There’s no such thing as a good idea. It’s in the process of discovering why it’s a bad idea that you realise what might work and you begin to experiment. In today’s episode of the Disruptive Entrepreneur Rob interviews serial tech entrepreneur, advisor, speaker, co-founder and first CEO of Netflix, Marc Randolph. In this insightful interview, Marc shares the untold story of Netflix, the mindset needed to cultivate ideas into companies and how you too can take action and start your own entrepreneurial journey.
How was the idea for Netflix born? – In 1997 when I was my company was acquired I was left with about 6 months to invest myself into starting a new company and Reed Hastings was the angel investor and we began brainstorming ideas. We had hundreds of ideas and finally landed a DVD by mail business. Usually, a good idea is indistinguishable from a good idea until you do the research.
We had to come up with a new model to attract and acquire customers. No due date and no late fees had never really been done before. But we were terrified that Blockbuster would move online, if they had, they would have crushed us. They were a 6 billion dollar business, now a lot of success is down to the skill of the entrepreneur, but it’s also down to the lucky breaks and Netflix certainly had a lot of lucky breaks.
‘That will never work’ book by Marc Randolph – was originally supposed to be called ‘nobody knows anything’ inspired by a quote about Hollywood and that face none knows the success of something before it’s launched and this is very much true about start-ups and for Netflix. The title ‘That will never work’ is born from the idea that often people with ideas do not pursue them because of the opinions of others but in reality, none knows, you will only know if you try it and find out for yourself. The book is really the untold story of Netflix and what it takes to start a company.
Two steps to starting a successful company
You need to have a propensity to take action – A lot of people with great ideas overcomplicate them in their head before starting and make it so complicated they cannot start. As an entrepreneur It’s not about how clever you are, it’s about creatively you can start as quickly and cheaply as possible.
Focus and triage – It’s so powerful to put all of your efforts into a singular thing rather than trying to accomplish lots. However, at the same time, you need to have the intuition to know where to focus as it’s rarely the thing that screams the loudest. In the early stages of a company other two things matter, money and customers. A lot of entrepreneurs focus on the peripheral things that just do not matter in the beginning.
How important is speed to growing a company – Speed doesn’t matter if you’re product or service isn’t right. Netflix was domestic for a very long time because we wanted to get our business model right and we saw a lot of competitors try to launch too quickly. However, learning quickly is very important. Do not waste time polishing things but be efficient and make sure you get it right. Being the first to market doesn’t count for anything if you have poor execution, it’s important to test and with today’s technology you can test your ideas much easier.
How can you help people action their ideas – You need to train yourself to look for pain. Aim to seem the world as an imperfect place and all of a sudden you will have ideas flood to you. Ask yourself what’s frustrating, what would happen if? How could I try that? And to try it, but not in a scalable way just try it by testing the market. The ONLY way of figuring out if you have a good idea is to try it. You will only know when your idea collides with a consumer.
What does Disruptive mean to you? – is a different way of doing things, it’s a dramatic departure from the norm. In the Netflix case, there was an established way of watching video in your home. We believe there was a better way of doing this. Many models in all businesses are being disrupted and you need to ensure you also disrupt yourself.
“A great idea is like finding the missing piece of a jigsaw puzzle”
“There’s no such thing as a good idea. It’s in the process of discovering why it’s a bad idea that you realise what might work and you begin to experiment”
“There were a thousand different zigzags in the Netflix story”
“When we thought of movie rental by mail we didn’t immediately write a business plan, we tested it first”
“Netflix was not a pre-ordained success. In the beginning, it was a scrappy start-up. There were dozens of times we almost went out of business”
“When companies are more established and mature they have more to lose and as a result, they play it safe, they often opt against new technologies and emerging markets.”
“I almost never put my own money into a start-up because I’m putting my time in and that’s way more valuable”
Rob Moore: Hi, it’s Rob Moore. Welcome to The Disruptive Entrepreneur Video and Audio Podcast. I’m very excited today, because we have Marc Randolph who is the original Co-Founder of Netflix. He’s described as a serial entrepreneur. I’m going to ask him his definition of that in a moment.
Marc, we just want to say thanks a lot for giving your time today.
Marc Randolph: Ah, it’s a pleasure to be with you. No problem at all.
Rob Moore: And where are you right now? Where are you in the world?
Marc Randolph: I’m in Santa Cruz, California. A little seaside town about an hour and a half south of San Francisco.
Rob Moore: And is that your home?
Marc Randolph: That you’re talking to me in my office. So, yes, my home.
Rob Moore: Actually, this is a bit of a random one, Marc. But when we just turn the cameras off, we were fascinated. So, the background is blurred. Is that, because you’ve got a brilliant camera that’s focussed on you, or is that because you don’t want the camera to see the background of your house?
Marc Randolph: Ah, I think both of those are a little bit of a benefit.
Rob Moore: Yeah, okay.
Marc Randolph: A lot of this effort is going to cleaning things up, put it that way.
Rob Moore: That’s very true. Right. So, one thing I’d be fascinated to ask you, Marc, is, how was the idea for Netflix born? Do you remember a day, a moment, a meeting, an idea where it’d kind of all started?
Marc Randolph: You know, I can’t believe you as an entrepreneur asking that question. Because you know, everybody always wants that as an epiphany story. You know that the idea that changed everything in the moment that it all became clear. And you of all people should know it doesn’t happen like that. That these things take place over weeks, or months, or years sometimes. That it’s not one person. It’s lots of people, each contributing little bits themselves.
But if there was an inciting event as we say it in screenwriter speak, it probably happened in 1997, when I got fired from a job. Well, fired is a wrong word. There was an acquisition that took place. And I realised that I had about 6 months in hand, while I was getting paid, while my stock option was investing, while I had an office, and I could use that time to start another company.
And the company that I was working for, that was being acquired, was a company founded by a guy named, Reed Hastings whose figures pretty prominently in the story. He also was losing his job. So, we came to this agreement that I would use the time to start my next company. Reed would be the Angel investor, and away we go.
So, we began brainstorming ideas. This took place during a car ride, during commuting, going back and forth, between our home in Santa Cruz, because Reed lives here in Santa Cruz as well. Our office in in Silicon Valley. We did probably hundreds of ideas in the car, ridiculous ones like, customised shampoo, or personalised dog food. We had one to do these personalised baseball bats.
And even a crazier idea, which was, maybe, we could do video rental by mail. This was crazy, because there was a Blockbuster at every corner back then. Video came on. I don’t know. Let’s see. Look at you. Maybe, you’re right then. VHS cassettes, those big and heavy and expensive devices. So, that idea got abandoned too.
So, this inciting event, if anything happened one afternoon, one morning actually, when we’re commuting to work, and Reed mentioned this new technology called, the DVD, which was, for movies. You know, it’s thin, and light, and small. The lightbulb went off. We said, maybe, this allows us to dust off that old video rental by mail idea we had a few months ago.
So, we turned the car around, went back down to Santa Cruz, and bought a music CD, because there were no DVDs then. We bought a little gift envelope, and we addressed it to Reeds House in Santa Cruz, and mailed it to him. And it got to the house in about less than 24 hours for the price of the first-class stamp. That kind of became the missing puzzle piece so that we thought, it will make video rental by mail work.
Rob Moore: All right. So, I feel like that was a bad question, but a good answer. So, I’m glad I’ve asked it.
Marc Randolph: Well, you know, it’s true, because people… But the thing is not unreasonable to have an epiphany story. Luckily, in this scenario, I have time to tell a bit more about it. And as you’ll hopefully hear, you know, DVD by mail ended up being a terrible idea. It didn’t work very well. But people don’t want to hear that. You know, their eyes glazed over. They want that quick and catchy little explanation.
As you come up with a shorthand, something which is, a good story that captures the emotional truth of what you’re trying to do. And so, just saying, oh, it came about, because late theatre movie. It’s a nice elegant way to say it even though of course, it’s just a tiny, tiny, tiny piece of story.
Rob Moore: Well, I tell you what fascinates me. Because I think conversations like this, where we’ve got time, where you don’t have to do the soundbite, and it’s not for media release, et cetera. It means you can get the truth. There’s no harm in your business idea being your 5th favourite idea, or your 12th favourite idea, or an idea that you did 3 years ago.
The point, was, it was one of your ideas, not the top of the list. Then when the opportunity presented itself, because you had lots of ideas, and you went through the ideation process. Because for someone, you and Reed to go through 100 ideas together, that says something about you as entrepreneurs, that your prepared to spitball a load of ideas.
So, actually, I think the fact that we don’t have an epiphany moment is better, because it’s more real to life about what happened.
Marc Randolph: And the interesting thing, is that, a good idea is usually indistinguishable from 1,000 other bad ideas. The interesting thing here, is, we came up with the idea for video rental by mail. Back, when it was just VHS. And I spent a bunch of days doing that research, and looking at the market size, and looking at, whether we take/build a website. It was only after I did the research, and what it cost to ship a big heavy VHS, and what they cost, that I realised that’s a bad idea. And we abandoned it.
But if I hadn’t done all that pre-work, well, then 2 months later, when the DVD arrived, I would have just going, oh, that’s kind of cool. A new way to watch movies. But instead it was like, when you’re in your house, and you look under the couch, and you find that missing piece from the jigsaw puzzle. And you go, oh! I know exactly where this goes! It allowed us to plug it in. If the first thing hadn’t happened, I doubted the second thing, would have meant anything to us at all.
Rob Moore: I also think what’s interesting, is, create a load of ideas, pick one, but you weren’t really keen. Well, it wouldn’t work at first, if you dismissed it. You pick it later. It’s mailing DVDs. But actually, it’s not mailing DVDs anymore. It became streaming. Then it’s not even streaming really anymore. It’s kind of content.
So, there are so many different iterations of that company, that is now, obviously huge and famous. That wouldn’t have had happened with the process of, I don’t want to use the technical Silicon Valley term. I try to stay away from those. But of course, the iterative approach, or at least the desire to continually improve, and to pivot, and move with the times in a business model. So, it sounds like, it’s a very liquid process as opposed of it being fixed. Would that be right?
Marc Randolph: Oh, absolutely. I mean, now, I’ve been out of Netflix for 15 or 16 years. I’d spent all that intervening time, working with hundreds of other early stage companies. I’m convinced there is no such thing as a good idea. They all suck. At every idea, here is a bad one. Once you accept that, that’s fine. Because then your job, is, just to figure out why it’s a bad idea. And in the process of trying your bad idea, sometimes, you get this little glimmer of hope as to why it might be good idea, what might lead to the next experiment, and then the next experiment, and the next experiment.
And you’re right. I mean, you identified 3 big zig-zags in the Netflix story. But there is always actually 1,000 little zig-zags in Netflix story. We were constantly experimenting. You know, I told you that the original DVD by mail idea, which had due dates, and had late fees, and was à la carte. It was terrible. Nobody wanted to do it. It took us 18 months of iteration, testing to finally stumbled on a model that actually worked.
Rob Moore: Why do you think it took so long? If you think about it, no one liked the late fees. No one like returning the DVDs. But it took quite a long time, didn’t it or did it?
Marc Randolph: You know, originally, we thought that the thing that was going to work, was purely the fact, that we had a better way of finding movies. You know, that we had basically almost unlimited ways of displaying content, and combining content, and recommending content. We thought somehow, that would be more compelling than the experience in a video store.
Now, we also thought the fact, that we had a big head start, because at that time, DVD was brand, new. So, video storage didn’t carry it. We thought those 2 things might be enough to jump start a video business. But the problem, is, you’re right, there was 2 days late fees. So, no one wanted it. And we had to come up with a whole new model.
And the one that we eventually found, which was, subscription. So, doing it, billing bill by the month. But the bigger innovation, was, we did this no due date, no late fees model, where people could take the DVDs they wanted, and keep them for as long as they wanted till they sit in their television. And when they’re ready to watch it, you plug it in, watch it. Then you mail it back to us. And it’d automatically ship another one.
` That’s a crazy, never been done before thing. And to think that I might had come up with that idea, one, is ludicrous. It took a long, long time and lots of experimentation to get to that.
Rob Moore: It’s funny thinking about this, because I think a lot of people think companies like, say, Blockbuster or Codec or other famous companies that didn’t pivot with the times, and kind of went a bit extinct, if you like. They should have seen it coming. Why didn’t they see it coming? They had loads of time to see it coming.
And I was listening to Total Rethink, which is, a book by David McCourt, who’s become a friend of mine. He’s a billionaire who I’d interviewed on my podcast. He says that a lot of companies when they’re more mature, they hold on very tightly to the way it’s done. Because they’ve got so much to lose. They don’t want to take the risks of the young guns, because they can’t.
So, they have this almost fallacy that the way we do it, is better, or they hold onto it, or they delusional about the way the market is changing. Did you find that with Blockbuster?
Marc Randolph: I think that’s completely true. I mean, certainly with Blockbuster. I’m in total agreement with him. That is exactly what brings down the listing companies. In Blockbuster’s case, they did see it coming. And they did recognise how powerful a model would be of online plus stores. Quite frankly, at Netflix, we were terrified they would respond in that way, because that would have crushed us.
But they were in this situation, they were a $6 billion in revenue company. So, even though they might have said, wow, it’s kind of nice to have an online business. They certainly weren’t going to put their A Team on it. They were going to leave their A Team on the business, which was, bringing in 5.99 billion. Why would they put some of their best people on a business, which at its best day, could have been $1 million a year. And that was the best day.
So, they kept waiting, and waiting. Of course, as soon as they began going direct, all of their franchisees were panicked. And the same thing happened to feedback company. They see where it’s coming, but they’re locked in. They can’t risk that revenue.
Rob Moore: Why couldn’t they set up a little Google X-type company, a little silo company, a little playful company over here, stick a team on it? Why wouldn’t they do that?
Marc Randolph: Well, they eventually did do that. But it was too late. They took a team, and they out them in a separate building. They gave them a budget and said, go after these guys. It was pretty scary. Because they did a reasonable… This is now their 4th or 5th try. But this one was serious. Actually, it was a pretty compelling offering. And at some ones, they were actually doing more in new customer acquisition than we were.
But Blockbuster had other problems going on. You know, they also had financial pressures. They were in the midst of all kind of hostile takeover business. So, they were distracted, which was, another… Listen, some of these things are not just the skill and talent of the entrepreneur. They are lucky breaks.
And Netflix certainly had a share of lucky breaks. One of them, which was, the fact that DVD took off at all, they could have gone on the way of laser disc. But it also was lucky that Blockbuster didn’t respond, and was very distracted.
Rob Moore: That’s a good point, because people don’t. Back to your comment about looking for the epiphany or the story moment, people don’t think about that. They think, ah, Netflix disrupted. And that’s the common thing. But a company being distracted, having shareholders, if they did, having their own business problems, their own challenges, because people just assumed they weren’t quick enough.
But from what you’re saying, they were quick enough. They just didn’t figure out a way to do it as well as you.
Marc Randolph: Yeah, right in the midst of their competition, all of a sudden, there was someone who was kind of doing the takeover. Takeover, but a greenmail, where they buy the stock, and then threaten. They had to buy their personnel. Then ultimately, they said we can’t afford to put the cash in this. And they pulled the plug. I mean there was a lot of lucky, lucky, lucky breaks.
But you know, part of the reason I wrote the book, That Will Never Work, is, to show that this was not something that just sprung forth over night, fully formed. You know, That Will Never Work, is, about these first critical 3 or 4 years. And all the things you have to do, and the fact that we weren’t a big company. We were a tiny little start-up. It tries to show, how something like this actually comes to be.
Rob Moore: So, I’ve probably pulled out 3 or 4 more things I want to ask you, which means, I’m probably not going to ask you some of the things I’ve already put on my list, which is, what I like to do, being disruptive, Marc.
But so now for, I’d like to go and talk about your book, because you’ve just mentioned that. So, this will be a good time. I love the title, by the way. I think that title says so many things in 4 words. I feel like it’s a stroke of genius of simplicity.
So, my first question before we talk about the content of the book, is, did that just come to you? Or, did you spend a long time ideating what the title would be?
Marc Randolph: All right, we spent a long time ideating about what the title should be. Because originally, what I wanted to call the book, was, Nobody Knows Anything, which is, a quote from a screenwriter named, William Goldman talking about Hollywood, that no one has any idea, before a movie comes out, how well it’s going to do, till afterwards, it’s done it.
Like, start-up is in the same way. if anyone who tells you that’s a bad idea or a good idea, hasn’t a clue. Because no one knows until it’s done it. But a book title as I’m learning, and as I learned, it’s collaborative. Because there are a lot of stakeholders. I mean, there’s myself. There is my publisher. We are being published multi-nationally, simultaneously. So, you have other countries that weigh in.
But I thought pretty strongly for That Will Never Work, because in some ways, it says the same thing, which is, nobody knows anything. Listen, if they were telling me that That Will Never Work about Netflix, it just goes to show that nobody really knows that you never have any idea, until you’ve tried it. And in many ways, this book is about trying it.
Rob Moore: Okay. So, I’m really glad you called it, That Will Never Work. I’ve written a few books. I’ve got a publisher. I understand about the collaborative effect. I’m not going to say, I’m the genius of all book titles. But Nobody Knows Anything, it seems like, a paradox for a book title. Because it doesn’t tell me what it’s going to teach me.
But I know you’ve said that, That Will Never Work is kind of saying the same thing, but it’s not. I don’t think. Because people always say to you, that will never work. So, I didn’t read it like, no one knows anything. I read it like, everyone always telling me that will never work. That will never work. That will never work. That just makes me want to go and do it even more. And that’s how I read the title.
Marc Randolph: But in some ways, I’m not going to argue, whether it’s the same, or not. But there’s a message here, that most people, everyone has ideas. I mean, everyone does. And so many people are blocked from their idea. It could be themselves thinking, oh, that will never work. I can’t try it.
But a lot of the time, it’s someone, they think, is in a position of authority. You know, the person that come downstairs and tell their spouse. They go, that will never work. Or, they go to school, oh, that will never work. And they go, oh, I guess, it won’t. And I’m really trying to tell people, it might. And the only way to find it out, is, to try it.
You have to take that next step. If you just sit there, thinking about it, nothing will happen.
Rob Moore: Yeah. So, you basically said, look, no one really knows anything. A company never ends up, or not never. It’s the wrong word. But often, a company doesn’t end up where it started. There’s often lots of iterations and pivots. Most ideas, if not all ideas are bad ideas to start with.
I like those as anti-concepts, if you like. I certainly agree with a lot of that. What would you say therefore, is, other concepts of your book, or your work, or your belief as a mentor then, in the more positive affirming way of how it can be successful?
Marc Randolph: You know, I wrote this book. I wanted it in some ways be kind of the untold story of Netflix, though it’s not just a late theatre movie, but what really goes into starting a company. But that’s really only a small part of it. And that’s really just a message for entrepreneurs or business people.
But the cool thing, at least to me, is that, over the last 15 years, I’ve been working with all these early stage companies. And more importantly, working with younger people, people who are still in the University, is, you’re beginning to realise that the exact same things that I’ve learned over 40 years as an entrepreneur, are the exact same things that anybody can use to take their idea, and make it real. That it’s good for almost anything. That it unlocks you. That gives you a chance to step ahead. And that’s what I wanted the book to really be about.
So, it’s about the steps. How do you know? How do you start figuring that it’s a good idea or not a good idea? How do you get people to help you with your idea? But it’s not a how-to book. I wanted to show how it really work in practice. How somebody who in many ways is less well educated, is less prepared, potentially even less hardworking than most people, can still make it happen.
Rob Moore: Okay. So, I know it’s not a how-to book. But it would be good to get some of those steps. I think you mention a couple of them, which is, great. But what are the things you’ve learned in all your vast experience of companies, which we’ll come to in a moment, that you think you could hand on to other people?
Marc Randolph: Okay. All right. So, the first one, of course, is, you need to have the propensity to action. That most people when they get this idea, they fall in love with their idea. They begin to embellishing it in their head. So, it starts that simple enough.
But they’re imagining it and go, oh, wow, just think once it has a couple thousand people, then I can do this. And then it’ll have ten thousand, and I can do this. I call it, building a castle in your head. Eventually, this little simple idea ends up being this ornate structure with interesting gargoyles and landscape property. Then of course, it is too hard to start. Then it does take lots of money and lots of people.
When Reed and I realised that DVD might be one way to unlock video rental by mail, we didn’t rush to the office and write a business plan. We didn’t rush home, and put together a pitch deck. We immediately said, how can we test this? Let’s just mail one to ourselves. And we turn the car around, and did it.
And if you don’t take those first steps, you’d ever start. And the real skill these days for an entrepreneur, is not how good your idea is, it’s how clever you are, how creative you are as figuring it out a cheap, and easy, and fast way to immediately learn. So, that’s one.
I’ll give you a second one. Another principle that I’m a big believer in, is, focus. At Netflix, we used to refer to this as the Canada Principle. Because for many, many years, we were only available in the United States. People always come to us and go, why don’t you expand to Canada? That’s an instant, easy, 10 percent pop.
Now, what we realised is, that was not going to be easy. That what seems simple, wasn’t. There were currency issues. There were language issues. But the more important thing, is that, by taking that effort, that would have taken us to get into Canada, and just doubled down in our core business. It would be much more than 10 percent pop.
So, it’s focus. In many ways, it’s also triage, because in a start-up, there’s 100 things that are broken. So many things are on fire. If you try and put all those fires out, you’re going to spend one percent of your effort on 100 things. It’s so much more powerful to put 100 percent of your effort on a singular thing.
But you’ve got to have this intuition about what’s the right thing. Because it’s rarely the thing that’s screaming out the loudest. Again, it’s one of the skills of picking the thing, that if you get that one thing right, all the rest of the problems don’t matter.
Rob Moore: And if you’ve got any tips on picking the right thing in the world of so many distractions. Because you said, intuition, which you’ve built up over many of years of running many companies like you have, Marc. But are there any ways that we can develop that skill of picking the right thing?
Marc Randolph: So, most people are going to have a gut about what is the critical thing. But they get distracted by what they think, has to get finished. For example, in an early stage company, there’s almost always only 2 things that matter. One, is, money. And no. 2, is, getting customers.
Usually, you don’t need to do both of those at the same time. And you certainly don’t need to have a great experience. You don’t need to look good. You don’t need new polish. You don’t need PR unless it’s customer focus. It’s a singular thing you do, that gives you flow, and that’s almost always, where to start.
And people don’t, because they care too much about other peripheral factors. They’re doing things like, working on their benefits. So, they’re working… I mean, it’s crazy to stuff ideas. I call it, selling the T-shirts. That in a pitch to me, someone even verges into the… And then when we’re successful, we will, you know.
I, immediately know that they’re not focussed, because they should be spending all their time on the getting to that point, not on what happens once they get there.
Rob Moore: Yeah, okay. Thanks, Marc. So, some things that came up, which I think, are really interesting. One, was, ideas, because you started talking a lot about that. And another one, I just wrote in a box, was, speed.
So, we’ll start with speed. How important do you think speed is in business? A lot of people are saying that speed and first, the market is really important. Of course, everything is travelling. And information wise at the speed of light now through fibre optics. So, we can do things a lot quicker. We can crowdsource quicker. We can test ideas quicker online and in communities. How important is speed? Or, can you sometimes rush too much?
Marc Randolph: Let’s see. I don’t believe speed for speed sake counts. It’s much more important to get it right, in my opinion. I mean, this is a perfect example. Netflix like I said, was, domestic for a long, long, long time. We see people coming up like, for example, in the UK, doing exactly what we’re doing. Pretty much a blatant copy. Of course, the temptation, is, let’s get there. And you go, no, our model is not right in the United States yet. We still have so much more to learn here. There’s plenty of time to come over, and do Netflix in the UK, for example.
But the thing, is, I am a believer. I won’t call it speed, but I’ll say learning quickly, and not because I’m saying go fast. I’m just saying, don’t waste time polishing things. Just throw something up quickly to learn quickly. But it’s not hurry, hurry, hurry. It’s don’t waste time polishing things.
The difference between when I started Netflix 22 years ago. And now, it’s you can do things so much faster. Back then, there wasn’t the Cloud. So, if you wanted to do a website, you had to build your own build-in server pages. You’ve got to have your own servers. And you didn’t have a place to put then. You had it in your office. You had to do your own redundancy. I mean, all that stuff you had it in yourself. And so, to test something, it took a long time.
You know, now you can take the idea for Netflix and test it in an hour. And so, you should. But don’t try and do it in 10 minutes. That’s not… I don’t see any advantage in 10 minutes versus an hour, versus a day, versus a week even.
Rob Moore: Yeah. So, you’re saying I guess, leverage the speed that we’ve already got behind us with technology. But don’t do things too fast.
Marc Randolph: Yeah, be it first to market. I don’t think really matters.
Rob Moore: No.
Marc Randolph: These opportunities come up, and most of the stuff, you’re trying no one has done before, anyway. So, you’ve got to be first. And it’s all execution. You know, that’s 99.9 percent of it. Being first with a bad execution, doesn’t count for anything.
Rob Moore: Yeah, okay. Thank you, Marc. So, ideas. You’ve talked a lot about ideas and many ideas or all ideas are not great. So, how do you come up with ideas? Because I liked what you said earlier. You said, everyone has good ideas. I think there are a lot of people that don’t believe their ideas kind of people. I completely dismiss that. I think everyone, like you said, could come up with lots of ideas. I just think they don’t know how. So, Marc, could we reverse engineer and get in your brain, and work out how you come with lots of ideas?
Marc Randolph: Absolutely. It’s pretty easy. The first thing I’ll say, is that, you say, lots of people have good ideas. I didn’t say that. I said, lots of people have ideas. Because remember, I don’t believe there’s any such thing as good idea. I get ideas and idea. You only find out, if it’s a good idea after you’ve collided it with a real person. In your head, there’s no way of knowing. Asking someone, there is no way of knowing. The only way to figure out, if it’s good or bad, is, to try it.
So, that is a basic question. Where do you start? The people, like myself in some ways, they do it for a living, do have a lot of techniques. Looking at new business models and applying them to old businesses, or looking at new technologies that have opened up new opportunities.
But there’s an easy, easy, easy way that I believe every single person can use. I teach this method. It’s simply that you’ve got to train yourself to look for pain, to see the world as an imperfect place. Once you kind of recognise how flawed the world is, all of a sudden, ideas almost instantaneously flood in.
So, you start by saying, what’s frustrating to me? You almost can’t help it. You get this, “what would happen if”, that just pops into your head. The trick, is, to learn how to capture that and immediately say, how could I try that? And not try it in a finished method, not try it in a repeatable or scalable method, but try in a way that just quickly validates, whether the idea has any merit.
Rob Moore: Okay, that’s great. I’ve not heard it answered like that before. I really like that. So, back to Netflix, if that’s all right. There are 2 things. Because you said in your book, you wanted to tell the untold story of Netflix. So, could you summarise what the untold story of Netflix is, please?
Marc Randolph: Netflix was not a preordained success. Netflix was not some division of a multibillion-dollar conglomerate. When we started, we had no money. We were in a crappy old bank building with this dirty green carpet. We had a safe in the corner. We stored our DVDs in the safe. That we couldn’t afford furniture. We had to bring things in from home. We had beach chairs. At the beginning, it was a scrappy start-up.
Another thing I wanted to share, is, that untold process, that it wasn’t like all of a sudden, I said hey, maybe we should do video. And Reed said well, let’s do our own content, and begin streaming it. Those ideas were formed slowly through experimentation, and trial and error.
There were dozens of times we came really close to going out of business. There were all these lucky breaks that took place. We tried to sell ourselves to Blockbuster. Luckily, they laughed at us. Amazon wanted to buy us, and we said no. There are all these places that could have gone in a different direction. I think in many ways, that’s the untold story of Netflix.
Rob Moore: Okay, thank you. Why are you not there anymore? So, I have purposefully not said, why did you leave, because I would just like you to tell the story as it happened. But why are you not there anymore? What happened?
Marc Randolph: Well, as I hope you’ve picked up from just this brief time we’ve been doing this, is that, I love that early stage of companies. I love the fact that you come in, and there’s no obvious path, where your job is to figure out, to find that missing puzzle piece, to sit around this table with really smart people solving really complicated, interesting problems.
One of the things, if you’re lucky, you figure out by yourself, is, what am I good at, and what do I love doing? I was fortunate that I found out pretty early in my career, that I love that early stage struggle. Netflix, as I mentioned, was my 6th start-up. I will immodestly say, I’ve become pretty good at it.
Netflix eventually did begin to grow up. I mean we did have an IPO 6 years in. We, all of a sudden, had some scale. We had a repeatable business model. We were able to attract these unbelievably talented people to come work for us.
So, even though I realised at that point after the IPO that I still loved the company. It was like a child, and I wanted to right wrongs and fight its battles. But I also kind of came to the realisation, that I didn’t necessarily love the problems that I was solving anymore, and quite frankly, I wasn’t very good at it. And I decided this is probably, if I really want to be successful, I should be doing the things that I love to do. I don’t think those things are at Netflix anymore.
So, I began this almost year long process, year and a half long process of gradually working my way out of a job. Now for the last 15 years, I’m the luckiest guy you’ll probably ever meet. I do get to spend my days solving really hard problems with really smart people. I get to do the thing that I’m good at, and I really love doing.
Rob Moore: Thank you. I’ve actually written as one of my questions, although just a statement really for you then to talk about, because I put here, so many start-ups. You said Netflix was your 6th. I guess you’ve done a lot more since. So, you’ve kind of already answered it.
But when people say, serial entrepreneur, I’m not sure they understand the definition. I feel like out of many people I’ve met, that would define you quite well, because you’ve had so many start-ups. So, do you just want to talk about serial entrepreneurship, and why so many start-ups?
Marc Randolph: You know it’s like being a carpenter. You have a set of skills. A person who is a carpenter or works in construction, they can’t build the house, and then they finish building the house. Then they go off and do some brain surgery, before they go off and sell some insurance. They go, oh that was fun. Okay, Then all of a sudden, they go, let’s build another house.
For me, it’s always been obvious that, that was the fun part, was, having these ideas in your head. You can’t stop them from coming. I mean, it’s equivalent to you walking down the street, and you see a little box with a puppy in it. You look around and you go, why is there a puppy by itself? Where’s the owner? Oh, this poor guy, he must be hungry. You can’t help, but pick it up and take it home.
And ideas are like that. You can’t abandon them. They wedge their way in your head, and they consume you. The only way to put out that fire is okay, let’s give it a shot. That happens one after the other. Blissfully, start-ups don’t last that long. Either they hit it. Netflix certainly hit it. It’s 6 years in, 7 years in, then hit it. My most recent company, Looker, I did it. And Looker company, that took about 6 years, but that hit it.
But some of them don’t. Some of them go 2 years, a year, and you go okay, in some ways you’re sad to see it go. But on the other hand, it’s like, oh, this is awesome, because I have these other 6 ideas I want to try.
Rob Moore: So, how many start-ups have you been involved in, Marc?
Marc Randolph: I’ve been an operator. That’s a Silicon Valley term, but I don’t like that one either. I’ve been an operator in 7. But the thing is once I left Netflix, I kind of said to myself, whoa there, buddy. It might be time to maybe try and find a model, which is, a little less intense, meaning, you know, doing start-ups, you’re kind of all in. You don’t necessarily work all the time, because I do work really hard at having balance. But intellectually, you’re all in. You’re thinking about it all the time. You’re responsible. Once I left Netflix, I said, I’m not sure I want to do another start-up.
But once you have that compulsion, once you can’t help but pick the puppy up, you need to feed that addiction. And the way that I have done that in the last 15 years, is, I work with other early stage companies. So, I’m a mentor to help other people make their ideas go real.
So, I’ve had 7, where I’m an operator, really hands on, in charge or almost in charge. But I’ve had probably a dozen, where I do what I would call, deep mentoring, where I spend enough time that I can really know the entrepreneurs, know the founders, know the partners, know the Board, know the employees, know the product, the competition. Because you need to be that deep, if you’re going to give, I’m not going to say, advice. If you’re really going to help someone in a meaningful way other than pattern recognition superficial advice. You really are trying to emulate that feeling you get, when it’s your company of coming in. As I said already, where we sit around the table to support people, and get to help solve really hard problems. You can’t do that, unless you really understand the hard problem.
Rob Moore: Sure, okay. So, I actually put on here your mentoring work as one of the things I wanted to talk about. So, that’s a great way to move into it. I’m going to try and think a bit more like you, Marc, and be inspired by this interview.
So, what I would normally ask, is, what are the traits of the successful companies you’ve mentored? But I’m going to flick it the other way, and put the problem-solving head on. What are the mistakes and pains that are common that you see in start-ups, and then what’s the solution to those?
Marc Randolph: So, obviously, it is one size fits all. It’s not one size fits all. Pardon me. They are all different. But I’d say, one of the things that was surprising to me, is that, when you expect at the beginning, when you expected, I expected when I came in to work with a company. I date them for a long time before I agree to do this, because I want to make sure it’s a fit.
But I expected that most of the questions and most of the work would be about how do we focus, and how do we iterate more quickly, or how do we test more simply. But in reality, probably three quarters of the things that early stage founders struggle with, are, interpersonal things. In many ways, the job of being a mentor is not far off from being a marriage counsellor, in that some of these young people are so smart, but they are so early in their career, and they are trying to build the Board. But not only have they never run a Board Meeting, they haven’t even been in a Board Meeting.
So, how do you help someone find a Board Member? How do you help them resolve conflicts with their Co-Founders? How do you help them establish balance with the rest of their life? Those are the types of problems that come up more frequently than not, because people don’t recognise they are all in. They are, in some ways, married to their Co-Founders. They have these weird lonely moments, because they can’t be fully forthcoming with their Board. They can’t be fully forthcoming with their employees. They can with their peers. Their peers don’t really know the problems. So, you play a very, very different role that I’m expected to play.
Rob Moore: Okay. That’s really interesting. I certainly find that. I run a company. We have about 85 staff in the office. I definitely find that keeping the staff happy, is, one of the things that takes a lot of the time, and also, it’s a very worthy thing to do when you might be thinking about product, or customers, or cash. But people is huge.
That brings me onto my next thing, which I’ve written in a box, because you said this word. I’d love to discuss this balance. So, you said, forgive me, if I’m paraphrasing, but you try and maintain some balance, because you can be intellectually all in on a company. So, how do you define balance, and what does that look like to you?
Marc Randolph: So, balance obviously is a personal thing. But what I mean by that, is that, very few people are fully fulfilled by their work. I mean I love what I do. I love those intellectual challenges. But if that was all part of my life, for me, speaking purely for myself, that would be very shallow. I really realised, I’m 61. So, I’ve had a change to figure some of the shit out.
One, is, I know I love the intellectual challenges of the business, and the starting up, and helping people get their ideas be real. That’s a big one. But the second part for me, is, I love connecting with people. I mean my family. I’m still married to the same woman. She’s still my best friend. I have 3 kids. It’s very important to me to have a deep relationship with my kids, and spend time doing fun things with them. I mean, going for long runs with my younger son, which I just did yesterday before. That’s the coolest thing in the world.
There’s a third component go for me, which is, my happy place is in the outdoors. So, climbing or whitewater rafting or mountain biking or backcountry skiing. If it’s outside, and there’s a chance of physical injury, I’m in. It’s not my term but I call that, feeding the rat. Because you do this crazy multiday climb, and you come back and you go, oh, I’m just ready to chill and drink coffee and relax.
But then a couple of days later, or a week, or a month, you can feel it gnawing at you. The rat is in there going, come on, come on. We’ve got to get outside, and do this again. You’ve got to feed the rat. Doing those things, it isn’t like you can go, oh okay, I’ve got 20 minutes. I’m going to go out, and go back and peek. It doesn’t happen. You’ve got to plan well in advance how am I going to fit the time to be off the grid for 72 hours, while I’m running a very fast paced hard company. And that only happens, if you work at it.
The same thing, for example, I vowed early on, I was not going to be one of those entrepreneurs who is on his 6th start-up and his 6th wife. So, we had this tradition that every Tuesday without fail, at 5:00 pm, I left the office, and my wife and I did a date night. And at first, when you announce that that’s what’s going to happen, everyone goes, yeah, yeah, yeah, sure.
But I was serious. If there was a crisis, well we’re going to resolve it by 5:00. Okay, you have to talk to me? Great, on the way to the car. Fantastic things happen. It’s after you’ve done this for 6, 7, 8 weeks, pretty soon everyone goes, Marc is serious about this, and they stop asking. Then an even better thing happens. Because what you’re doing, is, you’re modelling culture.
You’re not just getting upfront and say, our company stands for balance and then being a workaholic. I was saying listen, balance is important, and I was modelling for people, that I really believe it. So, then they all began taking date nights. That is the best possible scenario.
Rob Moore: I think that’s great. If it’s okay with you, I’ll do some quickfire questions, Marc. Is that all right?
Marc Randolph: All right, go ahead and shoot.
Rob Moore: Maybe we have 10 minutes or so left. I mean look, you can answer them as long as you’d like. It’s just they’re shorter ones.
Marc Randolph: Okay.
Rob Moore: By the way, a couple of these questions are not very good either. But the answers are nearly always good. So, I keep them in. The first one is, what’s the best advice you can remember ever receiving?
Marc Randolph: Wow. That’s good. What’s the best advice? I’ve gotten so much advice. That if something does not need to be repeatable or scalable when you’re trying to figure it out. I got that from an entrepreneur boss I had.
We were starting a company. I was budgeting things out to build it to last. He’s going, what are you doing? And I go, we can’t… He goes, just do it this way. I go, if we do it that way, we’re going to lose money on every single order. He said, who cares? But we’re going to find out if this is a viable business or not. If it is, then we’ll invest the money you’re proposing, and make it repeatable and scalable. But right now, we can find out for a fraction of that, whether it actually works or not.
Wow. That I took that to heart, and I’ve used that ever, ever since.
Rob Moore: Okay, thank you. And then, what’s the worst advice you can remember ever receiving?
Marc Randolph: Study harder. I work pretty hard, but I always work hard on the things that interest me. A lot of the times, they appear to be wastes of time. In school, I was a geology major. I wasn’t a business student. I majored in geology. I did that, not because I was looking for a career as a petroleum geologist. I like, as you learned from my previous answer, I just like being outside. I noticed pretty early that all the geology guys were going on field trips all the time. I go, sign me up for that. That’s what’s kind of led me every place.
I was a direct marketing guy and that was not a glamorous thing. But I found that so fascinating. I learned everything I could about that, because it interested me, not because there was some ulterior motive. The most tragic thing I see now, like I mentioned before, I do a lot of work with university students. The most tragic thing, is, these kids who are pursuing these careers that someone else wants for them, or because they think oh, I’ll make a great living at it.
But I can’t think of anything more shallow and depressing than making a great living at something you don’t enjoy doing.
Rob Moore: Okay. So, is there one thing in the world that you feel is really wrong, or that you really like to change?
Marc Randolph: Well, I hope I don’t taint you with this, or paint you with this brush. I think that there is an over glamorisation of entrepreneurship right now. When I was starting out, there was no such thing. I mean, there was the thing, and that people were certainly starting companies.
But there was no cult of entrepreneurship. You couldn’t take entrepreneurship classes. You certainly couldn’t major in it in school. What it feels like now is it’s being presented as this glamorous thing. They see movies, The Social Network. It looks like, it’s parties and fast cars, and getting rich, and being famous, or being on Shark Tank, getting to do cool podcasts. That’s the wrong reason. It’s like someone going, I want to be an actor, because I want to be rich. I’m going, you are wasting your time, because one in a million actors gets rich.
So, do something that makes you happy. If someone said, I just love creating characters, and I love performing, you’re in it for the right reason. Then maybe you’ll keep working so hard at it, you’ll eventually, be successful. But if you’re not, who cares? You’re doing what you love. I think starting companies should be like that. If someone is saying, I want to do this, because I think I’m going to be rich, or I’ll get all these options.
I can tell you from first-hand experience, it is not the case. It’s very rare. It requires a great string of luck. More often than not, you’re not. So, you better enjoy what you’re doing otherwise.
Rob Moore: Sure. So, could I chuck one thing back at you, Marc? I don’t normally do it at this stage of the interview, but I feel like I should. Could it be that there’s probably a lot of people who are in a job, who are very unhappy, and they are stuck in that job, because they feel they’ve got no other choices? Then let’s go with your phrase about maybe the glorification of entrepreneurship.
But that could give a lot of those people hope that they could do something, that they actually really enjoy, without so much fear and with a bit more knowledge, and guidance, and mentorship from people like you so that they could have the courage to start the thing they love to do.
Marc Randolph: I absolutely agree with you, 1,000 percent. That is the right reason. I don’t want you to pick hick away for a second, that being an entrepreneur isn’t the best job in the world. It’s fantastic. But I want someone to do it because of the things that you’re describing, which is, you get to self-direct your day. You get to pursue the things you’re curious about. You’re not working for the man. You get to work with really great creative people. You have a good time. You can have your own balance.
Those are the reasons to do it, not because you think I’m going to get rich, or I’m going to be famous. I mentioned a couple of times now about the work I do with students. I do the work at this one particular university, where 2 of my kids happen to go to college. It also happens my brother went to school there, who’s now like, a big managing director at a bank. So, he comes to this school to recruit people to go into banking. I come and tell them about how great it is being an entrepreneur. We joke about it, that we are fighting for people’s souls.
Rob Moore: I love it.
Marc Randolph: He’s way better armed than I am, because he’s luring them away to get these $100,000 summer internship type things. They are not really. But it seems like it to them. I’m saying, come here, live 5 to an apartment, eat ramen. But some people, eyes light up with that, then I know I’ve got them.
Rob Moore: Yep, great. Okay. So, we’ve added a new question in. I’ve tried this a couple of times. It’s just a simple one to nearly finish, and hat is, is there anyone that you think we should really interview on this podcast? Like if you were running your own podcast, or you are recommending one person you think, the world needs to hear more about them, who would that be?
Marc Randolph: I could find the names for you, if you want. But I would find some of the people who are very young and who are not major leading entrepreneurs. There are so many people that I’ve worked with, for example, at Universities who have these ideas as undergraduates, and go, I’m going to try and do this for real, and fight the pressure from their parents, and fight the pressure from society, and try something.
It may not be something anyone of your audience have heard of before. But it would speak to something else. It would speak to people just like me do this. They can talk about the experience they had of breaking outm and what they had to struggle with of doing something brand new. That would be interesting.
Rob Moore: Yeah, okay, great. I’ve never asked this to someone who has run a lot of businesses before. I feel like I should have asked this way before. So, I’m going to ask you, Marc. My guess, is, if you’ve done a lot of start-ups, you’ve probably lost some of your own money, and you’ve probably lost some of other people’s money. But you don’t hear/look like a person who’s living in fear of losing people’s money. So, how do you deal in your head with essentially, other people’s money, and the responsibility of managing that well when you’re starting a business?
Marc Randolph: Oh, I absolutely live in fear of living with losing other people’s money. I almost never put my own money into a start-up. It’s just the nature. I’m putting my time in, which is way more valuable than my money is. So, other people’s money is helpful as it helps validate that you’re staying aligned.
But and here’s an important one, is, the thing that I’ve gotten as I become more successful is I’m able to ensure that we’re aligned on outcomes. What happens, is, when you take outside money, this is no longer about you anymore. You have an obligation. Well, friends and family are different. But once you take professional money, they are not doing that, because they like you. They are not doing that, because we want to give Marc a shot. They want their money back times 10. And that can sometimes lead to divergence of outcomes.
So, you are always thinking about, wow, I have a responsibility here. I’ll actually close with this brief comment, because in many ways, it sums everything together, is, there was a point in Netflix, and I talked about this fairly honestly and vulnerably, in That Will Never Work in the book.
But where Reed Hastings was at that point, was not part of the company. He was my biggest investor and came in one day and said, Marc, I’m worried about your judgement and your ability to continue to run the company. At first, I thought he was firing me. But what I eventually realised, was that, what he was saying was this company will be stronger, if we run it together. What that did was made me really become introspective about what was going on here. I had this dream of being the CEO of a successful company. I thought I was on track to that.
But now I realised that there were actually two different dreams going on. There was the dream of me being CEO, but the successful company part was no longer my dream anymore. It was my employees’ dream. And to your point, it was my investor’s dream. I had this responsibility to other people to do everything I could to make this company successful, even if it was perhaps at odds with what I wanted personally.
I could not argue with Reed, that it would be a stronger company with both of us running it together. It took me a little bit of time to adjust to it, but I did then say, Reed, join us. He came in as CEO. I stepped over to be President, and we ran the company together. There was ego involved, of course. But ultimately, that was such a great decision, because that led to this renaissance at Netflix. It led certainly, since I even left Netflix. Reed ran it by himself, amazing outcomes.
But it all boiled down to, this is not about me anymore. It’s about money, and dreams, and making other people successful.
Rob Moore: Okay. Thanks, Marc. Final question, and that is, this podcast is called The Disruptive Entrepreneur. So, what does “disruptive” mean to you?
Marc Randolph: Disruptive in my opinion, is just basically, a different way of doing things. But it’s a dramatic departure from the previous way of doing things. I mean certainly in the Netflix case, there was an established way of watching video in your home. It was you got in the car, and you drove to Blockbuster. Reed and I believed there’s a better and a different way of doing this.
One thing after another, we’ve continually disrupted the assumptions about how should this be done. We’ve seen that time and time again in all kinds of other industries as well. Believe me, we’re just getting started. Many, many, many models are going to tumble. I don’t even pretend what Netflix is doing now, will eventually be disrupted. The challenge, is, if you’re not going to let someone else disrupt your business for you, you better figure out how to do it to yourself.
Rob Moore: Yeah, I agree with that 100 percent. So, where can we get your book, Marc? Don’t forget that there’s a lot of my listeners are in the UK. So, make sure we can get it in the UK, if we can or on Audible. Where can we follow you, if you do put any content out, or do any social media, or anything like that?
Marc Randolph: So, here’s the book. Hope it’s in focus.
Rob Moore: Get it really close. Yeah.
Marc Randolph: Anyway, it’s called That Will Never Work. It is available in the UK. Right now, it’s available in English. It’s available in Spanish. Other languages coming soon. There is a website, marcrandolph.com, which actually has resources to show, where you can buy it in the UK. I know it’s on Amazon. But I believe it’s on other resellers, which I don’t quite have on the tip of my tongue. You can follow me on Twitter at mbrandolph and on Instagram at That Will Never Work. I’ll be dispensing all kinds of great entrepreneurial advice.
Rob Moore: Marc, I’m really grateful for you giving your time today. Thank you very much. I really enjoyed it.
Marc Randolph: Thank you very much.
Rob Moore: Thanks a lot.
Marc Randolph: Fun talking with you. My pleasure.
Rob Moore: Thank you.
Marc Randolph: Cheers. Bye.