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Masters of Scale Episode Transcript: Reed Hastings
REED HASTINGS: The horse was the dominant form of human transportation for about
5,000 years: domesticated in Kazakhstan, 3000 BC.
REID HOFFMAN: That’s Reed Hastings, the founder and CEO of NetFlix. You might think he’s
giving an elevator pitch for a NetFlix Original—like Marco Polo, but without the blind Taoist
monk. He’s actually revealing the foundational strategy that drove the company’s success. He
starts the story on the plains of Kazakhstan and moves pretty quickly from there.
HASTINGS: The horse was the dominant form of human transportation for about 5,000
years—domesticated in Kazakhstan, 3000 BC. So for 5,000 years, if you wanted to
make a contribution of personal transportation, it was a better saddle, better breeding,
And then in one generation, from 1900 to 1930, everything changed with the internal
HOFFMAN: What Reed Hastings understands—with such clarity—is that technological shifts
don’t always happen incrementally. Sometimes, they burst over your head like a thunderclap,
and wipe away habits that have lasted thousands of years.
HASTINGS: And the trick is to realize, those are pretty rare.
HOFFMAN: So sometimes innovation happens fast—and that’s the kind of change we typically
aim for in Silicon Valley. But more often, innovation happens slowly. And Reed Hastings knew
early on that NetFlix needed both kinds of innovation. They started by sending DVDs in the mail,
and evolved into a streaming video service with original content.
HASTINGS: Much of the time, the right strategy is to improve what you've got, and then
some of the time, everything changes—and correctly recognizing the differences there is
really important. Humans are inventing faster and faster, and that does mean that the
typical business model is shorter lived than it would have been before. So I'm not
expecting Internet streaming to be 5,000 years, like the horse. But it may be like the
automobile, where it's 100 years or more.
HOFFMAN: Now that’s the sort of foundational insight that not only drove NetFlix strategy, but
also defined their culture. Here’s why: Reed could see that he needed a team that could
develop a first-rate logistics operation for shipping DVDs. And at some point, that same team
would have shed all of that logistical expertise and build an online streaming service from
scratch. So who the heck can make that leap? Certainly not someone who’s worked in a
mailroom for 50 years, and developed an expertise in shipping little red envelopes.
Reed knew he needed flexible problem-solvers who could change with the times, and he built a
company culture for and with them. It’s a great example of why I believe there are many good
company cultures and many bad company cultures, but a winning company culture emerges
when every employee feels they personally own the culture.
HOFFMAN: This is Masters of Scale. I’m Reid Hoffman, co-founder of LinkedIn, investor at
Greylock, and your host. And I believe that a strong culture is critical to companies that hope to
scale. But truly strong company cultures emerge only when every employee feels they
personally own the culture.
And by strong culture, I don’t mean authoritative. Quite the contrary. A strong culture should be
a true articulation of how your employees work at their best. It should be grounded in your
shared mission—the thing you’re actually trying to accomplish. It should be understood by
everyone and built by everyone. And it should start from your earliest days as a startup.
But the question remains, how do you get everyone across the org to share your values, without
stifling diversity and hiring in your own image? And trickier still, how do you spread those values
when you’re hiring new employees by the hundreds?
On today’s episode, I’m going to talk with Reed Hastings, the CEO of Netflix, about his journey
from a dysfunctional culture in the first phase of his career, to the high-performing culture he
nurtures at Netflix. At times, you might find it a bit awkward that Reed Hastings and I have
almost the same name.
But we’re going to push past that. As the episode continues, I’ll simply refer to him as “Reed.”
We’re going to come to the Reed Hastings story in a moment. But I want to start at the
beginning here. If you want to build a strong culture, the first thing you have to do is open your
eyes. You have to start observing your culture the instant you arrive at the office—as soon as
you walk through the front door.
Margaret Heffernan, former CEO of five companies, can spot the warning signs in just a few
paces from the front door to the front desk.
MARGARET HEFFERNAN: When you walk into a company, you instantly learn a huge
amount. I can think of one company that I do work with in Switzerland, where they have
outsourced the receptionist—and all I can tell you is that that cultural marker, which is,
“We don't really care about the people who walk through our front door,” pervades
everything about the way that they treat people in that company.
There are all sorts of cliches and truisms about first impressions. But actually, what you
see when you're walk in is almost always what you get when you get to know the
HOFFMAN: So as the world’s lone expert on reception desks, I had to ask Margaret: What’s the
friendliest reception she’s ever received?
HEFFERNAN: I can think of a company in San Francisco that I've written about a lot
called Method home care products, where the founders and senior people in the
company actually take turns being the receptionist, because they want to know who is
coming to see them.
HOFFMAN: At this remarkably welcoming company, the leadership team doesn’t just hand their
employees manuals on how to behave—neither are they passive observers. They embody their
cultural principles. I believe that a healthy culture emerges only when every employee, from the
CEO to the receptionist, opts into the culture every day. The cultural principles themselves can
change over time.
They can vary from company to company, and they can strike outsiders as really bizarre. That’s
all fine. But the one thing must remain constant: your staff must truly believe in your office
It’s best to start thinking about this when your team is small, and the culture is still malleable. A
company’s culture cements very quickly. So as you grow, you have to be very careful about
what it is you’re scaling. You can get away with a lot more when when your staff is teeny—say,
two or three people.
And that’s exactly the sort of team Reed Hastings was leading back in 1991. Long before he
had founded Netflix, he was a programmer. Reed, along with two of his colleagues, invented a
debugging tool for other programmers. They called it Purify, and it was a hit. That’s when things
HASTINGS: And on the back of one niche idea like that, was able to start a
company—Pure software. First round of funding was family and friends—20 people by
20K—to be able to get an office and start selling.
And then we doubled every year. And it was in one way tremendous—Morgan Stanley
took us public in 1995, we acquired all these companies. But in another way, it was
terrible, because we got more and more bureaucratic, less and less inventive, less and
less fun. And it was that classic, “Company got soft and political as it got bigger.”
HOFFMAN: Consider what Reed Hastings was up against. He was a programmer, not an
experienced executive. He was acquiring companies, which means whole teams, with their own
hardened working habits, were slapped together. At one point, his company, Pure Software,
acquired three companies in the span of 18 months. And as the culture eroded, Reid had a
HASTINGS: Well, I had the early idea that if anything was wrong, I could just work a little
harder to make it right. And so I was coding all night, trying to be CEO in the day, and
once in awhile, would squeeze in a shower. And it turns out that's not a good recipe for
leading a large group of people.
At the time, I thought if I could just do more sales calls, more travel, write more code do
more interviews, that somehow it would work out better. I don't think I ever really
escaped from that, until the company got acquired by our largest competitor in 1997, six
years after starting. And it was only then, in afterwards processing what had happened,
that I was able to get some perspective on it.
HOFFMAN: So Reed made a very typical mistake in his first company. He thought he could
solve his company’s problems just by working harder.
But hard work isn’t enough, and more work is never the real answer. To succeed as you scale,
you have to leverage every person in the organization. And to do that, you have to be very
intentional about how you craft the culture. This was exactly the lesson Reed took from Pure
Software. Their management decisions had created a culture that rewarded the wrong behavior
and retained the wrong employees.
HASTINGS: Well, the mistakes in Pure was that every time we had a significant
error—sales call didn't go well, bug in the code—we tried to think about it in terms of,
what process could we put in place to ensure that this doesn't happen again, and
thereby improving the company? And what we failed to understand is by
dummy-proofing all the systems, that we would have a system where only dummies
wanted to work there, which was exactly what happened. And so the average intellectual
level fell, and then the market changed, as it inevitably does. In that case, it was C++ to
Java, but it could be anything.
And we were unable to adapt to it, because we had a bunch of people who valued
following the process rather than the first-principle thinking.
HOFFMAN: Notice Reed’s double insight here. Pure Software couldn’t adapt because they had
the wrong employees, and they had the wrong employees because of management decisions
that explicitly selected for those employees. It was an insight that catapulted him. Pure Software
sold for $750 million dollars. That gave Reed the seed money to launch Netflix in 1997.
It started as a service that mailed DVDs to your door. And it’s easy to forget just how radically
Netflix upended the video rental business from day one. No late fees. No extra shipping
charges. Lose a DVD? Get a new one in the mail, no questions asked. Their most fearsome
competitor, Blockbuster, quickly followed suit, matching service for service, but not quite fast
Blockbuster filed for bankruptcy in 2010, and shrunk from 9,000 stores at its height to roughly 10
stores today, 8 of which are reportedly in a frigid part of Alaska with sluggish Internet service.
Score one, Netflix. But there’s a deeper reason Netflix was able to outmaneuver a company
more than 100 times its size. It’s not a story of competition, but cooperation—a cultural
flourishing that took place within Netflix’s headquarters. It was a culture built almost as a
counterpoint to Pure Software.
HASTINGS: we were unable to adapt to it, because we had a bunch of people who
valued following the process rather than the first-principle thinking.
HOFFMAN: A bit of background on first-principle thinking—you’ll hear this expression a lot in
Silicon Valley. First-principle thinking is the idea that everything you do is underpinned by
foundational beliefs—or “first principles.” Instead of blindly following directions, or sticking to a
process, a first-principle thinker will constantly ask, “What’s best for the company? And couldn’t
we do it this other way instead?” And these are the kinds of inquisitive minds that Reed
Hastings wanted to unleash on Netflix, for virtually every decision.
HASTINGS: And so the reverse of that, which we do at Netflix, is you have to be a
first-principle thinker. There's an overhead to that, about what's best for the company. So
this is true on the broad scale, like what kind of content we do. It's also true in the micro,
which is, “How should I travel, business, or coach, or by bus?” And we asked people to
do what you would think is best for the company. We don't give them any more
guidelines than that.
And some people that frustrates, but those are probably not the people that's a good
match for Netflix. And other people like this sort of first-principle thinking all the time.
HOFFMAN: This may sound like the sort of advice a tech entrepreneur would naturally follow.
Who wouldn’t want to hire a first-principle thinker? Well, it’s easy to tell yourself that in the
abstract. But when you’re running a fast-growing company, you’re also going to be telling
yourself, “I desperately need a sales expert, a programmer, a designer, an accounting
wiz”—and you’ll find applicants who have resumes with all of the skills suited for that moment.
It’s all too tempting to tell yourself, “Well, we’ll find a first principle thinker with the next hire.” Just
look at what happened to Reed when he was at Pure Software. He’s a first-principle thinker.
You’d think he’d hire other first-principle thinkers. Game recognizes game, right? And yet he
neglected that hiring standard—for six years. That is why you must define your culture before
you scale. And you have to think deeply about what cultural attributes you want to preserve at
Reed gave this a lot of thought in the founding days of Netflix. He wasn’t just looking backwards,
at the lessons learned from Pure; he was also looking ahead, where he saw an enormous threat
to the company. Forget Blockbuster—how would Netflix survive the dawn of online streaming?
Broadband Internet was making its way into households across the US. It seemed inevitable to
Reed that streaming entertainment would eclipse DVDs, just as surely as the combustion
engine eclipsed the horse and carriage.
And here’s what makes Reed such a fantastic strategic thinker—he was fretting about this in the
late ‘90s, when broadband Internet had reached fewer than one in 10 households.
To comprehend why Reed hires first-principle thinkers at Netflix, you have to remember how he
views these technological shifts. Innovations generally happen incrementally—except for those
moments when everything dramatically changes. And then everything moves slowly again.
HASTINGS: If we continued to refine DVD-by-mail for another two decades, that would
have been a failure strategy, because the underlying substrate was changing, and
Internet delivery was becoming possible. But now that we’re in Internet delivery, we think
that Internet television is going to be a 50 or 100-year paradigm. And so now our focus
should shift to be, how do we do better and better on the core?
HOFFMAN: Reed’s knowledge of history, the changing nature of technology and the historical
moment he was in, led to the understanding he would need people to change with the times.
People who could rip up a process, and return to the first principles of delivering entertainment
by any means necessary—whether it’s horseback, mail, fiber optic cable—or maybe in the
future, Elon Musk’s neural lace. Regardless, you need people who can change the business
So how did Reed identify those candidates? It started with a now-legendary document at Netflix:
a collection of more than 100 slides known as the “culture deck.”
These slides defined exactly what the Netflix culture stands for, and who they’re trying to hire,
and what they can expect.
HASTINGS: The culture deck started about 10 years ago. So first couple of years, we
were just focused on survival, then we got public in 2002, cash-flow positive—and it was
clear we were going to survive. So we then started really thinking about the
culture—what we wanted to be, how we wanted to operate. And so over successive
years, I improved this deck which I would go through with new employees. And
sometimes those new employees would love it, sometimes they were like, “Oh my god,
why didn't you tell me this before I started?
“That doesn't make sense to me.” And so we realized we should give it to every
candidate. And so then about 2007, 2008 we did that by posting it on SlideShare. But
again, it was really just to be able to send a link to the candidates. It's not very pretty, it's
not very highly designed, doesn't look like it's an external marketing piece, but that
authenticity, really, people liked in the outside world, and now it's over 10 million views
on SlideShare, and continues to be studied around the world.
HOFFMAN: And what were the unexpected benefits of having published it?
HASTINGS: Well, let's see—the core benefit, which we did expect, was that candidates
were very aware of the culture. The unexpected benefit was, many people became
candidates for us, because they loved that—what we described in terms of freedom and
responsibility—that might not have otherwise thought about us.
HOFFMAN: Here’s the fascinating thing about Netflix’s culture deck. It’s not meant to appeal to
every job seeker. In fact, it’s meant to repel some job seekers.
HOFFMAN: One of the things that I think that shocks people about the Netflix culture
document is they say, “Look, adequate performance should get you a severance
package.” What's the way that you both create that high performance, but also doesn’t
feel too dangerous to people?
HASTINGS: Yeah, we try to always emphasize honesty—so you can always ask your
manager, “Hey, if I were leaving, how hard would you work to change my mind to stay?”
That’s sort of the acid test—I would call it the “keeper test.” So we encourage people to
check in with their manager on that.
So we try to be very thoughtful, so it should be that there's no surprises about that—and
we all aspire to excellent performance, and there's no short-term judgment, or like, “Last
week you made a mistake, and so you're out.” It's not like that at all. It's about, really, the
expectation of future contribution, which is based on a range of factors and performance
HOFFMAN: This keeper test may sound a bit Darwinian. No one wants to hear a manager say,
“I wouldn’t fight to keep you. Thanks for playing.”
But I actually believe it’s more compassionate to ask this question, repeatedly. You have to be
thoughtful about who fits in, and who clashes with their coworkers. Suppose a manager decides
to keep a brilliant jerk on the team. Morale sags. The team’s performance drops. Then you have
a truly Darwinian struggle on your hands. And in that sense, the keeper test cuts both ways. A
manager can fail it as surely as any employee. That’s why a commitment to culture must
pervade every decision.
Without a clear sense of how staff should work together, it’s all too easy for managers to narrow
their focus on individual players. And emphasizing individual performance, at the expense of the
team, can be downright hazardous to an organization, as Margaret Heffernan has observed.
HEFFERNAN: There is often a belief among very successful, very competitive people,
that the thing you want to do in a company is get everybody to compete with each other.
That if it's “Everybody’s racing against everybody,” you'll have this kind of white heat of
brilliance and creativity. And I think pretty much everything about that's wrong. And that's
not to say that I'm not competitive—I'm deeply competitive with myself, in the sense that
I really want to do a better job today than I did yesterday. But I don't want you to fail. And
I have seen more companies and organizations go wrong, because of what I think of as
“I do want you to fail,” or, “I want your department to fail,” or, “I want your product to fail,
because that will make me shine.” I've seen more damage and destruction and waste
from that mentality than probably from any other misunderstanding. If you can build an
environment in which people really want to help each other, full of people who are
generous, you will do infinitely better than creating some kind of Olympic sport within the
HOFFMAN: Here we come to the essence of a strong culture. It serves as a check on selfish
ambition. It’s a civilizing force that excludes anyone who will drag down the team, and also
welcomes anyone who elevates the team. In short, it’s warm, but not cuddly. And if that sounds
a bit paradoxical, Reed Hastings has a clarifying analogy.
You’ll never hear him refer to his colleagues as a “family.” It’s a term that visibly grates at him.
He likens Netflix instead to a sports team—they expect high performance from their players, and
they use internal collaboration as a tool to drive external competitiveness.
HASTINGS: In team sports that really succeed, there often is a lot of warmth between
the players. And so it's emphasizing those aspects, and demonstrating that when people
come in, everyone tries to help them.
But ultimately, it is about performance, unlike a family, which is really about
unconditional love. Even if your brother does something awful and goes to jail, your love
doesn't stop. And that's just a different and important part of society, but that's not what
we're about. What we're about is collectively changing the world in the areas of Internet
television, and that takes incredible performance at every level. We're also about really
honest feedback all the time, so you can learn and be the the best that you can be.
HOFFMAN: Are there any company cultures that you think should do family versus
HASTINGS: I suppose a family business—it's a way of providing an income to a family.
HOFFMAN: So if it’s family already, why not.
HASTINGS: It’s a family already. But no—I mean lifetime employment, unconditional
support, no matter what the performance is. I don't see how that makes sense for
organizational excellence and contribution to society.
HOFFMAN: So let it be known that Netflix does not promise unconditional love—and they’re
exceptionally frank about this in their culture deck, which every prospective employee reads.
This has become a powerful tool for them—one that creates a built-in filter to every hire. It’s a
great hack that other companies would be smart to adopt. Because the hiring process is a
critical—but often overlooked—part of maintaining company culture. When you’re growing and
hiring fast, it’s easy to place expediency over excellence.
You’ll often find yourself tempted to hire perfectly-qualified candidates, who you know—in your
gut—are not a fit with your cultural values. My strong advice: Resist.
HOFFMAN: So how do you resist the urge to hire a candidate who is brilliant, qualified, perfect
in every way—with the sole exception that they might clash with the company’s culture? I asked
Jeff Weiner, the CEO of LinkedIn, how he does it. “With reluctance,” he told me—until he saw
the consequences of the decision.
JEFF WEINER: As the organization grows in success, you're going to have a lot of
demand for your products, and you're going to need to hire quite rapidly. And as a result
of that, you're going to be bringing people into the organization that are less familiar with
the founding DNA, what it was you're trying to accomplish.
I remember early on in my tenure at LinkedIn, we were around the table. Call it a hiring
committee, a small group of people responsible for evaluating new prospects. We were
evaluating some LinkedIn profiles, and there was one profile in particular for a very
important role, and the person who was sponsoring this prospect said, “Look at this
profile, look at the background, look at this experience, look at the skill set. I mean, we
couldn't find anyone better. I should warn everyone, I don't know that they're the right
kind of cultural fit for us, based on the following. But we'll make it work.”
And inevitably, when you try to pull that off, and you kind of rationalize to yourself that,
despite the fact you know there is this misalignment, you'll make it happen—inevitably, it
almost never does. And it becomes very expensive in terms of time, energy, and even
resources working through that, and trying to rectify those situations.
Fast forward about six to nine months, and we were around the table—very similar group
of people, evaluating somebody’s profile, and someone said, “Check out this profile, look
at this background, look at this set of experiences and skills, just unbelievable. But
they're not a cultural fit, so let's move on to the next candidate.” And that's when you
know you're in a position where you can scale—especially when that discussion is taking
place and you're not in the room.
HOFFMAN: Notice how Jeff points out that this willingness to reject A-players has to persist,
even after he leaves the room. Some CEOs, like Aneel Bhusri, co-founder and CEO of
Workday, refuse to leave the room until the team has made this decision so many times, it’s a
ANEEL BHUSRI: You know this well, Reid. In the early days, it's just you, and a few
other people, so we just did it ourselves. We set out to interview the first 500 people.
HOFFMAN: To be clear, by “we,” Aneel means he was personally involved in interviewing the
first 500 hires for cultural fit.
BHUSRI: After our hiring managers had identified people, and put them through the
process for skills, we would then interview the individual at the last stage, and it would be
purely about cultural fit. And we would test on whether they were an “I” person or “we”
person—we were looking for “we” people, we were looking for people that had a clear
driver for why they wanted to be successful. We were looking for people that were high
integrity. We were looking for people that did not job-hop. And you could look at a
resume, you can tell if they’re the shiny, new-penny type that jumps from one op to
another. We were looking at people that were going to be with us for seven, eight, nine,
We just did a town hall a couple days ago, and we’ve got tons of people who have been
with us ten years. And that's how you build a great company. So I was interviewing those
first 500 people.
HOFFMAN: And it's somewhat obvious from this, given that you set up that initial
culture, but how then, past the first 500, did you help keep that?
BHUSRI: Well, we kept interviewing people after the first 500, but we armed those first
group of people. We decided—I think it was at a company meeting—to say, “OK, now
you guys are on the hook. You interview the next 5,000. Make sure the next 5,000
people are great cultural fits.”
They still, to this day, take that role very seriously as ambassadors of the culture.
HOFFMAN: I want to acknowledge the risk of this conversation. A strong culture is great for
team performance—but you also run the risk of defining your culture so narrowly, that the
founding team starts hiring in their own image. And if your founders are a bunch of young, Ivy
League white guys hiring other young, Ivy League white guys, you’re not just being
biased—you’re being foolish. You want a strong adaptive team, you need different perspectives.
Tristan Walker, the founder and CEO of Walker and Company, considers the diversity of his
staff a strategic advantage. They’re hard at work developing health and beauty products for
people of color, which his competitors mistake for a niche market. It only looks niche when
you’re surrounded by white people, he argues. His competitors’ oversight is his team’s
TRISTAN WALKER: So how do we come up with ideas and idea generation, et cetera?
We have an innovation pipeline that's three, four years long.
But a lot of those ideas start with ourselves, because we're part of the community we're
serving. This goes back to some of that strategic advantage. I feel like the diversity of
our company needs to reflect the diversity of America, the diversity of the world. And out
of that comes innovation and ideas that are fresh and new.
HOFFMAN: It’s a sentiment echoed by Mariam Naficy, founder and CEO of MInted, a site that
sells home decor from independent designers around the world. She invites designers to submit
their best works through a crowdsourced competition. And she knows from experience that
great design is tucked away in nearly every market of the world, just waiting to be discovered.
MARIAM NAFICY: So my dad was with the UN. He is an economist—development
economist—and so we would move every time he got a new assignment. So we were in
Kuwait, then Lebanon, and we were there when the war started. Then Tanzania, which
was stable, Iran—so I was there during the revolution—and then Egypt. And then,
actually, I got exposed to a lot of design, architecture, and style that really influenced me.
And I didn't realize how much it did, until I started Minted. I saw things in Iran, for
example, that are hard to get to now.
I would go through bazaars with my mom. And my mom is Chinese, my dad is Iranian.
We would haggle our way through markets a lot.
HOFFMAN: And how did that diversity of international cultures and perspectives help
prepare you for thinking about, “We're going to do design competitions, we’re going to
crowdsource design, we're going to create a range?”
NAFICY: You realize the breadth of perspective that is actually out there, that we don't
necessarily have access to as consumers here—that really helped me. I think also, I
really believe different people have different aesthetic tastes, and you need to be able to
And the best way to address them is really by tapping into global creativity.
HOFFMAN: I only bring up these examples because they underscore the hidden costs of a
whitewashed office culture. You can scale a product to the world without looking like the world,
to be sure—but the slightest misconceptions you have about your customers translate into
missed opportunities for your business. And as an investor at Greylock, we look for a range of
diversity on the team and on its board.
We have worked with recruiting groups and all kinds of organizations, like Sheryl Sandberg’s
Lean In movement, to close the gaps. But I don’t claim to have a silver bullet. At the very
minimum, everyone should be playing the long game on this issue. When we ask this question
year by year, it has to be front and center.
Suppose you have your long game down. You have diversity, a culture deck like Netflix of 124
slides, clearly defined, built into the hiring process, shared with 10 million viewers.
Are you all set to scale? Not quite. Because your culture is not just an expression of how your
team works together—it’s how they work together at their best. You should tell the truth, but add
a dash of idealism.
HASTINGS: We try to constantly encourage employees to figure out how to improve the
culture, not how to preserve it. And so everyone is trying to add value by, “Here's a place
we can improve in what we do.” And so that keeps it very alive. It's not the golden
tablets; it's a constantly evolving living document and practice.
HOFFMAN: I like Reed’s expression—a living document. And it’s brought to life by a peculiar
tension between reality and aspiration—the culture you want, and the culture you strive for. A
truly strong culture is always under construction.
HOFFMAN: Do you release new versions of the deck?
HASTINGS: Yes—so it's been updated a couple of times. We haven't unwound
anything, but we've constantly realized—the current issue is the deck makes us, in some
cases, look cold and competitive, and actually employees experience us as very warm
But that aspect doesn't really come out in the decks. We're constantly trying to update
the deck to be more reflective of who we actually are.
HOFFMAN: So Reed will keep revising that document, and his employees will keep reading it.
And no matter what the size of your company, I’d suggest you do the same. Start early—when
you’re still small and your culture is still being shaped—and recognize that it’s both a creative
exercise and an organic system, one that your employees will shape with you.
Granted, there are people who will tell you, this is a highly overrated exercise. Culture is an
elusive concept. And some people question whether culture—right or wrong, strong or weak—is
just a figment of our imaginations. It’s a question I posed to Reed Hastings.
HOFFMAN: I had a conversation with a friend of mine—who I can't quote yet, because
he hasn't given me permission. But he basically argued to me that culture was a
retroactive narrative of successful companies.
When you're successful, then you can tell the story of the culture that made you
successful—and the classic one here is, “Culture eats strategy.” But do you think that
that counter point of view is just foolish? Or do you think that that is something that
actually, in fact, there is a little bit of, for really successful high-performing companies,
are then very congratulatory to their culture?
HASTINGS: Well, very successful companies also work in buildings rather than tents.
But that's a generally accepted practice, that buildings work better than tents. So you do
have to watch out for that retroactive thing, of kind of what's different.
But I would say, on balance, the culture will help Netflix prosper through multiple eras in
a way that, say, my first company Pure Software did not. And so from a personal
experience, we've been able to adapt from DVD-by-mail, taking on Blockbuster,
defeating a company that was 100 times larger than us, to then go from DVD-by-mail, to
streaming of other people's content, to streaming of our own content, from 100% percent
domestic to global.
So we've encountered many challenges, which Pure Software in the 1990s would not
have been able to do. And so I'm very personally convinced that the culture has been
helping on that. But again, I encourage people not to believe in things, that “Culture eats
strategy for lunch.” Both are really important. We spend a lot of time on strategy, and
why not do both well? Why do you have to rank them? Let's try to do culture well, let’s try
to do strategy well.
HOFFMAN: Think about that list of changes Netflix has weathered. The same people who
shipped DVDs are now producing original content, snapping up movies at film festivals, and
streaming entertainment worldwide.
Netflix is the Madonna of companies, constantly reinventing itself. And notice how Reed, despite
his strategic brilliance, is convinced that his previous company wouldn’t have made the
transition. It’s as close as you get to a control experiment—same strategic mind, two different
cultures. Only one conquers the world. And maybe culture is just a byproduct of strategy. Maybe
you can ignore it and focus on strategy alone.
But consider that list of threats that Reed faced—do you really want to take that risk? I wouldn’t.
And at the very least, if you’re thoughtful about culture, you can avoid hiring a bunch of white
guys named Reed. Otherwise, your water cooler banter will sound like this.
HASTINGS: Great pleasure, Reid. Now let’s do the Reed and Reid thing. Oh, right.
HOFFMAN: So Reed, it's always great talking to you. I always learn something new.
HASTINGS: You too Reid, a great pleasure.
HOFFMAN: I’m Reid Hoffman—not Reed Hastings. Thank you for listening.
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