Reed Hastings

Oh boy. Yeah. And David had a chance to ask Hastings if he ever expected this kind of success, why don't we listen in the company now which went public in two thousand two. The market cap is up about eighties six thousand percent, stock is up about forty one percent since then. Did you ever think that it would become that big and that's successful? Well now, because then I would have never sold a share, So you never know on on that and you know, honestly, there's been

a lot of luck along the way to UM. Blockbuster could have wiped us out many times. UM. When Viacom spun off Blockbuster in two thousand and four, they saddled them with a billion dollars of debt as their good by kiss. And you know that the covenants on that debt severely limited Blockbuster when they attacked us. So that was one. Another one is Blockbuster had us on the ropes.

And then Carl I com got elected um to the board of directors by the shareholders of Blockbuster, uh, and he fired the CEO over some you know, silly bonus issue, and then they completely changed strategies. And so all these things have been incredibly you know, lucky strokes. And so you need both skill and luck, which I'm sure you've experienced too. I've had a lot of luck, for sure. So let me ask you though, for those who may not be familiar with a new book you're coming out

with called No Rules Rules. Uh. In that book you described that you actually, at one point one of the go to Blockbuster and sell them the company for I think, uh some modest amount today fifty million dollars absolutely um. And uh. You know, in the early days, we were like, Blockbuster is going to wreck us as soon as we get big um. And we were almost right about that. And so we went to see them and and you know, they were very polite, but they were not interested. And

had they bought the company. Where do you think Blockbuster would be today? And where do you think Netflix would be today? It's always hard to tell, but I think we could have made Blockbuster modern brand. You have a culture you describe in your book which is very unique. And let me just go through a couple of things that you say that I found studying as somebody who's helped to run accompany myself as publicly traded. For example, you have a system where, um, people can take whatever

vacation they want to take. There's no limit. People can take any time off they want, no limit. Um, where did you get that idea from? Well, in the industrial economy, like factories, we measured people by how many hours they did on the job nine to five, eight to six, whatever that is. And we really want people to focus on ideas, on generating important work. And so you know, we don't measure them during the day. We don't clock

our people in. And if we're not going to tell whether someone is working five to nine or nine to five, which is a two to one difference in hours, why are we tracking whether they do fifty weeks or forty eight weeks a year? Um, you know of work that's in the noise, and so unlimited vacation. You know, it's sort of like saying dress how you want, you know, and then people still don't come to work naked. There's some cultural assumptions about appropriate clothing for work, and we

don't need to specify that. And in the same way with vacation, people understand getting work done and they get to live more flexibly. Okay. Were you also say in your book you don't have to please at your company your boss. Other ways you can go ahead and do what you think is best and your boss doesn't agree, that's okay? Is that easy to run a company that way? You know, again, we're really focused on inspiration over supervision.

So the traditional paradigm is that good management is close management, set subjectives, manages tightly and all of that's appropriate and safety critical environments airlines, producing vaccines, etcetera. But in a creative business, you don't care so much about what goes wrong. You care about enough of the right things get done.

Um And so we really focus on inspiring inspiring our people and having it the very open and collaborative and from that you get amazing technical innovation and you get amazing content innovation. You point out in the book that if people do a reasonably good job, they still might lose their job if they haven't done a spectacular job, and therefore they get a very good set but not

a continue job. Can you explain that theory? Yeah, and again in the traditional industrial paradigm, you know you have to do something wrong to get let go. You can think of a job as sort of a property right, you know, until you lose it by abusing your position. But if you think about professional sports, you know, if that team is going to win a championship, it has to have a mix of the right players that work well together, that are the absolute best in the world.

And so we try to model ourselves like a professional sports team. So highly paid, but you've got to earn your position every year, and it's about performance. And you know that's not right for everybody. Some people care mostly about job security. Other people care mostly about excellent colleagues, and you know, playing great team ball to achieving something important for the consumers. And you know we're attracting, you know,

that group of people who care about team excellence. So I have no doubt your book will be a best seller because it's a very interesting book. But I couldn't understand exactly whether you were saying that your culture is one that if other companies adopted, they would do better, or it's just that you're explaining what is so unique about your company and why it's successful. So which is

it or is it both? I think a certain type of company, a company in a creative industry where there's a lot of change, will do better by optimizing for flexibility than efficiency, and other companies, like an airline or a factory, wants to optimize either for safety or for manufacturing yield. So again, highly consistent results. And that's not for this Netflix culture, but for again a company that wants to be inventive and create new things. I think this offers a lot of fresh ideas for people to

rethink the traditional industrial paradigm. Let's go back a little bit to your background. So you grew up in the Boston areas that right, Boston and d c U. And you went to UH College at Bowden, which is a great school. And after you graduated, what did you do? I went in the US Peace Corps and I was a high school math teacher UH in a very rural part of southern Africa. And after that you decided that you would go to business school at Stanford. What led

you to decide to go to business school? And at Stanford? So I actually went into computer science UM, and I tried to take a business class, but they rejected me. UM. So Uh. In any case, UM, being at at Stanford in the mid eighties was an incredible experience because you learned so much entrepreneurial work from all your colleagues. Everyone's bubbling with ideas UM. And that's still happening today forty

years later. So when you graduated from Stanford, you decided to get into the computer industry and you were a programmer for a while, is that right? Yeah? I was a programmer at a couple different companies. UM. And then I was fortunate and had an idea of something that I really wanted to do. UM. That was in n So he took a year off and consulted on the side part time, and then wrote a program that ultimately turned into a company which was a reasonable success. Uh.

Morgan Stanley took us public in it doubled every year. UH. And that ultimately is the company that was so much process that it got too rigid. So it was a great learning lesson a right, So when you ultimately left that company after taking a public and ultimately merging with somebody else, you had the idea of starting what is

now on Netflix. Is that right? Yeah? I mean the timing was shortly thereafter um that a colleague of mine from uh pure Mark Randolph and I we're brainstorming on different ideas and then, you know, like many people at that point, I had had this terrific late fee and so it was, you know, thinking it has to be

a better way. And then it's when this friend told me about DVD that I realized, oh, you could mail those cheaply, and that you could potentially build a business there that was not in Amazon's direct interest because of the return loop that you constantly returned these DVDs, which was unlike Amazon's core. So it was e commerce, but you know, a smaller market than what Amazon was going after. The story is that you took out some DVDs I

guess from Blockbuster. You've found out that you had kept them too long, you didn't like paying the late fee, and that prompted you to think of something like this. Is that fair or is that just apocryphal? No, that's accurate Um, but it you know, sort of says every time something goes wrong. The idea didn't pop into my

head right then. It was later, you know, when I debating ideas that you know that the sting of that stuck because it was a forty dollar late fee, so you know, and it was all my fault, um, of just not breaking it back. So originally you're you're mailing DVDs back and forth. But the idea of streaming, who came up with the idea that that would be better? And was streaming that prevalent then or that common or people knew what it was. Yeah, people knew what it was.

And you know, I had had the good fortune. Um. The year I came back from the Peace Corps, so that's mid eighties now, Um, I got a job serving coffee at a company. And it turned out that that company, a Computer Lab, was the very first dot com. So there were no dot COM's at all, and then there was the first one, and that was this company's Symbolics

dot com. And so this was a company out of m I T that was like the hotbed of the Internet, but nobody knew the internet, um, And so there I was serving coffee soaking up the culture and how they thought. And so when I eventually, you know, went on to Stanford, Uh, you know, I was in the Internet thing um and then had been part of that in tracking that for a decade. Uh when it was a decade when Netscape

went public and everyone else tuned into it. So, I mean some of that, again is just incredible serendipity of you know, what's the company that I got a job serving coffee in the computer lab. Well, originally you would take programming that site Disney or NBC or ABC or somebody had, and you would or movies and you would put it up and people would pay for it, and you would pay the the people who produced it, I assumed some royalty. When did the lightbulb go off and

you said, no, we need to have original programming. Well, Ted was intimately familiar with the history of cable television, and right from the beginning he educated us on HBO's path, which their first twenty years in the eighties and nine, these they just had recycled programming, and then with shows like Sopranos and The Wire, Uh, they moved into original programming.

And what a difference it made for them. So we were very aware of that history, and then it was just a matter of biding time until we got big enough. So today the original programming that you have is that more popular than the non original that you're in effect renting from somebody else. Yeah, that's right. The original programming um driving the Old Guard, our our newest movie, Kissing

Booth two, an amazing movie. Our series like India Matchmaking or Umbrella Academy are all driving both the viewing and the membership growth. So we're fundamentally an original content business that supplements with licensed content around the world. Why is it that on Netflix, you your your content is very popular, but you don't do things like news or sports. How come you haven't done those yet? Well those are great areas,

but they're well covered by other companies. And we have so much more we want to do on series and films, and we're you know, breaking in the animated films and series. Now we've done really well with unscripted reality programming like India Matchmaking that I mentioned and Love is Blind, Tiger King. So our hands are just full. And again there's other companies doing other things, and you know, we just want to focus on entertainment and when House of Cards was

on Netflix. UM, did you suggest themes for it or plot lines or did you ever get involved in that or you stay away from what they're actually gonna do on the on the show, our book really talks about don't please the boss, do what's right for Netflix. And because of that, Ted Sarandos when he was negotiating UM with House of Cards with Kevin Spacey and David Fincher, he was willing to do very bold things because he

was convinced it was right UM. And so he paid a fortune and guarantee two seasons, which at that point no one had done, and he only told me about it later. And so his willingness to make big, independent decisions it's what led to us getting House of Cards. And of course he could have been wrong and it could have been a disaster, but it was a great series put us on the map. And that's again somewhat testament to Ted's personal skill, but also to the culture

that allowed him to make those decisions. And so when you started winning UM Academy Awards and Emmy Awards and other things like that, was that a surprise to you that you were getting it that kind of recognition. No, are. We've always wanted to work with great talent, and right from the beginning, UM, we knew that like with House of Cards, that the talent that was involved in that, Robin Right and Kevin Spacey. You know, we're potential to

win Emmy nominations for that. So if you if you back great talent, they they will win a war and it's you know, very life changing for them. For consumers, um, you know, it doesn't matter as much they're not as visible,

but in the talent ecosystem, it's it's very significant. Recently, you made an announcement that stunned a number of people, which was that you were bringing in your chief Content Officer, Ted Sarandos, who has been with you for twenty plus years, almost from the beginning, and making him the co CEO. Usually people who are CEOs and founders don't all of a sudden give up a lot of power. So why did you decide to do that and were you surprised

that the reaction was a bit of a surprise. You know, Ted and I have worked together for twenty years and we've been virtual co CEOs for the last several years. UM, so we've been paid the same you know, we don't do really do anything material without checking in with each other, So this was just acknowledging and formalizing you know what has been and so externally you know it's a change and that helps on ted stature and ability to do big deals. But internally it's really no change at all

from how we've been operating. At the time of the announcement, you said you were good for another decade, so uh and October, if I got it right, you'll turn the big six. Oh, and that I'll mean by seventy you might be ready to slow down. Is that a fair assessment? Well, you tell me how, what's your experience in that of uh sixty to seven? D right? I would say workaholics don't really pay much attention to age, and so as long as your health is good, I don't think you'll

change that much. But when you get seventy you might look around and say, maybe i'll do something else. But you've got a long ten years ahead of you. I suspect I'm sure you'll be in great health to do it. Well. I'm super excited about it. There's so much that we can do in terms of bringing the world together, sharing stories from around the world. Um and uh, you know there's just as the Internet grows to you know, every human being. I think there's just an amazing opportunity I had.

You and your wife recently made a contribution to United Negro collec College Fund and to Morehouse College and a Spellman College. Why did you decide to do that? Is that not your largest philanthropic contribution anyone, uh gift, No, it's not the largest, but it, um, it's the loudest

or sort of the most public. We tend to mostly be very quiet about these things, but we wanted to show solidarity, um, for black education, and black education is so critical to economic mobility, political mobility, and you know, the sense of belonging and the challenge you know, for us as a culture is really the legacy of slavery and it continues to be a tremendous scar across the soul of America. Uh. And it's you know, awful, and it's so bad that it's hard to look at and

talk about and it's so hard to look away. And we really haven't come to terms with the legas see of slavery in our country. So this you know, modest donation again relative to the needs is really about, um, you know, black economic gains and education. So the story that I read was that you were originally considering a gift of maybe one tenth at size, and then the last minute you increased it. Uh. When you called the head of the United Negro College Fund, was he surprised

or what made you change your mind? Well, I've known the head of u n c F for a decade UM, and he's taught me a lot about race in America. UM,

and we've been a donor for a number of years. UM. But it was really the current time UM that got us to make such a substantial and frankly public donation UM to again bring attention to the role of the HBCUs, the historically black colleges and universities UM like Morehouse and Spellman UH, and to support their work because they do develop UM you know, thousands and thousands of black leaders throughout this country, and they're really positive part of our

education system. And because white capital tends to flow to white organizations. UM. You know, there's relative capital isolation in the same way that we have social isolation, and so UM, you know, we wanted to be part of building those bridges. Now the industry that I've been in. The financial service industry is not replete with as much success as it would like in terms of minority hiring, and the technology

industry is probably somewhat that way as well. Is there something that you can do with Netflix to enhance your minority hiring it among the executives and other employees. Well, we we published the data and we've made every quarter and we've made great progress, and we've doubled our number of African American employees over the last three years. And you know that's throughout the business, but in particular in the media side. Our tech side is still underrepresented, you know,

as is in the field. Um, so we have a long way to go, but we're you know, trying to make those efforts not only again for African Americans, but for many underrepresented groups both in America and frankly around the world. So people who are watching this will say, Okay, I want to be like Reed Hastings. I want to build a great company. I want to be successful, have a great family, philanthropically active. What would you say is the key to leadership that enabled you to be what

you are today? It's about achievement of the company as opposed to personal achievement. So you want to be super proud of the organization and personally humble. So, UM, I assume you hear from your high school classmates, your college classmates, your Stanford classmates telling you they always knew you were going to be successful and they weren't surprised and by the way, they have a script for you or something like that. Um. Do you hear from a lot of

people like that? Yeah, I stay in touch with a lot of friends that way. Um. And you know, I was definitely a late bloomer. Um. I don't think I was one of those people that was marked at an early age. And you know where you read about how at age sixteen they were like unbelievable. Um. You know, I was very average, run of the mill kid. Um.

And um. You know, I've been super fortunate with a series of events in terms of my first company doing well, having that idea, which then laddered into being able to do Netflix. Um. So I feel incredibly fortunate, which is part of why my wife Patty and I, you know, were so dedicated on philanthropy. It's sort of looked, you know, like it seems to us miraculous that you know, we have this money and and of course we live a very comfortable life, but it's really the excitement of using

that money to then help others. So let's suppose ten years from now, when you say you might hang up your spurs at Netflix, you might. You're not committed to it. Uh, what might you do? Would you run for office? Do you want to be president United States? You want to be a senator, governor, philanthropy teaching? What do you think you might want to do when you turn the right? Bolt age of seventy? And I want to have my own interview show? Um, well, I'm sure you could get

that anytime you want one. I know a good uh company you could probably get on Netflix. That was read Hastings, co CEO of Netflix, on the David Rubinstein Show Peer to Peer Conversations. And that is it for Bloomberg Best. I'm at Baxter and Denise Pelligrini and this is Bloomberg