That Will Never Work

by Marc Randolph

  The bank’s challenge, the morning of our IPO, would be to figure out the ideal number to use as the opening price for individual shares. Set the price too high, and interested purchasers would drop out—and we would miss our $70 million target. Set it too low, and Netflix would leave millions on the table.

  Another complicating factor? Given the choice, the bank didn’t really mind a price that was too low. Part of the reason they’d fought so hard for a deal with us—above and beyond the big commission—was the opportunity to give their best customers an opportunity to buy low at the opening and sell high at the closing. Banks call that an opening day “bounce.”

  A bounce is not necessarily a bad thing. The quick jump in price can show the public that a company is “hot” and has “momentum.” But if somebody was going to make a ton of money on day one, we wanted it to be us, not Merrill Lynch’s customers. We wanted a healthy bounce—but we didn’t want to feel like we were being launched off the trampoline.

  “Dad!”

  Logan paused mid-bite, a huge scoop of vanilla ice cream balanced on his spoon. “Barry’s talking on the phone. On the plane. I thought we couldn’t do that.”

  He looked at me quizzically, carefully spooning ice cream into his mouth, then looking down to gather up more of the brownie at the bottom of his sundae.

  “Pretty cool, right?” I couldn’t help but smile at his enthusiasm. “You want to make a call? Maybe call Mom?”

  I hit speed dial for home and waited for Lorraine to pick up.

  “Greetings from Omaha,” I said when she answered. “I’ve got someone here who wants to talk to you.”

  Logan grabbed the phone and filled Lorraine in about the ride. He barely took a breath until he recounted the menu for lunch: Caesar salad, baked potato, and filet mignon, which he pronounced “min-yin.”

  “He sounds pretty excited,” Lorraine said when I finally managed to get the phone back.

  “A little wound-up. But very happy. You should have seen him when we got to cruising altitude. He was doing somersaults down the aisle. No joke. A forward roll between the seats.”

  “Well, I’m glad he’s happy,” Lorraine answered, and, imitating Barry, lowered her voice to a stage whisper. “Tell him not to get used to it.”

  I looked over to where Logan was scraping at his dish, trying to coax the last bits of chocolate sauce into his spoon. I wasn’t any less excited than he was—I was just better at hiding it. Truth be told, I think that was true for all of us. If we were honest, we would have all been doing somersaults right along with him.

  It was well after dark when the town car crunched to a stop under the portico of my parents’ house in Chappaqua. Logan was fast asleep, slumped against my shoulder.

  I was home again.

  “Welcome back, Mr. New Media Executive,” my mom said, holding open the door for me as I carried Logan up the front steps and into the kitchen. He blinked sleepily in the sudden light when I set him down.

  “You can sleep in the den,” my mother said to him. He nodded and shuffled up the stairs.

  I slept that night in my childhood bedroom, surrounded by my books, my beer bottle collection, and my Little League trophies. In some ways, it felt like I’d never left. I was forty-four years old. I was married and had three kids of my own. I owned a big house and an Audi allroad. But inside, I still felt like I was in high school, excited about the next day’s soccer match against Fox Lane.

  How would I feel the next day, after it was over? Would I feel like more of an adult? And what about the money? Would that change me?

  Lorraine and I would certainly worry less, I knew that. But I didn’t think we would be any happier. If growing up in Chappaqua had taught me anything, it was that happiness existed on a totally different axis than money. I grew up around fabulously wealthy, fantastically miserable people. You could spot them a mile away—impeccable loafers, beautiful bespoke suits, and an empty half smile on their face.

  I tossed and turned most of that night, my mind endlessly anticipating everything that could possibly go wrong. What if I woke up and the market had collapsed overnight? What if there were another terrorist attack? What if Reed were hit by a bus? What if, after all this work, I had to go back to square one?

  The only thing that calmed me down was staring at the train on the dresser against the wall—one of my father’s most elegant creations, completed sometime in the mid-seventies. The steam engine gleamed in the moonlight, so that the pistons almost seemed to be moving. It was the last thing I saw before I fell asleep.

  In many ways, it was an anticlimax.

  Like most tech companies, Netflix was going to be listed on the Nasdaq exchange, which is 100 percent electronic. There is no trading floor, no mass of hysterically shouting traders in flamboyant blazers, no balcony with a bell to ring. At the Nasdaq, every trade happens almost instantaneously—buyers matched with sellers—within an invisible, efficient, quiet, and orderly world of computer servers.

  That iconic image of the happy entrepreneur, ringing a bell over a sea of people, covered with falling ticker tape? That was the New York Stock Exchange. Sorry, wrong address.

  While total digitization might make for efficient markets, it’s a bit of a letdown if you’ve been building toward an IPO for almost five years. If we wanted to celebrate the actual first trade taking place, we had two options: gather in a windowless, climate-controlled Nasdaq server room somewhere in Weehawken, New Jersey, or watch things go down from the Merrill Lynch trading floor. Which, I hate to break it to you, has just about the same amount of drama as the windowless server room. But at least it has vending machines—a long row of them lined up in an alcove opposite the elevator.

  Logan found them immediately.

  “Are those the ones Uncle Randolph was talking about?”

  “Something like it,” I replied. Logan’s uncle, my brother, was a banker at Merrill Lynch. One evening at our house, Randolph had shared stories from the trading floor, with Logan listening wide-eyed.

  “These are people who gamble for a living,” Randolph had started off. “So they’re always looking for something new to wager on. I mean anything. One time, the bet was whether a trader could finish one of every item from the vending machine in a single day. We all kicked in twenty bucks apiece and told him he could keep the pot if he finished, but it was the side bets that were insane. People were throwing around hundreds of dollars wagering whether he would make it or not—and if not, where he’d quit.”

  At this point, Logan’s eyes were wide.

  “For most of the morning he was making good progress. He made it through the Snickers, the Fritos, and the spearmint gum, which he chewed once and then swallowed. But by the time he got to the Doritos, he was visibly flagging. There were three rows of them. So one of my friends—who had a sizable side bet going that the guy was gonna finish—ran downstairs to the Duane Reed we had on the first floor of the building.”

  “Why?” Logan asked.

  “To buy a blender,” Randolph said, cracking up.

  Now Logan was in front of the vending machines, eying the wares, doing calculations of his own.

  “No way,” he said. “There’s just no way.”

  The trading floor may have been quiet, but it was huge: an unbroken stretch of desks that filled a room the size of a football field. Each desk supported three monitors, positioned at a slight angle to one another, so that the occupant of each station could see an unbroken stretch of screen from one side to the other. Some of the traders had a second row of three screens perched above the first. The screens were full, with colored lines tracking the seemingly random movements of various financial instruments. Each station had a special oversized keyboard containing the standard QWERTY, augmented by dozens of other keys—a crazy mix of letters and numbers that seemed almost nonsensical. The traders had no problem manipulating these bizarre keyboards, though—they played them like prodigies blasting their way through Chopin.

  Each station
had a giant phone console, all of its red buttons blinking crazily. When Logan and I arrived, Barry had one of the phones cradled between his shoulder and his ear, his jacket half off, animatedly talking to someone. Reed was calmly answering emails at the next desk. Jay Hoag was standing off to one side, relaxed as always in his wrinkled blue oxford shirt.

  “Nothing happening yet,” Jay reported. “The markets are about to open, but they’re still working on finding a price. Could be another hour or so.”

  He pointed over to a corner of the trading floor, where four or five traders were frantically talking into their phones, some of them into two at once.

  “Every time they try a new price, they have to call everybody back. This could take a while.”

  This presented a bit of a problem. We could wait all day—but back in Los Gatos, the mood was a little different. Since Los Gatos was three hours behind New York, the entire company had come in early for a 6:00 opening day breakfast. Everyone was assembled in one of our downstairs wings, eagerly awaiting the start of trading. I’d promised that I would call in periodically from the floor to report, but what was I going to say?

  There was nothing happening.

  At 9:15 a.m. Eastern Standard Time, fifteen minutes before the opening, I called the offices.

  “Good morning, Los Gatos!” I announced, imagining my voice echoing from the big speakers that had been set up. I pictured everyone stopping their conversations and putting down their coffee. This, for them, was the moment. They didn’t know the moment hadn’t yet arrived.

  “I’m here on the Merrill Lynch trading floor with Reed, Barry, and Jay,” I continued. “It’s about fifteen minutes before opening, and…” I paused, trying to figure out what to say. “Well, um, absolutely nothing is happening.”

  There’s nothing like trying to describe the process of “price matching” to a roomful of people you can’t see or hear. I felt like a baseball play-by-play announcer trying to fill airtime during a rain delay. Turns out, it takes a lot of skill to make a room full of desks sound interesting. I was boring myself—I can’t imagine how bored my audience was.

  Finally, mercifully, Patty picked up the line and suggested that maybe I should just call back when I had more information to share.

  Amazingly enough, Logan wasn’t the least bit bored by the delay. He was fascinated by everything. One of the traders showed him how to bring up market quotes. He learned to use the Bloomberg terminal and searched for news about Santa Cruz. He typed away, happy as a clam at high tide.

  For me, though, the wait was unbearable. In between my random reports back to Los Gatos—There’s a guy talking on two phones at once. There’s someone watering a plant.—I paced the floor, biting my nails. I felt like I was in the hospital waiting for a loved one to come out of surgery. Imagining every possible outcome—most of them bad—made me nervous and jittery. I needed something to do. Eventually, remembering the disposable camera Lorraine had shoved in my jacket pocket, I occupied myself by taking photos. I got Barry on the phone, Reed staring pensively. The one I took of Logan—looking up from his desk chair, hands clasped in front of him, a serious look on his face, as if he were deeply concerned with the erratic futures pricing of the Krugerrand—is still one of my favorite photos of him.

  When the moment finally came, there were no flashing lights. No clarion of trumpets. No announcement at all, really. Just Barry wandering over to where Jay, Reed, and I were huddled and announcing:

  We’ve got a price.

  Across a long screen on the wall and the top of most of the monitors in the room, there was a crawl of letters and numbers reflecting trades as they were happening. An experienced trader could watch the crawl and have an immediate and visceral understanding of what was happening: APPL—16.94 _MSFT—50.91 _CSCO—15.78. We all turned our eyes to the screen, staring, trying not to blink and miss it. Even Logan knew something important was happening and turned his eyes up to see if he could figure out what everyone was looking at.

  And there it was: NFLX—16.19.

  Finally, I had something to tell Patty.

  “Put me on speaker,” I said.

  On the floor, it was a strangely emotional celebration. Reed and I hugged. Barry, Jay, and I shook hands. I bent down and gave Logan a long squeeze. The various Merrill execs who had been shepherding us through the process stopped by to give their congratulations. Someone opened a bottle of champagne. Even Logan had a few sips. He hated it.

  Reed and Barry were going to stick around to speak to reporters, but my job as the play-by-play announcer was done the second I heard cheers erupt in Los Gatos. Logan and I could leave. Our flight didn’t leave Teterboro—the general aviation terminal that handles private flights in and out of New York City—until five o’clock. In the meantime, we had the afternoon free.

  I knew what I wanted to do. I wanted to see the Intrepid, the World War II aircraft carrier permanently docked at a pier on the Hudson. There was a museum there, too, and a submarine.

  But first, there was a more important errand Logan and I had to take care of.

  We descended to the street and as we pushed our way out through the revolving doors, I carefully peeled off our security name tags and tucked them in my backpack as a souvenir. I raised my hand, and a cab slowed to the curb. “Eleventh Street and Sixth Avenue,” I told the driver as I climbed in after Logan.

  “Where are we going?” Logan asked.

  “You’ll see,” I said. “I know you’re a California kid, but it’s time you were baptized as a New Yorker.”

  As the cab pulled into the late-morning traffic, I settled back on the cracked seat and watched out the half-open window as the blocks spooled by. It was starting to dawn on me that my life had just irreversibly changed course. In the time it took for a ticker symbol to scroll across a screen, an entirely new path had opened up. For the first time in my adult life, I didn’t need to work. And I never would have to, again.

  The cab stopped for a red light, and I found myself gazing out the window at the people in the crosswalk in front of us. A man in a suit, frowning over a donut. A woman in a nurse’s uniform, tired after a twelve-hour shift. A construction worker, his yellow hard hat in hand.

  They all had to work. But I didn’t. Just a few hours before, I’d been the same as them—but now, suddenly, things were different. I didn’t know how I felt about the shift.

  It wasn’t a question of money. It was a question of usefulness, of the pleasure of utility. Working, for me, was never about getting rich—it was about the thrill of doing good work, the pleasure of solving problems. At Netflix, those problems had been incredibly complex, and the joy came from sitting around a table with brilliant people and trying like hell to solve them.

  I didn’t love Netflix because I thought it would make me rich. I loved Netflix for the Nerf guns. The water fights. The limericks. Coins in the fountain, epic argumentative battles in the conference room. I loved it for freewheeling brainstorming sessions in the passenger seat of a car, for meetings in a diner or a hotel conference room or a swimming pool. I loved building the company, watching it stumble, then rebuilding it again. I loved the arrivals and the departures, the triumphs and the losses—the raucous laughter at the offsite and the stunned silence on Vanna White’s jet.

  I loved it for Christina, Mitch, Te, Jim, Eric, Suresh, and all the hundreds of other people who had sacrificed their nights and weekends, worked holidays, canceled plans and moved appointments. All to help Reed and I make a dream come true.

  It wasn’t about the money. It was about what we did before we ever knew we’d get it.

  So what happened now?

  I wouldn’t be getting the money right away. In the interest of preventing a flood of selling, the banks had required that all of us agree to hold our shares for six months. So in a way, nothing was really changing. In a few hours, I’d get on a plane and fly back to California, and I’d probably head straight back to the office to deal with email for a few hours before headi
ng home.

  After all, we still had a lot to do. Blockbuster was gunning for us. We were hearing disturbing whispers about Walmart entering online rental. We still had tons of things we wanted to test. And I was eager to get back to my research on streaming.

  But a part of me knew that one phase of the journey had just ended. The dream was a reality. We’d done it—we’d turned an envelope and a Patsy Cline CD into a publicly traded company. It was the sort of success we’d all hoped for, the thing that we had promised the people who had invested their money in us. And had held out as a reward for those who had invested their time. The sort of success that, for most people, would call for caviar, champagne, and steaks the size of dinner plates. A long dinner at Le Bernardin, followed by a nightcap or three at the Ritz.

  But that’s not where my son and I were headed.

  The cab stopped and I shoved a twenty through the partition. Outside, the banner of Famous Ray’s Pizza shone dully in the daylight. Pies laden with pepperoni, sausage, and cheese rotated on spindles in the window. For a moment, before I opened the door, I savored that scene—on the day I’d dreamed about for years, minutes after the entire trajectory of my life changed, I was going to have a slice of genuine New York pizza with my oldest son.

  I was just where I wanted to be.

  “Are we there yet, Dad?” Logan asked, looking up from the printouts he’d smuggled from the trading floor, listing thousands of share prices.

  “We sure are, Logan,” I answered, and opened the door. “Come on. We made it.”

  EPILOGUE

  Randolph’s Rules for Success

  When I was twenty-one years old, fresh out of college and about to start my first job, my father gave me a handwritten list of instructions. The whole thing took up less than half a page, in my father’s neat engineer’s handwriting. It read: