This Netflix Co-Founder Turned His Idea Into A Company Worth Over $100 Billion | Marc Randolph

Marc Randolph:

I'm proud of the business success. Certainly, I've had two billion plus companies, I've had three IPOs. Certainly, from any scorecard I've done great. But the thing I'm proudest of is the fact that I was able to do those things while staying married to the same woman for 35 years and having my kids grow up knowing me, and best I can tell, liking me, and getting out and back country skiing and mountain biking and kayaking and surfing. That is the thing that I'm proud of.

Marie Forleo:

Have you ever come across an idea for a business or an invention and thought, "Oh, my God, this is amazing." And then you told people about it and they said, "That's pretty stupid. That will never work." Well, my guest today had that very experience and guess what? His idea turned into a hundred billion dollar company. And he's here today to share all of his hard-won lessons.

Marc Randolph is a veteran Silicon Valley entrepreneur, advisor, and investor with a career spanning four decades. As co-founder and first CEO of Netflix, he laid the groundwork for a service that's grown to over 200 million subscribers and fundamentally altered how the world experiences media. Marc's founded or co-founded six other successful startups, he's mentored hundreds of early stage entrepreneurs and helped seed dozens of successful tech ventures. He's the host of the podcast That Will Never Work and the author of the international bestseller, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea.

This book... Honestly, I don't read that many business memoirs. This was fantastic. Such good storytelling. I was talking to my partner, he's like, "Wait, did you finish Marc's book already?" I'm like, "Oh, yeah, I'm done. Highlighted, underlined." So congratulations on that. I know you said you wrote this book to puncture some of the myths that attach themselves to stories like yours and to show the amazing life of an idea from dream to concept to shared reality. So we're just going to dive in. First, you talk about this notion of distrusting epiphanies, that when they appear in origin stories, they're either oversimplified or just plain false, that the real story is a lot more complicated than that. So why is this truth so important for all entrepreneurs to understand?

Marc Randolph:

Well, first of all, I'm glad you went through the book so quickly. I think it's kind of appropriate that a book about Netflix would be bingeable. I think that was kind of one of those subtle things you're aiming for when you write a book.

Marie Forleo:

Yeah.

Marc Randolph:

No, but seriously, unfortunately, there's a tremendous amount of myths about entrepreneurship and about startups, about companies. And one of the big ones, as I do mention the book, is the epiphany story, which is that belief that somehow these great ideas, all of a sudden, spring forth fully formed, in some eureka moment, it's the moment that all becomes clear, because those stories do resonate with us. There's the classic, what is it, Airbnb, where they can't make their rent and, "Okay, we're going to put an air mattress down in our spare bedroom, and boom, there's the Airbnb."

Marie Forleo:

Yeah.

Marc Randolph:

Or Travis can't get a cab on New Year's Eve, and boom, there's Uber. Or late theater movies, and boom, there's Netflix. But the reason is it's not like that, that the patrimony of an idea is really complicated. There's lots and lots of people involved, each contributing little bits and there's huge dead ends, false starts along the way. And that's what I wanted to tell in the book was that this is a complicated process that's fun, that's scary, that's interesting. That's not just boom, we're finished.

Marie Forleo:

That's right. And knowing that truth, I also found it so reassuring because having the emotional truth of a narrative that is easy to tell in the media or easy to tell to investors or easy to tell to friends and family, or even potential customers, it's like that's valid too. And so I loved being able to see both sides of that. When you're trying to get something off the ground, you don't know what the hell it is, but it starts sounding good and you've got a sound bite, it's like yeah, it's okay to use it, but you don't want to fall into the notion, and I think I've seen this a lot with folks in my audience.

I've certainly tortured myself with it, with different projects. I'm like, "This should be going faster," right? "This should be a little bit easier," at least that's the voice in my head that sometimes comes up. But I think both are true. Have you seen, in some of your other companies, or even as you're advising entrepreneurs that yes, the myth is there, right? It's going to take time, false starts, it's not going to happen necessarily in an angel's kind of coming out of the clouds, an “Ahh” kind of moment. But do you also advise entrepreneurs to kind of whittle down an origin story so that it is re-tellable, that it is sharable, that it is kind of iconic or legendary?

Marc Randolph:

Yeah. Well, you may notice that I didn't call these origin stories fake or disingenuous

Marie Forleo:

Right. That's right

Marc Randolph:

And when people take them literally, yes, of course they go, "Oh, you're lying, it didn't really happen that way." But what you learn, especially if you begin telling the story over and over again, is people really don't want to hear 356 pages of where this idea came from.

Marie Forleo:

That's right.

Marc Randolph:

And their eyes glaze over. And so quickly, you realize, "No, they just need something quick and pithy, which is emotionally true."

Marie Forleo:

Yes.

Marc Randolph:

Which communicates what is the purpose of this, what were we trying to solve, what was our dream?

Marie Forleo:

Yeah

Marc Randolph:

And then you get on into the reality of what's going on. It's all the time. You need to have a narrative. You need to have some way of expressing what your vision is because that's what is the magnetic force field that aligns everyone who's working with you, that they're all pointing in the same direction, even if they're not necessarily being able to see which direction you're going, and that comes from having this clear narrative. And if the narrative you're telling the world is the exact same narrative you're telling your own team and then telling yourself, well, that's the sign of a really, really good one.

Marie Forleo:

So you shared that Silicon Valley brainstorming sessions often begin with someone saying, "There are no bad ideas," but you've always disagreed. There are bad ideas, but you just don't know an idea is bad until you've tried it. And I love that, because in our company, we're constantly brainstorming. I call it throwing spaghetti at the wall, because I'm Italian and I like spaghetti. And it's like you kind of do have to go through all the ones. So Netflix was your fifth company, after business four, you were coming up with a ton of bad ideas, so to speak, right? There was baseball bats, surfboards, personalized shampoo, even dog food. And when you eventually stumbled upon video tapes, and then eventually DVDs, your mom even said, "That'll never work." So I want to know if you have any advice for how to discern if our big idea is really kind of a bad and sucky idea, or maybe it's just not there yet.

Marc Randolph:

Well, I can shortcut the process entirely for you and for everyone who's listening, which is it's a bad idea. I mean, I haven't even... Just a minute, I'll put on the... All right. Oh, yeah, yeah, it's a bad idea. And the reason I'm so confident that it's a bad idea is because every idea is a bad idea. I mean, as you mentioned, every brainstorming session, “No such thing as a bad idea.” Well, BS, they're all bad ideas. But that's a critically important thing to understand because you cannot hold on to this precious gem, this golden child of an idea and keep it in your head where it's safe and warm and build it all up, only to collide it at some point in the future and realize then, it's a bad idea.

The truth that comes from realizing that all ideas are bad ideas, that the only way to figure out what's wrong with it, the only way to get that little insight that leads you to your next idea, the only way to eventually shift and pivot and change to get to a company that actually works, or forget the company, to get to something that actually works is starting, is taking that bad idea and colliding it with reality. And I've been doing this for 40 years. And this thing that I've learned is that I don't care about your ideas because I'm not looking for how good your idea is. What really separates a great entrepreneur is their ability to be creative enough to come up with a quick, cheap, and easy way to test it.

Marie Forleo:

Yes. Amen.

Marc Randolph:

That's what us entrepreneurs do really well.

Marie Forleo:

That's right. It's a Thursday when we're recording this, it'll probably be a Tuesday when it comes out, but I'm saying amen because we are in business church right now. And I know you also wrote too, I'm going to say this, I'm going to take..

Marc Randolph:

Say hallelujah.

Marie Forleo:

Hallelujah. We are in the hallelujah zone. In fact, you know what? Are you drinking tea or coffee? You're making me want mine.

Marc Randolph:

I can't tip it up. It's a cappuccino that I make every morning down with my ridiculously over the top espresso machine.

Marie Forleo:

I love that. And I often say, as a writer, this is basically my gift when I'm writing is just channeling caffeine into words. That's basically all I do. And I have…

Marc Randolph:

It's a new…

Marie Forleo:

Right? It's a gift.

Marc Randolph:

...form of alchemy, isn't it?

Marie Forleo:

It is. It's a form of alchemy.

Marc Randolph:

I love that.

Marie Forleo:

I'm tapping into the nectar of the gods and just channeling its wisdom onto a page. This one, I have…

Marc Randolph:

So I've got a different thing going here, Marie, which is that basically, my motto is why do something when you can overdo something? And so…

Marie Forleo:

This is why I knew we were kindred spirits. And I know our mutual friend, Heidi, she's like, "You guys got to know each other." I was like, "Yeah, I got a feeling about this, but this is good." That's been the story of my life. It's like, "Too much, Marie, too much." I'm like, "What are you talking about? This is how I came out. It's always too much."

Marc Randolph:

Exactly.

Marie Forleo:

Okay. Moving on, follow up that many entrepreneurs have, this particular question, how do I know when to give up on an idea? So we've already established the idea's probably sucky, it's scrappy, it sucks. But let's say they've been going, they've been pivoting, they've been trying, they've been testing, they've been kind of making these alterations and these tweaks and they're thinking to themselves, "Should I just accept the sunk costs?" You know what I mean? And say, "Okay, this one was really not working. I'm not going to give up totally, but maybe just this idea." What's your perspective there?

Marc Randolph:

You phrased it in an interesting way, which is when do I know when to give up on an idea. And I like the way you phrased it that way because it allows me to answer it really easily, which is as soon as you realize it's not a good idea, that you do not hang on to an idea. This big rule is do not fall in love with your idea. Fall in love with the problem. That's a different thing altogether, because the idea, despite the fact that you think it is going to grow up to be a Heisman Trophy winner or a Nobel Prize winner, the ideas may end up doing crack behind the 7-Eleven, and you just don't know that until you try it. So the trick here is give up on that, but don't give up on the problem, because the problem will get richer, more nuanced, you'll understand it better. You'll understand the customer and what they really need, because each of these failed ideas is making the problem closer to being solved.

Marie Forleo:

Yes.

Marc Randolph:

But I don't want to pounce on words as a way to weasel out of answering the hard question. And what you're really saying is when do I know when to give up. And I don't know, because I'm not wired that way and most entrepreneurs aren't wired that way. We give up when someone forces us to give up. When we run out of money, we run out of time, when it's so completely self-evident, this is not going anywhere and something else has my attention. It's more shifting tracks than it is giving up. And I just fundamentally believe that as long as it intrigues you, keep going with it. And eventually, you figure it out. But this ties into something deeper and I won't go too much time on it here, but it depends on what you're looking for.

And I think we started off this entire segment about talking about a lot of the myths surrounding entrepreneurship. And I think a lot of people get into this because they believe, "Oh, I'm going to be rich," or, "I'm going to be famous." And if those are the things you're looking for, you may as well give up now because it's extremely unlikely those things will happen. If you're saying, "I just love this problem solving. I love doing something different every day. I love working with interesting people and solving really hard puzzles," then this whole idea of failure and success are different. Because as long as you're coming in every day and getting to work on that problem, well, you're being successful.

Marie Forleo:

That's right. And by the way, my show, my rules, as long as you got time, I got time, so we can go as long as we want, we can go as deep as we want. I was really, really psyched for this one. And I want to stay here for a moment because I actually want to talk about something I read on your blog. And it was the thing, Marc, that made me reach out to our mutual friend, Heidi, and I was like, "I got to have Marc on this show. Now. I want to talk about this." So you wrote this very short blog, and it was very powerful and I shared it with my team, about when you visited a friend in Paris.

And you were talking with her French husband who has a small import business selling gloves from Switzerland to high end retail stores. And you had all kinds of advice, right? For all the things that he could do, potentially, to grow his business. And he was like, "I'm not having the advice from Marc Randolph." He was like, "No, sir." And he actually said to you, "Stop, why would I do any of the things that you're suggesting?" So I'm wondering if you could tell us more about that story, why your friend's husband was like, "Uh-uh." And the point of that blog that you really wanted to share.

Marc Randolph:

Yeah, it was kind of a revelatory moment because I'm so used to talking business and getting all excited about all the different ways you can grow and try and expand. And this friend of mine, this husband of my friend was having none of it, having this puzzled look, which I assumed was a language barrier. So I slowed down and used more hand gestures. And finally, I could tell he was starting to laugh because his comment was, as you said, “Why would I want to do any of that?” He goes, "I've got a great life. We have an apartment in Paris. We have a small place in the south of France. I take off five weeks every summer. I bridge my weekends many other times during the year. Why do I want to keep pursuing more and more and more at the expense of this wonderful balance of life that I have?"

And it was just a really interesting reminder that balance is probably more important, at least for me, than economic success. I mean, there's always more, but at some point, you say, "What I am now is pretty darn good." And then the struggle becomes, how do you maintain that? And I really kind of was… This is a long time ago, but it really opened my eyes that you could think about this world very, very differently.

Marie Forleo:

Yeah. And I'll tell you, I had so many times... I've been in business for about 20 years now. And I remember maybe it was around the 12th year mark or so, and I was invited to this event and it was at, gosh, I think it might have been at either Fortune Magazine or Forbes or something. I don't remember the exact one. Anyhoo, cut to the fact, there's a bunch of us being introduced around the table. And it was like, "Oh, Marie Forleo, she's just a lifestyle entrepreneur." And Marc, I will tell you, it felt it was a poo-pooing. You know what I mean? The person that was leaving this particular kind of event, he was an employee of the magazine. And I remember thinking to myself... And this is Jersey Marie coming out at the time, so just a little bit revealing of my alter ego. I was like, "Who the hell is this clown? From a financial perspective, I can guarantee I'm running circles around you."

But I remember feeling offended, I felt shame, I felt like I wasn't a real entrepreneur because I wasn't going out necessarily raising venture capital or wanting to grow at these hyper speeds. And it was a real experience for me to go like, "But I don't want venture capital." The whole reason I got into running my own business is because I'm a human being who values freedom more than anything. And I love making a difference to people, but I also love doing it in my own way. And I have a very unique quirky kind of vision for how I want that to come to life. So I just wanted to share that because for you, and I so appreciate and respect, not only everything that you've built, but how much you love solving problems and how much you love supporting entrepreneurs and making their ideas a reality. And I just loved this blog because it was another underscore of there's many different ways to play this entrepreneurial game, right? There's not

Marc Randolph:

Can I talk a bit more about balance then?

Marie Forleo:

Please. Yes, please.

Marc Randolph:

Only because... When I was probably in my late twenties, and I was living with my girlfriend at the time and I was working crazy, working weekends, working nights, not because I had a slave driver boss, because I loved what I was doing, deeply passionate, couldn't wait to get to the office every day. But I had this revelation that I was working all the time and my girlfriend was basically getting the leftovers. And it dawned on me, or maybe it dawned on me when she began hitting me about the head and shoulders with a stick, that this was not the basis for a sustainable relationship. And it kind of marked this moment where I said, "If I want to have some balance in my life, I have to make it, I have to prioritize that."

And for me, that balance has been tricky, because there's actually a third leg to that stool, which is the things that makes me whole as a person that really brings me the great joy is being outdoors. And I don't mean walks around the park. I mean, going out and mountain biking or backcountry skiing or canoeing a wilderness river in Alaska. I mean, these are not the types of events that you can fit in between a noon call and a two o'clock meeting. 

Marie Forleo:

Yep.

Marc Randolph:

And so if I was going to make all of this happen, be an entrepreneur, which is what I love doing, but maintain this relationship with my best friend and be able to feed that part of my soul that needed the outdoors, I was going to have to make that the highest priority. How do you do that? How do you fit all those three things together?

And I have to say that has been the focus of my life, much more so than I'm going to create, disrupt the streaming world or I'm going to make big returns for shareholders. It's not. It's can I do this thing I love, which is starting and building companies, at the same time that I can have a family and that I can get outside and enjoy the outdoors. And looking back, I'm proud of the business success. Certainly, I've had two billion plus companies, I've had three IPOs. Certainly, from any scorecard I've done great. But the thing I'm proudest of is the fact that I was able to do those things while staying married to the same woman for 35 years and having my kids grow up knowing me, and best I can tell, liking me, and getting out and back country skiing and mountain biking and kayaking and surfing. That is the thing that I'm proud of.

Marie Forleo:

And do you want to say anything? Because I can hear my audience after, again, doing this so long, I hear questions in advance. So I'm going to serve them up to you and say, they're going to be like, "Marc, tell us the secret. Tell us Marc." Is there anything that you want to say about whether it is mistakes that you've made in the past, in the quest to have that integration or anything that you've discovered that's worked for you that you're like, "Wow, this is something that has consistently enabled me to feed those three areas.” Even though I'm sure the ratios always change, it's always going to be a dance, different seasons of life. Anything you want to say about the how or the tactics?

Marc Randolph:

Sure. I mean, the underlying, the fundamental principle is if you don't know what you want, the odds are very slim you're going to get it. And the first part is deciding that this truly is the most important thing to you and not paying lip service to it. Not saying, "Boy, it'd be great if I spent..." But saying, "No, I'm... Well, in my case, I'm 30 years old. I have a bunch of years to do this. This is important to me." And then actively doing it. And if you think it's easy, I can tell you, it's really, really hard. I've worked really, really hard at it. And like I said, that's been the top objective of my life for the most part is balancing those three things. But let me give you an example and this is kind of…

I've talked about this before, but when we were starting Netflix, before I started Netflix, I had this principle that I said, "Okay, we're having one night a week at least where I'm going to leave the office at 5:00, we're not going to have phones. We're going to get a sitter for the kids and we're going to go out and have a night for the two of us." Listen, Marie, you've run a startup before. You know that things don't tie up nice and neat at 5:00 PM, but I was adamant. I said, "If there is going to be a crisis, we are going to wrap it up by 5:00. You need to talk to me, fine. We're going to talk on the way to the car."

But this amazing thing happens after you do this for a few months. It's like I don't know how it could be, but the crises stop happening after 5:00 PM on Tuesdays. How could this be? And more importantly, I'm a big believer in culture and how important culture is to a company. And culture is not what you say, it's what you do. And I could talk until I was blue in the face about how important balance is, and we need to make sure we have another life besides our work life, but nothing says that more strongly than watching the boss walk out of there at 5:00 PM every Tuesday. And that was perhaps even the more powerful thing is because then you begin seeing other people carving these times out of their life.

Marie Forleo:

That's right.

Marc Randolph:

And date night is easy. Imagine I'm going to go up and kayak the Noatak River in Alaska, which is 10 days to two weeks. Carving that time out when you're running a company, now there's an advanced maneuver.

Marie Forleo:

Did Reed ever say to you like, "What are you doing Marc? You need to be here X, Y, and Z?" Or did you guys just have an understanding that he knew who you were and y'all knew each other from the previous company and from always working together? Was that ever a friction point?

Marc Randolph:

It's deeper than that, Marie.

Marie Forleo:

Yeah.

Marc Randolph:

You've touched on a key aspect of a culture I've always had in companies that I've been part of, and certainly, permeated Netflix. And it's that thing they call freedom and responsibility, which is I don't care where you are, when you are, whether you're in the office or not, that's not what you're here for. But there's certain things that you're responsible for, which I expect you to get done.

Marie Forleo:

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Marc Randolph:

And since you said I have all the time in the world, I'll tell a quick story about that. And this is when I was running a company and one of my engineering managers, the person who is supervising the programmers, comes in and goes, "Marc, I got great news." And I go, "What?" He goes, "I'm in love." And for engineers, of course, that is great news, but he goes, "But..." I go, "Okay, there's a but." And he goes, "Yeah. She lives in San Diego." And he's up here in the San Francisco Bay Area. And I go, "Okay." And he goes, "So I've got a proposal. What I'd like to do is leave work at 4:00 or 5:00 on Thursday, and I'll fly down to San Diego and I'll work from there on Friday, spend the weekend. I'll work from there Monday, come home Monday night, be in the office Tuesday morning." He goes, "What do you think?"

And I go, "Well, let me parse this out. So if you are asking me if it's okay for you to go down and spend four days a week in San Diego and three days a week here, fine, I don't care. You can work on the moon for all I care. That's not what's important. But if you're asking me if I'm willing to lower my expectations of you, to change the things I expect you to get accomplished, well, that's easy because the answer to that is no. And so if you think you can... You're an engineering manager, people report to you. If you think you can do an effective job not being here two days out of the five days of the week, well, all power to you. You're a better man than I do. But I'm leaving it to you, I'm giving you the responsibility to solve this problem any way you want.

And that's the relationship that Reed and I had. That's the relationship we have that everyone in the company, which is if you just say, "Hey, I'm going on vacation, it's on you," that doesn't work. Before I go, I know what I have to get done. I pick the time of the year when I can do it. I make sure I've got people who can back me up, and then that's fine. That's the difference. It's deep, deep trust, but it's trust based on expectations of responsibility, coupled with the freedom to do the job however you think is the most effective way to do it.

Marie Forleo:

One of the things that I love that you shared was the process of how y'all named Netflix. I know you guys, you had the office, you had an idea, but you didn't have a name, and walking through the whiteboard with all the different possibilities. And I love that you shared this pro tip that one or two syllable names often do best, especially when the emphasis is on the first syllable. And I think the beta name you chose was Kibble. And you shared, and I didn't know this, Amazon was originally Cadabra, Twitter started off as Status. I've seen so many entrepreneurs, Marc, especially again, real newbies like, "What is the name? It's got to be perfect. If I don't have the perfect name, I can't start the business." And I call those things creative cul-de-sac. It's like you're in a little car and you're driving around, you're driving around, do do do do do, and I'm like, "Stop, get out, pick something." So what do you say to folks, whether it's a name of the company or anything else that they're trying to get perfect, what would you say to them when they get stuck there?

Marc Randolph:

Well, it's funny. You and I are kindred spirits. I'm going to borrow the creative cul-de-sac, I just call it circular problems.

Marie Forleo:

Yeah.

Marc Randolph:

Where you go, "Okay, this looks good, but it's got this problem. All right, let's try this because that solves this problem, but it creates a new one." And you do that three times and all of a sudden, you're back where you started.

Marie Forleo:

Yes.

Marc Randolph:

And the key is to recognize when you're in the creative cul-de-sac. You get into them, of course, but it's to recognize when you're there. And in many ways, it frees you up, because now, you have permission to choose a suboptimal solution. You don't need it to be perfect.

Marie Forleo:

Yes.

Marc Randolph:

Boy, do I have respect for people who are trying to name a company these days. It was hard enough back in 1997. Now, I think I described, picking a company name as a drunk cat playing Scrabble. Lots of Xs and Zs and blank letters and weird punctuation. It's tough, because you do, you need to have something which, hopefully, is evocative.

Marie Forleo:

Right.

Marc Randolph:

Makes sense, is easy to spell, doesn't mean something obscene in Lithuanian, you can get a domain name for it, you can get a trademark, you can get the Twitter handle of it. Oh, my God, it's impossible. Impossible. And so you're right, you have to settle. And our process was we had these two columns, one was names that were evocative of movies, one was evocative of the internet, because that's what we were combining at that time. And we just went through the list. And a lot of them were taken, a lot of them didn't work and no one, no one liked Netflix. I mean, to start, this is back in the nineties, a porno was called a skin flick or skin flicks.

Marie Forleo:

Yes.

Marc Randolph:

So having the flick's name was bad and that X at the end didn't do us much good either. But like you said, you're in the creative cul-de-sac and you go, "There is no good answer, so pick."

Marie Forleo:

Yes. And on that…

Marc Randolph:

And Netflix sounds a little porny, but it worked.

Marie Forleo:

It worked and I'll tell you, well, I'm going to get a little porny in the most creative way right now. A friend of mine and I who write together, we actually, we have a writing program teaching people. And I know as an ad guy, you'll appreciate this. I mean, writing copy as a business owner, especially in today's world, for me, it's one of the skills that I think anyone can learn and anyone can get better at. And I'm always trying to get better at it. And one of the tools that we teach people is actually to have word orgies. When you're trying to come up with a name for something, it's just like you make those lists and we show people how we do it. And it's so fun and it's so hilarious and it's so...

But that gets your creativity opened up and allows you to be silly and goofy and throw things at it that you would never even... And the most ridiculous or offensive or whatever, but just to stop that editing process. And usually, in the midst of that, something works. You go for enough volume, you go for enough silliness. And so that might help as you're advising. You say, "You know what? I didn't come up with this, so no one can get offended or get mad at you." You can say my friend Marie Forleo said you might want to have a word orgy on paper and just let them figure it out.

Marc Randolph:

I'm learning so much from you. This is awesome.

Marie Forleo:

So I want to go back to team for a moment because I had a cheer out loud moment on my couch when I was reading this. You shared about being wary of title inflation. You said, "Although it seems like it costs you nothing to give, it's actually far more expensive than it seems since it causes a cascading series of over promotions." I got to share this because this is just me having a moment. Anytime we are considering a hire, if someone walks in our virtual doors and they are hyper-focused on their title, or they keep asking like, "Okay, I got to know the growth path," and we're like, "You don't even have the job yet." I won't hire them. I'm like, "That is a problem. I don't want to..." I can love you as a human being, bless you, I want the best for you, but it's not going to be a part of this bus. Has your perspective on this changed over the years as you've been advising startups or do you still see that one as being pretty solid?

Marc Randolph:

Oh, no. I think it's completely valid, only because I see the problems that it creates later on. And problems of ego are really, really hard to solve. They make problems of financing and problems of product market fit look like nothing. And this classic case… And the other part is that in a startup, there is almost this planned obsolescence, which is that the people who are there on day one have a very specific skill set, which is that they are jack-of-all-trades, that they're good at lots of things, but not amazingly good at any one particular thing. They're people who have professional ADHD, where they're very, very comfortable working crazy on one thing, then shifting gears, doing something else, coming into the office and hearing this thing we've been working on for two weeks, we're stopping, we're going somewhere else, and they get excited about that rather than disappointed.

It's a very specific skill set, but if you are lucky enough to find that product market fit, to get the repeatable scalable model we're all looking for, the skills for repeating and scaling are different. And that leads to this very, very difficult conversation, which is I need to hire someone above you. And that's hard enough as it is, but as associating that and saying, "And we're knocking you down from being the senior vice president of worldwide marketing," when you're a 10 person organization, "and making you a director,” it just helps to say, "Listen, at the beginning, we're not going to have fancy titles. We're going to have something which gives the outside world some sense of what we do. And listen, if you need to represent yourself to American Airlines that you're the senior vice president of worldwide marketing, fine, but just that's not really your title."

It's hard, because as I mentioned in the book, it's easy to do that, especially when someone's saying... It's like union negotiation. I'll get myself in trouble here. It's so much easier to say, "We'll give you a bigger pension," than it is to say, "We'll pay you more today." It's easier to say, "We'll give you three more holidays," than, "We'll pay you more today." And as a result, you build up this tremendous overhanging stack of expectations, which are almost impossible to fulfill.

Marie Forleo:

I love that you hit on that. Okay. Now, I need to get to literally the place where... If I was doing cartwheels before, this was like back flips and back handsprings and throwing daisies at your book and unicorns were shooting out of my eyeballs. So the analogy about your streamlining process, you call it scraping the barnacles off the hull. I call it simplify to amplify. It changes my life every day, every month, every quarter. To set you up, you wrote, "In the wake of the Blockbuster fiasco, in the crash of the dot-com market, we took time to self-assess, then mercilessly pruned back all the programs, tests, additions, and enhancements that weren't contributing anymore." You write, "Most of the time, deciding what not to do is harder than deciding what to do.

Talk about this process, because I'm... You are preaching, I'm like, “Woo-hoo Sunday." I talk about this all the time. Trying to get people to simplify because not only is it some of the secret, I think, to our sanity, but it's been... I've experienced massive growth, revenue, profit, impact, everything, when we had the courage to slash a million dollars here of revenue, a million dollars here. I'm going to stop saying, I want you to say it because it's so good.

Marc Randolph:

Yeah. The, one of the superpowers of a startup is focus. It's basically taking every single person in the company and having them focused, putting all their force to bear on a single point. Startups are so hard, the nature conspires against them and throws everything they have. And if you're not putting all of your effort into a very, very focused point, you're not going to break through. But at the same time, startup's all about experimentation. You're trying hundreds of things, different customer approaches, different price points, different features, all sorts of stuff. And those two are antithetical to each other.

And what you realize is that even though this little test you did, this little extra price point you threw in seems insignificant, that it's cumulative. It's why we called it scraping the barnacles off the hull because one individual barnacle is not going to slow a boat down. But once you have 10,000 of them on there, it's extremely material. And so we would go in and say, "We're going to stop doing things." And believe me, there are voices which are shouting against that. For example, you are doing a $19.95 per month program and you test $14.95. Or you test if they're going to get an extra feature and that test fails, but now, you've got a couple hundred people who are on that price and every single other person's on a different price.

You don't recognize the cognitive load that goes into always acknowledging that. You're talking about a new feature and you go, "Oh, but we also have to make sure it works with the people who are at the lower price or the people who are getting an extra disc," or whatever the thing you were testing was. And quickly, you realize, "I can't obsess about not upsetting these hundred people. I have to obsess about getting it right for the next a hundred thousand people." And that is the trade off you have to make all the time. If you are Boeing and you have, basically, 60 customers in the world, well, it's different. You can't afford to lose one of them. But most companies, it's not like that. They have more to come and your obligation is to get it right for the future, not to protect the past.

Marie Forleo:

Yeah. And I feel like... I love that you said that because we do hear, and people... Again, especially for new entrepreneurs, which are many of the folks in my audience and frankly, even for all of us. It's like as people who are highly creative, I know myself, I'm a lifelong learner, always looking to grow and expand and challenge myself. You hear one message one day and then you're like, "Wait a minute, what the heck's going on?" And I think that is so important because, look, it's like the testing is valuable, but especially, in a digital-first kind of business, which are many of our people, you can test all day long.

You can have a million landing pages up, and like you said, you can have all these kinds of offers and all this digital product stream clutter that not only the cognitive load, but looking at it from a programming perspective, a CX, customer experience perspective... All of that, it can crash. I want to also talk about the Canada principle because I think this is just, again, another great analogy. Can you explain what the Canada principle is? Because I think this is perfect, especially when shiny objects come into play or you hear from person at dinner, I've heard so many times, Marc, "Marie, you're leaving X amount of money on the table, you should be doing this you should be doing that." And I'm like, "No."

Marc Randolph:

Yes, I am, but on purpose. Yeah, it's very true. And the intro here, of course, is that Netflix now is very different than the one it was back when we started. Because back then, it was a DVD-by-mail company. If you wanted a movie, we didn't stream it, we mailed it to you on a DVD, in a little red envelope. And also, we were a US only. So for many years, that was the case. But for every single one of those many years, there was almost invariably someone had come up to me and go, "Marc, you're leaving money on the table. You should be going into Canada. It's easy and it's a quick 10% bump in your revenues." Because market size is about 1/10th the United States. And at first you go, "Oh, that's kind of interesting." But what you realize is that what seems low hanging fruit rarely is.

That in fact, well in Canada, they actually use a different currency and confusingly enough, it's called the dollar. And they speak a second language in Canada. In fact, it is mandated that you use that second language in certain parts of Canada, and there's DVD title issues. And some of these movies have different names in Canada than they do here. And the list goes on and on and on. But the fundamental truth and what we call the Canada principle was that the effort required to get that additional 10% of revenue by going to Canada, taking that same focus and attention, and applying it to our core business would grow it infinitely more than 10%. And it was this discipline to say, "Don't get distracted. Keep on getting your core offering right. Keep focusing." You'll know when the right time it is to go into Canada, to go to the UK, to add on this, to try that. But for the most part, stick to your knitting.

Marie Forleo:

We have to talk about the losing faith in you PowerPoint, because I think as creatives, we often have a hard time seeing the situation from outside of ourselves. I mean, that's human, that's normal. And oftentimes, we're a part of the problem that we're trying to solve. When I was reading that part of the book, which I'll let you explain exactly what that means, but I felt it. I felt it in my gut, I felt it in my heart. I just thought you did such a great job of sharing, not only what that experience was like and how emotional it was, but also, the clarity that came from it.

Marc Randolph:

Yeah. I mentioned earlier about how it's a fundamental truth of startups that eventually, you're going to outgrow some of your key employees. And that's going to be a very difficult moment of sitting them down and explaining to them that the skills that were phenomenal at the beginning are no longer the skills we need now. And it would be unfair to not subject yourself to that same examining. And in my case, this was not long into the company, and I was working late, and Reed Hastings, who was my co-founder... But was not working full-time at the company, he was my chair, he was working in the Valley at something else. Popped his head in the office on his way home from work and said, "Listen, Marc, we need to talk." And as you know, as everyone knows, that's usually not, doesn't lead to good news. And in fact, it wasn't and he had a laptop there and he opened it up and began, basically, walking me through this slideshow, which in a nutshell was saying, "I'm losing confidence in you. I'm not sure about your judgment. I'm concerned about this."

And I said, "Whoa, whoa, Reed, I am not going to sit here while you pitch me on why I suck." And he goes, "No, no, no, that's not it at all." And what he was really saying was yes, he was having issues with my judgment, he was worried that I would scale. He's basically saying, "Listen, there's smoke at this small size, but we have to execute flawlessly and I'm worried there'll be fire later." But what he was proposing was that he come to join Netflix full-time and that we run the company together. And he left and I sat quietly at my desk for seems like hours, then went home, and my wife and I had a bottle of wine on the porch. And I really had to think about what this meant. But as I mentioned to you, Reed and I had this relationship founded on complete honesty, so I knew there was no ulterior motive, that I had to take very seriously what he was saying.

But the thing is I had this dream, of course, that I would be the CEO of this big successful company, but it made me confront that it was actually two different dreams. There was the dream, of course, of me being the CEO, but also the dream of having this big successful company. And that maybe they weren't the same. And more importantly, the successful company dream wasn't just my dream anymore, it was my investors, it was my employees, it was my customers. And it was hard to argue that in fact it would be a stronger company if Reed joined the company full-time and we did it together. And I'm not saying that I walked into the office the next morning, bright and cheery and all ready to... It was hard, because ego, as much as you don't want it to be there, it's hard to dispense with that.

But I did come around to it and accept it and embrace it. And in many ways, those next handful of years, while we were running the company together, were the renaissance at Netflix. It's where we came up with so many of the key innovations that led to our success. It's where we cemented the culture. And oh, my gosh, look at where Reed has taken the company since I've left. It was clearly the best decision, I think, I ever made at Netflix was being comfortable recognizing that I'm not the best person to lead this company into the future.

Marie Forleo:

You shared in the book that the finished product of Netflix wasn't your dream, that your dream was the process of making Netflix. Let's talk now a little bit about, from your perspective, how we might know when to stop pursuing an idea that maybe is not coming to life, or even more interestingly, when it might be time to walk away fully from something that's worked.

Marc Randolph:

I'm the wrong person to ask, I just don't know when to walk away. And it's not because I keep banging my head against the wall in some obstinate ridiculous way. It's that I've never been motivated by the trappings of success, I hate to use that word. I never started any of the companies I've started for the money. I never thought about that. Now, I've got seven. And if you had asked me on day one, which would be successful, which would be a failure, I never could have told you. I wasn't trying to handicap it that way. I did all of them because I was intrigued about solving a really interesting problem. And in Netflix case, it was is there a better way to do video rental using the internet? And that didn't need to be the... I never in a million years, I swear, never imagined that it would go the way it went, but that wasn't the point.

The point was every day, I got to come to work and sit around that table with some fantastically talented, clever, funny people, and work on solving these really interesting problems. And why would I want to give up on that? Even if it's not making huge amounts of progress. And more importantly, when I look back... Listen, it took a long time. Netflix is 24 years old. There were plenty of times when we felt we weren't going to make it. We were almost out of business when things were very, very dark. But when I look back now, those are the ones that I remember, those are the ones that were the best, that was the most exciting, we were all challenged. So looking for some, it's not working is the trigger to give up, doesn't resonate with me. Once I start getting that thrill of this problem is not interesting anymore, maybe.

Marie Forleo:

I want to start landing our conversation plane with William Goldman's famous words, nobody knows anything. You write, “Nobody knows anything isn't an indictment, it's a reminder, an encouragement because if nobody knows anything, then you have to trust yourself. You have to test yourself and you have to be willing to fail.” I'm wondering if you have anything more that you want to say on that as we wrap up our fun time together today.

Marc Randolph:

Yeah. William Goldman wrote that, he was talking about Hollywood and about how no one knows how a movie's going to do until after it's done it. You can have the 200 million budget failure and the $35,000 Blair Witch Project, which makes $200 million.

Marie Forleo:

Yes.

Marc Randolph:

Point is no one knows anything in Hollywood, but it is true any place people are trying new ideas, that no matter how many times people tell you that will never work. And that's why I call the book That Will Never Work, I call the podcast That Will Never Work because it's this reminder to me that that's what everyone's going to tell you, but you can't take that as gospel. Because truly, as William Goldman reminds us, nobody knows anything. The only way to know if it's a good idea or a bad idea is to try it.

And that the fundamental skill of all the things we've talked about today, Marie, the most important skill you can have as an entrepreneur is this predisposition to action, which is I'm just going to try it. Less thinking, more doing. That if you're not willing to take that step down the path, because you can't see around the corner, that you want to study the problem and get up on a rock and can I... Well, by the time you finally get up your courage with the confidence that, "Oh, yeah, there's something fun around the rock,” you're going to get there, and there's a hundred people there. You've got to take that first step, and without the first step, you'll never ever do it.

Marie Forleo:

Marc, you're awesome. I'm hoping we can have some cappuccino or coffee together at some point soon. And I want to tell you, I really, really... I think I mentioned this earlier, but if not, I want to make sure I say it, is your infectious enthusiasm for solving problems, I caught it and I loved it and I really, it was like, "Yes, what an incredible frame and mindset to adopt." And I found myself looking at it again yesterday and I was like, "Yep, that's one I'm going to mark in my heart to remember." So thank you for that, and thank you for this incredible book and your spirit and your drive and your support of all entrepreneurs everywhere. It's really been a pleasure.

Marc Randolph:

It's truly my pleasure as well. And thank you for the time today.

Marie Forleo:

Hey, if you've been waiting for the perfect moment to start or grow your business, guess what? There ain't no such thing. You need to click on the video right here next to me and you're going to learn how the world's most successful entrepreneurs get unstuck and get started. Click and watch it now.