The Netflix Revolution: Scaling Against All Odds | Patty McCord’s Untold Story

We ran out of money. You know, people would be like, are we gonna have layoffs? I'm like, if we don't come up with some money, it's over. That Christmas, DVD players dropped to 99 bucks, and the only marketing we could afford to do was to put a coupon in the DVD player box that said, try Netflix for free and our business lives, and get your first DVDs in the mail in about one business day. When you go to write your job description, you want to write, what's that problem? And what would it take to solve it? How you go and recruit for that. You find somebody who absolutely loves that problem and can't wait to do it for your company. Not the best qualified person. And strategy isn't what you're going to do, it's what you're not going to do. It's starting to make those. Those choices about, like, well, we could do this and we could do this, or we could focus on one thing and do it extraordinarily well.

You know, the way that. The way this happened. And I have to give credit to Eunice, my assistant of 28 years, more than my assistant. We still. I'll talk to you about, like, what I. Office angel, whatever. You. Yeah, Office Angel. Yeah. Yeah. So she reads a lot. I've read over a thousand books. And so this is her copy. I wanted to show you her copy. And so I've been through. I've listened to your whole book on audio. I've read the entire book, reading it. So I've been through your book twice. But she, like, some of you can't see it, but so all these things that are. Where the pages are folded and there's a different highlighting or my highlights. And then this whole entire book. I mean, Eunice went through this whole thing. This was several years ago because I think it came out in 2017. Right. And it is so damn good. Has anyone here read the book yet? Because. Okay. Every single page has something on it that is like an aha. That's insightful. And so we can talk about the book. And you're doing a lot of stuff. There's things with. I do have a list of questions for you, but I just want to let you know that we are not married to any of this. I really want to just get your perspective.

Don't worry, I won't follow along.

Yeah, good. I just want to get your perspective and insight on just business and what makes it work and what makes it fail and what creates a great team and what doesn't. Starting with this whole thing, let's just go right into a term that's used by a lot of people. Brad. Smart A players. Right. And you are. You don't really like the term A players.

There's a couple. I hate most of them. When I was. When I ran my team at Netflix, we used to have this whiteboard that was buzzword bingo. And whenever we'd get an HR thing, it was like, you know, empowerment. And the reason why I named my book Powerful was I was really sick and tired of empowerment. And I would do these HR meetings. I'm like, yeah, empowerment. All of a sudden, why do we have to empower everybod? Because we took it all away, right? And there's nobody that walks around and goes, you're empowered and has a magic wand. So, I mean, I'm going to put.

Your book back here so it's nice and display here.

And A players. I think everybody should hire a players in every single role in your company. But an A player in a role in your company may or may not be an A player in my company. So I did a group, I did a dinner with a bunch of young entrepreneurs. It was a Y Com thing or something. And one of the guys says, well, you don't really mean in every job. And I said, no, I kind of say what I mean. And he said, yeah, but, you know, there's some jobs that don't really matter. And I said, really? Which job in your company doesn't matter? You don't want an A player in it. Like, you know, like, say payroll. I'm like, so you don't want a really smart person paying all the other smart people? I said, by the way, just an FYI, in case you don't know this already, your finance department hates you. And he said, how do you know? You've never met anybody in my company. I said, you just told me, a perfect stranger, that you think your head of payroll is stupid. You don't think they know? You don't think they are fucking with you? Do you know why it takes so long to get everything out of finance? Because they don't want to make you happy. Right? So that's, you know. So let me step back for a second. So I'll give you a couple of big broad strokes that I've learned over time. If you create a company that's a great place to be from, it'll change everything you do. Okay? So I did a group of 500 CEOs in Canada one time, and they had brought their HR people. And I said, how many of you are in the job that you had when you graduated from university? How many hands went up? How many of you think retention is the most important metric to track in your company? That's a big fat lie. So why don't we stop doing big fat lies? And it led me to be a great place to be from. If you are a leader in your organization, no matter whether it's large or small, your job is to put together a team that does amazing work on time, with quality, that satisfies your customer, and is resume worthy. So that's, you know, if everyone on your team and first of all know that everyone on your team's not going to be there forever, that's a big fat lie. Know that you're not going to hire people that are going to grow in the company. Google does that. They hire people who they think will stay in the company 10 to 20 years. And they hire people for just brain power. But remember, Google is Alphabet. So like, for us at Netflix, they're like, you know, are you going to give me 20% of my time to think about what I want to think? I'm like, hell no. We want to give people movies, we just do one thing, and if it doesn't interest you, then that's okay. So Google's a player, for example, was never our a player because we were very, very structured around deliverables and time. And so everything in my book and everything that I talk about, I learned from engineers and product managers. So what I tried to do at Netflix, because Reed gave me permission to do whatever I wanted to do as long as I didn't totally screw it up. I asked for two things when I went to work with him at Netflix. No bozos, no assholes. And I got to be the referee. I got a red card, a yellow card, and a green card. And if I slap down the yellow card, you should worry because I got a green. I got a red one in my pocket too. But so what you want to do is constantly create teams for the future and not do the best you can with what you have, okay? Make a great company to be from. So my methodology, which is in my book, which is imagine you have the most amazing team or company in six to 12 months. But let's take six, because if you're in a real startup, you can't look any further than six months. I hate bonus programs and startups, especially, like our annual bonus program. I'm like, you have no clue what's gonna happen at the End of the year, right? There could be a pandemic.

Yeah.

Anyway, so in six to six months you create a team that is amazing. Everything is going like you want it to be. It's a well oiled machine, everybody's rocking it, we're firing all cylinders. What's happening then, that's not happening now and then because I came from Netflix, make a movie of it. Right? Just walk around and are there more meetings or are there less meetings? Are people standing up and debating fiercely what they think is the right thing to do? Or they have their heads down and they're just working? What does it look like, what does it feel like? Right. Where's the energy coming from? And you then reverse engineer that. Okay, six months. Remember, time is really important and this is the thing we don't do with people very often. I'm going to hire an amazing guy who's going to be amazing guy, like, okay, so what are they going to deliver in six months? Right? So in six months you got an amazing company, blah, blah, blah. Okay, so then work backwards and say, well, who do I have? And so the Deltas are who you hire. So what are the problems that can't be solved in six months by the team that you have? The team that you have might be able to solve them in four years, but you don't need it solved in four years, you need to solve in six months. And so when you go to write your job description, you want to write what's that problem? And what would it take to solve it? Not, I need five to seven years of progressive management experience and a Ruby on Rails. It's not full of acronyms because that's what you sell. So I'm a marketer, I'm an engineer, I'm a product manager. Because how you go and recruit for that is you find somebody who absolutely loves that problem and can't wait to do it for your company. Not the best qualified person, right? So I mean, I hired somebody one time. We were trying to solve a problem about something about matching movies to people. And there was this guy, somebody said, have you seen this thing, this app that this kid made up? And we think he's a kid that, that matches people. I look at it, I'm like, that's pretty cool. Get somebody like him. I'm like, why don't we just go get him? So he was a programmer in Phoenix at a bank and his website was half his woodworking projects and the other half was his Netflix app. So I brought him in and at the end of the interview, I said, he goes, how'd it go? And I'm like, we love you, so we're gonna, let's move you out. He's like, you get, you gonna hire me to do what I love to do and move me and my family? Like, are you kidding? I'm like, no, pretty much. You're our guy. He's like, oh, but, but what about programming? I'm like, you know, Banks will always be there. You can always go back. He's a VP there now.

Wow.

Wow. It's just a really creative. And I don't know what his. I know he didn't have a PhD from MIT. Yeah.

He just said, yeah, well, you talk a lot about people that love to solve problems and you talk a lot about problems. And I always think of business as solving problems for a profit. Right. And that every day there's going to be a boatload of problems. And I've even taken it so far as to, you know, people have this belief that everything's going to be a smooth running, you know, fine tuned oil machine. I mean, all the analogies and it's, it's a clusterfuck until it's as smooth as silk. And it usually isn't as smooth as silk. And as soon as it is, it's only for a short period of time. Like there's a sign up there that says, my life is an entrepreneur. That Hugh McLeod did that says, hell yeah.

I could see it from where I was sitting. Fuck no. Fuck no.

There's like two that say hell yes. The rest are like, oh, fuck. And so that's usually, I think there it is on the stage.

Because I've worked with so many different stages of companies. Like in the first, early, early stage, the first hundred people you hire, you want them to have a couple of things. You want them to be able to work very hard. Because all of your problems are problems of difficulty, right? So your whiteboards aren't full of solutions and strategies. They're full of not that, not that, not that. Because you don't know. Right. I remember somebody saying to me, why didn't management see this coming? I'm, we make it up. We thought we saw it, but we didn't see it. Okay? They work hard. They're the smartest people you can get for what you can afford to pay them. And they believe. And in the first hundred people, the belief part is really, really critical because all startups are kind of stupid ideas and if they were obvious, somebody else would already be doing it. So that's why you hire your sister's boyfriend, because he thinks it's a great idea. And people work hard and they get. And then should you. But I was thinking about a term. I call it step functional growth.

Step functional growth, Right.

Instead of everybody thinks it's going to be linear, right. It's just going to da, da, da, da, da. And what happens is if you get that first hundred people and you get a product that people want and you get enough money to pull it off and that moment is there, then almost instantly your problems are of scale. Right. And then when you get to problems of scale, you go back to the team and go, how should we solve this? They're like, work hard without food or water and beer. Or we could plan, or we could strategize and strategize. Most people in the early stage means planning and strategy isn't what you're going to do, it's what you're not going to do. It's starting to make those choices about like, well, we could do this and we could do this. We could rent movies, we could rent games, we could do sports, we could do porn, we could do. Or we could focus on one thing and do it extraordinarily well. Right. And so then when you get to that phase, then you do the same thing. I just said, okay, when do we want to do that? By the end of the year. Okay. Can we do it with the team we've got? Probably not. Okay. So it's not that we need some grownups in the room, but we might need some people with. Have had more experience with scale. Right. And there might be what. For us, when I looked around, we had all these teams of people that we had these very clever names for, you know, the content quality team or something. All they did was watch movies at their desks. Can we get our family members to do this? Like, why are we paying people to do this? Anyway, so you look around, you find out there's all these jobs you thought you had that you really. They don't really scale and you don't really need them. And they're wonderful people and they've made a huge contribution, but they can't do it.

Yeah.

So that's the first, hardest, always hardest parts of moving a startup as you scale. Right. Which is not that you don't have smart people who aren't a players and aren't capable. It's usually timing.

Yeah. Okay.

Second thing it is, is we hire people to do something. We hire people to build stuff. Two years, they build Something amazing. And now it's done. Right. You don't need another one of those. So you say, hey, Mr. Innovative Builder, we'd like you to do maintenance on this product. And then that innovative builder is miserable and it's our fault because we couldn't find another exciting thing for him or her to do. Right. So why aren't you taking care of my career? Right. And so then you learn about. I am the queen of good goodbyes. Very, very good at it. My best friends, including me, are people I've said goodbye to or have said goodbye to me. Right. Reed's my best friend. And so that's where, as a leader, you have to. You're in charge of creating that amazing team. It's your only job.

So let's talk about two ways I want to come to the goodbye thing. So Dan Sullivan, who's sitting over there in the corner, the disruptive one over there, he has many quotes. One of them, many great quotes. One is, the skills to get you out of Egypt are not the same skills to get you to the promised land.

That's right.

And so another way of saying it, the people that get you to one place are not the same ones that are going to get you to another.

That's right.

And I think that's always been the hardest for me. I think that's hard for most people here in this room. And it's one of the. And I've had people that have spoken here at the $k group that once they've reached 100 million in revenue, they've said, one guy in particular said, I could never believe it when I was first told this by all the management people that have reached out that everyone that works for you is no longer going to be with you. He's like, well, there's got to be a few that are really great. And they're like, no, you're going to. And I still grapple with that. It's like, I've had people that have been in my company for many, many years, through many different stages.

So do we.

Yeah. And so, like, I think it'd be really helpful for people here to learn when to just. It's time to say goodbye or the realization that you really want to help the person. Because most. I really try to nurture genius network in this group to be givers. And the challenge of being a giver is you don't want to hurt anyone's feelings. You try to give opportunities to everybody.

Yeah. But let me. Let me give you a different perspective. If you know There's a couple of reasons why people fail, right? It doesn't work out. One of them is you made a bad hire, okay? You just hired the wrong person. And in startups, that's easy to do because you don't really know what the job is, right? So you hire the person you like that think is really smart. They have an idea in the interview. It seems reasonable. You hire them. It turns out you are completely wrong and they're the wrong person.

Okay?

So that happens all the time, right? That is absolutely no one's fault but yours. The person you hired has no. You know, there's nothing. They did nothing wrong. You hired the wrong person. Right? And what I've learned to do is, with people like that, is to be able to say in the interview, this is risky, because I don't really know what the job is, and I think you're gonna be the right person. But if it turns out in six months, it doesn't work out. No harm, no foul, right? And then that person has that expectation, right? I remember hiring somebody that's, do you love him? Do you love him? Is he crazy? Crazy? Don't you want to have a beer with him? That's the cutest kid I've ever had in my life. He's not qualified, Right? I know, but, you know, if each of us works hard and works with him, we can bring him up to speed. I'm like, oh, there's a good return on the investment, investment for the company. We're gonna add another headcount with another salary, and we're gonna take 20% out of each of you to make sure that he comes up to speed for the job that he's not qualified to do. But I like him, too. And by the way, I'm not running the team. You are. So good luck with that.

Yeah.

And of course he didn't work out. This is a funny story. So he didn't work out. And I said to him. And I said to him in the interview, I'm like, you know, it's a little bit iffy here, bunky. So we get ready to go, and he's in. He's practically crying because I'm firing him, right? And I'm like, no, we aren't. Where do you live? I call a friend of mine at Apple. I get him another job, blah, blah, blah. Because he's a great kid. I mean, he's great. He's just not qualified for the job we have. So he comes into his exit interview, and he brought me a bush, like from the nursery. A shrubbery. And I'm like, oh, you brought me a shrubbery? No one's ever done that. He said, yeah. My wife said, how come you're bringing that bitch that fired you flowers? So that's thing one, you hired the wrong person. Thing two is they finish something, right? You hire them to do something, and they're done. And there really isn't another thing for them to do that's like that. I remember saying goodbye to our last QA engineer because we automated all the QA instead of doing manual qa. And she's weeping and moaning, and she's like, I'm so surprised. And I'm like, are you kidding me? Like, I've been sitting next to you in every meeting for the last year. We were talking about automating qa. I didn't think it'd be me. I'm like, well, who'd you think it would be? And I'm like. And I'm like, how dare you cry? You're from Netflix. You know, chin up and go get a raise. You're the last one. You know why? Because you're the best one. We wouldn't even be here this life if it wasn't for you. So number one of the good goodbye. Thank you. Even if you hate them, thank you for the contribution that you made to our company. Third reason is you turn over management, and the new management style is different than the old management style. There's loyalties, there's this, there's that. And so that's just tough. And so what you got to do with that one, if you're a leader is when you hire that new manager and they turn a lot of people over, which sometimes they do. Like, I remember one guy saying, I want to give you a. He'd been here, like, six weeks. I want to go over a presentation with you on how I want to optimize my team. And then you should tell me who it is. I should present it to an upper management to get it approved. I'm like, six weeks, you do the PowerPoint. Like, no. Put together the right team. He's like, I want to do team building. I'm like, great, go build a team. Like, we're not going to go to do trust falls. You know, go bowling. I don't know. I don't care. I don't. It's your team. Go build your team. So those are typically the reasons why people don't work out. And here's what you can do about those. Tell them. Tell them, Joe. Man, I think you might be the right guy to do this job. I really do. And you've done so much great stuff for us, but honestly, I don't know. So give you the opportunity, all the help you can get. But, you know, we have to have the right person. So, you know, for us at Netflix, for example, the DVD by male guys and gals were amazing, brilliant, fabulous, the best in the world. None of them were qualified to do anything on streaming, right? None of them. They didn't get to transition over. It was just a completely different set of problems.

Did most of them leave or did they have to be let down?

Depends on who they were. So I'll give you an example, a concrete example. I'm very pragmatic. I give you lots of real examples. Our IT team that ran our data center for DVD by mail. It was a physical data center that was in Santa Clara, that was near us, right? And we're talking about. We did an exercise at the executive staff because we had grown 30% quarter over quarter, three quarters in a row. Compounded, right?

Yeah.

And so Reid's like, well, we need to have a discussion about what goes to shit in a hand basket if this doesn't work. I'm like, you know, for once, what if it worked? Like, what if this kept going? So he's like, I don't know. Anybody want to do what Patty says? They're like, yeah, so CFO goes to whiteboard, does top line revenue, 30% growth, quarter over quarter. You know, compati's like, fuck, so much money. I mean, I'm like, barry, you know, might want to step outside and then come back in when you're a little calm. He's like, jesus, God. So at the time. So Ted, who's the head of Netflix now, he's co CEO, he's looking at the content spend and he's like, you know, in those days we would say, someday we'll be as big as HBO someday. And Ted goes, shit, you guys, we're HBO next year, right? We're like, oh, we met in our lifetimes. And then our head of engineering says, that's two thirds of the US Internet bandwidth. I'm like, stay after. So I said, neil, does anybody know how to do that? He's Brazil, like, no, don't think so. Oh, fuck, what do we do? And he goes, well, we're going to have to be in the cloud. And I'm like, does anybody in the cloud? He's like, I think Amazon's doing some stuff. I'm like, can we Call them. But they're the enemy. But they aren't the enemies. I'm like, does our team. Is there anybody in our team that knows how to do this? No, don't think so. So we go to the IT team and we say, here's our problem. And they say, don't worry. Why don't you guys go exec something and we'll build a cloud? And I thought, if anybody could, it's you, but not by next year. And if we couldn't do it, we would lose the opportunity. Right? So my role in the company was to say, how do we put together the team that gets us there? We cannot miss an opportunity because we have the wrong team.

What was so instrumental with you having this ability and learning this skill and being able to do it? Because I imagine there's quite a bit of art and science mixed together in this.

You know, the cool thing about Netflix was it was the first time that I was an equal member of the executive team. Like, I represented normal people. You know, when we'd test something, they'd be like, look at the. This is. This shows what your buffering speed is. I'm like, nobody gives a shit about buffering speed. I just want to watch my movie. Like, no. Yeah, you know, normal. Here's what the normal person would do in this situation. And I did a lot of testing because I could. I was a consumer like everybody else. So that was thing one. And I was really, really involved in the business because we were making it up. Like, would subscription really work? I mean, that was a really scary business model because between marketing and cost of goods and labor, it took $70 before payback. Right. Because we had to buy three DVDs and the people to open them and the postage and all that kind of stuff. Right? So the outlay for every new customer is, like, $70. And on the subscription model, they didn't pay back for nine months to a year.

Wow.

Right?

So you're really negative for a while.

Yeah, we totally bet the farm, right? So we were always like, margins were this then. But I understood what a margin was. And because I was so enamored with doing this instead of stupid HR shit, we just taught everybody how to read a P and L. I just figured if I could do it, we shouldn't hire anybody who can't do this. So we'd have a meeting every Friday in the parking lot, and we'd go over all the metrics. And so when it turned out that we ran out of money, you know, people would be like, Are we gonna have layoffs? I'm like, anybody got any other ideas? I mean, you know where it goes. Like, if we don't come up with some money, it's over. And the only thing we have to spend is salary. And they're like, we don't like that. I'm like, I know. But. So anyway, then once I kind of got going. So then once we laid off a third of the company, and then that Christmas, we laid off a third of the company in October, that Christmas, DVD players dropped to 99 bucks.

Wow.

And if you were alive that Christmas, you had a DVD player under the tree. And the only marketing we could afford to do was to put a coupon in the DVD player box that said, try Netflix for free. And our business went, wow. Now, remember, we still don't have any money.

Yeah.

So we're doing twice as much work with a third as many people, and it was more fun. And so that's when I made, you know, I. Driving to work with Reed, I'm like, I am so stoked about coming to work today. This is the hardest I've ever worked in my life. He's like, I know. What is it?

Hey, I hope you're enjoying this video. And I want to let you know that I have a new book that's come out, and if you'd like to get it absolutely, absolutely free, there's a link below in the description. Or you can wait till the end of this video, or you can Simply go to joe'sfreebook.com and you can get a copy there.

Okay.

That's the one thing I want to like having that sort of attitude instilled. So two things. One, I think, you know, I'll speak for myself. Always hoping there's this wonderful, amazing talent that I bring into my own organization. Then there's me, you know, who's pretty much the. What's that? Despair dot com. One that says dysfunction, and it says the only commonality in all of your dissatisfying relationships is you. So who do we have to be in order to build a good team? Because the term culture, the first four words are cult. Right. So there's culture. What is a culture? What does that even mean?

I'll speak to both things. One of them is I'm kind of okay with the cult thing. I mean, not in the. Not in the really bad way, but it really is something you kind of need to buy into. That's why we wrote the culture Deck was Reid said, let's have an off site and talk about values. And I'm like, let's not, you know, we have a product to build, and we just don't have time to sit around and, like, navel gaze and wordsmith some document, right? And I said, but you know what? What I will do this time, Reid, let's write down behaviors, right? If we say integrity, what does that mean? What would you see somebody do? If it was in our first drafts of those behaviors, one of them was iq Because I was like, can we write? We really don't want stupid people. And they were like, that's probably not that great of a. But we meant it, right? We meant it. We wanted people to be able to move along. We rewrote that part of the culture deck six times. Because what we would do at an off site, a management offsite, we'd say, okay, let's talk about reliability. Tell me somebody on your team that has done that last week. Tell me somebody on your team. Tell me somebody on your team. Tell me somebody that you know in the company who's not reliable and what do we do about it? Right? So that was when I started realizing that if we focus on behavior and what we want is a company, I mean, we didn't want everybody to have a company like that. The Netflix culture deck isn't a bible. It was our culture deck, right? It was like, this is what you can expect from. I would tell people when I hired them, I'm like, here's who we are, and if your manager doesn't act like this, then you have a right to call them on any part of this culture. So we started writing it down. That was the other big thing that we did, was we wrote things down and then we played against it, and we paid attention to it probably at a management meeting at least two or three times a year. And we really, really focus on it. And so when we had. For example, so after the layoff, we wrote the chapter called high performance. And once we actually had a company with a lot of high performance, that took me, my team, five years, I had to have a team of recruiters who understood the business and didn't just fill positions. And they had to be really good. So I hired my best headhunter and paid her extraordinarily well to teach my people how to headhunt. Because I'm a recruiter, it's like, this isn't brain surgery. And Reid said to me, because I said, you know, I'm gonna hire Jessica. Remember her? He's like, geez, great. I'm like, we're Gonna pay her half million dollars. Nobody in HR makes a half a million dollars. I'm like, profit center, you watch.

Wow.

She's going to hire five VPs. I had to do that. I had to get my CFO and my lawyers to agree with me that instead of doing performance improvement plans, which I think are the cruelest things that anybody does in any company ever, to be able to say, hey, by the way, Joey talked about that's not working out. So here's your big fat severance. It's been great. Let me help you find your next job. So to give up the performance improvement plan. The reason I decided to give up the performance improvement plan was I've been in HR for 30 years. People sue you because they're pissed because you didn't tell them the truth. You didn't tell them, you know, we may not need you anymore, Bunkie. We love you, but we may not need you anymore. And by the way, we have some time to figure that IT team. They're like, what do you mean? Will we not be here when we move to the cloud? I'm like, maybe not, but we got nine months figured out. Okay? So what you asked me about culture. I'm very Margaret Mead about culture. It's how you behave, how you behave with each other, what the team, what the system rewards. You know, Reeds would say it's that you pick up a piece of paper off the floor and nobody ever asks you to, Right? It's that you're responsible for each other, that you're reliable. So that's how. So once we had a high performance team, then we could do freedom and responsibility. So we go public. Our CFO sends me a copy of the travel policy, the time off policy, and the expense policy. Dear Patty Reid says that I have to run this by. Although I don't know why. This doesn't have anything to do with hr. These are all finance policies, and you should just do what I say, okay? So I'm looking at them, and they're the same policies we all have. We all steal them from each other. There hasn't been a new policy written in 50 years. So I'm thinking, well, let's do expense policies. So any expense over 4k has to be approved by somebody in finance, right? So I've got people with PhDs in math. They know what greater than 4k is, okay? So what they're going to do if they need 12, is they're going to go to finance and ask for four approvals at 3K each. They're going to be using their PhD math brains to figure out how to fuck with the person in finance who doesn't even know why they need the money anyway. It's just stupid, right? And so instead of you say, hey, by the way. So what I did, and this took years, was I had to get rid of all those people in finance whose job it was to approve things. If it's your job to approve things, your power comes from saying no. Yeah, that Engineer went in 4k and I told him, I don't think so.

Right.

So I had to get rid of all them and replace them with more senior people who could sit in the staff meetings and say, by the way, we budgeted 4k for individual contributor expenses and we're running six and a half. So how do you want to manage that with a budget? Because the budget's just a projection. It's not, you know, Bible. So that's finance, then. Time off. Have I ever fired a salary employee for being tardy or absent? No. In fact, I've said goodbye to people who work all the time because they're fucking weird. You know what I'm saying?

It's like, you're great, by the way.

If you had a life, then maybe you wouldn't be so exhausted. And, oh, by the way, if I have a time off policy, then I have to have people on my team who do two things. Police it and make exceptions. Because you have a policy, then all you do is like, well, you know, we're not really supposed to do this and I'm gonna have to run this up the ladder and get approvals. And the second thing, and it's like the finance thing, like, why would I have people on my team figure out how your people on your team work?

Yeah.

So that sort of gave me the mindset of, like, we should push all this stuff as far down as we can. Right? We should be at the team level. Right. And then when we got rid of it, of course people are like, people are going to never work. People are going to work all the time. I'm like, so, you know, we're going to pay you an annual salary. So if you only want to work six months a year, we're going to call that part time. You don't get to, like, arbitrarily take the other thing about this stuff. When people ask me about this, if you have people who are really engaged, they want to do it. Right? I mean, so you know the pandemic, right? Oh, my God. If we're not supervising, how will we Keep track of stuff. Well, you'd look at results like, my HR friends are like, what HR metrics do you think are important? I'm like the P and L. You know, if something's not happening that somebody said was going to happen, when you dig into it, it's probably a people issue, but it's probably not motivation. Right. It's probably not because you're unhappy.

So let's talk about that. So you don't have vacation time off?

No.

You don't like incentives?

You don't track it. Don't track it, Right? So I'm supposed to be this innovative guru these days. So, like, when I left Netflix, I was like, shit, what am I going to do now? I'm working every day for my whole life. I never did anything innovative. I didn't. I just stopped doing stupid stuff.

It's a very good idea, which.

Stop doing stupid stuff, which is what every one of you is doing right in your. And so I would. I remember when I used to do keynotes. This is one of my favorite stories. We, Steve Jobs, had called Reed and said, by the way, we have this new device that we're launching, and it's going to be able to stream video, and we'd like you guys to be partners with us to launch this new device. It's going to be transformational. So Reed gets the head of product and me together, and he goes, you know, Steve, blah, blah, blah, blah, blah. And I'm like, well, when's it going to happen and what is it? And why is it transformational? And Reed's like, well, it's Apple, so we don't know any of that shit. And I'm like, well, you know, we are going global. Da, da da, da, da, da, da da. I mean, we were kind of maxed out with projects, and do we know what technology is? What the tech stack? How do we do it? He's like, I don't know. So he says, and if you guys say, we can't do it, we won't do it. So we go back to Neil's and he explains, you know, you can see. You guys all know this, the twinkle in an engineer's eye when you say, it can't be done. You know, they're like. So I'm like, all right, I'll get out the midnight oil and the cuts, and we'll just pick a team of people to do it. So it's the iPad, of course, and Steve's launching the iPad at Mac World. Are we invited? No. And there were like, Seven people who were allowed to go over to Apple and observe the device on a velvet. So one of them comes back, I'm like, how was it? And he's like, okay, we launch it. I come into the meeting, I'm like, oh, my God, you guys, it is transformational. The kid next to me is streaming spongebob in his high chair. He can't even read. And, oh, my. It is. It is touch. Technology is so compelling, right? It's like, primal. I can't wait till I go into my media room and swipe my wall. And the guys are like, they start riffing like jazz musicians, like, oh, you're not going to have to get up, you know. No, no, no. And the other one says, you know, you take out your iPhone, put your thumb on it, and the mud o meter will say, patty, are you sad? You know, and immediately comedy will show, starring all your favorite people. And I remember being in that room thinking, if it was at the right place at the right time with the right people in the room, that can happen. Why not me? These guys get to have all the fun. If they can think of a whole new way to do this, why can't I think of a whole new way to do what I do? So what I did was, when I started throwing things away was I did what everybody else did in the product. I would say, look, I can't really a b test time off, but all the lawyers are telling me that we're crippled with lawsuits because men are going to take more time off than women or my HR friends are like, this is going to be a morale issue, you know, people. And I'm like, but I don't think so. I mean, I think you guys are grown up enough to do this, but let's try it for six months, and if it turns out that they're right and I'm wrong, then we'll just go back to the way everybody else does it and we'll call it best practices. Right? Right. So that's just how it came about. Right. And so as we started doing those kind of experiments and the world didn't fall, you know, sky didn't fall, then it was just. We just kept doing it.

So with delegation, like, when you. There's a lot of people you had to hire and just put them in charge and let things. Let them do their thing, and there's probably been a lot of errors, a lot of mistake, a lot of guidance, a lot of education. How are you able to let go in intelligent ways or what were some of the ways I'd love to hear.

Yeah, in the Netflix culture deck, that's the chapter called context, not control. So we were doing an investor presentation one time after we had gone public, and each of the heads that the organizations were presenting to the investors, what was going on with them with their goals, blah, blah, blah, blah, blah, blah. And I'm sitting back with one of the VPs, and I'm like, damn, you know, I work here. I'm learning stuff. And she said, yeah, can you. Can you believe we go to all this effort for a bunch of strangers and we don't do it for ourselves? Which begat new employee college, which was every quarter, all the new hires got together, and every head of every organization said, here's who we are. Here's what's important to us. And we just gave people the context around the business. So it was the second phase of the metrics meeting, where we would teach people how the businesses interchange. It was funny because we all thought, this will be great, right? I'll put together a presentation. I won't have to do anything every quarter. I'll just whip it out, show up, and do it every quarter at the business chain. Ted called me up and he's, God damn it, I can't use my slide deck. Gotta do a whole new one. So it's context, and so it's about. For example, here's some practical ideas. If you have people in marketing and engineering and product, and whoever the leaders are in those organizations should rotate into the other organizations for their meetings and talk to them about it. And you should say, when somebody goes, you know, I think the people in marketing have their heads screwed on backwards. What they're doing is stupid. I'm like, what'd they say when you ask them? So get off your butt and go find somebody in marketing and say, help me understand. So my favorite phrase is, why do you believe that to be true? Another one I'll teach you is when an employee says, I think that was a dumb decision, Right? Why management made a dumb decision? So you ask them two questions. The second is more important. The first one is, if you were in management, what decision would you have made? More importantly, if you were in management, what information would you want to have to make a good decision? So you teach people the scientific method, and if you do that over and over and over and over and over again, then when they say they know to open, when they open their mouth to bitch about something, they better have an idea about how they would do it differently.

Gotcha.

So, yeah, I'm like. I'm like, you know, everybody says lowest common denominator and pay attention to the whiners. I'm like, you know, complainers, they're dime a dozen. Problem solvers.

Problem solvers, that's who you want.

And so when you go back to having people in your organization that stay with you, there's a couple things that make those people successful. One of them is they're very curious about the business, and they're curious about things that are other than what you hired them for. Right. So we tend to hire people for roles in various small niches. I'm sure I hear this from the military all the time. Like, the more you learn about the broader team, the more you learn about. The more you learn about what everybody is doing. Then you know, what your role is on the team and how you operate and how the communication works. Right? So they're curious. And the other thing is they solve problems.

Could Reid have done what he did without you?

Never, Never. You know, my ex husband's family would always say, one of their digs against me, because they would be like, what is it you do? You plan parties? And they would say, well, it's a good thing you met Reed Hastings, or you'd be nobody. You know, it's a good thing Reed Hastings met me. We're very yin and yang. And it was really, really helpful in the beginning because Reed is very, very data driven. He's very analytical, and he's very logical. And so I would say, I would be able to say to him, and this took years, by the way. He's like, I don't understand why everybody's so upset. You know, this is what I said. I'm like, I was there. I know what you said. I will quote you word for word. Do you want to hear what they heard?

Explain that. Because there is.

Here's an example. He's like, I don't know why people understand that things have changed and business moved on and the decisions that we made have changed. I'm like, well, okay, so most people hear your decisions at the quarterly company meeting. So in this particular case, you have reversed yourself 180 degrees. And they're here going, what the fuck? Right? So together I would learn to go, you know, I know what you mean, but that's not working. He was really, really great about saying the decision I made was wrong. And here's what's most important. Here's the information I had when I made the decision, and here's what turned out to be what actually happened. And so that kind of modeling, if you model that stuff all the time, then the people that rise up to the top will rise to the top because they'll say, I don't agree with you. Here's what I think we should do instead, or, here's the consequences if we do what you say. But they can't just whine about it.

So the attitude of playing to win versus playing not to lose, where I always find myself, and I'm not sure I love to. I'm asking as a question for myself and also for everyone else, where I feel like I need to either bring on new talent, upgrade my team, do something, is when this belief where everyone's, like, playing not to. They're not playing the win, they're playing not to lose. And then all of a sudden, the growth gets stalled, and then there becomes this sort of tension.

I would say my advice to you would be wrong. Start, boss.

Explain this.

First, you want to start with, what does winning team look like? And what's the time frame for doing that? Okay. And then ask yourself that question, because otherwise you will be play not to lose. Right. I mean, we were so lucky at Netflix, and I know I'm talking a lot about Netflix 10 years ago, I coach a lot of companies. Companies. But, like, if we didn't win, it was death. Aren't you afraid of Amazon doing streaming? Aren't you afraid of Apple going into streaming? It's like, yeah, of course we are. I mean, they're amazing companies with really talented people, but if they screw it up, they'll go sell phones. We screwed up. We're dead.

Yeah. How many times did you get close to death? I mean, I would imagine more than once. Yeah. I mean.

How do you.

So in a situation like with Reed, where would you give each other slack? Because I imagine there were some times where it's just like, you know, what kept you from jumping ship or making or having the emotional stress?

We taught each other a lot. And then, I mean, you know, when I left. So basically what he said. So we had a different. We had a ritual every year. We took the company to Sundance, and at Sundance, Reid and I would buy a bottle of wine and we would say, would you hire me again for next year? Am I the right? At one point, no. It was really, really, really beginning. And one of his habits was sort of public humiliation. And I said something. He goes, yeah, McCourt, I could fire you in a hot minute. And I brought him in a room. I'm like, newsflash, asshole. I Could quit in a hotel minute. You know, you're not the only game in town, so. And I'm not doing this anymore. You. You brought me here. So if I'm going to fail, the worst thing that could happen is that I would be surprised. Right? Don't let me do that. Don't humiliate me. If you don't think I'm the one, you just got to tell me. And he said, okay, I'll do that for you if you'll do it for me. I've never run a company like this, so every year at Sundance in January, we'd have a bottle of wine and have that conversation. The wine got a lot more expensive. And I remember the year we went to streaming or dvd, but I'm like. He's like, yeah, we're gonna have to hire all these people and drivers and, you know, warehouse workers and all that kind of stuff. And I said, you know, to be honest with you, I'm not your gal. I don't even know what minimum wage is. I mean, maybe they have to be bonded. I don't know anything about truck drivers. And, you know, this is big. This is going to scale pretty fast. He's like, yeah, shit, you're going to be terrible at that. And he's like, but if I hire somebody that's really good at that, they're not going to be really good at talking to the tech guys. Because engineers and me, you know, I would say to them, does that sound stupid to you? Just say it out loud again. Just ask yourself, would your grandma say, that's a smart. That's a smart idea, Joe. She'd say, what the fuck? So anyway, engineers and I. And he said, but they wouldn't understand them. So let's. This year, you hire somebody that's really good at that, and if that doesn't work out, then I'll replace you. Right? And then when I left, finally, 14. It was 14 years, because two years as a contractor, it was on the cusp of original content.

Did you. Did you want to leave?

No. No. I mean, I thought I'd be there forever, but it was just after the. You guys remember the Qwikster debacle? Anybody who remembers that when we decided to separate the DVD by mail from the streaming company, we're going to call the DVD by mail company Qwikster. It was a total disaster. It was a complete, total disaster. And we were fighting. He's like, well, going to separate $9 for this, $9 for that. I'm like, we're going to double the price in the biggest recession in history. Are you crazy? Surprise of a latte. I'm like, hello, Mr. CEO, Private Jet, Arkansas, you ain't buying lattes. Yeah, so anyway, so we were going to separate the math. They're going to be a separate company. They're going to have a separate CEO. We divided the company. They started recruiting from us. There was all this nasty, nasty shit that was happening in between. And what happened, looking back, it's a really interesting MBA case was. It was the first customer revolt online. I mean, I remember waking up in the morning looking at the Wall Street Journal and there's a quote, you know, in all caps from like, customer Joe Blow says, netflix has screwed me. I'm like the Wall Street Journal. And people quit in droves. And they had nowhere to go. I mean, people quit. There was no other option. It's like, screw you, Netflix. So all of our plans for all. And at that time, reed was his CEO of the year. You know, business is growing 30% quarter over quarter. We go into like, are we the best executive team on the planet?

Probably. You know what? Yeah.

What?

Because you've seen this where you're like the darling and then they hate you.

Then they hated us. I mean, they hated us. And it was just cruel and heartless. And so the bet, like, we always made big bets. We always bet forward. The bet was original programming. And so if original programming was going to work, then the power shift from the company would go from the technology to do streaming to Hollywood and content. And I'm not the Hollywood gal.

How did you guys filter for everything that ended up showing up? How much? I mean, how the hell did you make decisions on what goes, what doesn't? Because that has to be. There has to be such a process to that to figure out what's, like, what. Just how to decide what the public wants. What's going to be weird geeks.

We just. It's data. We a b. Test it all the time. All the time. All the time. All the time. I mean, in the. I'm sure still that if we looked at all our Netflix, all of our Netflix presentations to each of us, we'd probably have 15 different versions.

Well, let's talk about the marketing, the subscription model. I imagine you were one of the biggest creators of everything going to a subscription. Not everything, but a lot.

So scary.

Yeah, I mean, it was so scary.

I mean, the studios were like, hey, Netflix, good luck with making your own content. We're Disney.

Yeah.

I mean, we think we know what we're doing. And oh, by the way, how are you going to get Kevin Spacey to work with you? This is before Kevin Spacey was bad news. And we used the model that we used for employees, which was a few good things done really well with a lot of talent and pay well. So we just changed the model. I mean, that's what. That's the whole strike right now you and I were talking about earlier. It's like we just changed the model completely. And then, you know, like Blockbuster, it took the studios, like, a couple of years to realize. Oh, shit. You know, the other thing I think that's really important for all of you, a good lesson from what we did was we were customer obsessed. I mean, like, if you had an idea and you could. So this is part of the culture, right? Yeah.

I mean, even back in the DVDs.

Just constantly, we rejected anybody who wanted to build a really great team. You're the size of your org chart, you know, just if you could not put forth an idea that wasn't on behalf of the customer, period, end story. So that obsession made leadership a really different thing. Right. Because I'd be like, I don't hear your idea having any effect on our consumer. Want to help me understand why you need 22 more engineers? Yeah, because what are they going to work on that's going to make the service better? Right. And the beautiful thing about that particular product, because I worked on a lot of other ones, is we're all customers. I did a bunch of work with Warby Parker back when they were. And so my Warby Parker story is I go to visit them. They're the glasses company. They're in this shitty building in New York. And I say to the guy in the bottom, I'm like, do you know where Warby Parker. I don't know, six or seven. I don't know. And I walk in and it's just this dusty, dirty New York warehouse. And in the corner is their store. And it's made of pallets, right? And the glasses are all hanging on the pallets. And it's packed. It's completely word of mouth. Completely word of mouth. And so when I was coaching, consulting with them, they're like, hey, we think it'd be a really cool idea to open stores. I'm like, stores. Brick and mortar stores. And it was really interesting to watch how that business turned an online phenom into a brick and mortar experience. Right. And should they. That was a great. Here's a great example. Like, should they. When they decide to open stores. I go in, I interview with all their executives, and when they tell me this is a strategy, and they tell me this is the guy that's going to do the store stuff for us, and I look at everybody's CVs and I'm like, I mean, this guy doesn't have any experience. So I'm just going to tell you, I'm going to be honest at the end of the day when I tell you this guy's not going to be able to do it. So at the end of the day, I come back and I'm like, well, if you hire somebody from the Gap, they're going to have a lot of experience in cookie cuttering cookie cutting Gap stores. And it'll be efficient, it'll be effective, the customer will understand it. You know, they'll know what they're expecting. It'll be, you know, But I'm like, this, this guy, he breathes the company, he knows the customer, he knows who wants the hipster frames versus who wants the stunner shades. So if you look at Warby Parker stores, there's a lot of similarities in all of them, but they're very, very particular to every business, every city they're in. The Warby Parker store in Nashville is covered with guitars. The Warby Parker store in Noe Valley in San Francisco has like a lot of dog dishes. And you can take a picture with your dog with glasses. It was just really fun to see other businesses. Peloton. I worked with Peloton at the beginning. Who else? I did a couple of years just consulting with Eventbrite.

And by the way, we'll take questions too. So if some of you have some questions, and let's get ready for that. What are some companies that you absolutely admire their culture and how they do things right now?

You know, it's hard because people want. It's kind of like the question is, who's doing best practices?

Well, yeah, I guess. Yeah, you're probably right.

Let me take you to the. Go to the pandemic, right? So when I did my keynoting right after I wrote my book, after every talk, people would come up to me in the back and go, oh, God, what you're talking about is so logical and it's so reasonable and it's so obvious. But we can't because we're regulated. We can't because we're in Europe. We can't. Our CEO won't let us, we can't. Our CFO won't let us. We couldn't Possibly work from home. That would be so radical. We can't give them freedom and responsibility. We can't take away the policies. We can't do this. We can't. And then the pandemic happened 48 hours later. But he's working from home. And so now when I talk to those folks, I'm like, you had that muscle all the time. You could have done it years before. And guess what? You know, now you can go. And guess what everybody did when you told them to go home and work. They went home and worked because people want to work. That whole, you know, the whole Chief Happiness Officer perk shit made me crazy. And, you know, I remember interviewing this person in the city. I'm like, and you're the Chief Happiness Officer. I'm like, what is it that you do? Well, as you notice, there's a lot of products in the ladies room. I'm like, I did totally redid my hair. It looks great. And I do T shirts. Because if we don't, one of our employees is going to walk out the door, turn right, go two blocks down, and join another company for better beer. I'm like, let the door hit him up. Somebody's going to leave you for better beer. And then find out when their happy hour is and go to their place because they have better beer, right? So I said to them, I'm like, okay, here's your assignment. And this is at. I think this was at Stripe. I said, I want each of you to find three people in the company that have a reputation for being really amazing. That everybody, you know, it doesn't matter, really, title. But people who are like, oh, yeah, he's great. I mean, I love working with that person. Or I love working with her. She's amazing. And I said, ask them to tell you a story of something they did that they felt made a difference for the company and the customer. And every single story will be about something hard, hard, hard. Oh, that day we went home, and the macadamia nuts and the cookies were so fresh.

I wanted to see. Let's see.

The beer was amazing.

There's this.

We knew we were doing good at Netflix because I used to go across the street with my shopping cart if we had, like, achieved a milestone, and I would get beer. And we knew, like, if I get imported beer. Oh, man, not Coors Light again. I'm like, you know, Roi, people, let.

Me read this part. This is so. I think, all right, so great teams relish a challenge. So this is a quote. Great teams are made when things are hard. Great teams are made when you have to dig deep. When I'm hiring, I look for someone who gets really excited. Excited about the problems we have to solve. You want them to wake up in the morning, God, this is hard. I want to do this. And then you want people who absolutely love problem solving. So how do you identify that early on before you hire them?

Oh, it's pretty easy. So one thing you need to get really, really good at, that most people don't put a lot of energy into, is interviewing. I interviewed Astro Teller, who's the head of Google X.

Before he was there?

No, when he was there and he came running up to the interview, we were sitting here like this on his rollerblades. And he's like, what's your favorite interview question? I'm like, that's not how I interview Astro. He's like, sell me this microphone. I'm like, you're selling microphones here? Why would you ask me? He's like, my favorite question. Because I want to find out if they're creative. I'm like, it's just the dumbest question. Like, does this have anything to do with what you're doing? So I hate trick questions. The way I interview is I take something on somebody's resume and I pull the thread, Right. Oh, wow, that's amazing. Joe, you were a part of launching that product. I use it all the time. It's terrific. So you weren't a manager or director. Oh, you're an individual contributor. That's great. And you're singularly responsible for bringing it over the edge. How many people are on 400? Did you do it on time? Well, no, but we weren't that late. What would you have done to get it on time? What went wrong? Well, my boss was this. You're not a problem solver.

Okay. I hope you found that video awesome and useful. So if you want to get a free copy of my book, I want you to click here. And if you want to watch some more videos that will be useful and awesome, click here. Go ahead. They're over here. Do it now. Come on. Thank you. Watch them.