#496: Marc Randolph on Building Netflix, Battling Blockbuster, Negotiating with Amazon/Bezos, and Scraping the Barnacles Off the Hull

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At this altitude, I can run flat out for a half mile before my hands start shaking. And I also do personal questions. No se doye. Cybernetic organism, living tissue over metal and those galaxy. No Hello, boys and girls, ladies and gents, this is Tim Ferris. Welcome to another episode of the Tim Ferris Show, where it is my job to interview and attempt to deconstruct world class performers from all different avenues, all different areas of life, whether it be business, military, sports, or otherwise.

Now, today we have a very special guest. Although he's best known as the co-founder and first CEO of Netflix, Mark Randolph's story has a lot more to it. His career as an entrepreneur spans more than four decades. He's founded or co-founded half a dozen other successful startups, including most recently Looker Data Sciences, which he sold to Google in 2019 for$2.6 billion. That's with a B billion dollars. He is currently mentoring a handful of other early stage companies and advising hundreds of other entrepreneurs. He is also an active seed investor in Startups all over the world, author of an international best selling memoir and host of the brand new podcast, one of my favorite Titles for a podcast I've seen in a long time, That Will Never Work. And we're gonna talk about why that has some relevance to a lot of his story. In that podcast, he dispenses advice, encouragement, and tough love to struggling entrepreneurs. When not surfing, mountain biking, or backcountry skiing, Mark is a frequent speaker at industry events, works extensively with young entrepreneur programs, sits on the board of the environmental advocacy group.

Number one for the planet. I'm laughing, folks, because I just retook that about seventeen times. And shares the National Outdoor Leadership School's Board of Trustees. You can find him everywhere on Instagram at ThatWill Never Work, Twitter at MB Randolph with a PH, Facebook at Mark. B Randolph LinkedIn. Mark Randolph and website Where I'm sure you can find everything, Markrandolf.com. Mark, welcome to the show. Well, thanks, Tim. That was quite a mouthful and I I struggle with Advocacy Group as well, too, so don't worry about that.

I wanna start Perhaps in a in i in the the midstream of your chronology of sorts. A little in the earlier chapters, and that is at twenty one years old. So you were kind enough to send some some notes to me, but they're sufficiently cryptically written that I don't know any of the story, which is perfect. And that's what I like. So this alludes to surviving on the streets Of Hartford, Connecticut, for three days without money, watch, wallet, food, et cetera. Could you please tell me this story? Yeah, it's an experience that probably you would find happening today. It kind of begins verging on something almost illegal. But I was working

at the time for a program which took young people from urban backgrounds, uh, sometimes adjudicated youth, as they call them, and we used to call it Hoods in the Woods, but took them out into the uh backcountry to try and really stress them a little bit and help them learn about themselves. And it was a pretty powerful experience for them. And as the training For us. They wanted us to have an experience where we felt similarly disoriented so that we could understand what they were going through. And of course, all of us were pretty comfortable.

campers, hikers, backpackers. So they had to find something a little different. And the experiment they came up with involved taking us to an urban area. And for me it was Hartford, Connecticut. taking away our watch and our wallet and our ID and dropping us off um on a sidewalk at about ten thirty in the morning and saying we'll be back for you in three days. And they had us write a emergency phone number on our arm with a Sharpie, just in case. And we were on our own. Dog tags, but cheaper. Exactly. But listen, I would I was m probably more likely to chew my arm off than I was to call that phone number. I was gonna make it through this thing. And you know, it was pretty

Pretty fun for a while. And then of course, you know, being a twenty-one year old, you begin getting hungry. So your first chore is to find food. And my first tactic was uh it's a little embarrassing even to say this, but I would go to the food court and I would hover until I saw someone get up from their plate and walk away with food still on it, and then like a seagull, I would swoop in.

and finish the food on their plate. But that worked. And then I began saying, listen, I should maybe cut out the middleman. I wonder if I can get some money. Um and I can buy my own food. And I came up with the idea that I would panhandle for it. And I thought to myself, well, how hard could that be? And the answer is Really hard. I don't know Tim whether you've ever how to walk up to a stranger and put your hand out and

Ask for spare change. But there is something deep in us in our pride That makes that really, really hard. And I tried for hours before I get the courage to even make my first ask.

And of course the person just looks down and walks past you and you just feel like nothing, but little by little. you kind of begin to hone the ask. You know, what do you say? How do you approach someone? What kind of person do you think is more likely to give you money? And after a handful of hours, I kind of had gotten the hang of it. And The interesting thing What worked for me

Was Complete sincerity. At the beginning I was trying, you know, bullshit I was you know I've lost my wallet, I had it taken from me, I was on and after a while I would just look people up walked up to people and say Can you spare some change? I am really hungry.

And they could see it in my eyes and see it in my face. And that ended up being the most effective thing. And I have never ever forgot that experience of begging for spare change on the streets of Hartford, Connecticut. Because As an entrepreneur

It's part of the job description that you're always asking for money. And I just have to say that when you have begged for spare change on the sidewalk, that asking a VC for fifty thousand dollars is nothing. So uh that is a great story, number one. Number two If you're ever a professional wrestler or MMA fighter, I think Mark the Siegel Randolph is a great And even as early.

As The panhandling. experiment days, you're already split testing, and I think we're gonna come back to that. But I want to first go to the wilderness experiences or those types of experiences that you alluded to. Was that organization the National Outdoor Leadership School, or was that a different organization at the time?

organization. I during my summers all through late high school and certainly all through college, I would spend three months a year basically leading, uh either going on or later leading these backcountry expeditions. And two months of the year I would do them for the school called the National Outdoor Leadership School. And then one month a year I would do it for an organization called the Wilderness School. And that was the one that was actually not done in the Rockies like Knowles was, but it was done in uh down the east coast, um in the Berkshires and the Catskills. Uh and that was the program that was for the adjudicated youth.

Where I had to do the Hartford uh Urban immersion program. What did you Take From

Knowles. And maybe you could elaborate a bit on that experience of the National Outdoor Leadership School. What did that Provide you. I mean just to to jump to the punchline pretty much that taught me almost everything I know about leadership.

It's in a very was a very special way of learning leadership. And just for some quick background for those who have never heard of Knowles, it's A leadership school. But it uses the wilderness as that classroom. And the format, um, although course lengths are different, are pretty basic, was they take a handful of people, they bust you to a trailhead, they drop you off. And off you go. And you're out in the mountains for thirty days.

and there's no contact, you're not coming back into town. you're a self-contained group. And then you get picked up the end of the thirty days and the course is done. But The learning methodology here is

Each day they break the group, which might have 12, 16 students, into small groups, three or four, and they appoint a leader of the day. And the leader of the day has responsibility for that group. What time they're going to leave in the morning, what the route is going to be, when they're going to stop for lunch, how long the rest breaks are going to be, whether they Stop when someone's complaining about a blister or say, let's push on. And trailing behind you, of course, is one of the instructors, one of the leaders of the whole group. But they're not saying anything. They're just watching and trying to make sure you don't end up being eaten by a bear or falling in a river. But I started doing that as a student when I was 14 years old. And this was this opportunity to have real leadership responsibility, to make real decisions with real consequences. But the most

Incredible part was you found out. Hours later. the results of your decision making. You found out what happens if you don't leave until 1030 or 11 in the morning. You found out what happens if you let the break linger for an hour and a half for lunch. You find out what happens if you take the wrong trail. And you begin learning even more subtle things. You learn how to communicate with your group, how to communicate with confidence and clarity, decisions about things you're really not that confident or clear about.

When you need to ask your group for input and when you don't. And I was learning that when I was fourteen. And Each time you do that.

you're given a bit more responsibility. And I end up coming back and being an instructor for the school. So all of a sudden I had a higher level of leadership. And eventually I was a course leader where I was in charge of the entire group for the thirty days. And so For me, by the time I actually entered the workforce, became an entrepreneur with real stakes. I had been doing those things already for years. And it was this chance to learn leadership by doing it. Not by studying it.

Not by talking about it. But by actually doing it. And That ended up being the most incredible preparation for the career that I ended up uh

Choosing. Several. follow ups here because I'm fantasizing about Uh John Rambo. First blood.

Developing my skills not just communication, but practical wilderness skills. That's partially tongue in cheap, but not entirely. Does the National Outdoor Leadership School offer programs or extended

program. So not just a long weekend, but a week or two for Adults. I I remember when I was when I was working on one of my books looking at different schools like Boss, the Boulder Outdoor Surviv, and I'm sure uh Knowles if it has an adult program. If for for an adult who would want to experience something like this, are there options that you're aware of? Absolutely. And because you can learn leadership at any age. And certainly the format is slightly different. But there's courses which are, for example, as short as three days, there's courses that are as long as an entire year. There's semesters. I mean the one I described is kind of the core offering, which is one month, but of course it's unreasonable to expect a uh

an adult who has a job and a life to detach for an entire month. So Yes, there's great programs um for adults and they're given not just in the United States, but all over the world with varying degrees of difficulty depending upon what your physical appetite is for um for that type of thing. Let me ask you about communication. Because you mentioned communication and how much that changed your communication with groups about decisions, say throughout this entire process. And it makes me think of Warren Buffett, who will will often say that his best investment was in a Dale Carnegie

Course. on public speaking because it just it puts everything else that you do How did your communication change over time when communicating these decisions. In other words, if if you were to look at the before shot. You have some audio of your first maybe kind of awkward.

attempts at communicating and then you flash forward a few years and look at the after Uh could you give us an example? Uh or describe how those would be most different. Yes, certainly. You're actually very um astute to pick up that leadership is a huge uh le communications driven thing.

And People are looking to you. to as I said, you know, communicate with some confidence and clarity where we're going. And There's lots of ways to do that.

And one of the things that experience teaches you, one of the things that Knolls teaches you is that we all have different leadership styles. And you have to find a leadership style that works for you. I mean some leaders work much better by leading from the front. So when they're communicating, it's really here is what we're gonna do. But other leaders are much more collaborative. They're one of those leaders where um it's never quite clear who's making the decision because they're so good at soliciting opinion and having it come out as a group um opinion. Yeah, it's also leadership is highly situational. If we're just going for a hike, I'm more than happy to sit and let's talk about where we're going and where do you think and how's everyone feeling today?

But listen, when the shit hits the fan, when things are really nasty, when you're high in a peak, when the weather's coming in, there is no time for that. In that case, you have to shift and realize now, I have to basically say, do this now. And that people recognize in my voice the urgency of this that there's not time to challenge this. There's not time to question this. If we don't go now, someone's gonna get hurt. Um I've spent

pretty much my entire life continuing to work on communication skill. You know when I look back at uh at college the two most valuable classes that I took was uh writing class. And a public speaking class.

And I use both of those skills almost every single day. And I've also kind of realized that You never And Or never finish getting better at them. You know, writing a book.

Wow. that required all kinds of understanding of how much more complex this was than I ever imagined and all the things that I had to learn. And as I began getting into public speaking six or seven years ago, where I had to do this not in front of five or ten people. But in front of five or ten thousand people. It just steps it up incredibly. But

That's what's fun. I mean learning a craft. That's that's the best. So let's let's hone in on what appears to be one of your Superpowers and certainly craft.

And that is Split test. Iterating. Uh we we talked about the panhandling.

And uh as as also an aspiring busker. So not only do I want to be John Rambo, but also Busker at some point who like drums on the sidewalk for for money anonymously, pseudonymously at some point. But I see a reality show in that somewhere. It's the mask. The masked buster. Oh my God, is that that's Tim f is that Tim Ferriss drumming? Just if I'm if I'm if I'm looking for other ways I can self immolate publicly, I will definitely I'll definitely jump on more reality television. But when did you first cut your teeth or how did you most effectively cut your teeth professionally.

And you can take that in any way that you like. With with split testing and iterating. And uh maybe you could explain what that even means for people who may not know the term. Sure. And this goes way back. Uh I mean to the very roots of entrepreneurship. You know, I I I I guess probably the first thing I did was I was a I did candy arbitrage.

You know, where basically you recognize Wow. I can buy a bag. of candy for a dollar. With twenty pieces in it.

And I can sell each of them for a dollar at school. And once you realize that there's this opportunity and you jump in. And that's what I did when I was probably in fourth or fifth grade. And but the iteration comes from What can I get away with? I mean at first you buy it for 10 cents and sell it for twenty. And you go, that was easy. Maybe I can sell it for two dollars. And of course it doesn't go so well. But little by little, as you keep trying different things, you hone in on the one that actually has The best return for you. I also sold American Seeds.

Which is uh probably the closest thing that America had to indentured servitude back in the uh sixties when I did it. Where basically you went door to door selling seed packets. And if you uh sold seven or eight thousand seed packets you could win a fifteen cent whistle or something like that. But nevertheless, I was into it because I'd go up to the door and I'd pitch it And it wouldn't work, and then I'd have to try at the next door. And little by little, again, you're trying different things. Now what happens if I say I've put together a combo pack? Or if you buy three, I'll throw in a fourth for free.

And each trying all those little things to find out which ones work best. Which ones work best for you? Which one works best for the product you're trying to sell? Yeah. And you know

We can jump into this, but this is a big piece of my life. You know, before I really became a tech entrepreneur, I was a direct marketing guy. You know, junk mail, uh direct response television, catalogs, uh mail order. mean magazine circulation. And that is entirely about Testing things, trying different things. And seeing which ones work.

Which ones don't? And for ones that work. What works better. So I'll share something that I don't think I've ever shared publicly before. One people may have heard, which is I in

applied to a few different jobs. One was trilogy software. which I was very excited about. Didn't get the job, ultimately. The other one that I was excited about Which I which I also uh did not uh make the final cut for was Working at Capital One. Capital one for people.

Listening, you might recognize that associated with credit cards. At the time, they were one of the most sophisticated direct mail outfits. They were extremely analytic and very, very good at split testing. And I, as someone as a kid who had terrible insomnia and watched lots of infomercials, was fascinated by all of this. iteration and the idea that you could over time determine exactly what worked and exactly what didn't. Could you speak to I suppose a a a Credo

a quote of yours that is a sharp contrast with there are no bad ideas. It is there's no such thing as a good idea. Could you speak to that and also maybe give us an examples? Of Some ideas that started off really bad. In your life.

W I'm not even sure where to start with this such an overwhelming uh collection of bad ideas. I've over time I've migrated and I've moved from thinking, Oh, you know, there's no such thing as a bad idea into well, yeah, well, there are some bad ideas and now I am firmly convinced there's no such thing as a good idea. Every idea. Is a bad idea.

No idea. Performs the way you expect once you collide it with reality. Um and the more I learn the more I believe that it's true. And what that has forced me to do is say I've got to stop thinking about things and I've got to just begin doing them because that's the only way I'm gonna figure out whether it's a good idea or a bad idea.

Yeah. That's hard for us. It's hard for people because people don't like to fail. Uh they want their experiments to work. And so

They do this terrible thing. Where You keep it in your head. where it's safe and where it's warm and where you can embellish it. And it's a great idea as long as it's all imaginary. and in the safety of your head, it can, you know, grow and you can add on divisions and you can pivot it into new areas and you've built this huge castle in your mind.

And then of course if you ever decide to do it, of course it's way too big and too complicated to do. So it's all about taking these bad ideas and colliding with the reality as quickly as possible. And I will give you the classic, classic idea. And this is actually the Netflix. Beginning. Um and it came from when

My Netflix co-founder, a gentleman named Reed Hastings and I You know, we're both out of work. Trying to figure out What do we do next? And I I knew at that point that I was going to start another company.

And um Reed was going to go back to school, but he was gonna fund this startup we were gonna do. We had to find the idea together. And There's a bunch of crazy ideas which I probably should go into with you just to give you Actually I'm going to take a second and do it if that's okay. I want to tell you some of the crazy ideas that actually might have been Netflix. Because they're examples of bad idea, good idea, who knows? So one of them

Was Personalized shampoo Where And I had this great idea and I pitched Reed that okay, here's how it goes, Reed. You're gonna cut off a lock of your hair. You're going to mail it to us, and then our team of Ace Hair Scientists is going to formulate a custom blend just for you.

And then you're gonna subscribe to it. And then read. Thought that was pretty stupid. So that didn't go any further. So then the next day in the car of ask the car pulling to work with him, I go, Okay. Here's the next one. Custom dog food.

We're going to formulate a custom blend just for your pet. For its breed and its gender and its act And he didn't like that either. And then the other one was video rental by mail. That wasn't quite as bad because video rental was a

six billion dollar category. But the problem was this is 1997, video rental was on VHS Cassette, and you may remember it was big and awkward and expensive. And we bag that one. And now here's the thing I was talking about about good ideas, bad ideas. We one day heard about this technology called a DVD.

And We were in the car talking about D V D's and it's small and it's light and it's thin. And then the idea popped in our head. That maybe We could mail DVDs to people.

that this might dust off that old video rental by mail idea. But Rather than saying, What a good idea, let's do some research. rather than rushing to the office and working on a business plan, rather than You know, putting together a pitch deck. We just turned the car around mid commute and drove back down to the town we lived and tried to buy.

A D V D. And of course there weren't any, it was in test markets, so we bought a used music C D. And mailed that to Reed's house in Santa Cruz. for the price of a postage stamp. And the next morning we learned

Is it a good idea or a bad idea because he had gotten this C D that had got to his house in less than twenty four hours for the price of a postage stamp. And that was a way of knowing is it a good idea or a bad idea? And I have seen that play out A thousand, if not a thousand, a million times. We are constantly surprised the one you think is great is terrible.

The one you think is uh terrible is great. It's impossible to know until you try it. So personalized shampoo. Custom dog food. Were there any Non negotiables.

Or non negotiable. the ideas that you brainstormed. So for instance, listening to just the very short list, one of the questions that popped into my mind was what percentage of these businesses that you're brainstorming. or subscription based.

Right. Like were they was that a prerequisite? Were there any prerequisites or was it all Just blank slate. You've touched on one of the greatest ironies of the entire Netflix story, I think. Yes, there was absolutely prerequisites. And just to back up the story of a hair, I mentioned earlier that I had spent fifteen, twenty years As a direct marketing guy.

You know, I had done everything in direct marketing. I had done catalogs, I done mail order, I had done m magazine circulation. subscription business. And so Yeah, when in nineteen ninety six, ninety seven, uh the internet was just starting to take off. And there's this little company called Amazon, which was actually starting to show some promise in selling books. I immediately immediately saw that This was incredible. This was direct response on steroids. This was the most incredible tool.

For someone who's a direct marketer. And so one prerequisite absolutely was I was gonna do e-commerce. One of these ideas it had to involve selling something. On the internet. The second prerequisite, as you probably picked up from the

Personalized shampoo. custom sporting equipment like bats or surfboards. Was that I wanted it to have a high degree of personalization.

I mean I had been at the cutting edge of direct mail personalization, but that was lame. That was The h best we could do was Dear Tim Ferris!

Won't all your friends and neighbours that 27, you know, crescent circle. It was just so so ridiculous. And I immediately saw that with the internet we could create a custom Page just for you. So that was a prerequisite. And yes.

I wanted Subscription. I wanted a recurring revenue business model. I wanted to sell once and then just fight to deliver a product that everyone wanted to keep. And

This great irony. Is that Netflix started without subscription. I thought There's no possible way I can do a subscription business in um video rental by mail. But it was so compelling.

on the other dimensions. It was so compelling in terms of personalization, in terms of what we could do as an online site relative to what a bricks and mortar store like Blockbuster could do. that I decided this was worth pursuing even though it didn't have subscription. And Just to get the the punchline here. The reason that the book was called That'll Never Work, the reason that the blog is called That Will Never Work is because that is what every single person I pitched that idea told me. You know, my investors, my employees, my my wife.

Uh told me that'll never work. And They were right. It didn't work. And it took us a year and a half of one failed experiment after another, one test after the next.

And the thing that eventually turned it around was Subscription. Uh. I'm kicking myself even now. Yeah, you guys had due dates, late fees, it's all all a cart.

Absolutely. I Just a quick thanks to one of our sponsors and we'll be right back to the show. This episode is brought to you by Wealthfront. Did you know if you missed ten of the best performing days after the 2008 crisis, you would have missed out on fifty percent, five zero percent of your returns. Don't miss out on the best days in the market. Stay invested in a long-term automated investment portfolio. Wealthfront pioneered the automated investing movement, sometimes referred to as RoboAdvising, and they currently oversee$20 billion of assets for their clients.

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Tim. I you iterated what did the approach to iteration look like? In other words, did you have a system? I think a lot of people test, but it's in a pretty ad hoc way. Maybe they keep good records, maybe they don't. How did you how did you approach

These tests over A a year and a half. Well, it evolved, and it evolved Pretty quickly. You know, we launched this great excitement. It was April of nineteen ninety eight, so you know, twenty th Three years ago. Wow.

And almost immediately realized th there was good news and there was bad news and No, the good news was we had a hundred thousand dollar month. But it was all selling DVDs. And that was kind of almost this last uh almost an afterthought of selling DVDs. And the rental

was sucking wind. We were doing about two percent of our revenue in rental because nobody would do it. And We go, okay, we gotta try some new things to try and unlock this rental business. And The problem wasn't that I didn't have ideas of things I wanted to try. I had tons of ideas. The problem is that back then I was a bit of a perfectionist.

And so the tests we put together Would be these many works of art. We'd do custom photography or we would like lovingly craft and argue the all the copy. We would, you know, spell check it and have copy editors review it and we would stress test the site and check every link. And as you can imagine, that would take, you know, two weeks to put together. And then the test would fail. And we'd look at each other and say, We just wasted two weeks.

And we'd say, Okay, faster. And we Cut some corners and do a test a week. And it would fail. And then we cut some more corners and we begin to do a test every other day. And then pretty soon a test every day.

And soon we were doing four and five tests in the same day. And As you can imagine They're getting pretty sloppy. By then.

You know, there's misspellings, there's the wrong image, the watermark is still in it. We're crashing the site and the links don't work. I mean It is so sloppy. This learning It was incredible because we realized it Didn't make a difference.

That no matter how crappy this test was. That It was still So in other words, if it was a bad idea.

Even these beautiful two week tests. didn't make it a good idea. But if we had stumbled on something interesting, even with these unbelievable mistakes and crashed sites and dead links, people still would raise their hand, they would shine the spotlight, they would call us, they would come to the door. And then you saw as plain as day what was working and what you had to then fix.

And it always surprised us. And so this Insight. informed everything from then on. And this insight was that it was not about having good ideas.

It was about building the system and this process. And this culture. For testing Lots of bad ideas. And

Netflix has never turned back from that. I've never turned back from that. I realize that the key To being successful. is not how good your ideas are. It's how good you are

It being able to find quick, cheap, and easy ways to try your ideas. That's what I look for now in entrepreneurs. That's what sets apart the good ones from the mediocre ones. So let's let's double click on that,'cause this is exciting territory. So if we if we just grab sort of an analogous Let's say it's a comparison, it's a metaphor, choose your word, but in the world of science, scientific research. The scientific really, it's like science per se isn't this kind of uh god with a with a lab coat on. But the scientific method is a way of testing hypotheses, but the scientific method itself doesn't generate good hypotheses. Right. There's so there's there's something to be said for

certain assumptions that are made, certain assumptions that are tested that come up then with the ideas or the statements to be tested. And When I'm listening to you describe this story, I would imagine there are many entrepreneurs who after a period of time when they look at their revenue breakdown and they see ninety eight percent DVD sales, two percent DVD rentals, they say, you know what?

Great. We're gonna double down on DVD sales because that is the signal we are getting. That is the product market fit that we are seeing. And they would have become the I don't remember the exact name of the Columbia Records or these various outfits that would sell music by mail, right? So they you'd become the equivalent or sort of the Amazon of of DVD sales. Why didn't you do that? Yeah.

Doing a startup is kinda like riding a mountain bike downhill, which you've gotta spend like ninety five percent of your time staring five to ten feet in front of you. But Every so often you've got to look up and see where you're going.

And We were basically struggling to hang on to doing that hundred thousand dollar first month. But every time you looked up, you did not like what you saw. Amazon? which right then was just selling books, had made no secret of the fact that they wanted to be the everything store.

And we knew that the next category they was gonna gonna go into was music and movies. We knew that pretty soon once D V V D got a foothold, that m Walmart would begin selling D V D, that Kmart would begin selling D V V D, that Petsmart would sell D V D, that everybody would be selling D B D's and we didn't think we could. Or want to. compete and was essentially going to be a commodities business.

So the challenge was Wow. How do we Get out of this.

How do we avoid jump from a dead end business, which is paying all of our salaries, so we can ride it for a while, but how are we ultimately gonna make the rental part successful, because that's the only one which we think we can sustainably Maintain. And the challenge here

Well, Doubly bad because Doing both things at the same time was really nasty. I mean selling and renting was confusing to customers. It was really hard to describe what we did clearly. And operationally it was complicated. I mean the checkout process was really complicated. Our metrics and analytics were all confused. The warehousing, the inventory, and the insight that came here was that We couldn't do both.

that if we were going to be successful, we had to pick one of them. And so the challenge for us was like which one? And as you mentioned, The temptation, the easy path, was basically to say, Well let's uh Stick with sales. It's paying ninety eight percent of our revenue. We'll figure it out. But On the other hand

If we could get rental to work. That could be a huge business, and one that we could probably own because it was so operationally complex, because the margins were so good. And It points to this other incredibly important attribute for entrepreneurship.

besides this predisposition to action that I was talking about earlier, which is Courage. You have to have the willingness. And the confidence to walk away. From

Sure mediocrity. To bet everything. On the long shot. of a big success. And that's just balls.

You've gotta say, I'm gonna bet we can figure this out. And so let's Let's bet. And in Netflix's case, you know, we did that. We Almost six months in Decided that

Oh the Things that were happening with sales was just making it harder and so we stopped. In a single day. and walked away from ninety eight percent of our revenue and said, If we're gonna make it, we're gonna make it as a rental company. Was part of that predicated on

Thinking of your Now this is not quite the right term, but kind of exit strategy and the type of business you are building in in so much as thinking about kind of go big or go home. This is either going to be a publicly traded company or it's going to be zero. This is not a lifestyle business. We don't want a lifestyle business. Therefore we're going to bet on this We're gonna bet on that two percent. We're gonna bet that we can turn that into a hundred percent. And was any of that predicated on the possible outcomes that you had

seen as your menu of options. I c wish I could. Have wish you could have seen my face as you were asking that question. Because

I sincerely don't think I ever had ever crossed my mind one way or the other. Seriously. I never was thinking oh There never was an exit strategy. I never, at Netflix or any of the other preceding startups that I did, thought about that. This was all about. Solving a really interesting problem.

And the path to solving that really interesting problem. led through having to be willing to walk away from the sales because that was not helping us solve the big problem. There are realities to the business, of course, that you you need financial permission to keep going.

But I certainly wasn't thinking, Oh, mediocre success could be a nice lifestyle business. It it was more that I was caught up And the excitement and intellectual stimulation of saying, wouldn't it be incredible If we could Figure out a new model using the internet.

to be a better way for people to rent movies. Um, and that's what I thought about every morning when I came to work. That's what I thought about all day. That's what I thought about when I went home. That doesn't lend itself to thinking, Oh, I could probably get out easy here or I could return money to the investors and go home. It never part of the plan. How did you think about naming the company? What were some of the best worst ideas that you or anyone else had?

You know, it naming a company is brutally Hard. Because the criteria For a good name um has a lot of elements to it. I mean for one, you'd like something That was evocative of what you were trying to do.

You want it to be Easy. You want it to have the dot com available and maybe the dot biz and whatever the other possible things. You wanna make sure you can also get alternate spellings. You wanna make sure it doesn't mean some terrible obscenity in Lithuanian. You know, you want to make sure you can get a trademark. You want to now you need to make sure can I get the Twitter handle? Can I get Snap? Can I get TikTok? I mean, you need to cover all these bases. And it's really Hard

now and it was really hard then. And it's so hard. That well. So when you start, when you s found the company, when you actually incorporate and you say, okay, now I've gotta begin paying people, I need to have checks, I need to enter into contracts. You're not ready to go through that huge uphill. battle to figure out your name, you just come up with what's called a beta name. It's the name you're gonna use while you're kind of getting ready to launch.

And Our beta name at Netflix, this is kind of little Netflix trivia, was actually called Kibble. We were kibble dot com. Like the dog food. That's great. Probably because I was so excited about the uh custom dog food idea. And it w and but the thing is when I had a I had I had a person who was one of my early investors at Netflix, as a matter of fact, but on a board, but also a friend of mine who I had done a startup with in the past, who gave me the advice and he said, Mark, when you're picking your beta name

Pick something so bad. That when you finally get to the point you're trying to pick your real name and you're really struggling, you won't be tempted. to use your beta name. So that was the other advice. So it's gonna be So we were struggling as of course. And we're getting to the end. You know, we're getting probably only uh two or three weeks away from launch and we still don't have a name. And so we go, okay, we're gonna have to force this one. And we got everyone in a conference room and we on a whiteboard made two columns and in one we brainstormed every possible

word that was evocative of the internet. you know, net and web and e And then the other column. We brainstormed words that were evocative of video or rental. and then began drawing all the you know the crisscrossing lines between them.

And You know, s some of them were I thought pretty good. My favorite actually was replay dot com. Which I thought, oh that's pretty cool. But Um replay was available, but it cost$4,000. And they may as well quoted me forty million dollars at that point, that I wasn't gonna pay forty thousand dollars for a domain name. Another one was cinemacenter.com.

Yeah. And then we had all the other variations. We had Web Flix, we had Netflix with a CKS, we had, you know All these crazy names. And Netflix.

Was Far and away, no one's favorite. And I don't know whether you remember this, Tim, but back in the you know, in the sixties and seventies The nickname for porno

Used to be a skin flick. Or skin fricks. And everyone's going, no, we can't call it flicks. And that X. That X is even worse.

But you know, after a while you're going on the list and you go, I can't get the domain name, I can't get the trademark, well, this is already being used in Canada. And then finally you go, Okay, this we gotta make a decision. And you know, Netflix was a A little porny. But it was the best we could do.

And I I just want to underscore one thing you said that's really important. Likely at least at the time. available as a trademark across the board. Right. Domestically and internationally. If you look at something like replay dot com or even Netflix with a CKS, you can stretching a little bit here, but you can get into kind of dist Descriptive murky territory and like you said, there are these checkboxes that are really important to look at very closely. A friend of mine

The uh GameStop Mania and Excitement. You know, a friend of mine was thinking of using the sort of uh WSB Wall Street bats, et cetera, for a sort of spin off. business of sorts and uh and he was about to put a bunch of money into developing it and I said, Before you do that, make sure you go to USPTO.gov, take a look at who owns any trademarks. And you may just dodge a massive bullet, which she which he ended up doing.

Netflix. So we have Netflix. Now You've invoked. A name and the the name is is one of the demigods, maybe even a major, not lesser god of e commerce. And that is Jeff Bezos. So less than a year into

This Netflix. Little porny but effective journey. You get you get a call from none other than Uh, Jeff Bezos inquiring about potentially buying the company. Can you tell me about your trip to Seattle or anything else about that exchange? But you've got to understand how it felt.

For me. to get a call from Jeff Bezos. I mean this was two things. First of all, This was the idea that Everybody said that'll never work. This is the idea that no one had confidence in.

And to get a call from Jeff Bezos. I mean the pioneer, the king. Of e commerce? Oh my gosh, the validation. It was like

Okay, someone, at le not just someone, not just anyone, but Jeff Bezos sees potential in this. So it was this tremendously exciting moment. And You know he when he called He was a little cagey. It was like, you know, listen, I'd love to come out come on up to Seattle, I'd love to meet you guys. Let's just come on up and we'll get get acquainted. So he didn't come out right out and say he wanted to buy the company, but it didn't take um you know rocket science to figure out that's what this meeting was going to be about. As I mentioned earlier,

They were just books at that point, and we knew that video or music or both was next on the list, and so it was pretty sure that Netflix was a candidate to be a make or buy evaluation. In other words, Maybe you could jump start. into video by buying us. So Reed and I flew up to Seattle.

And this is Pre um you know, pre-ways and pre-Google Maps. We had printed out. Um the map from a site called MapQuest. MapQuest. I knew it was coming. If you can remember those days.

And and I was so sure that Reed had fucked this up, if you'll pardon me uh because we were in we were in a pretty sketchy part of town. I mean what we're walking past there's broken glass on the sidewalk, there's people sleeping in the doorways, there's hyperdermic needles, there's sex shops. And Uh I go. There's no way that the

pioneers of e commerce or Here. But yes, you turn the corner and there in the this old warehousey building Uh through these dusty plate glass windows I could see in and see that there was a sign. Lo and behold.

Amazon. And we go in. And it's You can't picture this because it is jammed to the gills with people and dogs and pizza boxes and printers stacked on top of piles of books. And people are crammed in five or six to a cubicle.

They they get ushered into this conference room. And the conference table Is four. Doors. That are

No obviously not in doorways. They're on saw horses. pushed together to make a conference table. And in fact As you're walking in, we had noticed that Every single person was working. at a desk made out of a door.

And it was wow, this is pretty crazy. And we had this great conversation because Jeff and I kind of were totally riffing on this excitement. of starting these companies. And he was talking about When he had rigged up a bell that would ring every time an order came in, which is exactly what we had done. So we had this kind of opening day excitement um stories to tell. But of course we got down to business and in fact

Yes, they were interested in perhaps using Netflix to jumpstart. In a video and they talked to us, understood everything. And on the way out, we had the CFO of Amazon exquorted us out and kind of did the hints. She goes, you know, in the event this happened, we should set expectations. It's probably gonna be in the ten to fifteen million dollar range. And

That Wouldn't have been so bad. For Something I've been working on for less than twelve months. You know, and at the time I owned 40% of the company.

But It was really interesting. what Reed and I talked about in the flight home. Because Again, this is the company that everyone had said will never work, but we had managed to put together an e-commerce website. We had managed to find a copy of every single DVD available at the time. We had forged these partnerships with all the DVD player manufacturers that were bringing us in customers, and it felt

Like at that moment that We had got it all figured out. Yeah. And We kinda looked at each other and said, I don't think we're ready.

To hand someone else the keys. Um and so in some ways this wasn't a trip up to sell the company. Or maybe the trip up was to sell a company, but on the way back it felt more like a commitment ceremony. Well we kinda had to look each other in the eyes and say Are we in or are we not in? And uh

I think luckily for the rest of the story. Um We were in. So you're you've you've described the flight out. I would love to hear you talk about the flight in. Um

And uh maybe it's part of this extends to well before that, but how did you prepare for or strategize for The Amazon meeting. Oh the the depths of And and the reason I ask in part sorry to to interrupt. you and me both. But part of the reason I ask is that you mentioned a term that I think is really important, and that is

the buyer build decision. Right, so Amazon can use you to jump start. their video business, but they could also choose to build it themselves. And sometimes big companies I'm not saying this is what Amazon did, but sometimes will invite smaller companies in To have them Open the kimono, so to speak, and

share lots and lots and lots and lots of details, uh, sometimes under cover of due diligence, so that they can then go ahead And just build everything a lot faster internally, right? That does happen. I'm not saying with Amazon, but it does happen. So I'd love to hear how you guys Prepared for this meeting. So

You know, I'd been in Silicon Valley for ten years by that point. I knew that was certainly one of the components. of someone someone's interest. I knew there was always the chance that they'd just pick our brains and do it themselves. And so that navigation wasn't particularly tricky because we knew going in

What to expect. But I much prefer to be pretty forthcoming and I've always believed it's better to assume Good about people?

Than to protect myself from bad. I'm willing to get burned. Because normally it works better for me if I go in being vulnerable and honest. But the real story, the preparation, you know, I laughed when you mentioned that because it it really is in some ways Maybe it's a flaw of mine. But a but the best i is that I am a a ridiculous over preparer.

for important things in my life. And just to give you a really quick example of this from way earlier in my life, you know, I was a second baseman. when I was playing high school baseball, which is the that was the basically the end of my baseball career as far as I got. But I thought I was a pretty good high school Second baseman. And

One of the jobs of a second baseman is to back up first base when a throw goes to first. And there was one particular game where all of a sudden a throw came to first base and missed first base. And amazingly enough, I happened to be back there and snagged the ball and threw the runner out a second. And when I came in You know, the coach it was going to be a little bit. That was amazing.

How did you know to be back there? For that play. Um It was Puzzling to me'cause I said I am back there.

Every pitch. I run behind first base every pitch. And that's how I treat these kind of negotiations. I'm ready for pretty much anything.

I think deeply about what could this meeting be about. What are the questions they're gonna ask? What do they really want to know? What are the best way to position our company favorably? What do I need to understand about Amazon to make the decision about whether I might want to have the company sold to them? Um and then I go through what my answers might be. And of course

you've prepared a hundred different answers and you only end up using eight of them. What? That's okay. That just means that it comes off more uh More positively for you.

Don't try this at home, folks. Yeah. Yeah, so that'll never work. You heard it over and over again from possible sources of financing, from Everybody left and right. With respect to Netflix, what were the biggest things that people missed or got wrong in terms of assumptions about Netflix that led them to conclude that'll never work. And I'll give just a quick example with, say, Uber, for instance, early on, they were turned down by everybody for financing, just about, because it was assumed that whatever market they had, their total addressable market, it was a fraction of whatever the current

On demand. Black sedan. car service market was. And that was an incorrect assumption because ultimately Uber Black ended up funding the R D and subsidizing what later became Uber X and before you know it, the market expands exponentially. So what what were people missing or getting wrong? that led them to say that'll never work.

reasons that almost everybody drew on to the conclude that'll never work. And the first was Blockbuster. That Here we were, this tiny little upstart.

Everyone said blockbuster is the problem. And that just makes sense because blockbuster at the time had nine thousand stores. They had sixty thousand employees. They were doing six billion dollars in revenue. And The thought that we could

Get a foothold against that. And worse. It wasn't just getting a foothold against a bigger company. It was basically saying we're proposing a model where you come to the internet and you order a movie. And we mail it to you.

And it's gonna take anywhere from one to four days for that movie to arrive. And people could not get their hands around how that could possibly work. When you could pretty much throw a stone from any place in the United States and Hit a blockbuster.

Why would anybody do it through you when they could just drive five minutes and rent from Blockbuster? And They had a point. We did have some things up our sleeve, basically the fact that everyone hated Blockbuster. You always want to compete against someone that everyone else hates. But we also why did they hate Blockbuster? Blockbuster the part of it was Blockbuster's attitude.

Blockbuster did not believe. that they were in the customer service business. Um and so people were frustrated with the experience. They also relied In their business model. Um.

Late fees. Yeah. Late fees. Oh I remember that. In fact, they actually had an internal term for it. And they called it managed dissatisfaction. And

Oh my God, that's great. And you always want to compete with someone whose core tenant is managed dissatisfaction. They they also had a problem that because they weren't they were really in the demand fulfillment side that they had this new release issue. Where a new release would come out. And

People like Lemmings would all flock to the blockbuster and they would all want the same movie. And of course, Blockbuster can't afford to buy enough copies to satisfy every single person who wants it on day one. Because their whole model is you buy it once. And then you turn it.

twenty or thirty times. And so what they have to do is basically say, We're gonna have A lot of people not getting the movie they came in for. And that will force them to come back again and run it next week or the week after so they can get the turns out of it. So all these things were fundamentally

Frustrating. Yeah. And and discovery. You know, the reason that everyone flocked to new releases was it was so hard to find something else to watch that you would do that, if you may remember this, you go to the store and you basically begin doing this pacing like a tiger you see at the zoo.

Up and down each aisle, just hoping something leaps out at you. that you haven't seen before, that you've heard of, that you want to watch. And so you naturally gravitate to the new release wall, not because they're better movies, because it's a higher percentage Anyway, lots and lots of reasons we go, this should be disruptible. But blockbuster was just one reason. The other reason everyone said that'll never work was the fact that the DVD was digital.

It's a digital medium. And Everyone said well just a matter of Time. Months before

This movie can be downloaded. Or streamed. Who's gonna want to get it on DVD when they can just Stream it to their house. And um

They were right about that latter one. You know, we thought they were wrong about the timing. That it would be a long shot. If it was gonna happen in a few months, we thought it was gonna be years. But nonetheless, both of those were very reasonable objections about why uh this business would never work. And we really had to attack both of those um if we were going to be successful.

So you invoked Darth Vader. In this particular In this particular movie, Blockbuster. And

Although the story of Blockbuster is also kind of amazing. I mean just the hoisinga and the entire the entire arc of that is just amazing in and of itself. But two years in The perfect storm of bad news, as I have it here, led you to fly not to Amazon, but to Dallas to try to sell Netflix to Blockbuster. What happened there? What was the bad news?

And how did that trip? Two blockbuster go. These stories have such twists and turns and ironic moments. You know, and I we started we spoke earlier um in our conversation About the um

the struggle to find the, as they say, repeatable scalable business model, how when we launch it didn't work. how we had a figure out how to get rental to work and how we struggled for a year and a half And that eventually The thing that Worked.

was this completely irrational combination of things. One of them, as I mentioned before, was subscription. But the other thing was that one day I was in our warehouse. And at the time, we probably had several hundred thousand DVDs in the warehouse. And I remember

Looking around at these full shelves and thinking what a shame. They're doing us no good sitting on the shelf. I wonder if there's some way to store these movies at our customers' houses. Let them just keep them. And maybe they do, I don't know, peer-to-peer exchange. Maybe they keep it as long as they want. And when they want another one, they mail it back and we'll replace it.

And that idea When combined with subscription was worth a test. And when we test it. Finally. You know, after a year and a half it worked.

And it worked. Remarkably well. It took off. I mien people were signing up in droves thousands a week. For this new.

No due dates, no late fees. subscription video rental program. Now That's a great But

As you may know about the Subscription business, it has some great things about it and some bad things about it. And the great thing about it is it's recurring revenue. Once you've acquired that customer. If you take good care of them. They pay you month after month after month for years.

If you do a good job. The downside is All the acquisition cost takes place up front. all the money you spend on marketing and fulfillment and customer service. to get that customer.

Is out the door. And it's usually a number way in excess of how much they pay you that first month. it takes having to be a customer for six to twelve months or even longer sometimes to recover that marketing expense. So When orders are flooding in the door, on one hand you're going, this is fantastic, but it also means that money is flying out the door. And

That is Not so fantastic. And it's especially not so fantastic when you get to April of the year 2000. When all the wheels suddenly come off the cart. of the dot com bubble.

If I can Mangle two metaphors there, sorry. In other words, what had been easy in March. Basically we just go outside the Netflix uh headquarters, we'd wave the green flag and the big dump truck full of money would back up and

jump it into the driveway and we'd send everyone out with the wheelbarrows to bring the money in. All of a sudden you get to April and the drivers are putting their head down and There is not a cent to be had, especially not for a company with dot com in its name. So we're desperate. We have finally cracked the code.

We're Succeeding But we're going bankrupt in our success. And That was probably the lowest moment. And

We Reed and I looked at each other and basically decided this is the time to as they Refer to it. Time to pursue strategic alternatives. Which is the Silicon Valley expression for basically you've got to sell this sucker, you know, and fast. And the obvious strategic alternative at the time was, of course, blockbuster. Um but You know, they were huge, they were six billion dollars in revenue, we were five million dollars in revenue.

We were a hundred employees and they were Sixty thousand employees. So we know we try getting this meeting, nothing. you know, wouldn't return the calls, wouldn't respond to the emails. So The this is all preamble to this meeting with Blockbuster, but it's such a crazy story. The time they chose to call

Happened to be we are doing this corporate retreat. at a place called the Allisall Ranch, which is in the foothills of Santa Barbara. And As you can imagine, it's pretty casual. um because not only is we're casual at work. So when you go to a retreat, you gotta work at it. And I had bought nothing but T shirts and flip flops and shorts.

And that's when they call and say we'd love to see you tomorrow morning in Dallas. And we're looking at each other and going, There is no way we can't get from This ranch in Santa Barbara to Dallas by tomorrow morning. And so we did the thing that you

would prudently do when you're many millions of dollars in the hole, which is we chartered a corporate jet. To fly up to Dallas. Oh, this is perfect. I'll s I'll share with you one more piece of Netflix trivia. So that jet

was owned by Vanna White. Uh Okay. But anyway we fly to Dallas, we end up g being ushered up into this big 17 or 18 story blast and steel skyscraper and they bring us into this conference room, which is the size of a football field and this beautiful endangered hardwood conference table. And I remember sitting there going, oh my God, every place has like paper and a pen and there's Go they've got extra office supplies. This this is something.

And then in come the blockbuster. guys and they're in their very expensive clothes and You know alligator shoes. Which is in contrast to me.

and shorts and flip flops. I was jealous because Reed had on a Hawaiian shirt. He had buttons. But anyway. We

Make our pitch. And uh We're gonna combine forces. that we will run the online part of the business. Blockbuster will run the stores.

we laid out all the incredible synergies that come from having this blended model business. And then we'd all live. Happily ever after. And it was going great. You know, they were they were leaning in.

They were asking good questions. And then they asked. Of course, the obvious question. Which is how much? How much are we going to pay for you guys. And

We had obviously rehearsed this one on the plane. So read. screwed up his courage and kinda leaned in and said Fifty million dollars? And

They Laughed at us. I mean not Out loud. But

I swear John Antioca was like trying to hold back um A laugh. And As you can imagine, the meeting went downhill pretty quickly after that.

And it was this long Quiet ride in the cab back to the airport and an even quieter ride. Back to Santa Barbara on the plane. And it was a crushing Moment.

Because We had finally gotten this meeting. It was self-evident to us. that this blended model of online and stores could be an incredibly powerful force, and Blockbuster hadn't seen it. And so now

Rather than This being the you know you know as I say in the movies, the Deus Ex Machina moment where The heroes are backed up against the cliff and the Indians are lining the cliffs and there there's sudden death and all of a sudden in comes the cavalry and plucks them to safety. But Unfortunately not only was

Blockbuster not gonna save us. Blockbuster was gonna compete with us. And wow. That was sobering. And

As we got back and said to ourselves, what's gonna happen. It was this realisation that this was one of those problems that there wasn't gonna be a shortcut. There was not an easy way out. There was not something we missed. That

You know, as my dad used to say to me sometimes, you know, Mark, sometimes the only way out Is through. we are gonna have to confront this uh head on and Take on Blockbuster. And you know, it took us

I don't know, ten plus years. But eventually, you know, the company that had Nine thousand stores is down to one. And the company they could have bought for fifty million dollars is now worth two hundred and fifty billion dollars. It's such an amazing

Turn. When I think back to that moment to where Netflix is uh today. But Amazing thing here is that when I tell that story to people, there's These

Dichotomy of reactions. Because for the people who are the entrepreneurs They're going, Oh, this is so inspiring. You know, like a handful of people with no experience in the video industry took down a six billion dollar company.

But sometimes I tell that story to corporate audiences and for them. So very Different message. then it's basically you have no idea who's coming after you and they're gonna come after you not doing the thing you do well. They're gonna come after you doing the thing poorly, or you

Don't do it all, or you're scared to do. Watch for the people you consider rounding errors. Touche. As uh as uh one Yahoo executive said to uh a friend of mine, Alexis O'Hanian, who co founded Reddit. He said, Oh, you guys are around in her in a meeting looking at their traffic. Didn't turn out so well for for you. I love that question. I have so so I can see it from a from a number of different perspectives.

And First question I like to ask is related to your reputation for not accepting no as an answer. Right. So I'm trying to zoom in because Hindsight 2020, of course, it makes an excellent story, but there are lots of startups that go out of business. There are lots of startups that don't survive. the existential threats and the economic meltdowns. They just do not make it through. So when I go back

To that point in time. You guys. offer or suggest, propose fifty. They basically laugh. Why didn't you keep dropping the price until you found a price they would accept?

I'm not saying you should have done that. I'm just wondering been a whole mix of emotions. Why not? Look for the soft landing.

At a lower price. Or find a price that would finally be a yes. I think There was a couple of things. We hadn't picked fifty million dollars at random.

On one hand it had no underpinnings in valuation. This wasn't based on multiples of next twelve months revenue or anything that you'd normally use to value a business that you were trying actively to sell. It was based on two things. It was based on number one. We had raised fifty million dollars to date.

And it's spent. Most of it. And this was a way for Reed and I to make our investors whole. And that

If it was gonna be dramatically less than that. We were less interested. The other one was the reasoning we thought that would make fifty million dollars reasonable was not What was Netflix worth to someone as an ongoing Netflix? But what would it be worth

To blockbuster. То є сесік більон долар з інвені то ха. A team of people who were deeply involved in the technology of video rental. Which quite frankly Blockbuster wasn't. And so we thought

That Them recovering. their investment many times over purely by getting a small bump in the six billion dollars revenue. would make it work. But

There neither of those reasonings for them resonated. And so I don't think this was a question of well, maybe forty, maybe thirty five. I think they would have gone back to some cash flow analysis or some next twelve month revenue and that would have been dramatically, dramatically less. sufficient that it wasn't worth us.

recovering pennies in the dollar for investor better for us to say, Well screw it, let's uh Let's prove these guys wrong. So next I wanna bring up I would love to hear you all explain. Something that I see referred to as the Canada principle.

Now I'll just gonna I wanna I wanna read a line here which is from it's on BGR.com, but this is a quote from you. Please feel free to correct me if I'm wrong. I'd certainly be extremely surprised to ever see ads on Netflix, only because Netflix is so focused on the Canada principle. What in the hell is the Canada principle? So the Canada principle. When you're starting out as we were in the United States and you're starting to get a little bit of traction. So this maybe we're we're past the blockbuster thing. Our subscription, no due dates, no late fee program is doing gangbusters. And

People say You should go into Canada. That'd be an easy 10% bump. In your revenues. Because you know, Canada is approximately ten percent the market size of the United States.

At first you go, well, that's kind of interesting. Yeah, that'd be a pretty easy way just to get a quick 10%. But then you begin to think about it and you go, I'm not quite so sure about the easy. I mean, for one, they do have a different currency. Some of our DVDs have different rights arrangements in Canada than they do here. There's this little issue of language that part of Canada actually speaks French, and in fact legally mandates that the materials are in French as well as in English. And you begin accumulating all these small things, which under some circumstances you might go, that's not a bad price to pay for an additional ten percent.

bump in your Revenue. But what we realized is we were growing so quickly at that point. That

Were we to take the exact same effort, as minimal as it might be, that it took to get into Canada and just apply it back on our core business? we would get a way bigger bump. Than ten percent. And what the Canada principle really says is You've got to focus.

that the real key is picking the two or three things that are the most important. Then if you get those right, nothing else matters. And allocate all of your resources to that. And you have to very, very Consciously.

Choose not to do things. Which appear easy. You've got to say, Oh oh, there's Netflix Clones. Launching in the UK. Should we enter the UK to try and

stamp them out to beat them to the punch? And you have to say no. we are way better taking the distraction that would occur doing that. and doubling down on the things that we're already good at. Because that learning, that acceleration We'll just pay dividends down the road and we eventually do decide.

to enter the UK. For example. But that focus That's at the heart of I believe what makes any startup successful is not getting distracted. We used to also call I refer to it as scraping the barnacles off the hull.

Because as you're moving, you're testing things and you're trying things and you're slowly but surely accreting New features. Your business. And of course you have a new thing you want to try.

And now all of a sudden it's gotta be reverse compatible with this. And you wanna change the price, but you go, wait a minute. What about that small group who have this different offer? And You have to consciously go into a meeting wherever you discuss what you're gonna do next, and at the same time discuss

What are we going to stop doing? All those things designed to make sure you're putting all of your attention on the things that really matter. I mean this is particularly true uh in s uh well it's true in many things, but software development, I mean you get paid for adding features, uh or you get rewarded for adding features as a as a programmer seldom rewarded for removing features, which is how you end up with A lot of kinda bloated.

Overfeatured. Software. One of the quotes from the same piece that I mentioned that I really like is these things which seem like low hanging fruit never are. Ads are a distraction, never an additive thing. that I have for you is what were some of the most tempting Opportunities. that in retrospect were most important to say no to. You've mentioned a couple, right? Canada

You mentioned entering the UK. Were there any other temptations or internal pressures, anything that in retrospect were really important to have said no to. There was certainly the temptation to do softcore adult Not hardcore stuff, but adult content. Only because that's such a huge driver of new technologies.

And that took some discipline to say we don't want to get entangled up in that. And not out of any moralistic preaching about what's appropriate or not appropriate, but purely because being a company which was pretty much had customers in every single county in the United States. We just didn't want to self leave ourselves vulnerable to a particular district attorney who was behind in the poll someplace and wanted to take down the smart alaki e-commerce folks way back in California. That was one we dodged early on. Games.

People talked about we should do games. but it didn't take too much thinking to realize that games do not have the shelf life that movies do. able to dodge that one. Probably the closest we came to getting distracted. Was As we approached the

What was going to be our first shot at an IPO. We had decided we were going to become a portal. Because Portal was the business model de jour at the time, which basically said, no, no, you're not a movie rental site. You are everything movies.

You're gonna be where people come for showtimes. You're gonna come to get reviews. You're gonna be able to buy tickets. And we actually started down the path of building that out. and we put in place our IPO prospectus. based on the fact that we were gonna be a portal. And When the

Bubble burst. in April of two thousand and we had a pull our IPO That was such an unbelievably lucky break. Because if we had ended up going public as a portal. We would have been committed.

And we never could have made that work. You know, a f a friend of mine. It might be Mike Maples Jr. has said to me, uh or actually I think it's Brandon Stanton of humans of New York fame, but said sometimes you need life to Save you from what you want to give you what you need. Something along something along those lines. I'm paraphrasing, but

Yeah, sometimes those catastrophes are lucky breaks. Uh something that has a bit of a a ninety degree turn. But we've been I think talking a lot about strategy about the business, about Netflix. And that's

Certainly. on one side of the ledger, but while this is all happening, you have a personal life. Two. Think about it. Uh to manage.

uh well, poorly, or somewhere in between. And I What a read. A

Paragraph. About Tuesdays at five PM. And and then I'd love to discuss this because this is something that my girlfriend and I would like to work on. And here it is. And we feel free to fact check. I vowed early on I was not gonna be one of those entrepreneurs who is on his sixth startup and his sixth wife. So we had this tradition that every Tuesday without fail at five PM I left the office and my wife and I did a date night. And at first when you announced that

That's going to happen. Everyone goes, Yeah, yeah, yeah, sure. But I was serious. If there's a crisis, well, we're going to resolve by 5 p.m. Okay, you have to talk to me. Great on the way to the car. Fantastic things happen. Can you please speak? About this decision. And how you stuck to it and implemented it because I I know a lot of couples and I'm part of one of them who

have kinda committed to this, but then it falls by the wayside. I this happens a lot. And I would love to hear you tell your story And share any advice that you have. For people who might want to emulate this. I've always had my

Priority. To be balanced. And like everyone, I screwed it up. But I who's able to self correct

right about when I turned thirty. So of course during my twenties and late twenties, I worked like a dog and my girlfriend then, my now my wife. You know, I think That was hard on the relationship.

The fact that I would go and work on weekends, I would be there till eight or nine o'clock at night, essentially squeezing in my relationship. In whatever spare time was left from the business that I was working on, but I was also short changing not just her, I was short changing myself. You know my passion is outdoors. You know, my passion is backcountry skiing and mountain biking and surfing and kayaking and alpine climbing, and these are not things that you can squeeze in between your 11 o'clock and your one o'clock calls.

If you want to be able to continue to do those, you've got to make space for them. And so I kind of had this moment of where I said I am Not

Going to lose these two important parts of my life. and began compartmentalizing. And that's when the date nights started. And

It was not just Netflix, it was other companies prior to that where they saw this happen. You know, people Talk all about corporate culture.

And They write manifestos and they put together slideshows and they carve it in their building cornerstone. But you know, culture is not what you say, it's what you do. And so people all preach about we believe in balance and take care of yourself. And then they don't Act it. And what was so fascinating about me having that discipline that at least one night a week

I would leave at five o'clock. no matter what was going on, is that once I got through the first two or three months of it. It got immeasurably easier. Because people Stopped asking.

They start trying to put meetings on the calendar after five on Tuesdays. They realized they were gonna have to resolve this crisis on their own. Or Do it before five if they wanted me to help. And the best part.

The best part was that Everyone else began realizing that they could. Do this. But they could not only leave at five o'clock on Tuesday because they realized there was nothing that I was gonna drive that was gonna pull them back.

I was modelling how I really wanted the culture of that company to be. I'm still pretty busy, but I still manage to get away and go for a five or six day backcountry skiing trip. I still get to fly up to, you know, northern Alaska and do two weeks in the Noatak River because I make space for that and I prioritize that space and the things I have to get done, I make sure I get them done before I leave and then prepared to get picked up by someone else while I'm gone. And then I can jump back in when I return.

Um and it's Hard. But It's important. It does not happen.

If you wait until let's see if I have enough time. It only happens if you make that time. How did you land on Tuesday nights and did it start off on a different night and just not work.

I don't remember. Yes, it me it moves around and it moves so you know, the shorthand every Tuesday is probably a little bit just making it a simpler story. The point is it's every week. And a lot of times the babysitter can't do it on a Tuesday, so fine, we're gonna do it on a Thursday. But it it wasn't so much the discipline of that, it was the fact that this is gonna happen. And this is gonna happen before anything else gets scheduled. But I would say by and large it was Tuesdays. Or sometimes Wednesdays. Could you tell a story of a time that it was stress tested where there was a crisis that was large enough or a situation

that seemed important enough where you're like, God, I really it would be it would probably be best for the business for me to push date night. Are there any examples of how you've navigated that that you could share? Yes, of course there are. The founder of Knowles, a guy named Paul Petzel. Used to say rules are for fools.

Because in the mountains things happen and even though all of your processes and systems say do it one way, sometimes you gotta do it a different way. And It's also like people I know who are really disciplined about their eating. Listen, once in a while you gotta let loose. You've gotta be able to fall off the uh the eating well wagon and have

you know, six slices of pizza. But it's fine as long as you get back on the next day. Um, it's you know, the one of the core principles of meditation is that Oops, I've gotten distracted. Let's get back to it.

So yes, there were certainly circumstances where those Tuesday rules got broken. But they were dramatically The exception. And

the trick was when recognizing when it happened and not to have that be the camel's nose under the tent. But to say that was a once in a long period exception. And certainly things that happens when Netflix went public when we were fighting for our life with um You know, with Blockbuster. when there's personnel crises that I just have to be there for.

But it's certainly it's something that My partner. My best friend can understand Because she sees that the consistency is there on the other side of it. And that

If I'm saying this one time I need to do this, then I'm not just Making it up. Not not an excuse. Can you make any recommendations? So number one, I I love the expression camel's nose under the ten. I've never heard that before in my life. It sounds amazing. Sounds like the uh sounds like the good title for a parable of some type. Uh And the uh The question I have is what advice could you give to people who want to implement a date night? Like what are some tactical pieces of advice or best practices, recommendations for those who are are starting off with some training wheels. They don't even know what to do. Does that mean

Watching movie and eating popcorn, is it going out and having dinner? Let's pretend that Covid doesn't exist just for the moment. What are some of the what are some of the things you've learned over time? Any recommendations? Yeah, absolutely. So f first of all, these aren't one size fits all. This worked for my wife and I. This worked for the type of business I was in where I was the boss and I could Do this.

Obviously. You may not be able to do this if you work for someone else. You can't just go, I'm leaving at five o'clock. Thanks very much. It's recognizing the principle behind it and saying, What would work for me? That's part one.

Part two is Do not design a New Year's resolution with 18 different things in it. Any of us who've made resolutions know you're lucky if you can make one of them happen. Uh no less trying to have this aspirational list of all the things that you think would be wonderful if they happened. So start small.

Say I'm gonna put my phone away. Every Saturday from nine in the morning until Sunda morning. And be present. and see how that feels. I mean in other words, take steps which are possible, take steps which are manageable. And then the third thing I'd recommend is I'm a

Big believer in establishing habits. Um and this of course has been beaten to death, but doesn't make it any less true. Pick something. And try to stick with it.

It is more important to find something that you can reasonably do over the long haul. than it is to make this a huge jump. But not be able to hang on to it. And it's with practice, with realizing that Wow, if I don't do email all weekend.

The world didn't end. You know, or if I say I'm gonna do it from f after five on Sundays. That No one Freaked out.

Maybe I can try something a little bit different in a few months. That's all. what I've done or what worked for me, it's what works for for you. It's the principle. It's that

Business Is Secondary. You know, you can have all the money in the world, but if you don't have a strong relationship or you're not doing the things that make you happy when you're not at work.

What's the point, you know? Let's talk about that type of clarity and specifically what I have down here in my notes as a moment of clarity that you experienced. So that's that's a statement I definitely want to unpack. And that that seems to have led to writing your book and ultimately to your new podcast. What was this moment of clarity?

What was the purpose that you Found clarity around. I've had Two big phases in my life. And I have to briefly have to give you the first piece because that'll explain what happened in the second one. And I've always believed that

If you get older, you are incredibly lucky if. you find out two things, two important things about yourself. And the first is what are you good at? And the second thing is what do you enjoy? And I was remarkably lucky early in my life in my early twenties.

to discover those things and even more lucky that they were both the same thing. And it was early stage stuff. It was entrepreneurship. It was starting things. I love it. I love that challenge. I love the problem solving. I love sitting around the table with the smart people solving really hard problems. And

Here's the immodesty o alert. Um I'm actually really good at it. Um just because I have some of those innate skills. Maybe it's from all the direct marketing stuff, maybe it's just that I'm really good at focus or have an innate sense of triage. But

I've been incredibly lucky that I've gotten to pursue that. For forty years. And I started a bunch of companies all of which were so exciting and so fun, and two of them which did remarkably well economically too. And that was my purpose for the first

Fifty. Some odd years of my life. And then I had left Netflix and I had left Netflix back in two thousand. Two.

Two now. Two thousand three, so quite a while ago. And I was drifting a little bit. I mean I was

pretty fulfilled because I was mentoring other early stage companies, I was working with entrepreneurs, I was kind of getting my fix. And then I got invited. To come to Necker Island, which is Richard Branson's you know, the founder version.

Billionaire. his private island in the British West Indies to come for four days. and hang out in the beach and kite surf. And party.

And that's pretty special. And I said no thank you. And That decision. lasted about as long as it took to tell my wife about it. And then all of a sudden, uh no, I'm canceling my boys mountain bike week that I had planned for that same time and all of a sudden we're buying sunscreen. But we got it I would it wasn't all gonna be just fun and games. I was going to Necker Island because they wanted me to do a forty minute presentation on turning dreams into realities.

For a conference of women successful business owners. And the title of this conference was Finding Your Purpose. And I was going my to my wife, I go ah We'll go, I'll do my bit and then we'll spend

Three to four days on the beach. Not so bad. I went Gave my speech. And then decided I'd hang out. and listen and find out what this finding your purpose stuff is all about.

And I listened to the first speaker and then I sat down in the chair again. And then the second speaker and put my towel into my chair. And one day led into the next to the next and pretty much I had realized I had dramatically overbought on sunscreen.

But it made me Think w what is my purpose? I was here as a speaker, but it was speaking to me. And I was going, I have this amazing platform because Netflix has done remarkably well, largely since I left for the things that have nothing to do with me except perhaps my DNA and the foundation I established. But because of it. People will I can get ten thousand people to come sit and hear me speak for an hour. I can get thousands of people to read things that I've written.

Oh. What am I Doing with that. What's the point? What do I really believe in that I want to use this thing for?

And it was that, like you said, that moment of clarity. Where there was I was not doing the right things with it. And I had to change it. And what I decided was this that all this 40 years of being an entrepreneur and all these tips and tricks and secrets that I learned to get. Startups off the ground. We're

Not surprisingly, the exact same tips and tricks and secrets and approaches and attitudes that you could use to get any idea off the ground. And that all of us have these great ideas. But that most of us never act on them. And I decided then and there that that was my purpose was to

Give people that nudge. Give them that support, give them that encouragement. It says I can do this. I can I have this idea, I've always wanted to do this. Doesn't need to be a business. It could be I'd love to live in the city, but I can't afford it. Well how can I figure this out? I'd love to change jobs. How can I make that happen? How do I start? And it led to the book, you know, that That Will Never Work, which on one hand is the starting and growing of Netflix.

But it's really more fundamentally these lessons about how do you take an idea. And make it real. For years I've been Mentoring. early stage companies. I've been doing these hour long.

uh advisory calls when people write me and go, I'm struggling with this, with that. And I say, let's get in the phone for an hour and let me see what I can do to help. And about a year ago I began recording those calls. 'Cause I thought this might be interesting to somebody. And It's remarkable because when I did play these tapes for people it totally resonated with them. They empathize with the protagonists who are struggling. Some of the tips I was giving them they could apply to their own stories. And that fundamentally is what led to me saying this is an opportunity to actually make it even more broadly available, which is what led to the

That will never work podcast, where it's basically not me. You know, interviewing people. It's me just Doing what I do all the time, which is helping other early stage entrepreneurs. take that idea and make it real. Or take the idea they've already made real and bring it to the next level. Or turn their side gig

into a real gig. It's uh it's been remarkable and it's uh it's just so fulfilling. And B.

quite honest, it's not entirely altruistic. I still get now. to sit down with people and sit around that table and solve these really interesting problems, but I don't now need to Stay until one in the morning. Working on it. So that will never work. The podcast. This is where you dispense the advice, encouragement, and tough love.

Two. An assorted cast of characters, uh including struggling entrepreneurs. Could you give us a uh teaser of The format it sounds like it's conversational. Just like these these phone calls that you recorded. Uh can you tell us about any of the Any of the people who who make an appearance of the types of people? Well what's really fascinating is when I started doing this, I kind of thought

I'm gonna run out of Topic. That we're gonna hear the same things over and over again. Uh how do I what w you know, do I do an app, or how do I raise money, or But what you realize is everyone's struggling with something different. And they're all coming with these incredibly fascinating businesses. You know, one of the young women that I interview early on is that she was a worked for a pickup artist.

For ten years. You know, the kind of people who train men to pick up women. And she finally said, this is totally awful. And she started a business that helps people find genuine connection, men and women.

Um and is running these seminars to do that. But was struggling with how to build the funnel. to end up making this an economically sustainable business. Well that was a fascinating business. Um another woman runs an not that that this is not the theme, so don't draw too many lines between these. She runs an erotic art gallery online. And selling very, very high end quality erotic art. But of course, the most obvious place for her to promote. would be social media. But she keeps getting banned.

And so she's struggling with how do I walk that fine line? How can I perhaps lean into this problem? And become maybe a spokesperson for unreasonable censorship. Another person is on the verge of uh breaking ground on a sixty thousand square foot Indoor Adventure Park in Texas with things like zip lines and repellings.

And beer. Now what could go wrong with that? But what he w he was calling about was He realises that once this thing is open. That's an eighty to a hundred hour work week.

How is he gonna maintain balance in his life? With all of this happening. It's just they've been they're remarkable stories. They're interesting people, they're funny. And I learned things and I I'm hoping the people who uh are listening will

Not only be entertained, but also Learn something as well. Sounds incredible. I can't wait to listen. And that will never work can be found wherever podcasts are found, or is there particular outlet, is it exclusive anywhere, or is it non exclusive and uh ubiquitous? Well, we're trying to make it ubiquitous, but I'm pretty sure unless you have some very obscure podcast platform that you prefer, will you find it in all the obvious places. Perfect. Well I just have maybe one more question. What are two more questions for you? And this has been so much fun. So th this is a question.

That Sometimes leads to a dead end. So it's not always easy to answer, but I'll try it anyway because it's fun. And that is if you had a billboard Metaphorically speaking. On which you could put an image, a quote Question.

Fortune cookie, mantra, anything. To get that message to billions of people. What might you put on such a building? Oh god Oh, this question you're not gonna believe Oh. It's real it's

Well, you know, we early on we said we I would be very transparent and vulnerable.'Cause I actually I've had this discussion with my family um before. And a a quick background on this. Um Doesn't have to be quick. I've got all the time on work. So four or five years ago, maybe a bit more, maybe ten years ago I was driving I live in Santa Cruz, California, which is pretty much the most politically left leaning city in the most politically left leaning state. And I was driving by and it was one of those things where everyone was protesting.

And I can't remember what the issue was, but it was one of those things like, you know, honk if you're For this. But Everybody was for that. Um and I go, why are you if you really believe so strongly in in change

Why are you doing it here? It's g w that issue is gonna win ninety nine to one. Why don't you why aren't you going and doing that on the corner in Arkansas, whatever the politically opposite, polar opposite is from California, from Santa Cruz? And it gave me an idea. Uh as always does when I w usually when I come up with something that's a problem.

instantly comes up with the idea. Um, and I was going, what if we made a platform that allowed people to do that? Which they have an issue they feel strongly about. How could they now express that concern but do so in a place where it actually might make a difference? Try and advocate for the issue you believe in in a place where that is actually being contested.

And I don't mean presidential swing state things, I mean small issues. And then I go Well a cool thing would be if these were crowd sourced campaigns. And I think the way to test it is to do billboards.

That we will do a crowd sourced contest for this issue of what the billboard s should say. And then people will vote with their dollars on which billboard with the understanding where billboard wins that all the money flows that billboard. And then the money goes to actually running that billboard. Some place else in the country. Or in the world. And of course that I didn't go anywhere.

But One of the things we were joking about is what would be the universal billboard to put up. And my family loves these uh types of exercises because they very quickly veer toward the absurd. So the reason I was so embarrassed that you asked this, and I will confess what the billboard we decided we would put up everywhere would be.

And it would largely be to support horse owners that we Uh we know. And It would say hoof. Okay.

And then a big heart. And then E D. You know, hoof hearted. That is the billboard.

No. I can't believe I said that. Well uh that's great. I'm being transparent. Hoof hearted or hoof love. erectile dysfunction. Or there are so many different ways to read this. I like that it's kind of a rarshock test. It's like a license plate. It's a hoof

Oh H O F then a picture of a heart and then E D. Hoof hearted. Oh, I get it. Oh pardon. Uh Mark. I would expect no less.

from Mark the Siegel Randall. And uh this has been so much fun. I really appreciate you taking the time uh and I've I've greatly enjoyed this. Is there anything else you would like to say or share or request of this audience At all that you'd like to make. Certainly I w I would really have missed my chance if I didn't say something to the people who are listening here. I talked before about what kind of my whole purpose is trying to give people this nudge and

All my years as an entrepreneur, all my f you know, six, seven companies All the people that I've worked with, all the companies I've coached, the most fundamental thing I've learned that separates the people is they start. They stop thinking. And they start doing. And if I could encourage every single person here who has an idea, and I know you all have an idea, I know everyone who's taken a shower has had an idea.

But what really separates People is the ones who actually get out of the shower and do something about it, to paraphrase uh Nolan Bushnell. And so I would just say Think about that. Think about the next time you have the idea that you don't

make an excuse that you don't say, Well, I need a co founder, you know, I need an MBA, you I need financing. That's ridiculous. If you have an idea, the only way you're gonna find out if it's a good idea is to do it. So Take that swing. Here, here, take that swing.

Markrandolph.com at that will never work on Instagram, Twitter, MBRandolph, Facebook, Mark B Randolph, LinkedIn. Mark Randolph and of course we'll link to all these things and more in the show notes at Tim.blog forward slash Podcast. Mark? Thank you so much for all the time.

Uh Tim, it was such a pleasure and uh thank you so much for the time. I really appreciate it. And to everybody out there listening, thank you for tuning in. And until next time. Get out there in the world, take that swing. Hey guys, this is Tim again. Just a few more things before you take off. Number one, this is Five Bullet Friday. Do you want to get a short email from me? Would you enjoy getting a short email from me every Friday that provides a little morsel of fun before the weekend? And Five Bullet Friday is a very short email where I share the coolest things I've found or that I've been pondering over the week. That could include favorite new albums that I've discovered. It could include gizmos and gadgets and all sorts of weird shit that I've somehow dug up.

in the uh the world of the esoteric as I do. It could include favorite articles that I've read and that I've shared with my close friends, for instance. And it's very short. It's just a little tiny bite. of goodness before you head off for the weekend. So if you want to receive that, check it out, just go to fourhourworkweek.com, that's fourhourworkweek.com all spelled out, and just drop in your email and you will get the very next one. And if you sign up, I hope you enjoy it. This podcast episode is brought to you by Helix Sleep. Sleep is super important to me in the last few years, I've come to conclude it is the end all be all that all good things, good mood, good performance, good everything seem to stem from good sleep, so I've tried a lot to optimize it. I've tried

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