanted a big house to raise our kids in. There were three of them, and in our tiny rental, it always seemed like they were running into each other. They didn’t have much space to play outside, either, and we were so close to the highway that the noise of cars kept us up at night.

  But our attempts to find a new home hadn’t been going anywhere. There were no places in our price range anywhere close to Santa Cruz, and when we looked over the hill, toward San Jose, what we saw was even less encouraging. Realtors, hearing what we had to spend, showed us places that were almost comical in their inadequacy. One place had grass growing on the roof—and it wasn’t on purpose. Another came with a flock of goats.

  Then, in October, a three-story house on fifty acres in the hills outside Scotts Valley came on the market. It had once been a vineyard, and in the early twentieth century it had been a country resort. The owners were octogenarians who couldn’t maintain the property anymore. The first time we took a tour, dragging the kids along with us, we fell in love. It was perfect for us: a big house on a lot of land.

  It was also just shy of a million dollars.

  That night, somewhat panicked, I called my mother for advice. She was a real estate agent and knew my family almost as well as I did.

  “We really want this house,” I said. “But it’s a lot of money, more than I’ve ever spent. And I’m just starting this new company. Do I really need the added risk? What should we offer?”

  “If you want it, don’t try for a bargain and risk losing it,” she told me. “The anxiety of paying that much won’t last. But the enjoyment of living there will last forever. Go all in.”

  So we did.

  Did I have buyer’s remorse? Of course I did. Even the night after the papers were finalized, when Lorraine and I were sitting on the deck with a few of our friends, drinking a bottle of wine and watching our kids chase each other in the lengthening shadows cast by the redwoods that towered over our new lawn—even then, when we were ostensibly celebrating our great fortune, I was thinking: Is this the biggest mistake of my life?

  What if the company failed? What if I lost my job? What if DVDs-by-mail never took off?

  “Remember our post-college days?” Lorraine said that first night, after our guests had driven away. “Our splurges?”

  When Lorraine and I were first married, we were about ten thousand dollars in debt. At the time, I was working my first job in direct-mail marketing and making about thirty thousand dollars a year. Lorraine’s income was about the same; she was making cold calls as an entry-level stockbroker. We set a goal to get out of debt in a year, and for the next twelve months we kept a meticulous notebook, counting every single expenditure, no matter how minor. Toothpaste: $1.50. Donut at the train station: 75 cents.

  Once a week, we allowed ourselves two big splurges: a square pizza from the Athens Pizza joint down the street, and a case of bar bottle Schlitz. When we’d drunk the beer, we took the bottles back for the rebate.

  “We did it once, we can do it again,” I agreed.

  By nature, I’m not a cheap man—in fact, much of my behavior in business is a kind of rejection of my own father’s meticulous carefulness when it came to money. The expenditure notebook was an aberration, a reaction to a particular problem. Normally, when there’s money, I spend it. Not wastefully or stupidly—but in the boom-bust cycle of Silicon Valley economics, I’ve always believed that you should spend the money you’re given. Spend it wisely, but spend it.

  Although I had quite a bit of startup success early on, I was never a big equity holder—so although I did okay, there weren’t huge rewards. My first actual windfall came when I joined Borland, just a few months after my thirtieth birthday. My timing was good: the products took off, and so did our stock. I was wealthy…but only on paper, since all I really owned were stock options. One night at a bar in Hong Kong, I was bellied up next to Doug Antone, Borland’s senior VP of sales. We were talking about how well the stock had done, and when I shared that I hadn’t realized any of that, he almost spit out his drink.

  “What are you waiting for?” he asked. “As soon as any of my stock vests, I sell it. There is plenty more upside if the stock keeps going up. But if it goes down, you’ll be glad you took something off the table.”

  From that day on, not only did I adopt that philosophy, but I became one of its biggest advocates. I always told my employees to sell when they could. One of my favorite expressions actually came from Lorraine’s old boss from her entry-level stockbroker days: “Bulls make money. Bears make money. Pigs get slaughtered.”

  (That boss was later indicted for insider trading. He might have done better to have actually followed his own advice.)

  Despite my professed ambivalence toward money, anytime I paused that first fall at Netflix, anxiety about my finances set in. The only cure, it seemed, was work. I didn’t worry about Netflix’s future when I was deeply engaged in ensuring it. And I didn’t despair about our new house when I was working on it. I spent every Saturday and Sunday for months fixing the place up before we moved in: ripping out vines, clearing out brush with a tractor, removing dead trees that the previous owners had left where they had fallen ten, twenty, even thirty years prior.

  I had a vision of bountiful grapes and fruit trees. After an East Coast childhood of canned fruit salad and pears in heavy syrup, I wanted nothing more than to walk out in my backyard, pluck a piece of fruit right from the tree, and eat it standing on land that I owned. But to do that, I needed to do some planting. I needed to clear a space, plant a sapling, and week by week, month by month, nurture the tender thing that grew there under my care.

  My daily routine in the fall and winter of 1997, in the months before we moved, was everything I’d ever hoped it would be. I’d wake up and help Lorraine get the kids ready for school, and then I’d hop in my car for the three-minute drive to the office. If the weather was nice and I wasn’t in a hurry, I’d walk there. All day I’d find myself working on an idea I’d come up with, in the pleasant company of a team of people I’d handpicked for their obvious talents. We were deep in the planning trenches. For someone with ADHD and—I’ve long suspected—a mild case of OCD, there are few more pleasant places to be.

  Every day at work, I had my pick of hundreds—no, thousands—of prob
lems to work on. And since I was in charge of and surrounded by brilliant people, I could focus on what interested me. That’s one of the great pleasures of being at the helm of a startup in the planning stages. The company is small enough that everyone in it has to wear multiple hats, but big enough that you never have to wear one that doesn’t fit properly.

  Here are just a few of the issues that faced us that fall:

  1. Setting Up an Office

  You never have to think about it when you’re working at a large public company like Borland or Pure Atria, or even when you’re an employee at an established startup. But I was learning that when you’re in charge, it ultimately falls on you to ensure that the most basic elements of office life—telephones, printers, staples for the stapler—are there for your workers. We needed to buy phones. We needed to buy computers. We needed to wire the office so that all of our gadgets actually worked. And even if we spent roughly five minutes total thinking about décor, somebody still had to buy the folding card tables and set them up in something approximating a straight line.

  Not only that, I had to make decisions about things I’d never considered. Did we want the office cleaned weekly or biweekly? How do you organize keys? Which bank should we use? Should I hire an outside firm for HR?