Netflix’s Reed Hastings: Why culture matters

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The horse was the dominant form of human transportation for about 5,000 years. Domesticated Kazakhstan three thousand B C. That's Reed Hastings. The founder and CO of Netflix. You might think he's giving an elevator pitch for a Netflix original.

Like Marco Polo, but without the blind Daoist Monk. He's actually revealing the foundational strategy that drove the company's success. He starts a story on the plains of Kazakhstan and moves pretty quickly from there. The horse was the dominant form of human transportation for about 5,000 years. Domesticated Kazakhstan three thousand B C

So for five thousand years for if you wanted to make a contribution to personal transportation, it was a better saddle, better reading, better hooves. And then in one generation from nineteen hundred to nineteen thirty, Everything changed with internal combustion engine. What Reed Hastings understands with such clarity is І за технологічку shifts Don't always happen incrementally.

Sometimes they burst over your head like a thunderclap. And wipe away habits. That have lasted thousands of years. And the trick is to realize those are pretty rare. So sometimes innovation happens fast. And that's the kind of change we typically aim for in Silicon Valley.

But more often. Innovation happens slowly. And Reed Hastings knew early on that Netflix needed both kinds of innovation. They started by sending DVDs in the mail and evolved into a streaming video service. With original content. And much of the time the right strategy is to prove what you got.

And then some of the time everything changes and correctly recognizing the differences there is really important. Humans are inventing faster and faster. And that does mean that the typical business model is shorter lived than it would have been before. So I'm not expecting internet streaming to be five thousand years like the horse. But it may be like the automobile where it's a hundred years or more. Now that's the sort of foundational insight that not only drove Netflix strategy. But also define their culture. Here's why.

We could see he needed a team that could develop a first rate logistics operation for shipping DVDs. And at some point. That same team would have to shed all of that logistical expertise and build an online streaming service From scratch.

So who the heck can make that leap? Certainly not someone who's worked in a mail room for fifty years. and develop an expertise in shipping little red envelopes. Reed knew he needed flexible problem solvers who could change with the times, and he built a company culture for and with them. It's a great example of why I believe there are many good company cultures and many bad company cultures, but a winning company culture emerges when every employee

feels they personally own the culture. You gotta have incredible talent at every position. There are fires burning when you're going out. Can you believe it? Such an idiot. And then you go back to this is totally gonna be amazing. There are so many easy way. Sorry, we made a mistake. But you have to time it right. Oops. It just seems absolutely Not ball ten years later and be like, well that's just how you do it. We haven't made it just how you do it.

This Is masters of scale. I'm Reed Hoffman, co founder of LinkedIn, investor at Graylock. And your host. And I believe that a strong culture is critical to companies that hope to scale.

But truly strong company cultures emerge only when every employee feels that they personally own the culture. And by strong culture I don't mean authoritative. Quite the contrary. A strong culture should be a true articulation.

Of how your employees work at their best. It should be grounded in your shared mission. The thing you're actually trying to accomplish. It should be understood by everyone. And built by everyone.

And it should start from your earliest days as a startup. But the question remains How do you get everyone across the org To share your values. Without stifling diversity and hiring in your own image.

And trickier still How do you spread those values when you're hiring new employees By the hundreds. On today's episode, I'm gonna talk with Reed Hastings, the CEO of Netflix. About his journey from a dysfunctional culture in the first phase of his career to the high performing culture he nurtures at Netflix.

At times you might find it a bit awkward that Reed Hastings and I have almost the same name. But we're gonna push past that. As the episode continues I'll simply refer to him As Reed.

We're going to come to the Reed Hastings story in a moment. But I want to start at the beginning here. You want to build a strong culture, the first thing you have to do is open your eyes. You have to start observing your culture. The instant

You arrive at the office. As soon as you walk through the front door. Margaret Hefernan. Former CO of five companies. Can spot the warning signs.

In just a few paces. From the front door. To the front desk. When you walk into a company You instantly learn a huge amount.

There are all sorts of cliches and truisms about first impressions. But actually what you see when you walk in is almost always what you get when you get to know the company better. So As the world lone expert. On reception desks.

I had to ask Margaret. What's the friendliest reception she's ever received? I can think of a company in San Francisco that I've written about a lot called Method Home Care Products. Where uh the founders and senior people in the company actually take turns being the receptionist. 'Cause they want to know who's coming to see them.

At this remarkably welcoming company. The leadership team doesn't just hand their employees manuals on how to behave. Neither are they passive observers. They embody Their cultural principles.

I believe that a healthy culture emerges only when every employee From the CO to the receptionist. Ops into the culture every day. The cultural principles themselves can change over time. They can vary from company to company and they can strike outsiders as really bizarre.

That's all fine. But the one thing must remain constant. Your staff must truly believe in your office culture. It's best to start thinking about this when your team is small and the culture is still malleable. A company's culture cements very quickly.

So as you grow, you have to be very careful About what it is you're scaling. You can get away with a lot more when your staff is teeny. Say. Two or three people.

And that's exactly the sort of team Reed Hastings was leading back in nineteen ninety one. Long before he had founded Netflix, he was a programmer. Reed, along with two of his colleagues, invented a debugging tool for other programmers. They called it Purify. And it was a hit.

That's when things got messy. first round of funding was family and friends, twenty people by twenty K to be able to get an office and start selling. And uh then we doubled every year. And it was in one way tremendous. Morgan Stanley took us public in nineteen ninety five, you know, we acquired all these companies. But in another way it was uh terrible because we got more and more bureaucratic, less and less inventive, uh less and less fun, and it was the classic uh company got soft and political as it got bigger. Consider what Reed Hastings was up against.

He was a programmer, not an experienced executive. He was acquiring companies, which means whole teams with their own hardened working habits were slapped together. At one point, his company, Pure Software, was acquired three companies in the span of eighteen months. And is the culture eroded?

Reed had a solution of sorts. I was coding all night, trying to be CEO in the day, and once in a while would squeeze in a shower. And it turns out that's not a good recipe for leading a large group of people. At the time I thought if I could just do more sales call, more travel, write more code, do more interviews that somehow it would work out better. I don't think I ever really escaped from that until the company got acquired by our largest competitor in nineteen ninety seven, six years after starting.

So Reed made a very typical mistake in his first company. He thought he could solve his company's problems, but Just by working harder. But hard work isn't enough. And more work.

Is never the real answer. To succeed as you scale, You have to leverage every person in the organization. And to do that You have to be very intentional about how you craft the culture.

This was exactly the lesson that Reed took from Cure Software. Well the mistakes in Pure was that every time we had a significant error. Sales call didn't go well, bug in the code. We tried to think about it in terms of what process could we put in place to ensure that this doesn't happen again and thereby improving the company. And what we failed to understand is by dummy proofing all the systems that we would have a system where only dummies wanted to work there. Which was exactly what happened. And so the average intellectual level fell and then the market changed and we were unable to adapt to it because we had a bunch of people who valued following the process.

Rather than the first principle thinking. Notice Reed's double insight here. Pure software couldn't adapt because they had the wrong employees. And they had the wrong employees. because of management decisions that explicitly selected for those employees.

This insight catapulted Reed as he set out to build Netflix. And we'll come back to the Netflix story in a moment. As we're releasing this episode, just a week after Travis Kalanick Step down a seal of Uber. I made a slew of controversies over the company's culture.

We thought that this was worth noting. Reed Hastings' experience at Pure Software was a relatively benign example of how a company culture can go astray. Uber. Was more toxic. If you permit.

Or encourage. Abusive, excessive, or exclusionary behavior early on. It's very hard to reverse those organizational habits. Producer Dan Kedme. called Adam Grant to get his take on what happened to Duber.

And what other founders could learn from it. Adam's a professor at Wharton School of Management. And the author of Give and Take. And a friend. In examining the cultural collapse at Uber,

Adam sees broader themes at play. beginning with the way that founders envision their role in the world. I often think about people On a spectrum of givers and takers. And there's this belief in Silicon Valley that if you want to be disruptive and you want to be sort of a CEO who drives major innovation and change.

Then you have to be a taker. You know, and you look at Uber and you think, Well, you know, they they had to break all these rules, they had to fight with taxi companies, they had to you know, sidestep laws in multiple states and countries and You know, you you need a bunch of takers who are willing to just go in and take what they feel they deserve and what is ultimately right for their business. And the data don't support that story at all. It's a giant myth.

And so What you really want if you want to drive disruption Is you want disagreeable givers. The people who enjoy conflict who like to challenge the status quo and rock the boat. But are motivated to do that.

in service of helping other people be successful or Achieving a meaningful organizational goal. Adam's takeaways have a lot in common with what Reed Hastings shared earlier. Great companies hinge both on the people you hire and the culture you build to keep them.

Our producer Dan Kedney asked him to elaborate. I think as a founder, if you're trying to build a culture The first thing you do is you say, It is nice to have the right people on your bus, but it is even more critical to keep the wrong people off your bus. And Actually, Mark Chussell has a great article about this. He says we all have our to do lists.

But we forget to make to don't list. A list of the things that we won't do? And I think that every founder should have one of these when it comes to hiring What are the qualities that I am absolutely unwilling to let into the organization? So I'm sure we have

plenty of young founders who are listening to the podcast right now. Like at what point should they start Thinking about this issue. Yesterday. It's never too early to think about

the culture that you're shaping and it's a lot easier to shape culture through who you let in the door. Than through trying to radically change people's behaviors. So we've seen two examples here of how culture can go astray. One of them pure software relatively benign. And one of them Uber.

Rather toxic. In either case Culture sticks. And if you don't want your company to get bogged down in corrosive or downright scandalous behavior, you have to avoid the bog to begin with.

with the lessons of pure software fresh in his mind. Reed treaded carefully into the next phase of his career. Pure software sold for seven hundred and fifty million dollars. That gave Reed the seed money to launch Netflix in nineteen ninety seven. It started as a service that mailed DVDs to your door.

That's easy to forget. Just how radically Netflix upended the video rental business from day one. No late fees. No extra shipping charges.

Who's a DVD? Get a new one in the mail. No questions asked. The most fearsome competitor, Blockbuster, Quickly suit. Matching service for service.

But not quite fast enough. Blockbuster filed for bankruptcy in twenty ten. And shrunk from nine thousand stores at its height. To roughly ten stores today. Eight of which are reportedly in a frigid part of Alaska with sluggish internet service.

Score one Netflix. But there's a deeper reason Netflix was able to outmaneuver a company. More than a hundred times its size. It's not a story of competition. But cooperation.

A cultural flourishing that took place within Netflix's headquarters. It was a culture built almost as a counterpoint. to pure software. We were unable to adapt to it because we had a bunch of people who valued following the process. Rather than the first principle thinking.

A bit of background on first principle thinking. You'll hear this expression a lot in Silicon Valley. First principle thinking is the idea that everything you do is underpinned by foundational belief. Or First principles.

Instead of blindly following directions or sticking to a process, a first principle thinker will constantly ask What's best for the company? And couldn't we do it this other way instead? And these are the kinds of inquisitive minds that Reed Hastings wanted to unleash on Netflix. For virtually every decision.

And so the reverse of that, which we do at Netflix, is you have to be a first principle thinker. And there's an overhead to that about, you know, what's best for the company. So this is true on the broad scale, like what kind of content we do. It's also true in the micro, which is how should I travel? you know, business or coach or by bus. And we ask people to do what you think is best for the company. We don't give'em any more guidelines than that. And some people that frustrates, but those are probably not the people that's a good match for Netflix. And other people like the sort of first principle thinking all the time.

This may sound like the sort of advice a tech entrepreneur would naturally follow. Who wouldn't want to hire a first principle thinker? Well it's easy to tell yourself that in the abstract. But when you're running a fast growing company You're also going to be telling yourself, I desperately need a sales expert, a programmer, a designer, an accounting whiz.

And you'll find applicants who have resumes with all the skills suited for that moment. It's all too tempting to tell yourself. Well We'll find a first principle thinker with a next hire. Just look at what happened to Reed when he was at Pure Software.

He's a first principle thinker. You'd think he'd hire other first principle thinkers. Game recognizes game, right? And yet he neglected that hiring standard. For six years.

That is why you must define your culture before you scale. And you have to think deeply about what cultural attributes You want to preserve at scale. Reed gave this a lot of thought in the founding days of Netflix. He wasn't just looking backwards at the lessons learned from Pure.

He was also looking ahead. where he saw an enormous threat to the company. Forget Blockbuster. How would Netflix survive the dawn of online streaming? Бродбен Іннет вокені цве на households across the US.

It seemed inevitable to read that streaming entertainment would eclipse DVDs Just as surely as the combustion engine eclipse the horse and carriage. And here's what makes Reed such a fantastic strategic thinker. He was fretting about this in the late nineties. when broadband internet had reached fewer than one in ten households.

To comprehend why Reed hires first principle thinkers at Netflix, you have to remember how he views these technological shifts. Innovations generally happen incrementally. Except for those moments. When everything dramatically changes. And then

Everything moves slowly again. If we continued to refine DVD by mail for another two decades, that would have been a failure strategy because the underlying substrate was changing and internet delivery was becoming possible. But now that we're internet delivery, we think that internet television is gonna be a fifty or hundred year paradigm. And so now our focus should shift to be how do we do better and better on the core. Reads knowledge of history. The changing nature of technology and the historical moment he was in

Led to the understanding he would need people to change with the times. People who can rip up a process and return to the first principles of delivering entertainment by any means necessary. Whether it's horseback? Mail? Fiber object cable?

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Hey, listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show because every Friday we release a second Rapid Response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely. From Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Humans will never be more intelligent than AI. Those were great at AI and those that went out of business because they weren't. How do we build a future?

That is human centered. I'm Rana El Calyubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week, I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives.

Find pioneers of AI wherever you tune in. So how did Reed identify those candidates? It started with a now legendary document at Netflix. A collection of more than a hundred slides. Known as the culture deck.

These slides define exactly what the Netflix culture stands for. And who they're trying to hire. And what they can expect. The culture next started about ten years ago. So first couple of years we were just focused on survival. And then we got public in 2002, cash flow positive, and it was clear we were going to survive. So we then started really thinking about the culture, what we wanted to be, how we wanted to operate. And so over successive years I improved this deck which I would go through with new employees. And sometimes those new employees would love it. Sometimes they were like, Oh my God, why didn't you tell me this before I started? That doesn't make sense to me. And so we realized we should give it to every candidate.

And so then about two thousand seven, two thousand and eight, we did that by posting it on SlideShare. But again, it was really just to be able to send a link to the candidates. You know, and it's not very pretty, it's not very highly designed, doesn't look like it's uh external marketing piece, but that authenticity really uh people liked in the outside world and now it's, you know, over ten million views on Slide Share and continue to be studied around the world. And what were the unexpected benefits of having published it? The core benefit which we did expect was that candidates were very aware of the culture. The unexpected benefits was many people became candidates for us'cause they loved that. what we described in terms of freedom and responsibility that might not have otherwise thought about us.

Here's the fascinating thing about Netflix Culture Deck. It's not meant to appeal to every job seeker. In fact. It's meant to repel some job seekers. One of the things that I think that

shocks people about the Netflix culture document is to say look adequate performance should get you a severance package. What's the way that you both Kind of create that high performance. But also Doesn't feel too

Dangerous to people. We try to always emphasize honesty. So you can always ask your manager, Hey, if I were leaving, how hard would you work to change my mind to stay? That's sort of the acid test, call it the keeper test. So we encourage people to check in with their manager on that. So we try to be, you know, very thought. So it should be that there's no surprises. about that and then we all aspire to excell performance and there's no short term judgment or like last week you made a mistake and so you're out. It's not like that at all. It's about really the expectation of future contribution. Which is based on a range of factors and and performance to date.

This keeper test may sound a bit Darwinian. No one wants to hear a manager say, I wouldn't fight to keep you. Thanks for playing. But I actually believe it's more compassionate. To ask this question repeatedly.

You have to be thought about who fits in and who clashes with their co workers. Suppose a manager decides to keep a brilliant jerk on the team. Morale Sags. The team's performance drops. Then you have a truly Darwinian struggle on your hands.

And in that sense, the keeper test cuts both ways. A manager can fail it as surely as any employee. That's why commitment to culture must pervade. Every decision. Without a clear sense of how staff should work together, it's all too easy for managers to narrow their focus on individual players.

And emphasizing individual performance at the expense of a team. Can be downright hazardous to an organization. As Margaret Hefernan. has observed. There is

Often. A belief. Among very successful, very competitive people. The the thing you want to do in a company. is get everybody to compete with each other.

That if it's everybody's racing against everybody, you'll have this kind of white heat of A brilliance and creativity. And I think pretty much everything about that's wrong. And that's not to say that I'm not competitive. I'm deeply competitive with myself in the sense that I really want to do a better job today than I did yesterday.

But I don't want you to fail. And I have seen more companies and organizations go wrong. because of what I think of as negative competitiveness. I do want you to fail, or I want your department to fail, or I want your product to fail. Because that will make me shine. I've seen more damage and destruction and waste from that.

mentality. And probably from any other misunderstanding. If you can build an environment in which people really want to help each other. Full of people who are generous.

You will do infinitely better. than creating some kind of Olympic sport within the company. Here we come to the essence of a strong culture. It serves as a check.

Unselfish ambition. It's a civilizing force. That excludes anyone who will drag down the team. And also welcomes Anyone who elevates a team.

In short. It's warm. But not cuddly. And if that sounds a bit paradoxical. Reed Hastings has a clarifying analogy.

You'll never hear him refer to his colleagues as a family. It's a term that visibly grates at him. He likens Netflix instead. To a sports team. They expect high performance from their players, and they use internal collaboration as a tool to drive external competitiveness.

In team sports. that really succeed, there often is a lot of warmth between the players. And so it's emphasizing those aspects and demonstrating that when people come in, everyone tries to help them. But ultimately it is about performance, unlike a family which is really about unconditional love. Even if your brother, you know, does something awful and goes to jail, your love doesn't stop. Okay, and that's a just a different important part of society, but that's not what we're about. What we're about is collectively changing the world in the areas of internet television, and that takes incredible performance at every level. We're also about really honest feedback all the time. So you can learn and be the best that you can be.

So let it be known that That Netflix does not promise unconditional love. And they're exceptionally frank about this in their culture deck. Which every prospective employee reads. This has become a powerful tool for them.

One that creates a built in filter to every hire. It's a great hack. That other companies would be smart to adopt. Because the hiring process is a critical

But often overlooked. Part of maintaining company culture. When you're growing and hiring fast It's easy to place expedients over excellence. You'll often find yourself tempted.

To hire perfectly qualified candidates. Who you know In your gut. Are not A fit with your cultural values.

My strong advice. Resist. So how do you resist the urge to hire a candidate who's brilliant, qualified? Perfect in every way. With the sole exception that they might clash with the company's culture.

I asked Jeff Weiner, the CEO of LinkedIn, how he does it. With reluctance. He told me. Until he saw the consequences of the decision. I remember early on in my tenure at LinkedIn, we were around the table. It was, you know, called a hiring committee, a small group of people responsible for evaluating new uh prospects.

And we were uh evaluating some LinkedIn profiles and there was one profile in particular for a very important role. And the person who was kind of sponsoring this uh prospect said look at this profile, look at the background, look at this experience, look at the skill set. I mean we couldn't find anyone better. I should, you know, warn everyone. I don't know that they're the right kind of cultural fit for us based on the following, but

We'll make it work. No. And inevitably When you try to pull that off. Inevitably and almost never does.

And it becomes very expensive in terms of time and energy and even resources uh working through that. Fast forward about six to nine months. And we were round the table, very similar group of people evaluating somebody's profile and someone Said.

Check out this profile. Look at this background. Look at this exp set of experiences and skills. Just unbelievable, but they're not a cultural fit. So let's move on to the next candidate. And that's when you know. you're in a position where you can scale. Especially when that discussion is taking place and you're not in the room.

Notice how Jeff points out that this willingness to reject A players has to persist even after he leaves room. Some CEOs, like Anil Bushry, Co founder and CO Workday. Refuse to leave the room until the team has made this decision so many times that It's a reflex.

in the early days it's just you and, you know, a few other people. So we just did it ourselves and we set out to interview the first five hundred people. To be clear, by we, Anil means he was personally involved in interviewing the first 500 hires for Culture Fit. And we would test on whether they were an I person or a we person. We were looking for we people. We were looking for people that had a clear driver for why they wanted to be successful. We were looking for people that were high integrity.

We were looking for people that did not job hop. And you can look at a resume, you can tell if they're the shiny new penny type that jumps from one op to another. We were looking for people that were gonna be with us for Seven, eight, nine, ten years. We just did a town hall a couple of days ago and We've got tons of people that have been with us ten years and that's how you build a great company. So I was interviewing those first five hundred people. And it's somewhat obvious from this, be given that you you set up that initial culture, but how then past the first five hundred did you help

Keep that. Well, we kept interviewing people after the first five hundred, but we armed those first group of people. We decided I think it was at a company meeting to say, Okay, now you guys are on the hook. You interview the next five thousand, make sure the next five thousand people are great cultural fits. I want to acknowledge the risk of this conversation. А Strong culture is great for team performance. But you also run the risk of defining your culture so narrowly

That the founding team starts hiring in their own image. And if your founders are a bunch of young Ivy League white guys, Hiring other young Ivy League white guys You're not just being biased, you're being foolish. You want a strong adaptive team?

You need different perspectives. Tristan Walker, the founder and CEO of Walker and Company. Considers the diversity of his staff a strategic advantage. They're hard at work developing health and beauty products for people of color. Which his competitors mistake for a niche market.

It only looks niche when you're surrounded by white people, he argues. His competitors oversight is his team's opportunity. So how do we come up with ideas and idea generation, et cetera? So we have an innovation pipeline that's three, four years long. But a lot of those ideas start with ourselves. Because we're part of the community we're serving.

Right. So this goes back to some of that strategic advantage, right? Like I feel like the diversity of our company needs to reflect the diversity of America, diversity of the world. And out of that comes innovation and ideas that are fresh and new. It's a sentiment echoed by Merim Nafisi, founder and CEO of Mintid. A site that sells home decor from independent designers around the world. She invites designers to submit their best works through a crowdsourced competition.

And she knows from experience that great design is tucked away in nearly every market of the world. Just waiting to be discovered. So my dad was with the UN, he's an economist, development economist, and so we would move every time he got a new assignment. So we were in Kuwait. Then Lebanon and we were there when the war started. Then Tanzania, which was stable, Iran, so it was there during the revolution, and then Egypt.

And then actually I got exposed to a lot of design and architecture and style that really influenced me and and my mom is Chinese, my dad is Iranian. we would, you know, haggle our way through markets a lot. And how did that diversity of international cultures and perspectives help prepare you for thinking about We're going to do design competitions. We're gonna crowd source design. We're gonna

Create a range. You realize the breadth of perspective that is actually out there that we don't necessarily have access to as consumers here. That really helped me. I think also I really believe different people have different aesthetic tastes and you need to be able to address them. And the best way to address them is really by tapping into global creativity.

I only bring up these examples because they underscore the hidden cost of a whitewashed office culture. You can scale a product to the world without looking like the world, to be sure. But the slightest misconceptions you have about your customers translate into missed opportunities for your business. And as an investor in Greylock, we look for a range of diversity on the team and on its board. We have worked with recruiting groups and all kinds of organizations, like Cheryl Sandberg's lean in movement to close the gaps.

But I don't claim to have the silver bullet. At the very minimum. Everyone should be playing the long game on this issue. When we ask this question year by year, it has to be front and center. Suppose you have your long game down.

You have diversity. A culture deck like Netflix of 124 slides clearly defined. Built into the hiring process, shared with ten million viewers. Are you all set to scale? Not quite.

Because your culture is not just an expression of how your team works together. It's how they work together at their best. You should tell the truth. but add a dash of idealism. We try to constantly encourage the place to figure out how to improve the culture, so not how to preserve it. And so everyone is trying to add value by here's a place we can improve in what we do. And so that keeps it very alive. It's not the golden tablets. It's a constantly evolving living document and practice.

I like Reed's expression. A living document. And it's brought to life. by peculiar tension. Between reality and aspiration.

The culture you want and the culture you strive for. A truly strong culture is always under construction. Do you release new versions of the deck? Yes, so it's been updated a couple of times. And we're constantly I mean we haven't unwound anything, but we've constantly realized like the current issue is the deck makes us in some cases look cold and competitive, and actually employees experience us is very warm and collaborative. But that aspect

doesn't really come out in the deck. So we want to we're constantly trying to update the deck to be more reflective of who we actually are. So Reed will keep revising that document, and his employees will keep reading it. And no matter what the size of your company I'd suggest you do the same. Start early when you're still small and your culture is still being shaped.

And recognize That it's both a creative exercise. And an organic system. One that your employees Will shape with you.

Granted, there are people who will tell you This is a highly overrated exercise. Culture is an elusive concept. And some people question whether culture Right or wrong, strong or weak.

is just a figment of our imaginations. It's a question I posed to Reed Hastings. I had a conversation with a friend of mine who I can't quote yet because he doesn't give me permission. But he basically argued to me that culture was a retroactive narrative of successful companies. It was when you're successful, then you could tell the story that culture would make you successful, and the classic one here is culture eat strategy.

Do you think that that counter point of view is just foolish or do you think that that is something that actually in fact g there is a little bit of really successful high performing companies. Are then very congratulatory to their culture. Well, very successful companies also work in buildings rather than tents, okay. Um but you know that's a generally accepted practice that buildings work better than tents. So y you do have to watch out for that retroactive thing of of kind of what's different. But I would say on balance, you know, the culture will help Netflix. prosper through multiple eras in a way that say my first company, Pure Software, did not.

So we've encountered many challenges of which pure software in the nineteen nineties would not have been able to do. And so I'm very personally convinced that the culture has been helping on that. But again, I encourage people not to believe in things that culture eat strategy for lunch. Both are really important. We spend a lot of time on strategy and why not do both well? Why do you have to rank them?

Let's try to do culture well, let's try to do strategy well. Think about that list of changes Netflix has weathered. The same people who ship DVDs are now producing original content. snapping up movies at film festivals, and streaming entertainment worldwide.

Netflix is the Madonna of companies. constantly reinventing itself. And notice how Reed, despite his strategic brilliance, is convinced that his previous company Wouldn't have made the transition.

It's as close as you get to a control experiment. Same strategic mind. Two different cultures. Only one conquers the world. And maybe culture is just a byproduct of strategy.

Maybe you can ignore it and focus on strategy alone. but consider that list of threats that Reed faced. Do you really want to take that risk? I wouldn't. And at the very least, if you're thoughtful about culture.

You can avoid hiring a bunch of white guys. Named Reed. Otherwise your water cooler banter. Will sound like this. Great pleasure, Re.

No, let's do the read and read thing. Oh, right. So Reed, it's always great talking to you. I always learn something. You too, Reed, a great pleasure. I'm Reed Hoffman. Not read hasting. Thank you for listening.

Astros of Scale is a Wait What original. The show is recorded on site in California and produced at the studio inside SY Partners in New York. Our executive producers are June Cohen and Darren Triff. Our producers are Chris McLeod, Jenny Cataldo, Dan Ketney, and Ben Manila. Our supervising producer is Jay Punjabi. Original music. is by the Holiday Brothers.

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