This is Masters in Business with Barry Ridholts on Bloomberg Radio. This week on the podcast, I have an extra special guest. Her name is Patty McCord and she was the chief town officer in charge of things like HR and culture at Netflix. And she is also the author of a new book, Powerful Building a Culture of Freedom and Responsibility.
If you were all interested in what it was like to be in Silicon Valley in the eighties and nineties, how Netflix came together, and why we are now in the fifth era of Netflix from DVD to streaming, to go down the list to original content to whatever the next things they're working on. Uh, if you're curious as to how companies recruit and the importance of corporate culture, you will find this conversation fascinating. I found her to
be the lightful. She is extremely knowledgeable about all sorts of things taking place both in the world of corporate um HR and within technology and startups. Rather than me just babbled incessantly, let's jump right into it my conversation with Netflix Patty McCord. My extra special guest today is Patty McCord. She was the chief talent Officer at Netflix for fourteen years. Her presentation on the subject of corporate
culture has been shared almost fifteen million times. No less a star than Cheryl Sandberg called it the single most important document to ever come out of Silicon Valley. She is the author of a new book, Powerful, Building a Culture of Freedom and Responsibility. Patty McCord, Welcome to Bloomberg. Thanks for having me. So I'm excited about this because A I'm a big Netflix fan and B you wrote a really interesting book about the concept of corporate culture
and how to implement it. Let's let's talk a little bit about your background and how you ended up at Netflix. In the late eighties, for four years, you ran the corporate diversity program at Sun Microsystems. How did you end up at Sun? A girl from Dallas? How does that happen? Hmm? Let's see. I started out in tech as a recruiter. So I started out in a company called Sgate and
I w hard drives. Yes, I recruited assemblers and then technicians, and then engineers and then vice presidents and then I ran staffing for them, and um and I did it because uh, my husband then was an artist and I was working with him and it was too boring for me. I needed to be someplace social. So I said, I just needed Mr Coffee. I just need to be with other people in a Mr Coffee. So that's how I I did the recruiting job, and so I got pretty
hooked on the technology. I really liked the people and the things we were doing. I um, so from c Gate to Son, how does that um? Because I interviewed somebody for a position at H at c Gate and no, this was later. Yeah, it was a c Gate and she was from Son and I called to make her a job offer, and she said, oh, I didn't like you or your company or your team. But I know I didn't like your company or your team, but I really liked you, So why don't you quit and come
work for me here at Sun's Crazy? So she bugged me for about two years and then it was who would you work with its son? Was this the Scott mcneelie ero or yeah? I said mcneeli ra. Yeah, mcnelie who told me one time when I was presenting on diversity to the executive staff. So the executive staff at that time was Carol Bart's ed Xander Scott McNeely. You know, um, Berrik Schmidt murderous. Yeah, and Scott told me one time. Now, I wasn't born with a silver spoon in my mouth, Patty,
Mine was platinum. That's pretty fun. It was a different era to say to say at least, So how do you go from Sun to Netflix? Um? Let's see, I went to Europe for Sun. I uh were in Europe. I was in Scotland. We had a plant there in Scotland. And I went because our theme dijure in HR at
that time was going global. And I came back and I was like, hey, I'm global, and but we had switched themes and now we were quote re engineering, and I said, I remember saying, oh, you mean we're gonna have layoffs, No, we're re engineering the workforce, you know, Barry. I think that may have been the seed of my hatred for HR speak. So so right sizing was the phrase. I remember that so deplorable. Re engineering is such a neutral sense, isn't that nice? You know? And it's so
geeky engineering. We're giving people new job descriptions. No, we're firing that, we're gonna we're gonna call it re engineering because we didn't do that. So um, then I took a job at Borland, which was a software company that was arrival to Microsoft Office at the time. Did they ultimately end up buying word Perfect And I'm remembering that correctly, but they had it was and then um Microsoft competed by basically undercutting the product and price and wiped it
all out. But it was changed a p s. They always did a lot of fun. Here's a fascinating thing, you know. I'm a hr I'm not particularly I wasn't particularly technical at the time I went to Borland. I had a two eighties six standalone computer and I came from sunwhere I had a spark station. Right I could I could publish newspapers on my desk, and I asked somebody to bring me something. I'm like, don't we have this in soft copy? Can I get it off of the quote net? And they said, I'll bring it to you.
And the person came to me and handed me a floppy drive sneaker net a floppy drive, and I'm like, hey, thanks, And I held up my hand like am I supposed to do with this? I didn't know anything, but it was um it was desktop applications. I could use the product myself. Um, it was really cool. I worked a lot with the spreadsheet group with Quadrupro and it was still HR. So from HR and recruiting, how do you make the transition to I'm all about culture, I'm all
about talents. How how does that take place? Well? I think that when you recruit what you are all about talent anyway, it's not just money, park stock options, No, No, it's matchmaking right, It's about knowing what problem a team is trying to solve, who are the right people to do it, getting under their skin to understand what drives people like that, particularly technical people. You know, they're wired really differently, and I like different kinds of problems. I
was really curious about that. And then when I arted recruiting like executives, then that was another insight into what's leadership really like? What are people really about? So I was at Borland and um one of my vps that I worked with had taken a job at a small startup and he took it because he really liked the CEO there. And so I called him up one day and said, Hey, how's it going. How's your HR person? He said, Oh, the HR person is terrible. Getting rid
of them I'm like, how do you recruit? I said, I said, great, why don't you hire me? And he said to me, you told me if I recruited out of Borland you'd break both my legs. I said, like, I didn't mean me, and he said, lots of luck, I'm not going to do it. The CEO's name is Read Hastings. So I hung up the phone. Remember back the day you could dial Star six nine and it would call back. So I called back and Read sister, who was the receptionist, answered the phone and I said,
may I speak with Mr Hastings? And she put me through just like that, just like that. So I said, you don't know me, but I'm going to be your next HR person. And um, that's how I met Read and I went in for an interview. And during the interview he asked me about my HR philosophy. Now, remember I'd been at SUN so I could speak fluent HR. Read. I believe that it's imperative that each individual in the organization are empowered to be engaged, and you know the
relationship between the corporate objectives in there. And he said to me, what are you saying? Do you people even speak English? How is this supposed to help me sell software, and so I got in an argument with him. Yeah, at the job interview, I'm like, well, you don't know me, and he's like, well, you're not telling me anything. So we have this big tip and I go home and my husband then said how'd it go? And I said, well, he said, you got to grow up and be a
good girl. You are the breadwinner of this family. We have three children. You got to start acting like a normal person. So um, he hired me nothing intervening having a tiff over corporate speed. So we came back. I came back for a couple of interviews and I was going to walk that. I walked that back and I said I was sorry, and then I was going to report to the CFO. And I joined six months before the I p O. I joined at the cusp of
our international expansion. This was a job where I got to be in charge of HR and it was a tiny little startup and there was literally nothing. How many how many people were there when they were about to go IPM couple of hundred, maybe more than that, because we had opened our European office. We grew that company through merger and acquisition. Every time we acquired a company, we doubled. So when I left, we were a couple of thousand. We'd acquired four companies in five years. That
was Pure Software. Pure Atria was acquired by Rational was acquired by IBM. But it's an important part of my story because um Reid was the first time CEO. It was my first time actually running a whole HR department, and so I was very aware of policies and procedures, and I would take if we acquired your company, I'd take your handbook in our handbook and I'd smush them together, and I try and have overall comprehensive policies that would piss off the fewest people that I cut this off right.
Um anyway, So then the company we got acquired and they did what any what we did whenever we acquired a company, they wiped out all the upper manage who acquired you, guys. Pure Atrio was acquired by a company named Rational. Okay, so Rational acquired us Read and I and the rest of the executives were gone. Um and I started consulting then, and Read started investing in other startups at the time, and Netflix was one. Oh, so this is when you started with read what it wasn't Netflix?
What was the company? It was called Pure Atria or Pure Software when I was first So when he went off and invested in Netflix, how did he end up as CEO? And how did he bring you along? He was co founder and um, he was chairman of the board for a year or so, um, maybe more. And then he decided to go in and run the company with the co founder Mark Grandolph at the time, and the company was expanding, and so he called me up to join them, and I said no because I thought
it was a really stupid idea. DVDs through the mail hold that thought because I want I share your thoughts and we'll talk about that. Let's talk a little about culture. It's become such a huge issue in our society. Uh. And there is somewhat of a well documented culture problem coming out of of Silicon Valley. Uber is probably, um, you know, the poster child. But we're seeing things at
adventure Capital, farms, at Google, it elsewhere where. There's a little bit of a bro mentality and not necessarily the healthiest culture. How difficult is it to build a culture for a big company. And if you have to step into a mess like uber, how hard is it to turn that supertanker around. Let's start with what I define culture as. I'm very Margaret Meat about it. Okay, it's the way you behave, It's the stories that you tell. It's what you do when no one's looking. It's what
employees see management do and say. It has almost nothing to do with what you write down. So the famous Netflix culture deck, I didn't write. It was a collaborative thing that we did to onboard people, and it took us about ten years to create. So culture isn't something you declare and then it's so it's right. Yeah, So if you're in a large corporation and you're setting out to empower people, but everyone has to ask five people for permission to do anything, then talking about empowerment, it's
absolutely ridiculous. Secondly, um, I know everybody wants to point to the Silicon Valley as the you know, the birthplace of bro Topia. And and actually Emily Chang, who's a Bloomberg reporter who wrote the book, I think it's a fabulous book and I learned a ton and I lived it, so her research was really good about it. But the issues that are happening in the corporate world right now,
are happening all over the place. So I just got an interview a couple of weeks ago by a reporter and the Guardian in the UK and she said, oh, you know, the people in Silicon Valley must be just freaking out because of their employees going rogue and going to the internet and complaining about sexual harassment. What are you going to do about that's horrible thing that's happening out there. And I said, well, first of all, going rogue, you mean like using social media like we all do.
We don't really think about that is like a rogue thing anymore. Yeah, I said, you know, it is a problem that people in companies feel like nobody inside the company has live thing to to them, and so in order to get an audience they have to go to a bunch of strangers on the internet. That's a serious
cultural problem, but going rogue isn't. And second of all, I said to her, because you've never experienced any sort of harassment as a female reporter in the UK, right And she's you know, it's crickets On the other end of the line, I'm like, this is a problem. It's a real problem. There's actually a phrase called reporting while female that so this this covers every single person woman if you want to do the me too movement, and every single business around the world, from from Maids to
Maven's right. So it's not an issue of the Silicon Valley. The Silicon Valley, however, has a particular problem that's a result of so many men in tech. So because of the overwhelming you know, we talked earlier about how I ran um, how I ran diversity at SUN in the nineties. So oh, I actually started running affirmative action, which morphed
into diversity. So I knew the numbers. And when I read Lean in ten years later, and I looked at the numbers because I knew what they were right that the because I did affirmative action reporting for the number of females, the numbers were worse. So the number of women in technology had declined. And it just and I looked back and I realized, you know, back in the day, in the nineties, we celebrated our diversity up one side and down the other. I mean, my single day Mayo
party had ricocon. You know, I had the mariachi band. It was amazing, and I didn't fix pay Huh. Right, we could have fixed equal pay back then, and we didn't, right, And so what would the pushback have been if you had said at that time, by the way, we should pay male and female engineers the exact same amount, and this will allow us to recruit the best people across the entire industry. Because that's not how we recruited, because the actual, um, the actual fact of recruiting went like this,
tell me how much you make, we'll give more. We'll give you more. Right, we'll give you whatever it takes to hire you. And so those were the negotiations, and
that was what was perceived to be the negotiation. I was just reading, um, my friend Jenna Rich just wrote an article yesterday about she's a headhunter and Silicon Valley has been around for a really long time, and she said, you know, if you ask what the salary ranges for a particular position, and it's between one and two hundred, women will think one seventies a good offer, and then
we'll always argue for two hundred. Right. So some of it is cultural, some of it is by us, some of it is the types of positions that we're in. And so now I just did an HR conference yesterday and I stood up in front of them and I said, all right, let's let's be clear. Which are the three most female dominated departments in any company? Sales and are getting HR and Finance. And I stand with my legs apart in my hands on my side of the fists, and I get all shrill, and I'm like, fix pay.
We own it, we own compensation. So like we are women, we own our own compensation. So let's fix the systems that keep it down. So so, in other words, the women in the accounting department HR, these are the people who helped determine what the internal pay structure of a company is going to be yes, which is a lot of what my company is about, my my company, I'm sorry, which is a lot of what my book is about.
What my book is about is re examining all the institutions inside of a company and saying, if we had to start over again, would we do it the same way? Right? So that's the reason I wrote the book powerful, is that I believe that we're actually harming ourselves by using the same methodologies for managing people and managing compensation and managing recruiting that we've been seeing since the sixties. I mean, really,
it goes back a long, long way. So when you have a merit increased budget that once a year, at the end of your annual performance review, we give you a six and a half percent merit increased budget on a bell curve distribution with ratings and rankings and salary ranges and them and them and that, and you start out underpaid. You'll never catch up, right, You'll never catch up. We were just discussing the challenges in setting up a corporate culture or helping to turn one around at a
Brotopia type shop like Uber. But let's talk a little bit about um about the corporate culture. And and there's a quote from the book that I really like. A great workplace is not espresso or lush benefits or sushi launches, grand parties or nice nice offices. What is a great workplace? And how does culture play into that question? I often ask people when they ask me that, So I'll ask you that if you think about the time you went home from work and you spontaneously told your spouse or
your pet, oh my god, it was a great hit work. Today, it's almost never that there were macadamia nuts in the cookies or that Mohito was just right. Are really they are really good? And you might say that, but when it's really about work and it really comes from your soul, it's usually because you did something hard with other really smart people that you didn't think you could do. I mean I and it worked out well, and well, I spend a fair amount of time with Silicon Valley happy people. People.
What what are you in charge of? I'm in charge of making employees happy. And I tell them, well, I'm like, that's not a job. Okay, that's a that's a thing to do, but it's not a job, because you know, I used to tell my team when I worked at Netflix, and I thought of myself as the CEO of the culture, right, I would say to my HR team, Yes, we are a service organization. It's not spelled s E r v A n t S. And by the way, the people we serve don't work here. We serve the people that
use our product. And so our job is to make sure that we get out of the way or and make sure that our teams are comprised at brilliant people who can do the hard work of creating an amazing service that keeps people coming back to Netflix. Netflix as an example. And now that I work with you know, I work a lot these days with pretty large corporations. And when you get really large global corporations or hundreds of thousands of employees and you have internal departments like HR,
they get pretty divorced from the business sense. And so that for me, that combination, that's the real critical way to change things. So since we're talking wrapping that in corporate culture, corporate culture is unique to every corporation because
every corporation serves a different customer. That's quite fascinating. So as the HR department starts to grow on the other side of the river from software developments in asset management, it's going to be research, portfolios, financial planning, all that stuff becomes completely separate from that. How do you bring it back across the river. How do you get HR
to serve the customer by working with the other divisions? Well, you make we're serving the customer and understanding the business a core part of the knowledge of literally everyone that works in a company. There is nobody in any company that you should hire that doesn't have the capability of
understanding the basics of a profit and loss statement. So, for example, I was just talking to somebody yesterday about customer service and she was new in customer service, and she said, you know what can I do to really enhance this experience for people? And I said, Number one, don't lie and tell them that this is the beginning of their lifelong career at the corporation, because it's not. It's usually a job that people are in for a
couple of years before they can't take it anymore. To teach them how to read a p n L so that they can know that if they have a customer that hangs up and says, wow, that was a great experience, I'm going to tell my friend to use this. That is actually a direct line marketing contribution to the business, straight to the bottom line, because that's a marketing marketing dollars that you didn't spend because you acquired a cut new customer for free. It's it's easier to keep customers
and it is to get new customers. It's it's hugely fiscally responsible to do so right. And if I believed as a customer service rep, my job wasn't to listen to cranky people complaining all day, but my job was to create an experience so that somebody would tell somebody else to join for free, right that I was contributing to the bottom line. Then I would learn more about what it is that I do. Secondarily, I would learn a skill that I and take with me for the
rest of my career. I could go into the next company and not say, well, how many kinds of craft beer do you have? But instead, do you have a profitable business model? Right? And and most people don't. Really, It's crazy to me. I don't think I understood that until I was fifteen years into my work life. So when did that that? That's really You're going right to my next question. What led to the realization that, hey, culture really matters? You know? I don't know that it
was birthed that way. There was no brand epiphany. It was a lot of little things. No, the story I told you of when Read and I worked together in that software company, when we it was a great company, and we had a lot of great people, we made a lot of great products, but it was a company like every other company. And so when he asked me to join Netflix, and I thought it was a dumb idea and I didn't want to do it, and what. What he did that compelled me was he said, let's
create the kind of company we want to work for. Like, what if we're successful again but we love it, right, what will we do? And I said, oh, okay, if we did that, how would you know? And he said, oh, I'd want to walk in the door every day and solve these problems with these people. And then he asked me how would you know? And I said it wouldn't it be cool if we were a great company to be from? Great to be from? Yeah? And it changed everything for me, Like what if I could on your resume,
it's like, oh, you're at Netflix? Were you there during DVD? Were you there? What did you do? Because there would be an assumption that you did something amazing, right, And so the thing that we did differently there that didn't seem crazy radical at the time and didn't seem like a new wave of inventing culture was we just wrote stuff down. So the famous Netflix culture deck was an internal document for onboarding people. Uh, you said something war that cracked me up that I just have to ask
you about. When I first heard about from my good buddy Jeff Whitzman, who whose company got bought by Yahoo, and he moved to Silicon Valley to Palo Alto in the mid nineties and has been happily asconced in California ever since. We were talking about this, and I'm like, DVDs by mail? Who would ever want? You know, there's a blockbuster on the corner. Why do I want to get DVDs by mail when I'm living here in the city.
It sounds pretty silly. What was your response when Reid first said to you, here's what the business model of the company is. I thought it was ridiculous. And only, you know, he was the only There are three people I knew that had DVD players, and they were all geeks like him, right, And I had three kids and a house full of VHS tapes. Right. It just there's no way I was going to give up that space on my bookshelf, right, you know, and for those silly
little things. And and I met him one time the parking lot of an office Max early in the morning. He had his kids in a stroller, and I said, um, what are you doing? He goes taking the kids for a walk and I said, what kind of father are you going to office Max? He said, I bought a postage meter. I'm mailing DVDs to myself and they don't break. And that's how he told me the idea about Netflix. Really, so that's how he tested it. He mailed it to him.
So yeah, it was crazy. And so when I think about my career at Netflix, um, I think I'm kind of a serial entrepreneur. And so I was very lucky because I got three separate companies when I was at Netflix. The first one was on the DVD by mail business. Could we come up with a business model that would actually make money before we ran out? And that was very touch and go. So what was the model that you would send it to people? They could have one?
Our original model was late fees and duo days. It was just block Best and if you kept it, you would continue to hold it for a Yeah, it was. And then then we did the subscription model that made a little more. So that was the second kind of we really were taking down Blockbuster. So that was my second start. Hold the DVDs for as long as you want, and when you send it back to us, we'll send
you the next DVD in your queue. I remember interviewing somebody one time and she said, oh god, you know, my daughter watches The Little Mermaid over and over again, and I bet I've had that DVD for six months. You probably won't want it back. No, you just bought it for three times. I like, you know, keep it as long as you want. It's we don't care. We
just want your daughter to be really happy. And I'm thinking the same thing would have bought it seven what was it, twelve dollars a month or and but you know those are old old days. That's Netflix is twenty years old, right, that's azing. So that was my second startup was DVD by Mail. The third one was figuring out the technology of digital streaming uh and that was a very technical challenge that most people don't realize. Back if if only the company had a person in charge
of HR with a lot of experience with engineers. Yeah, So I left as the company morphed to be what it is now, which is a global original content company. That's the fourth business effect, which is the fourth business effect. And knowing read they're up to something that's the fifth business in the future, I just don't know it now because I've been gone for so long. So you know, well, I love to reminisce about the days at Netflix, because
they were wonderful. Um, what I want to talk about now is about the innovative spirit that we had there and the most important part of the culture. There was this belief that if you put the right people in the room with a really hard problem that mattered, and you took away all the constraints and gave them focus on a do date. This is one thing that startups
don't do very well. You know, their end game is someday right instead of like like the end of the year or at the end of the quarter, had some hard deadline. And that's partly because engineers are very scheduled driven, are very you know. It's interesting all the stuff that I talked about I learned from them or from product managers. You know why. Like I say to HR people now, I said, look, let's take the annual performance review. What is it? What do you do it? Is it a
feedback mechanism? Okay, let's say we do that to give people feedback on their performance. Well, when you step back and said, let's create a system to give people feedback for their performance once a year, I mean, seriously, what else do you do once a year that you're good at that would be nothing, right, So, I mean it's just a bad it's a bad system for doing that. So if you're an innovative engineer, you would say, well,
that's dump throw that away. Let's start with the end game and work backwards and test a couple of things so we can figure out the system that really does
do that. Right, What a cool idea? Right? If you say it's a system to fairly compensate people, and you're in a very dynamic work environment where compensation moves pretty rapidly constantly for different positions, why would you do that once a year by looking at survey that looked at companies that were similar to you kind of last year, right, I mean, so I I'm okay if you choose to do what you've always done. So this is sort of my message by my revolution. I want to start right now,
which is choose it. So what was the the either the pushback or the feedback from read when you start throwing away hey, views are cherished in long held corporate philosophy. No no, no, no no, no, no no no no. The pushback was completely the opposite. Just no, no, no, it was read he's the innovator. Oh really? Yeah? No, it was Reid who would say, how can we have to how can we have to have paid time off? And you know, the hr v P I was a real
hr verse off. So so for example, we when we went public, we had to come up with a new scheme for paid time off and was that a legal requirement or just have it? You know we had at the time we were paying people you accrued to day a month and it was an honor system. And when you left the company, we trewed up. But the auditors didn't like it because we were technically paying everybody thirteen
months a year. It was all falling to the bottom line because you don't true up until you leave the company. The socks guys didn't like it because because it wasn't like it what everybody else was doing. And then UM and I and I didn't want to write down here's your ten holidays and here's your tin vacation days, and here's your six six days in my office. We called that big boy rules. Yes, so you get work to do and if you need to take time, well, so I didn't want to write a policy that said that
and yet tell the engineers I'm just kidding. I don't really care what you do, because because engineers will look at that and go typical, HR, I sexually harass somebody and you're gonna fire me. But the time off policy, you don't really care, right, So easy policy or it's inconsistent, it's not a policy. So I say that to Read. I'm like, this is what I think the engineers are going to think, and Read as an engineer says, oh yeah, hey, by the way, do you have to have paid time off?
And the HR VP and ME says, of course you do. Everybody's got paid time off, right, So then the hanging out with Read Forever VP and me says, you mean legally. So I go and google it, and I do some research and I can't find any statute that requires paid time off for its salaried employees in California. So anyway
we get rid of it, right. But where where I become the CEO is where Read comes up with these crazy ideas, Well, maybe we don't even have to have it, Maybe we don't even have should we even have a travel policy? Should we have expense approvals from finance? And I start thinking, well, if we really have hired adults who are really smart and really capable and really responsible,
then you do we really need to do that. But I also have to operationally go back and say, well, if there's no one in finance that approves the expenditures, I still need to know what you're spending. So then I got yes. And then you in bed a finance person in every organization who says, hey, by the way, you budgeted for individual expenditures at ten tho dollars. A
person in your run rates eleven. So how are we going to think about that in terms of the budget Which is the real question to ask, not that I went to finance and they said no, right, it's what do we actually spending? What do we actually and and it's that um, it's that product, like look at everything that you do. Right, So what's the purpose? What's the purpose of the travel policy? Right? Is it to save money? Then say hey, by the way, here's your travel expenditure maximum. Right?
Is it to be efficient? Then you have to think about who's traveling for what and what right? And if you think about that in terms of what's the right thing for the company. See, now I'm teaching people it's not about you, it's about us. It's about the p m l it's about the customer, it's about the company. What's the right thing to do in this and that adds up to a corporate culture. It does right, And so we wrote down as we started to do these things,
here's what. So for example, if you look in the old culture deck, it says there's five words you act in the company's best interest. Now, the whole system around that means you have to hire people who do right. You have to have people be responsible when they don't. There have to be consequences right, good and bad for when people act the culture. So the question you asked me was how did I come up with that? I didn't. We did it collaboratively over many, many years, and the
thing that was different was we wrote it down. That's that's just fascinating. We have been speaking with Patty McCord. She is the former chief talent officer at Netflix. She is also the author of Powerful Building a Culture of Freedom and Responsibility. Be sure and check out our podcast extras, where we keep the tape rolling and continue to discuss all things corporate culture. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg
dot net. Be sure and check out my daily column on Bloomberg View dot com. You can follow me on Twitter at rid Halts. I'm Barry Ridhults. You're listening to Masters in Business on Bloomberg Radio. Welcome to the podcast. Thank you Patty for doing this. I'm really enjoying the conversation. And before we get to our standard favorite questions, there's still a bunch of things I have to ask you that I didn't get to. Um. First, you were right in the heart of Silicon Valley in the late eighties
and throughout the nineties. What was that period of time like how to be man? It wasn't I mean, it was just something new and exciting every day. There were you know, there's an energy in the Silicon Valley that anything is possible. Really yeah that uh, I think partly because of the whole stand Stanford, you know, young entrepreneur thing. You know, much has been said about the maligned millennials term. I really hate um, you know because when you're in
your twenties, you were a millennial. I was millennial. It was a while back when we were millennials. We work but but but yeah, but here's what we had. This's the same. What do you want when you're twenty something everything, when do you want it now? Right? And there's some of that energy that's always been in the Silicon Valley, which is it should be better, and we should be able to make it better, and so let's just go
do it. You know, when I consult with startups, I tell them, look, here's the three types of employees you want in a very early stage startup. You want the smartest people you can hire for whatever you can afford to pay them. You want them to work really hard because when you solve early stage problems, they're problems of difficulty, and the way you solve them is you just pound at it. You know, not that. You know, your white boards are full of lists of like, not that, not that,
not the value, do it? Screw it up because you're making off up. If there was, if it was a smart, reasonable idea, somebody else would already be doing it. So all startup ideas are stupid. So when people say that's a dumb idea, it's like, of course it is. It's
a startup. And the third thing you want is you want people to believe, right, and those beliefs in those early companies are not rational, right, and so it's like, well, I think because you're gonna believe you have to beat theage, you can believe you're gonna do something no one has done before, and that all the stars aligned and there's a giant cash yeah right, and and it's all everybody's gonna be a millionaire on the day of the I p O. I mean, so all the myths that go
with it. But you actually don't want experience people in those early days very often because they'll say, no, we've tried that, it doesn't work. Now. As soon as you're at the point where you actually have something and you actually have a customer and you might actually have a business and there's actually a light at the end of the tunnel, then almost instantaneously those are the wrong people because now you say, okay, how do we take this
to a level of scale and complexity. And in the early stage, people go work hard without food or water maybe beer, right, not sustainable? Not well, and so you have to say, well, or we could plan it um. So that's where you know, I try and help people through those step functional changes in their organizations. Is that is that why we so often see the founders not succeeding as CEOs. It is why we sometimes see that happen. You know, I've seen it all, Like a lot of
the myths that we have, I've seen busted. Right, could can co founders continue to run a company that's never gonna happen. It's never gonna happen forever. Um. I work with Warby Parker, their co founders still run the company. The well read Hastings, Google, go down the list of people, well they're founders, but but I mean co founders. Right in my day, there was only gonna be one Larry Ellison, There's only one Bill Gates, There's only one read as things.
You know, there's only one at the top. But we see now a number of co founding organizations that exist with co founders for a long time, like two at the top for example, and that work. That can work out. Yeah, So I think that what I want to talk about now is the innovative nature of Silicon Valley. We can all pick up in terms of how we operate in business.
So when I go consult with or talk to Bank of America or Fidelity or some very large organization, now they want to know, Okay, now how do I undo this albatross. You know that we've created that's very efficient. It is a huge scale and has no ability to be nimble. And all of these little fintech companies are nibbling at my ankles and they move so much faster, faster than more innovative, the creative, and they could address problems you're not even aware of. So I have to
tell you a story. It's an interesting way. I'm consulting to one of these large institutions and somebody says, well, um, how do you feel about remote working? And I said, that's an odd question to ask me in uh And I said what do you mean by that? And he said, well, um, here at our bank, in this particular city, we still require people to come in at nine and leave at five. They have to they have show up for work. And I said, do they have to bring their own tools?
To what I said to it? I said, do you take away their cell phones that they walk out of the door at five? Yeah, exactly. And it made me think, you know, it's one of the answers to your question. Later, I made me think, why did we have to use
to show up to work? Because our equipment was there right, and and the and the thing I hold in my hand now, I used to have to ask a burly guy to help me get out from under my desk, right, so you know what I said to him, Like we all work remotely now, I mean there are issues of supervision and control and company however you could I'm not
a big fan of any of those. But even if you're mandated to do that, the technology exists, whether the person is down the hole or on the other side of the country, you still you could still monitor email with whatever software you need to. You could still make sure they have all the tools that everybody in the room has. The the the idea of you have to come into the office at nine, and you we prefer you stay at least till five. That seems almost you know.
I have been in situations in innovative companies in the Silicon Valley where I think it's really important to be at work. And here's when I think it's really important to be at work, when you're collaborating and inventing stuff. When you need to walk up to somebody and go, you know, I got this idea, I just need to run it by you. It's funny. I said it in Netflix at one point The only perk I want to have is showers, because you know how like you say, um,
I had this idea the shower this morning. But well, if we get stuck in the meetings, like everybody in the shower don't come out. You have an idea, right, But my wife makes fun of me because I will rehearse presentations in the shower, not just goes to the acoustics. It's just a great place to free. So so back to remote you know, so, I think, um, a lot of planning and execution happens at work. A lot of innovation happens when you're you know, on the beach space
bust in space, or in the shower or whatever. So I don't think that having I don't think technology tethers us like all the things that you just said. I think it frees us to be able to participate in work kind of on our own schedule. And so the idea when you said about command and control and compliance and so I'm not sure that those things are necessarily part of a healthy work environment at any size at
this point. Well, if you're a regulated entity, you have to check those you do, but but like you said, you don't have to check those boxes by walking around with a clipboard. And so that's my whole point. You know, we should use the tools and the technology we have to innovate the way we work, just like we innovate
the products that we use. When you think about when you think about how I'm looking for the exact word, when you think about how popular and attractive urban spaces have remained or become what you described, having all that intellectual capital in one space, having people in the same room collaborating, innovating and venting, just just brainstorming. That's challenging to do remotely. You need to be face to face for that. Ideally. I'm not saying you can't do it
other ways. But when everybody's in the same room it's just for three hours, it's different. If it's a different experience, it's true. But you know, I UM, I wrote my book collaboratively with the team people that I put together all over the u S. We've literally never been in the room together UM and they very much feel like my team, UH and I know them really well. And so I think technology changes out a lot. Let's look at the technology of UM skyping and you know remote
screen screen sharing. I mean that's changed. So I'm a recruiter. I go back a long, long way, right, And phone screening used to be something that I was really good at because I listened a lot for nuances of voice. But I'm telling you, screen sharing changes everything. Seeing somebody's body language, having those conversations. You and I are talking about, how much more fun this is because we're in the
same room together. But the closer you can get to that, the more I think you can still extend those collaborative conversations without having to physically be there. That that makes perfect sense. So I have one more Netflix question. You were there for fourteen years. What led to the decision to EDG? Is it? Was it mutual? Was it your decision? How did it come about? Everybody loves the breakup story?
Down what happened. We've been together for a really long time and the company was morphing, and so as the company morphed into UM, you know, a original Programming Global, it was a good time to leave. And we had just come out of the Quickxter scenario that that whole disaster of UM splitting the company from the DVD by mail business, and and so we're both kind of ready
to say, let's move on, let's do something different. So you know, I was sad that I left because I've been there for a really long time, but I also was like super grateful that I've been there long enough to see what I had seen. And you had a big pile of stock options, pile of stock options. And I've been saying forever, forever and ever and ever be a great place to be from and clearly sitting here in front of you, that turned out to be really true. Right.
That sounds great. It's um, it's kind of fascinating watching the company grow and they have the ability it seems to be as disruptive as Apple or Amazon has been. Uh, stop and think about the current generation of millennials. They could care less about having a cable let me, let me push back. They have already it's over. Oh you know, I'm not in Reed's head anymore. But I'm telling you world domination is so yesterday. Well I'm talking, you're talking.
So it's really just where this specific We've been talking about what Netflix is doing, not with the technical tactical details, but that if you build a business from the perspective of the customer, don't we all want to be able to watch whatever we want to watch, whenever we want to watch, personalized to us anywhere in the world. Yeah, of course, I think it's kind of done and done. It's if it's not fully realized the overall trends. Certainly
we're we're not debating if we're debating. When I would argue we're close there, it's not quite a hundred because every time I go so I'm a fan of the expanse and I open fire up my Amazon firestick and I have to say, was that was that an Amazon Prime? Is that Netflix? So there's so many choices you have to you have to and now Apple is throwing billions of dollars at it. There's gonna be a run of
there is no like flick on the TV. I certainly hear you, and I know and I know that will get better because Amazon Prime and Netflix are tech companies at their heart. They all stink it organizing the material, and that goes for across the board. I'm going to argue with you because I just can argue I just walked out of my hotel room this morning, so flip
to the channel guide on your hotel. It's better than well, first of all, it's an unfamiliar set of channels at home if you still have cable of satellite and you flip to the guide, Well, I know exactly where my favorite things are. I know where HBO is, I know where the Science Sci Fi channel is. I know what BBC America is. Those are my three go two's, and there are a bunch of others. Um but I also know I don't know where Showtime is, but I assume it's near HBO, so I could go find it. These
are really good questions. I'm gonna have to call it my geeks and see what's up. So because you know they're working on it, so you know that that's obvious to Ever, when I go to either UM Apple TV or Amazon Prime or even Netflix, Netflix gives me a run of stuff and it. Now here's the other issue, and this, I think is is our problem because neither you nor I or millennials. I suspect, although I've asked millennials and they don't they don't agree with this. I
suspect it's geared towards millennials. And they look at me and say, well, who cares what you want to see? We're putting your favorite list here, and then Netflix originals here, and then there's a bunch of other things. And that's the order that these kids want it, and they're a future I just find there's such a fire hose of amazing stuff and try and not. Like, my issue isn't how do I find something I want to watch? There's a million things I want to watch. I know what
I want to watch. How do I go find that? Like Jack Ryan is coming in August. I know that's going to be an interesting show. I don't need to see that every time I log on. I've already made a note of it. It's already in my favorites list. In August, they'll see it. But why is that the second tile bunky? I'm not there anymore. I don't really know. But but but is that user interface is the next challenge?
I will tell you that I am absolutely one sure that there are people all over the world working on this particular issue. And where where I saw the trend line, which I think is happening all over technology right now, is that what's been driving most of the solutions to what you're talking about is not our our age, whether we're millennials or boomers or what our habits are because we remember, innovators don't start with what the problem is now?
They start with what's the solution going to be for everyone? All right? So it has heretofore been personalization. It's that's the magic thing. Can I use the data to give you stuff? Can I intuit what you're gonna want? And so now we're in the middle of the why is that a good thing or not? You know debate that was certain to happen when big data began to touch
every single one of our lives. Right this is the whole Facebook scenario right now, and the Russian meddling and all that, you know, So personalization is it until somebody else gets to decide what's personal to you? So I mean, I think that's a really interesting technical um new frontier for us right now. And uh and since I'm not inside a company that's doing that, I can't tell you what's happening, but I can tell you that knowing knowing these people the way I know them, this is somebody's
full time. Can't go to sleep at night without thinking about what's the solution to this issue? What I miss about the DVD era of Netflix? Oh you're getting nostalgic old school, But it's not. It's It's was the ability to go to the website and organize my list, right, But now I want to be able to do the same thing for my Netflix screen. So that Why are you showing me this run of documentaries, none of which I like? Why is that even here? What I have
to scroll through a thousand You're not there. Listen, I'm not not asking you to solve this from me, Patty. I'm just identifying somebody's built an app to do it. Um, Now do I need an app between me and Netflix on my television? The way you're going to think about how you use all of these devices in the future is going to be a bumpy road as we start to solve some of these problems like they always have been.
Like for example, when I was there, okay, when I was there, I was there when the first ability to remember when the back and you want to go back on the day, back in the day streaming was it was it was downloading, and it was downloading into a tiny little app on your on your screen on your PC that didn't have very good sound. It was kind of choppy. So I I was at Netflix from the we invented the interface on your laptop tow porting to
every technology known to human kind. I remember interviewing somebody from Motorola at one point who kept messing with this flip phone during the interview, and I said, will you put that thing down? I'm trying to talk to you because you know we're gonna be watching video on our phone someday. And I said, right, that's just not going to happen. He's like, yes, it is. It is absolutely gonna happen. You're going to do it, and you're gonna commercial from and I and I sounded just like you.
That's not the way I want it. I have never gotten an animal I want, and so I don't care. So I because I lived my whole career there in Silicon Valley. You think it will happen. I know it will. I know every you know to go from not buffering to streaming, like to push the button and have it play instantaneously. That inside our company was probably a four
year effort. It's harder than I remember when the news reports would come out and say, of Internet traffic from eight till midnight is Netflix or some insane I don't remember what it was. I write in the book about how we realize we're going to be third of the US Internet band, which we all just stopped and shocked,
but now you know. But but the Silicon Valley also has this thing called Moore's law, UM, and so which we theoretically are coming up on the end of which theoretically and but engineers believe in as a religion, which is, don't worry it'll show up right, It'll get solved because
somebody and I guess that's um. That's a really important part of the message I'm trying to send, which is, for every person, there's some problem that's really compelling, and somewhere there's a company that needs someone to solve that really compelling problem, you know, and that matching happens over the course of your entire career, and that no company continues to give you that compelling problem forever, nor did
they owe it to you. So that dance between learning what you love to do that you're great at doing, and finding the place that really needs someone who loves to do and are great at doing that. That's the dance of living. Are are living our careers for the rest of our life. You are describing the current season of Silicon Valley. I don't know if you watch Oh God, yeah, I love it. But it's that whole idea of here's the problem we're trying to solve. People want to participate.
You watch the show, you enjoy How how much of a parody gets really close? It's really close. I mean, I don't like the stereotypes, but I know every one of those guys. They they've claimed that there is no one individual, that it's all a composite so as to not make any one person by type they are. There is always those types. But but you said something really important. Um, that's what's the essence of my book is too, which is own your career. You know, don't wait for somebody
else to tell you what to do. Don't be a victim, um, be proactive about doing great stuff that's going to satisfy you, because otherwise you're gonna end up to be a victim and not and be disappointed. And on the other side of things, my message to corporations is stop lying to people and telling them your your family and that we're going to take care of you and will always be fair, because right now that's simply not true. It hasn't been for a nor has it been for a long time.
So I think that we can be grown ups and have these kind of conversations for twenty or thirty years, which or forty however long we're going to work. So let me get to my favorite questions is are what I ask all of my guests. I'm curious to see how some of your answers go. U tell us the most important thing that people don't know about your background. I was going to be a teacher. I was passionately going to be a bilingual elementary school teacher. Why did
that not happen? You know, it didn't happen because I got uh. I was a reader in antitrust litigation when I was in college, in my student teaching year, and they offered me a job at like three times what a salary what a tenured teacher would make, and I took it. And all these years I felt really guilty because I had given up my dream. And I was
at this executive off site one time. All men, right, we're up in Sonoma and we're writing down you know, what would you tell your twenty year old self for you know, one of those things? And I'm writing about how like I gave up my dream and I realized. I looked around me, I was like, wait a minute, I speak fluent engineering. They're taller than I expected, and they're all men. But I am a bilingual teacher. That's right, English and engineer. Yeah, I ended up doing it anyway,
Who knew? Tell us about some of your early mentors who guided your career when you were just getting into hr UM. I was thinking this morning about a woman named Nancy Haggey, who is the woman I told you the story about his son who hired me. And the first one on one I had with her, I had my you know, my pen and my little pad of paper to take notes, and she said, now write this down very carefully. I have something very important to tell you. Poised,
She said, I'm your safety net fall. That's very nice, very nice, And at the time I was really worried about, you know, doing the right thing and following the right career path. And so that early advice really stuck with me forever. Who who else influenced your approach to hr and the development of culture? Oh, it's totally read. My working with Read Hastings was the most incredible innovative part of my whole career. And I mean, it's it's because it's not that I rolled off the turn up truck
and met Read and everything was wonderful. Our collaboration was really really fruitful for both of us. Um, there are members of my family who always say, you know, you're awfully lucky you met Read, And I often say, you know, he's awfully lucky he met me. And if we hadn't both had the lives that we had before we came together. But but at the point where you know, when you start throwing things away and all bets are off, then
it gives you the confidence to just keep going. I mean, and in my field, like what if you try something it turns out to be the dumbest idea you ever had. Well, no, biggie, you just go do what everybody else is doing and call it best practices. That that is such a dangerous phrase. Uh. Tell us about some of your favorite books, be they fiction, non fiction, h R related or not. Well. I just
finished bro Topia Emily Chang Bloomberg Reporters book. I love it a lot because she really researched a life that I lead. I can imagine. First of all, she's very, very good at what she does. But she's also this very cute woman in the middle of San Francisco. I can't imagine what sort of nonsense she deals with out there, A lot, I would guess, enough to write a book about a lot of nonsense. So I I love Emily's book. Um, I was thinking of the books I loved lean In,
Um I love I loved Gloria Steinham's biography. Right, got a trend here? My daughter, my twenty seven thing. Daughter says, oh, well, mom, you know you're a two point oh feminist. I'm like, seriously, I have a number. What does that make her? She's three? Yeah, yeah, it's a whole different thing, understandable. Any other books not that I think of. Okay, uh, tell us what has changed within the industry of both HR recruiting and corporate culture.
We talked about a little bit. I think, uh, I think mobile computing, if that's the right way to I think it's funny that we call it a phone, right when it's a phone and it's a camera, and it's it's video and it's yeah, you know, it's it's a computer, it's a it's a search engine, it's uh, you know, all those things, and I think that ability it's creepy
sometimes when you're in rooms of a hundred people. You know, I do a lot of public speaking, and when I first started doing it with younger audiences, I thought, oh, that I'm too old. They don't like me. It's not very interesting. They're all looking at their phones. And then then I realized, oh, they tweeted every word, so that processing is really different. And I wasn't a Twitter user. I thought it was ridiculous and I'm completely be a
junkie because it's such real time information. Absolutely, so I think Twitter is the new tape we like to say whatever, or it's the old tape. And because you know, my kids will be like, mom, it's so snap right, nobody tweets anymore. But but so that I think that technology of having that ability with you at all times, I think that's really significant. I think that will really change.
It's made the world so much smaller because things happen in parts of the world and suddenly you have a bird's eye view of exactly what's going on, which has been, which has been going. I mean, the idea that we can undo globalization is just like it laughable. It's crazy stuff. It's just so silly. So so mobile computing slash iPhones are the current major shift. What's the next shift that's
going to take place? I think the technology is going to enable us to work the way that is really efficient and effective, which is collaboration across geographies, um, across cultures,
across you know, thinking about customers as global customers. I think that that will change speed and that you know, we have this belief I think from the fifties that business grows in a linear fashion, you know, all those up into the right charts that we're so used to seeing, and actually I see it really evolving right the when I talked to the large financial institutions, for example, that
say I think we've got it. You know, we've been doing it like this for three hundred years and we're huge, and momentum won't stop us. Well, tell Blockbuster even better,
that's exactly right. Tell us about a time you failed and what you learn from the experience, you know, and this moment in my life and the whole me too movement, Um, I think about the times I failed to stand up for what was right when I is there, you know, well, maybe he won't do it anymore, and we really need him because he's a sales guy and we have a hockey stick end of quarter, right, So let's just he won't misbehave. And it took me a long time to
realize that people who misbehave inappropriately with each other. Let's take that particular example, are probably lying about the quarterly sales number two clients. MS. Yeah, So I think, you know, if I look back and think about what I would do over again, it would be to own my shrillness sooner. What do you do about somebody who is just spectacular at their job but brings so much baggage it may not be worth it. You let them work somewhere else.
And that's I just told somebody yesterday. I said, cocktail party last night, we were talking exactly about this, and I said, well, you guys, it was a bunch of recruiters. And I said, you know, you can tell them in the interview. I've done it many times. You know. We're done with the interview, and I say, you know, you're you're a brilliant guy, and you have a lot of skills, but you know you've got an attitude that's really off putting. And I don't think you're going to be successful here.
In case anybody hasn't it has not told you this explicitly before you fall into that category, right, and we're just not doing it. Thanks a lot at what's the reaction to that? Um? A lot of times like humble, stunt, silence, or they somebody's people have said that to them in one way or another their whole lives, and it's until somebody says, well, we're not tolerating that. It's the same with sexual harassment, right. You know, it makes me crazy. I don't want us to be I don't want this
to be an HR issue to fix. You know, go tell HR and there's a hiring issue screen. No, it's a living, every day issue. We need to not be the people that investigate set harassment after it happens. So that's your question, was what have I failed at? I failed at standing up going That's what I'm talking about right now. You just did it. Knock it off, right and saying in your twenties, look when you look at my body instead of my face when we're having a
conversation at work, that's weird. Please stop. And when you're young, you'll go, oh, I didn't realize I was doing that. I'm sorry. Thanks. When you're forty five, Yeah, not acceptable, And every no one's ever said anything then you think it is acceptable that that's that's pretty astounding. Um. What do you do to keep mentally fit outside of work? What? What?
What do you do for fun? I have two grand dogs, grand dogs, grand dogs, kids dogs, and my kids dogs and grand dogs I think are close to as good as grandchildren because I had to give them back. Um, we have we have a sailboat and uh we do a lot of sailing in the Monterey Bay, which is where I live. And um, and I've taken up gardening again. I'm going to now do all of those like things that semi retired people might do if I have semi We were just talking about the weather here in New York.
The nicest thing about spring is all the shoots are coming up. All my raised beds I'm getting ready to replant. It's really this is my favorite time of the year, or certainly seems that way. It's very zin, isn't it. It is totally getting your hands in the dirt. There's just something specially maybe the future is the combo of like your hands in one hand in the dirt. On the other hand, on your cell phone. No, when I'm
out there, the phone sits in the shade. If I'm lucky, I leave it on the charger and side so I don't have to deal with it. But there are times to be completely in totally UM. And now my two favorite questions. If we were talking about millennials, If a millennial or college graduate came to you and said, I'm interested in a career in HR, what sort of advice would you give them. Well, I'll tell you what general
career advice I give people early in their career. Anyway, I say, it's not what you know or who you know, it's who knows what you know, who knows what you know, who knows what you know. So the idea of a network we used to call it networking is now part is breathing, right, because everybody is socially networked all the time. But I would say, early on, start building a group of people around you. It can be on social networking that know what it is you're interested in, that you
get to know. Because more importantly, UM, it's about owning your own career from the very beginning and not passively joining a company and waiting for them to take care of you. And it's about trying new things and figuring out what it is that you love to do. So I have in the book I talked about my algorithm for success, and it's a mathematical formula and it says, is what you love to do that you're extraordinarily good at doing something we need someone to be great at.
And so when you're early in your career, you don't know, right, And so it's really important early to try things that you think you might not like to do to find out if you really don't interesting And my favorite question, what is it that you know today about culture and hr and the like that you wish you knew twenty plus years ago? I wish I had realized my own power. Um, I wish I realized how much it mattered. I mean I came up with you know, when I started well,
I started recruiting. So that was a very um measurable thing to do. I called this many people. I got this many phone screens in this many interviews, and I made this many offers and I got this many hires. And because I was an internal cruder, I could see sort of who worked out and who didn't like when I put a button a seat that I knew wasn't the right butt right. Um so, but I didn't know how important what I did was. I thought it was administrative.
And then I went through a part of my career and part of my function where our job was to protect ourselves from those evil employees that might sue us.
And I lived through that long enough to realize that when evil employees sue you, it's usually because you did something that made them really mad, usually by not telling them the truth that made them think it was totally unfair, that they were blindsided by something or tortured with their performance improvement plan into ben into being told that they're incompetent when they're not. That's when people sue you. And now,
you know, I kind of live in this goofy. I tell HR people all the time, like you you know, you think they think you're schizophrenic. Half the time you're there to make them happy with craft beer, and the other half you're protecting the company from them suing you, like who are you? That's that's fascinating. And so I think we're a vital part of every organization, and that's putting the right teams together that get amazing stuff done.
We have been speaking with Patty McCord, former chief talent officer at Netflix and currently the author of Powerful Building a Culture of Freedom and Responsibility. If you enjoy this conversation, be sure and look up an intro down an inch on Apple iTunes, where you can see any of the other two hundred such conversations that we've had over the past four years. I would be remiss if I did not thank my crack team who helps put together these
conversations each week. Uh Modina Partwana is our audio engineer slash producer, Taylor Riggs is our book or slash producer, and Michael Batnick is my head of research. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. I'm Barry Rihoults. You've been listening to Masters in Business on Bloomberg Radio.