That Will Never Work In Conversation with Marc Randolph

Mark, we we're really very excited to hear you today and people here really coming to learn from your experience. Um I know you like hiking. I just picked up a hat for you, a cap has Abu Dhabi name. So it's a gift from me to you. welcome you to Abu Dhabi

because I know you Yeah, please. I know you like hiking. So, um so this is a good uh

Is this your first time to in Abu Dhabi?

It is not. I'm an F1 fan, so I've come in for the race before. Uh and that's was here this weekend. So I I enjoy it each time.

Lovely. Uh well, welcome to Abu Dhabi and I'm really honored to be with with you today. Mark, Netflix, I've read your books. I followed your uh path. It's an amazing um journey.

How did how do you see it today? reflecting on the few years back how Netflix has actually dis disrupted the business disrupted the price and the contents of which you're offering. You started with DVD and you need to tell us what you're offering today more than just sub subs subscriptions to Netflix.

Yeah. Well, I mean, obviously this is a perfect time to be talking about Netflix because uh it's a big week for Netflix.

I know 72 billion

828 82 billion. I I I I was commenting to someone that at the very beginning before we even launched uh I was trying to buy a better domain name. I was trying to buy a better name than Netflix and it was $50,000. And I I go, "Oh my god, it may as well be $50 million. I can't afford $50,000.

And so to see Netflix spend $82 billion on something is completely mind-blowing. And so many of the things Netflix has accomplished since I left is uh astounding and unpredictable. But I think that says something about entrepreneurship, about starting things is you never really know where they're going to go. Uh the funny thing though is that despite how much bigger and how much different Netflix is than when I started it, I can so clearly see the elements of my DNA in the company. A lot of the culture that Reed Hastings and I established when we started it are things which still guide the company today.

So it's a very odd feeling of I kind of recognize this company, but in some ways it's a very very different uh place. So what it is today uh is it subscriptions or is it productions? Now this move you just mentioned the 72 billion acquisition what that's going to make of Netflix in the future. So at the beginning and I need need to kind of give you the context for that answer. So at the beginning as you may know Netflix was not a streaming company.

Netflix was a DVD rental by mail company. Uh, and we called it Netflix for a reason. Is because when we started the company doing DVD rental by mail, everyone said that will never work. And they had two reasons. And one was Blockbuster, huge video rental store.

Of course, no one's going to rent by mail. But the other reason was it's digital. It's just a matter of time before people are streaming or downloading, but it's coming. And we knew that that was true, but we didn't know when. In fact, we thought it was going to be a long time before there was the possibility of doing a digital business.

So the challenge was how do you start a company and have it stand for something which endures once the world changes? We could have could say okay we're the best shipper of plastic and that would have worked in a DVD world but not so much in a streaming world. And if we had said we're a streamer, everyone would have laughed. There was no streaming. So, we had to focus on something and we chose to pick something that was delivery agnostic and we said we're going to focus on content and specifically we're going to make Netflix stand for a great place to discover great stories and we've done that from the very beginning.

That was what it was about, about making sure everything was discoverable, new ways of finding titles you liked, building an algorithm for predicting taste, and then it led naturally into buying streaming content. It led naturally into producing our own content. But that core underpinning has never changed. People thought about us as a place to find great stories when we had 300 employee uh of customers and they still think about Netflix as a place to discover great stories now that there's more than 300 million customers. And my prediction is looking out 20, 30, 50 years, I don't know how content's going to be delivered.

I mean maybe we're going to beam it telepathically into our fillings or something crazy. But we'll still think about Netflix the same way. How we get the content to you might be different. So Warner does bring up some interesting challenges. I never thought they would do theatrical business and I'm curious to see how that plays out, but I know at their core they do consider themselves a content business.

Reflecting back, Mark, what when when you're driving and think about it, what do you think that was the key success for the company? Is it the people you worked with? Is it luck? Is it determination? Is it the fact that you don't back up?

What what what do you think that's got you to here?

Am I allowed to pick all of the above? If I had to pick one thing though, it would be it's the people. And more specifically, it's the culture bec because of course the 10 people who were there at the beginning are not the same 10 people who are there now. But what has not changed is the culture which is how does Netflix make decisions? How does it communicate?

How do we communicate with each other? How do we empower people to make decisions autonomously? And all those things are are tricky. I mean, we could I don't know whether I did did a keynote an hour or so ago and talked exclusively about culture,

but if we have a second, could I just give people a couple of hints about crazy culture? So, I don't know a quick quiz. Is anyone familiar with the Netflix expense policy? H trick question. There isn't one.

Uh vacation policy? No, there's not one of those either. Travel policy. All right, you're a smart crowd. There's none.

There's no policies. or there's one policy which is four words long and it's use your best judgment. And we've built this company that allows people to be autonomous in their decision-m which allows us to have people making decisions who are closest to the customer, who are at the fringes of the organization, who are closest to where the problems are occurring and are given the autonomy to respond to those things quickly. And we believe that it's not so critical to predict the future. What's critical is kind of putting yourself in this position where you can respond quickly to whichever way the future goes.

And that empowerment was easy with 10 people. It's possible with a 100. It's really hard with a thousand. And it's brutal with 14,000. And that is the core thing that Netflix makes sure they never lose sight of because listen, we know that AI is going to be extremely disruptive, but none of us know how.

None of us know what really is going to happen. And the trick in my opinion is not to predict it properly. It's to set yourself up that when it happens, you're ready and you can move and adapt and change. And that is a cultural thing. And that's what I think is the most valuable part of the DNA.

uh that Netflix carries forward.

Reading the books, I know there was an occasion where you had a challenge with your partner um where he wanted to move in the management of the business. I'm a lawyer. I'm used to people breaking up after a few years. Hard change, money comes in and then disputes. How did you manage to maneuver all that through the years that you did not break up?

And I see a lot of startup after a few years they they part from each other.

So I had a co-founder, a gentleman named Reed Hastings. Uh and Reed's company had purchased my previous company and uh we he bought our company. I went to work and my business, most of them went into the basement and they formed a business unit and I ended up running global marketing or something crazy working directly with Reed. And it turns out that Reed and I lived in the same town and began commuting to work together every day. Did that for six months and got to know each other really well.

And there was one thing that drew us to each other, which in retrospect we call radical honesty. Um, both Reed and I are brutally honest, which is we don't mince words. We don't shade the truth. We don't spare each other's feelings. We say exactly what we're thinking.

And it's a remarkable way to have relationships with somebody because you can be arguing about what the right answer is, but as soon as you arrive at what's self-evidently right, it you forget whose idea it was. You forget what the what who might have been opposing it. And that's the relationship we had. So when there were tough times, and there were certainly some pretty tough times, I always knew that Reed didn't have an ulterior motive. He wasn't trying to do something and saying something else.

Okay.

And you know there's a very specific example. If we have a moment I can tell that story. But

so so when we started the company uh I was CEO. Reed was my chair of the board. He wasn't working for the company.

Uh but he would pop in every week or so. He'd talk on the phone all the time. He was a great strategic sounding board. And there was a moment not too far into the company, maybe a year or so, and after work, Reed stopped by and put his head in and said, "Hey, Mark, we have to talk." And you may recognize that when someone starts a conversation, we have to talk.

It's not usually a good thing. And in this case, Reed opened up his laptop and began walking me through a series of slides about me. Uh, and he was saying basic, he started off good. You know, you have great judgment. This, this, this, and then it moves into the bad part.

He's going, but I'm worried about some of the decisions you're making. I'm worried about your hiring. And he goes, you're doing a great job, but this company's got to move really quickly, and I'm worried that at the speed we're going, we're going to have some misexecutions here. And I was totally kicked back in my chair because I thought he was coming in to fire me. I mean, he was the chair.

He was my angel investor. He had more equity than I did. But what Reed was proposing was that we run the company together. That he come in as the CEO, that I slide over and become president, and we do it together. But that was tricky because I had this dream.

I wanted to be the CEO of a big successful company. But if you think about it, those are two different dreams. There's the CEO dream and there's the big successful company dream. And sometimes they may not be the same. And and worse, this big successful company dream wasn't just my dream.

It was my customer's dreams. It was my employees dreams. And it was certainly my investor's dream. And I because of this relationship, because Reed and I had such an honest relationship, I had to take it at face value and I had to go back and sit in the porch with my wife till early in the next morning talking it through and realized he's right that it would be a stronger company with the two of us running it together. And if I really wanted the dream about a successful company to come true, I should be willing to do what that takes, even if it meant not being the CEO.

And it was probably in some ways the hardest decision I really had to make. But also probably the best decision I've ever made because those next five years we ran the company together. That was the renaissance at Netflix. So many of the things that set the foundation for what Netflix has become happened then. And and I'll translate this to the things that you're dealing with is that if you've ever done a startup, if you're in an early stage company, one of the hardest things is when you have to let someone go who's been there since the beginning.

They started the company with you. They did everything you asked. They worked nights and weekends and they were totally flexible. But now you've gotten some success and you need someone with a different set of skills and you've got to sit them down and say you're not the right person for what happens next. We've got to turn that lens on ourselves and ask ourselves are we the right person for what happens next.

And that's what happened. You were very close in selling the company for 50 million to okay. Do you ever think about if that really happens and where were you today? And what would you be doing today if that happened?

Well, I I can guarantee I most certainly would not be sitting here uh had that had that happened. Uh and I very much doubt there'd be a Netflix had that happened. I think so.

I mean, I I suppose people are familiar with that story. It's fairly famous. But, you know, we we were a subscription business. Uh, and as you all know, subscription businesses are fantastic because they're so predictable and they allow you to spend a lot more money on acquiring the customer than you get back in the first month. But that means when you hit some success and you're acquiring quickly, it's incredibly cash intensive.

And uh, we were cranking and spending tons of money until the dot crash of 2000. And that's when we had to try and sell ourselves to Blockbuster to save ourselves. And long story short, went to Dallas, pitched the company $50 million, and they laughed at us. And uh

if you were not into Netflix, Mark, in your heart, where would you be? What would else would be?

Oh, who knows? But I'd be doing personalized shampoo or or or or custom dog food or, you know, vitamins. You know, Netflix. Listen, Netflix was not because I was a movie guy. It is not like Reed and I were in the car debating who the best French cinematographers were.

You know, I had little kids. I watched Lion King about a hundred times. That was my movie experience. I did this because it was a really interesting problem. And if that problem hadn't worked, I would have tried to solve some other interesting problem.

Is it solving the problem or do we want to be starting a business, being an entrepreneur or both?

Oh, no. It's not being the entrepreneur. That's that was a that was just a secondary effect. And when I started, I've been doing this for 45 years. And when I started, there was no such thing.

I mean, there were certainly people who started companies, but there wasn't this cult of entrepreneurship. There weren't movies and books and TV shows. You were you were basically a person who couldn't hold down a regular job. But I was doing it because I was curious. because I I would see a problem and go, gosh, there's got to be a better way to solve this problem.

And Netflix was just I wonder if it's possible to do video rental by mail. And just like my all my companies start that way. I I and this is I know that sounds strange but I never did this because I wanted to be successful or did this because I wanted to have have be be wealthy or because of be zero. This was entirely it is so exciting coming to work every day and figuring out how to solve some really interesting problem. But isn't that's often the case?

You don't really look at the money or look at the business. you do you do the right things and it's fall in your lap.

It's what you should do. But I'm very concerned these days because too many people, young people especially, watch these movies and they read about Jeff Bezos and Elon Musk and and they think, "Oh, this sounds glamorous." So they watch Shark Tank or Dragon's Den, whatever it's called here, that and they go, "Oh, it's all about pitching and cocktail parties." And it's not. It's brutal.

It's hard. It's lonely and so exciting. But I think a lot of people get into it for the wrong reasons. But you're right. If you're focused, if you just go, what's the problem and love coming to work each day?

Then listen, maybe you'll be successful, but doesn't make a difference. You're still getting this amazingly vibrant, rich life by getting to come to work each day and sit around a table with smart people solving really interesting problems. And man, that I can't think of a better life than that. you referred in your book as startup being lonely.

Um how do you view the challenge of startup today different from the time you started today with the with the changes around the world today? So, so a couple things and probably the biggest thing is it's now become reasonably standard practice to have a co-founder. Uh, and that that makes a huge difference having someone else who is there in the trenches with you, who understands what you're going through, who you can have these hard conversations with. But that's that's one piece of it. But the other one is that there is a huge community of entrepreneurs now and you have resources and I see it here.

I mean I'm doing a event later on is it hub 71 I guess you know and speaking to young founders here and it's happening all over the world where you have other people that are going to different companies but are going through the same thing. There is a support from the state there's support from the universities. It is a totally different world than it was when I uh when I started when you were largely on your own.

So is it easier today to raise fund do you think than than the time when you started?

Oh my gosh, it's immensely easier and it's two there's a couple things. One is the things I described which is the ecosystem is here and the infrastructure is here that now there are funds and there's funds for every single level. There's funds for every single vertical discipline. It's it's so much easier because people have now understood that sometimes these crazy risks can actually generate great returns. But I think the bigger difference is that when I started when we started Netflix, the idea was a stupid e-commerce website and that took us six months and more than a million dollars to build.

And now you could do that in an hour for $49.95. I mean, if we wanted to have the servers, we had to buy them. We had to wire them ourselves. We had to build the payment portals to the bank.

We had to build our own security. I mean, now you have PayPal and you have the servers. You have AWS. Oh my gosh, it's so much easier. And then we often said that the the distance between inspiration and validation, the idea and proving it.

Well, for us, it was six months and a million dollars. Now it's about six minutes because the tools are there which means you can take these chances easily and quickly and cheaply and I think that is the real foundation of entrepreneurship is how quickly and cheaply and easily can you try ideas and and how optimistic you are with the new young generation that's coming up. Are they different from your generation?

Yeah, it's it's they're they're fantastic. I mean, for one, they're they're so much more digitally fluent um than I was. Uh you know, when I was in school, uh you need you were encouraged to study a second foreign language so that you could be reasonably conversant with other cultures. And yeah, I I did I'm my claim to fame is I am terrible at a lot of languages. So bad in bad in all of them, good in none of them except for English.

And even then, I'm not so good. Uh these days the language that many young people speak is technology. Uh and and most people know how to code even though they have no intention of being a software engineer. But it means when these conversations take place um they're fluent. They're able to they're able to if you're a business side person, you're talking to the engineer, you speak their language and it's so encouraging.

Their risk threshold is so much higher. their parents are supportive of this career. I mean, for most cases, if you came in 40 years ago and said, "Hey, I wanna I'm gonna drop out of school or I'm not going to go to law school or I'm going to drop out of school. I'm going to start a company." Oh my god.

You can't imagine the reaction you'd get. Uh, now it's like, "Oh, good. Good for you." I mean,

become a millionaire.

It's a Yes. Become a billionaire. It's astounding. So, it's it's a it's a I wish especially with the advent of AI and the disruption that's bringing I wish I was 30 again.

I mean, I'd be all in it. What a amazingly great.

What would you done if you were 30 again? What would you do different?

Oh, so

you have a smaller company.

What's that?

You'll have a smaller Netflix or

No, I wouldn't do Netflix. Uh I would do I would disrupt something else. uh you know and is a lesson here too but the as an entrepreneur starting small companies you're always going up against usually a large established competitor I mean Netflix case it was Blockbuster but if you're in fintech you're going against the big banks you know if you're doing a pharma you're up against huge farmers so and those big companies have all kinds of barriers they've put in place either legal or financial or logistical It's brutal. Whereas, oh my gosh, in a matter of years, all of those barriers are starting to crumble because of AI. Every business is being disrupted, which means all of a sudden there is this huge opening for a young company to go after some big huge market without the big company being able to crush them instantly.

What's your view on AI, Mark? Oh,

it's complicated. Um, it scares me. Uh, I've I don't know if you remember there was uh that IBM built a chess computer. I think it was called Big Blue or Deep Blue or something like that. I guess it was Casparov was playing it and the computer made a move and if you watch the video you can see him have this reaction of this almost disbelief, fear that the computer could be so sentient and I I have that feeling frequently.

I'll ask it something and it comes back with something so unbelievable that it scares me. That's the bad that's the scary part. And listen, there's a continuum of outcomes and I yes, maybe a a very small percent is it's the end of the world, but I don't think that's the likely scenario. I think having an opportunity to rethink how we do almost everything with the objective of making it better um is a positive thing. So I think in balance I'm an opt I'm an AI optimist.

Very good. Now Netflix is one of the few company that's global and the loyalty is global. People are loyal for it all over the world and and subscribe and they now if you visualize the world today with the changes and the happening how do you think the world's going to change with regard to businesses and power shifting? Well, obviously I look at what's happening in my home country with some sense of despair that I see business decisions being made for reasons that have very very little to do with sound business decisions and and I just instinctively know that's not a good outcome. uh I see other company countries and I'll put the Emirates in that category who start at first principles which is what do we need to do to build a region that is built for business and we'll identify the impediments and boom boom boom boom boom we knock them all off.

uh and I think what it is saying is that we're entering a world where your geographic center if you're a business is is can be any place and you're going to choose the place where it's the easiest to be successful and the challenge of course is that all of us have different cultural expectations and that's the hard thing about what Netflix has done is says we we're a global company and it took a long time to say how do the things we do translate which are the things which are universal and which are the things which local and I think that is something that all of us have to uh have to figure out um figure out on our own and Netflix was lucky you know we basically made the bet that content is content that Americans don't just want to watch American content and uh Indians watch Indian everybody wants to watch something that resonates globally and that's exciting

and I'm I'm assuming your requisition of Warner Brother that's basically fallen to this global vision as well, isn't it?

Yeah. I I again, I don't work there now. I can't predict what is going to happen with Warner, but absolutely. I mean, Harry Potter, that's uh that's a global brand as is Gone with the Wind, as is all those that content. It's great stories and how they come is just the mechanics, but it's what really moves us as people.

And if we can Netflix can deliver that, the rest doesn't count. Mark at um as an entrepreneur and as a person, what when you look back at Netflix and when you started, what do you think the biggest challenge single challenge that you had um in in in in in driving this company? Oh, the single biggest challenge. I mean, there were there were there was no single biggest challenge. And that's the nature of it.

Is it my first my first objective? I want to be the one of the top 10 video rental chains in the country. I mean, laughably small in retrospect, but that was hard. And then you get to that point and you collapse and go, "We did it." And then you look up and there's Blockbuster.

And then you claw past Blockbuster. and you look up and there's Amazon and Apple, you know, it's it never ends. So, uh, what's the biggest challenge? I don't know. It's getting over the hump right in front of you.

It's keeping your eye on the immediate, not getting distracted by the future. Um,

did you have a second thoughts? Wake sleep in the morning and the more sleep at night and in the morning you have a second thoughts on things.

No.

Or you were determined all the time. But again, I wasn't focused on focus on success. I was focused on solving a problem. And even when things didn't work, I may be disappointed. I go home a little disappointed, but by the time I came in in the morning, I go, "Oh, I've got another thing I want to try."

And every day, every day, and on and on and on. And the only way you leave is when someone drags you out of there. And if I want to start a a new business as a startup, what would your advice to to me would be?

Uh I would almost c well first of all I' I'd advise something I'd do a problem you love. I would do a problem you understand. I would not fall in love with my idea. I'd fall in love with a problem. Something you know because that is what's going to keep you coming at it.

Do not do something you're not in love with. Do not do it because it's a big category. Oh no, you've got to have that internal fire and that comes from starting something you love. That's what I would advise. And listen, so if you love AI, do an AI startup.

But if you go, h I'd rather do something in this, do that. That it's like being an actor or an actress. Do not go to Hollywood to be an actor, actress because you want to be rich and famous because you won't. Do not be an entrepreneur because rich and famous because you won't. But if you do it every day because you think it's exciting and you get to solve interesting problems, then you'll be successful.

And if you happen to be rich and famous, that's just a bonus.

Any view on this region?

I'm sorry.

Any view on this region?

Any indecision

on on any view on this region? Abu Dhabi, the region here. Do you have a view on this region?

Yeah, I'm I'm I'm both scared and excited. uh the the core tenets of entrepreneurship are focus, discipline and commitment and it's very scary when you see a country with those attributes and uh I think it's really remarkable what you've accomplished and I think it's exciting to think about what you're going to accomplish.

Marks this discussion could go on for for hours. I'm really very excited and but you know you know enough that as a businessman when I gave you the hat there's nothing comes free is it?

So I going to have you to sign this because there's nothing comes free here.

I would be I'd be delighted

I'm really delighted to be with you today and thank you very much pleasure. Very inspiring. Pleasure.

Thanks everybody. Thank you.