Reed Hastings Best Quotes

If you’re hiring someone for an operational position, say window washer, ice-cream scooper, or driver, the best employee might deliver double the value of the average.

The best entrepreneurs don’t just follow Moore’s Law; they anticipate it. Consider Reed Hastings, the cofounder and CEO of Netflix. When he started Netflix, his long-term vision was to provide television on demand, delivered via the Internet. But back in 1997, the technology simply wasn’t ready for his vision—remember, this was during the era of dial-up Internet access. One hour of high-definition video requires transmitting 40 GB of compressed data (over 400 GB without compression). A standard 28.8K modem from that era would have taken over four months to transmit a single episode of Stranger Things. However, there was a technological innovation that would allow Netflix to get partway to Hastings’s ultimate vision—the DVD. Hastings realized that movie DVDs, then selling for around $ 20, were both compact and durable. This made them perfect for running a movie-rental-by-mail business. Hastings has said that he got the idea from a computer science class in which one of the assignments was to calculate the bandwidth of a station wagon full of backup tapes driving across the country! This was truly a case of technological innovation enabling business model innovation. Blockbuster Video had built a successful business around buying VHS tapes for around $ 100 and renting them out from physical stores, but the bulky, expensive, fragile tapes would never have supported a rental-by-mail business.

In 2002, with a new understanding of what makes a great place to work, Patty and I made a commitment. Our number one goal, moving forward, would be to do everything we could to retain the post-layoff talent density and all the great things that came with it. We would hire the very best employees and pay at the top of the market. We would coach our managers to have the courage and discipline to get rid of any employees who were displaying undesirable behaviors or weren’t performing at exemplary levels. I became laser-focused on making sure Netflix was staffed, from the receptionist to the top executive team, with the highest-performing, most collaborative employees on the market.

Our employees were learning more from one another and teams were accomplishing more—faster. This was increasing individual motivation and satisfaction and leading the entire company to get more done. We found that being surrounded by the best catapulted already good work to a whole new level. Most important, working with really talented colleagues was exciting, inspiring, and a lot of fun—something that remains as true today with the company at seven thousand employees as it was back then at eighty.

DON’T SEEK TO PLEASE YOUR BOSS. SEEK TO DO WHAT IS BEST FOR THE COMPANY.

Since then I have come to see that the best programmer doesn’t add ten times the value. She adds more like a hundred times. Bill Gates, whom I worked with while on the Microsoft board, purportedly went further. He is often quoted as saying: “A great lathe operator commands several times the wages of an average lathe operator, but a great writer of software code is worth ten thousand times the price of an average software writer.” In the software industry, this is a known principle (although still much debated).

With a fixed amount of money for salaries and a project I needed to complete, I had a choice. I could hire ten to twenty-five average engineers or I could hire one “rock-star” and pay significantly more than what I’d pay the others, if necessary. Since then I have come to see that the best programmer doesn’t add ten times the value. She adds more like a hundred times. Bill Gates, whom I worked with while on the Microsoft board, purportedly went further. He is often quoted as saying: “A great lathe operator commands several times the wages of an average lathe operator, but a great writer of software code is worth ten thousand times the price of an average software writer.” In the software industry, this is a known principle (although still much debated).

At Netflix, we don’t have a lot of jobs like that. Most of our posts rely on the employee’s ability to innovate and execute creatively. In all creative roles, the best is easily ten times better than average.

In a high-performance environment, paying top of market is most cost-effective in the long run. It is best to have salaries a little higher than necessary, to give a raise before an employee asks for it, to bump up a salary before that employee starts looking for another job, in order to attract and retain the best talent on the market year after year. It costs a lot more to lose people and to recruit replacements than to overpay a little in the first place.

Today the entirety of the travel and expense policy still consists of these five simple words: ACT IN NETFLIX’S BEST INTEREST That works better. It is not in Netflix’s best interest that the entire content team fly business from L.A. to Mexico. But if you have to take the red-eye from L.A. to New York and give a presentation the next morning it would likely be in Netflix’s best interest that you fly business, so you don’t have bags under your eyes and slurred speech when the big moment arises.

I learned from that exchange with Leslie that the entire bonus system is based on the premise that you can reliably predict the future, and that you can set an objective at any given moment that will continue to be important down the road. But at Netflix, where we have to be able to adapt direction quickly in response to rapid changes, the last thing we want is our employees rewarded in December for attaining some goal fixed the previous January. The risk is that employees will focus on a target instead of spot what’s best for the company in the present moment.

Creative work requires that your mind feel a level of freedom. If part of what you focus on is whether or not your performance will get you that big check, you are not in that open cognitive space where the best ideas and most innovative possibilities reside. You do worse.

In order to fortify the talent density in your workforce, for all creative roles hire one exceptional employee instead of ten or more average ones. Hire this amazing person at the top of whatever range they are worth on the market. Adjust their salary at least annually in order to continue to offer them more than competitors would. If you can’t afford to pay your best employees top of market, then let go of some of the less fabulous people in order to do so. That way, the talent will become even denser.

When I started at Netflix, Jack explained to me that I should consider I’d been handed a stack of chips. I could place them on whatever bets I believed in. I’d need to work hard and think carefully to ensure I made the best bets I could, and he’d show me how. Some bets would fail, and some would succeed. My performance would ultimately be judged, not on whether any individual bet failed, but on my overall ability to use those chips to move the business forward. Jack made it clear that at Netflix you don’t lose your job because you make a bet that doesn’t work out. Instead you lose your job for not using your chips to make big things happen or for showing consistently poor judgment over time.

I just watched Bull Durham with my kids. On a pro baseball team, the players have great relationships. These players are really close. They support one another. They celebrate together, console one another, and know each other’s plays so well that they can move as one without speaking. But they are not a family. The coach swaps and trades players in and out throughout the year in order to make sure they always have the best player in every position. Patty was right. At Netflix, I want each manager to run her department like the best professional teams, working to create strong feelings of commitment, cohesion, and camaraderie, while continually making tough decisions to ensure the best player is manning each post.

If you have the best employees on the market and you’ve instituted a culture of open feedback, opening up company secrets increases feelings of ownership and commitment among staff.

DON’T SEEK TO PLEASE YOUR BOSS. SEEK TO DO WHAT IS BEST FOR THE COMPANY.

(1) always act in the best interests of the company, (2) never do anything that makes it harder for others to achieve their goals, (3) do whatever you can to achieve your own goals.

The best entrepreneurs don’t just follow Moore’s Law; they anticipate it. Consider Reed Hastings, the cofounder and CEO of Netflix. When he started Netflix, his long-term vision was to provide television on demand, delivered via the Internet. But back in 1997, the technology simply wasn’t ready for his vision

In two years of research the best example of self-disruption I can find is Netflix. Netflix’s transition to streaming from DVD rental by mail was not nearly as smooth as many would like to remember it, but in hindsight it appears genius. Netflix was founded in 1997 as a DVD mail service and pretty rapidly rose to take huge market share from local video stores who could not compete with its vast range of titles. People soon appreciated the appeal of no late fees, the ability to have several movies out at the same time, as well as its unlimited consumption tariff. Always keen to keep abreast of the latest technology, in 2007 Netflix spent about $40 million to build data centres and to cover the cost of licensing for the initial streaming titles (Rodriguez, 2017). When internet speeds allowed, it introduced streaming as an additional service for its existing subscribers. Monthly fees remained the same, but those with more expensive tariffs were given access to more hours of streamed content. While it added something for free, it also helped give people a reason to upgrade to more expensive plans. Growth was impressive, the video libraries of streamed content rose, the share price rose impressively from $3 in 2007 to over $42 in 2011, and life was good. In September 2011 Netflix made a very bold move. It created two tariffs, and moved all its US subscribers onto two separate plans: the original DVD-by-mail service was to be called Qwikster; the other was a streaming service for a lower monthly fee. The market was shocked, and by December the stock price was below $10 and the company was in pieces. The company rapidly lost higher revenue DVD subscribers and within nine months profits were down by 50 per cent (Steel, 2015). And yet slowly things changed. First, the lower prices suddenly appealed to a much wider market, bringing in far more paying customers, allowing Netflix to buy more content and to slowly raise prices. Then Netflix started making its own original content, clearing out global streaming rights, and then at a flick of a switch it was able to expand globally. If Netflix had not disrupted itself it would be a very different company. It would rely on a massive physical distortion system, with very high costs. It would probably have lost out massively to YouTube and would have withered away as a mail-order DVD supplier. Instead, Netflix’s share price is now nearly $200, five times more than it was when it bravely self-disrupted, it operates in 190 countries, makes nearly $9 billion in revenue from over 110 million customers (Feldman, 2017). Today DVDs represent only 4 per cent of Netflix’s users. It seems that in 2011, when Wall Street was demanding the resignation of Reed Hastings for reinventing the business, they were wrong. From this you can see the pressure this approach places on leaderships, the confidence you need to have, the degree to which this antagonizes the market and everyone around you. This move takes balls. The confidence, conviction, and aggression, to change before you have to create your own future, is remarkable.