RANDOLPH’S RULES FOR SUCCESS
Do at least 10% more than you are asked.
Never, ever, to anybody present as fact opinions on things you don’t know. Takes great care and discipline.
Be courteous and considerate always—up and down.
Don’t knock, don’t complain—stick to constructive, serious criticism.
Don’t be afraid to make decisions when you have the facts on which to make them.
Quantify where possible.
Be open-minded but skeptical.
Be prompt.
That original list survives, framed and behind glass, hanging next to the mirror in my bathroom. I reread it every morning when I brush my teeth. I’ve given a copy to each of my kids. And I’ve tried, for my entire life, to live up to all eight rules.
Randolph’s Rules for Success are wide-ranging, broad-minded, and idiosyncratically punctuated (my kids and I laugh about the missing comma in #2 all the time). They somehow manage to be both extremely general (“Be open-minded but skeptical”) and charmingly precise (I love how the succinct “Be prompt” ends the list—it seems like the most minor rule, but its placement implies the opposite). The conduct they prescribe is one of openhearted, hardworking rationalism: an ideal my father—a curious, decent, and devoted man—exemplified in his own life.
Randolph’s Rules helped me at school. They helped me in the outdoors. And they helped me—immeasurably—in my career. In them I see the basis for my practice of constant testing (#2, #6), my ethos of curiosity and creativity (#7), and my willingness to take risks in service of a goal (#5). I see the seeds for Netflix’s culture of Radical Honesty in #4’s admonition to stick to constructive, serious criticism. And of course there’s a direct path from rule #1—Do at least 10% more than you are asked—to all the espresso- and pizza-fueled late nights in the Netflix offices.
My father very rarely got to see the professional side of his son. Since my parents lived on the East Coast, they hadn’t really gotten to encounter me in my professional element. Sure, I’d hit my mom up for money in the seed round for Netflix. And I told them all about my work: at Borland, at Integrity, at Netflix. By 1999, when I came to New York to give a speech to a bunch of DVD executives and invited them, they knew that Netflix was successful and growing. But they’d never quite seen it in person. At least not until that night.
I remember being nervous. Also proud—immensely proud—to look out at a full auditorium and see my parents in the back row.
Afterward, my dad and I sat in the empty auditorium. The stage was bare in front of us. He put his hand on my shoulder and congratulated me, said he was proud. Then he told me that his doctor had picked up something strange in a cranial X-ray and that he was going in for a brain biopsy at Mount Sinai the next day.
My breath caught in my throat. My mother had already told me that he’d been acting a little funny lately—hence the visit to the doctor in the first place—but this didn’t sound good. I covered my anxiety the way I usually do: with a joke.
“You need that like you need a hole in the head,” I told him.
He laughed.
We had the same sense of humor.
My father died of brain cancer in March of 2000. It was an intensely painful time for me, and it happened largely in the background of the story I’ve been telling. Throughout 1999 and early 2000, as we were testing various aspects of what would become Marquee and putting the finishing touches on Cinematch, I was flying back to New York at least once a month, as my dad underwent treatment. It was the most time we’d spent together in years.
My dad faced his diagnosis with the same attitude he faced most things in life. He was open-minded but skeptical when given positive feedback about his progress. He didn’t complain. He was courteous and considerate to everyone he dealt with in the health-care system—doctors and surgeons, nurses, orderlies and assistants. And he was prompt to appointments and meetings.
When he died, I took about a week off to grieve with my mother in New York. Then I flew back to California.
But something was different from then on. My father’s death put things in perspective for me. It led me to evaluate what truly mattered in my life—what fulfilled me as a father, a husband, an entrepreneur. As a person.
I started to realize that the pride I felt, that night in the auditorium in lower Manhattan, wasn’t about the fact that the room was full, or that my parents could see how successful I’d become.
Well, it was partly about that.
But more importantly, the pride I felt came from the message I was giving that night: how the media landscape is changing, and what you can learn from the companies that are changing it.
My father died just days before the collapse of the internet bubble. As a value investor, he’d never understood the hype, never understood the frenzy. He would have been unspeakably delighted to have seen that he was right all along.
I wish he could have seen it. And I wish he could have seen us survive it. He never got to see us take the company public. He never heard my stories about taking a private plane to New York with my son in tow. He never got to hear me talk about the financial windfall of the IPO and all that it entailed for my family.
But you know what? It didn’t matter. Because he got to see me onstage, talking about the thing I love: Solving problems. Team-building. Building a culture that works. How to refine your startup mentality.
He saw me doing what I loved. That’s what really mattered.
As you get older, if you’re at all self-aware, you learn two important things about yourself: what you like, and what you’re good at. Anyone who gets to spend his day doing both of those things is a lucky man.
By the beginning of my seventh year at Netflix, the company had changed dramatically. My role had changed as well. I still ran the website—continually tweaking how we signed customers up, what we charged them, how they chose their movies, and in what order we shipped to them—but I had gradually transitioned many of the other aspects of the company to more capable executives.
We had long since passed the one-million-subscribers mark. We had moved headquarters twice, as a swelling workforce successively burst our figurative seams.
We had finally figured out a way to get next-day delivery to the majority of the country, and the positive word-of-mouth that this generated accelerated our growth.
We’d gone public. With the money that provided—and our growing reputation—we were able to attract amazing people to come work for us. People who were stars in their field. People who had run their own companies, or had done the logistics for multinational corporations, or had built the infrastructure of the internet.
We were now deep in the throes of our battle with Blockbuster for rental supremacy. By then, Reed had started trotting out the familiar origin story for the company. Remember it? It went something like this: Reed came up with the idea for Netflix when he found an old rental copy of Apollo 13 in his house, went to return it to Blockbuster, and saw a $40 late fee. Then he thought: What if I never had to do this again?
If this book has taught you anything, I hope it’s shown you that the story behind Netflix was a little more complicated than that. And I also hope it’s shown you how useful narrative can be. When you’re trying to take down a juggernaut, the story of your company’s founding can’t be a 300-page book like this one. It has to be a paragraph. Reed’s oft-repeated origin story is branding at its finest, and I don’t begrudge him for it at all.
Is it a lie? No—it’s a story. And it’s a fantastic one.
The truth is, the patrimony of any innovation is complicated. There are always multiple people involved. They struggle, they push, they argue. They each contribute different backgrounds and inspirations: years in the mail-order business, a passion for algorithms, an enduring desire to do the right thing for the customer, an insight into the cost-effectiveness of first-class mail, a knowledge of the power of personalization. Yes, maybe even a late fee on a movie. And thro
ugh a process that might take days, might take weeks, or might even take years, this group of people comes up with something new and different and great. And as you’ve seen, in our case the result was Netflix.
But that story is messy.
And when you’re talking to the press, to an investor, or to a business partner, people really don’t want to hear it. They want a version that’s neat and clean with a bow on it. Reed recognized that almost immediately, and so Reed came up with a story. It’s a great one: simple, clear, and memorable. That story captures the essence of what Netflix is about, and it solved a big problem for us.
That story gave us a narrative.
By 2003, Netflix had been around long enough to write its own story: David versus Goliath. And it was looking like David might have a shot.
Netflix had grown up. But so, I realized, had I.
I still loved the company. I loved it with the passion only a parent would know. I righted wrongs, dispatched enemies, and was always pushing the company even harder to succeed. But as quarterly numbers mechanically came and went each successive year, I slowly realized that although I loved the company, I no longer loved working there.
It turns out that I did know what I like, and what I’m good at. And it wasn’t a company as big as Netflix. It was small companies struggling to find their way. It was newly hatched dreams for which no one had yet discovered a repeatable scalable business model. It was wading into companies rife with crisis, to solve really complex problems with really smart people.
And I’ll blow my own horn here for a minute: I’m pretty damn good at it. Every startup has hundreds of things going wrong at the same time, all clamoring for attention. I have a sense of which two or three issues are the critical ones, even if they are not the ones screaming the loudest. But they are the issues that, if you fix them, then all the rest will take care of itself.
I have an almost obsessive ability to focus on those singular things—single-mindedly attacking them at the expense of everything else until I have wrestled them to the ground.
I have the ability to inspire people to quit their jobs, take a pay cut, and help wage an improbable battle against an apparently implacable foe.
These are critical skills for running a startup. They’re less applicable to running a company with hundreds of employees and millions of subscribers.
The time had come.
I think I knew that for a while, after the IPO. But it didn’t become real until the spring of 2003, when I asked to work on developing a Netflix kiosk with Mitch Lowe.
We had often tried to figure out how to compete with Blockbuster’s ability to provide immediate service to its users. Although Netflix customers had a ready supply of movies on top of their TVs, that was as close to instant gratification as we got. If a customer later decided they wanted something different, they were out of luck. But Blockbuster customers could just drive to one of their thousands of stores instead of waiting for the mail. It was our Achilles’ heel. We were deathly afraid that Blockbuster would roll out a blended model, combining online with retail. We knew that would be compelling for customers.
Mitch Lowe had been a relentless advocate for a kiosk solution, in which Netflix subscribers could use small outposts of the service to rent and return DVDs. Well before joining Netflix, he’d dreamed of developing the technology as a facet of Video Droid. And now it was looking like Reed was amenable to testing the idea out.
“Mitch and I found a great site for the test in Las Vegas,” I told Reed. “And I’m thinking I should be there with him. I need to focus on this. Maybe even exclusively.”
“That’s fine,” Reed said. “We can move all of your front-end stuff over to Neil. Combining the project managers and the front-end engineers under a single person will probably work better for everyone.”
“But if this doesn’t work…,” I said, watching Reed’s face as we both came to the same realization. “I’m not sure it’s fair to Neil for me to yank it all back six months from now.”
Reed swallowed and cocked his head. “Well,” he said, “I guess we’ll have to talk about severance. Just in case.”
There was an awkward pause, and then I couldn’t help it—I laughed.
Reed smiled warily.
“I mean, we’ve talked about this,” I said. “We both knew it was coming, sooner or later.”
And it was true: Reed and I had spoken often about how I was feeling. He’s too smart not to have noticed that my skills weren’t the ones that Netflix would be needing in the years ahead, and too honest to hide that from me for very long.
Now, though, he looked relieved. Under this arrangement, he wouldn’t have to have an uncomfortable conversation with me. He wouldn’t have to draft up another PowerPoint, craft another shit sandwich—because the decision wasn’t his.
I was working one last project. Then, if it didn’t work, I was leaving—on my own terms.
Six months later, I was back in Los Gatos, wearing the New Media Outfit one last time. Or at least a version of it. I’d kept the iridescent blazer, but I’d swapped out the khakis for jeans. And the moiré shirt was gone, replaced by a T-shirt.
If I was going out, I was going out comfortable.
Netflix had rented out the historic Los Gatos Theatre for my going-away party. The little company that went months without an office, ran up epic tabs at Hobee’s, and conducted our first meetings in a seedy motel conference room was now too big to assemble in any one place in the office. And to send off its original founder, another mass gathering at the picnic tables wouldn’t do. Instead, I was getting the red-carpet treatment—or at least the red velvet seat treatment. The Los Gatos Theatre is the kind of place with velvet curtains on the walls and real velvet on the seats. Like the Netflix offices, it has a popcorn machine in the front. But this one is the real deal, made in the days when popcorn was the only thing you could buy at the concession stand.
In other words, it actually worked.
As I walked up to the front of the theater with Lorraine and the kids, I couldn’t help but be struck by the sheer size of the company now. People were spilling out of the lobby and onto the street. I recognized most, but not all of them.
“Wow,” Lorraine said. “I knew it was big, but part of me still imagines you going to work every day with ten other people, sitting on our old dining room chairs.”
I laughed. But she was right. Things had really changed. The original team of eight now numbered in the hundreds. Our IPO had instantly netted the company nearly $80 million. Gone were the days of calling up Steve Kahn or my mother for $25,000. That initial investment from my mother had gone up nearly a hundredfold. She bought an apartment on the Upper East Side with it.
But gone, also, were the scrappy underdog days. I missed them. I missed the late nights and early mornings, the lawn chairs and card tables. I missed the feeling of all hands on deck, and the expectation that every day you’d be working on a problem that wasn’t strictly tied to your job description.
I’d felt that again, in a way, with Mitch during our stay in Las Vegas. We’d had a blast. For three months, we’d lived together in a condo in Summerlin, a community west of Vegas, near Red Rock Canyon. We’d set up a prototype kiosk in a Smith’s supermarket a few blocks from the condo, offering instantaneous rentals for Netflix subscribers. In true Netflix fashion, we hadn’t actually built an electronic interface for customers to use. Instead, we’d just employed our usual validation hacking—we built a miniature store inside the supermarket, where Netflix subscribers could pick from a selection of DVDs and return movies from their queue. Mitch had used a shaper in Santa Cruz to build a NETFLIX EXPRESS sign made from a surfboard, and we’d hung it from the ceiling of our little store. We weren’t testing whether or not a computer kiosk could work—we were testing how customers would use one. Would they pick movies up? Bring movies back? Just add to their queues?
We’d spent a lot of time in the supermarket that summer, usually at night. In the summer, that�
��s when people in Vegas go grocery shopping. It’s too hot during the day, and people work weird hours at the casinos. At one in the morning, we’d watch the cocktail waitresses, dealers, and strippers try to use our pseudo-kiosk. We’d wander the aisles with clipboards, asking questions about how they felt about being able to return and rent movies at the grocery store. If they weren’t Netflix customers, we tried to convince them to sign up—and if they didn’t want to, we listened to their reasons why.
We learned a lot. Most importantly, though, we learned that the kiosk idea was a winner. People loved it.
I was sad when the three months in Nevada were over. I’d grown accustomed to going mountain biking in the predawn hours, taking early evening hikes with Mitch, or just sitting around the deserted condo pool in the afternoon, talking about business and life. Mitch was excited to show our findings to Reed. He thought that the tests had proven that kiosks could be an intermediary solution to our immediacy problem—when one-day shipping wasn’t fast enough, maybe a kiosk could bridge the gap.
But upon our return to California, Reed hadn’t agreed.
“It’s expensive,” he’d said. “Once you go kiosk, you’re in the hardware business, and you’ll have to hire and manage a whole fleet of people all over the country to stock the kiosks. It’s a good idea, but our focus is better spent on our core business.”
“The Canada Principle,” I said.
Reed nodded.
It’s a great principle. But it left me out of a job. Kiosks were a no-go. That meant that I was drawing up my severance package.
Mitch, for his part, used the tests from our three months in Vegas to start another little company. You might have heard of it. It’s called Redbox.
So there I was, sitting onstage at the Los Gatos Theatre, looking out over a sea of faces on my last day at the job. Lorraine was next to me. So was Logan, in his IPO blazer and loafers. Morgan was trying to keep Hunter—five years old now and much more mobile—from taking off his shoes and throwing them into the audience. She wasn’t succeeding.
That Will Never Work Page 30
