<\/p>\n
About three years ago, Reed Hastings set out to answer a question that had\u00a0bedeviled Hollywood for the past decade:\u00a0How did a small DVD-by-mail company build the most popular TV service in the world?<\/p>\n
Hastings, the co-founder and chief executive officer of Netflix Inc., was\u00a0never fond of revisiting his past. \u201cThere\u2019s not a nostalgic bone in his body,\u201d says Patty McCord, a\u00a0former employee and longtime friend. But after outmaneuvering media barons, tech conglomerates and startups to build a global entertainment colossus, Hastings agreed to write a book.<\/p>\n
He didn\u2019t want to write a gushy memoir, what Hastings\u00a0calls \u201cCEO pontification books,\u201d in which corporate bigwigs chronicle their rise to the top of the business world, offering their life as a model for aspiring entrepreneurs. They\u2019ve all left him dissatisfied. \u201cEvery time I read one, I wonder, \u2018What\u2019s the reality?\u00a0What\u2019s it really like?\u2019\u201d he says, speaking from his home in Santa\u00a0Cruz, California.\u00a0Take \u201cThe Ride of a Lifetime,\u201d Bob Iger\u2019s reflection on his time at Walt Disney Co., now Netflix\u2019s chief competitor. The book offered great insights about Iger\u2019s early days at ABC, but, in Hastings\u2019s view, everything was a little too tidy. \u201cHe covered all the acquisitions that went well and none of the disastrous ones.\u201d<\/p>\n
Inspired by books such as \u201cThe HP Way\u201d and \u201cBeyond Entrepreneurship,\u201d Hastings chose to write about what he says is the real key to Netflix\u2019s success: its culture. That topic will strike some as hopelessly dull. Who wants to read a tome about travel and expense policies? But the\u00a0Netflix culture is already an object of fascination for Silicon Valley and Hollywood \u2014\u00a0ever since Hastings released a 127-page PowerPoint presentation on the topic in 2009.\u00a0That slide deck has since been viewed more than 20 million times\u00a0and hailed by Facebook Inc. Chief Operating Officer Sheryl Sandberg as perhaps the most important document ever to come out of Silicon Valley.<\/p>\n
Hastings, 59, is hoping his new book will have a similar impact. \u201cNo Rules Rules,\u201d co-written with Erin Meyer, expands upon the PowerPoint presentation, outlining a 10-step plan to replicate the Netflix culture of \u201cfreedom and responsibility.\u201d \u201cThe goal is to give back and influence young organizations about a set of principles we think are valuable,\u201d Hastings says.<\/p>\n
Though Hastings didn\u2019t set out to write about himself, \u201cNo Rules Rules\u201d serves many of the same functions as a memoir, reflecting what he has learned in his 30-year journey from young, ambitious entrepreneur to one of the world\u2019s richest people. It also offers a glimpse inside the mind of a man who is affectionately called a robot by his employees. Hastings is brilliant and focused, an engineer who predicted the future of Hollywood 20 years ago and has seldom erred in executing his vision. But he is also unsentimental and less outgoing than your typical entertainment mogul.\u00a0<\/p>\n
\u201cErin dragged many very personal stories out of me,\u201d he says, while describing his personal journey as only \u201cmarginally interesting\u201d and unlikely to change anyone\u2019s life. \u201cA good book about culture may change some other organization in a positive way.\u2019<\/p>\n
Hastings is fond of talking about how few decisions he makes, suggesting that his job is little more than cutting ribbons and kissing babies.<\/p>\n
When Hastings first released the culture slideshow, McCord was convinced it would damage the company. The presentation encouraged employees to openly criticize one another for the sake of transparency, and it recommended that managers get rid of workers whose performance was \u201cmerely\u00a0adequate.\u201d She was in charge of recruiting and human resources at the time and recalls thinking,\u00a0\u201cOh God. You\u2019ll scare away all our candidates.\u201dUltimately, however, it filtered out the candidates who were wrong for the company. \u201cIt made discussion and hiring very different,\u201d McCord says.\u00a0\u201cIt wasn\u2019t just talking about whether or not you were qualified but whether or not you liked to be independent. Do you deliver when you say you will?\u201d<\/p>\n
The approach boiled down to a simple idea: Hire the very best people and get out of their way. Netflix employees are paid far more than they would earn at almost any other company, receiving\u00a0unlimited vacation, generous parental leave and no official limit on expenses. The company\u2019s decentralized decision-making lets\u00a0people take big swings without approval from above. Hastings is fond of talking about how few decisions he makes, suggesting that his job is little more than cutting ribbons and kissing babies.<\/p>\n
But former employees have complained about the downside. While Netflix\u2019s\u00a0practices may filter out some underperformers, the approach\u00a0can feel impersonal and leaves the ever-present specter\u00a0of losing your job.<\/p>\n
\u201cIt does hurt when people say it was terrible at Netflix,\u201d says Hastings, but he\u2019s confident that most\u00a0employees enjoy the workplace.\u00a0\u201cThe percentage of people leaving is at its lowest it\u2019s ever been.\u201d (Some of that, he acknowledges, is due to high compensation and some is due to the pandemic.)<\/p>\n
Netflix\u2019s high-performance culture was forged during\u00a0a round of layoffs in 2001, just after\u00a0the dot-com bubble popped. The company needed to raise money to prop up its unprofitable business and\u00a0had to fire a third of its staff to stay solvent. The layoffs, though painful, had no effect on the company\u2019s performance. If anything, the company was better off. Hastings and McCord soon realized that Netflix could do more with less.<\/p>\n
A Boston native, Hastings traveled across the country in 1985\u00a0to study computer science at Stanford University, the sun in Silicon Valley\u2019s solar system. After graduating, he worked at a couple of technology firms before coming up with the idea for Purify, which identified errors in computer programs. Hastings built a prototype of the product by himself before approaching other people to help \u2014\u00a0one of whom was Raymond Peck, then dating Hastings\u2019s co-worker.<\/p>\n
The early years of that startup were fun, Peck says. Hastings would host hot-tub parties and beer bashes for the small group of employees. But even then Hastings showed an ambition that amazed his colleagues. Hastings\u2019s view for the business \u201cwas almost evangelical \u2014\u00a0the fervor he had for doing great and amazing things,\u201d Peck says.<\/p>\n
Hastings would often ask McCord to rate him as a boss. She had joined the company after stints at Borland Software and Sun Microsystems, where management\u00a0threw chairs across the room, McCord\u00a0says. On the jerk\u00a0meter, you barely flicker, she would tell him.<\/p>\n
Hastings is fond of talking about how few decisions he makes, suggesting that his job is little more than cutting ribbons and kissing babies.<\/p>\n
Most of Hastings\u2019s fellow CEOs were more interested in taking their staff on private jets, but he just wanted to write code. \u201cIt was a very geeky software company,\u201d says\u00a0McCord. \u201cReed wrote the first program \u2014\u00a0he was the geek of the geeks.\u201d<\/p>\n
Pure Software \u2014\u00a0as it was then known \u2014 was successful enough that it started buying other companies, and that\u2019s when things got complicated.\u00a0New employees didn\u2019t assimilate, creating a company with many fiefdoms and cultures. Hastings began to compromise in hiring, bringing on \u201cB people\u201d instead of \u201cA people.\u201d Pure shuffled through five heads of sales in five years.<\/p>\n
Hastings tried to compensate by micromanaging. Everywhere he went, he\u2019d ask people what they were doing and try to offer assistance. McCord would give tours of the offices to prospective hires and point out Hastings\u2019s cubicle. \u201cYou like it when he\u2019s in his cubicle because it means he\u2019s not in yours,\u201d McCord would say. (Hastings has no office at Netflix; he just floats around from room to room.)<\/p>\n
Not long after Pure went public in 1995, it acquired a company called Atria that was similarly sized and generated a lot of money. But the software was flawed, and the company\u2019s leaders blamed the customers instead of fixing it, Peck recalls.\u00a0Not long after that, Hastings sold the company \u2014\u00a0then called Pure Atria \u2014 to Rational Software\u00a0and walked out the door.<\/p>\n
\u201cWe had built something amazing, and then because of market forces and his inability to continue that culture, that got destroyed,\u201d Peck says.<\/p>\n
Hastings never planned to run Netflix. He took his money from Pure and made a series of investments, of which Netflix was just one. Hastings had taught math in Swaziland after college\u00a0and planned to explore the world of education. He joined the California Board of Education in 1996 and that\u00a0led to a campaign to expand\u00a0access to charter schools in the state. He has since spent more than $100 million on education initiatives.Netflix\u2019s first CEO was\u00a0Marc Randolph, a former employee of Hastings\u2019s at Pure. But he had an entrepreneur\u2019s mindset, and was better suited to starting companies than building them. So Hastings, who was already on Netflix\u2019s board, stepped in to help steer the ship.\u00a0They ran the company together for a couple of years, and then\u00a0Hastings took over full time.<\/p>\n
Given a second chance at leading, Hastings swore not to repeat the same mistakes. He has\u00a0avoided\u00a0acquisitions and tried to make no compromises when hiring the best people\u00a0\u2014\u00a0even when it led to being sued for poaching.<\/p>\n
As Netflix has grown, what started as a technology company led by engineers has morphed into an entertainment company led by thousands of people trained in Hollywood studios. The two sides have often disagreed, including over how best to market Netflix\u2019s shows and movies. (The engineers prefer to only use\u00a0algorithms to target an audience, while\u00a0Hollywood executives like billboards and parties.) Yet Hastings says any lingering tension has been resolved in Los Angeles\u2019s favor. The company now spends two-thirds of its money on content, and has more employees in Los Angeles than Silicon Valley.<\/p>\n
In the last decade, Hastings has made just one huge blunder:\u00a0splitting Netflix\u2019s original\u00a0DVD-by-mail business from the streaming business\u00a0and renaming it Qwikster. But even then, he knew that the future of TV was online.<\/p>\n
Netflix\u2019s rivals in tech and media have tried all sorts of approaches, but Hastings has stuck to a few general principles. Its service doesn\u2019t sell ads. It doesn\u2019t rely on user-generated content (Netflix doesn\u2019t want to be YouTube or TikTok). And it hasn\u2019t strayed into tangential businesses such as gaming or music or theme parks.<\/p>\n
The singular goal was adding more subscribers to its service.<\/p>\n
Hastings is fond of talking about how few decisions he makes, suggesting that his job is little more than cutting ribbons and kissing babies.<\/p>\n
\u201cThey have a really long-term strategy,\u201d says\u00a0Peter Chernin, a veteran media executive and investor. \u201cThey focused on growth with the assumption that growth will lead to great profitability.\u201d<\/p>\n
That focus is about to be tested. In July, Hastings announced that Ted Sarandos, his longtime lieutenant, would be his co-CEO. This formalized an arrangement that had been functioning in practice for many years, and reflected the company\u2019s shift from Silicon Valley to Hollywood.<\/p>\n
Sarandos used to travel to Silicon Valley every week to meet with the engineers. Now it\u2019s the reverse, with Hastings visiting Los Angeles.\u00a0When movie stars and directors think about Netflix, they don\u2019t think about Hastings. You won\u2019t find him on red carpets like Amazon.com Inc.\u2019s\u00a0Jeff Bezos or at premieres like Apple Inc. boss Tim Cook. That\u2019s Sarandos\u2019s role.<\/p>\n
Co-CEO arrangements are unusual and rarely successful. Sarandos, for all his skills as an executive, is in some ways the\u00a0opposite of Hastings. Hastings is an intellectual; Sarandos, a schmoozer and pop-culture encyclopedia. While Hastings is analytical and unemotional, Sarandos is more prone to making\u00a0decisions based on personal relationships.<\/p>\n
Hastings dismisses the\u00a0concerns, noting that Sarandos has been a huge evangelist for the culture he created, and the company\u2019s anchor in its transition to Hollywood. Hastings has also reassured employees and investors he\u2019s not going anywhere soon. \u201cIt\u2019s not like I want\u00a0go sailing,\u201d he says. Hastings\u00a0still wakes up everyday to look at a dashboard of new sign-ups and top-performing shows.<\/p>\n
Yet the promotion of Sarandos and the writing of the book are clear signals that Hastings has begun to map out Netflix\u2019s future without him at the top.<\/p>\n
\u201cI love the work of Netflix, but it\u2019s also true it won\u2019t be forever,\u201d he says. Hastings points to Microsoft Corp. as his model: \u201cLook at Microsoft, now 20 years from Bill Gates. There\u2019s still\u00a0a lot of Bill Gates in Microsoft. There\u2019s a lot of evidence you can make a big imprint that lasts for a long time.\u201d<\/p>\n
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