Reed Hastings Quotes

Fear no more the heat o' the sun, Nor the furious winter's rages; Thou thy worldly task hast done, Home art gone, and ta'en thy wages; Golden lads and girls all must, As chimney-sweepers, come to dust. Fear no more the frown o' the great; Thou art past the tyrant's stroke: Care no more to clothe and eat; To thee the reed is as the oak: The sceptre, learning, physic, must All follow this, and come to dust. Fear no more the lightning-flash, Nor the all-dreaded thunder-stone; Fear not slander, censure rash; Thou hast finished joy and moan; All lovers young, all lovers must Consign to thee, and come to dust. No exorciser harm thee! Nor no witchcraft charm thee! Ghost unlaid forbear thee! Nothing ill come near thee! Quiet consummation have; And renownéd be thy grave!

Lead with context, not control,” and coaching your employees using such guidelines as, “Don’t seek to please your boss.

it made our workforce smarter. When you give low-level employees access to information that is generally reserved for high-level executives, they get more done on their own. They work faster without stopping to ask for information and approval. They make better decisions without needing input from the top.

If you give employees more freedom instead of developing processes to prevent them from exercising their own judgment, they will make better decisions and it’s easier to hold them accountable.

even when other team members were exceptionally talented and intelligent, one individual’s bad behavior brought down the effectiveness of the entire team. In dozens of trials, conducted over month-long periods, groups with one underperformer did worse than other teams by a whopping 30 to 40 percent.

Elon Musk (of Tesla, SpaceX, and SolarCity), Jeff Bezos (of Amazon), and Reed Hastings (of Netflix) are other great shapers from the business world. In philanthropy, Muhammad Yunus (of Grameen), Geoffrey Canada (of Harlem Children’s Zone), and Wendy Kopp (of Teach for America) come to mind; and in government, Winston Churchill, Dr. Martin Luther King, Jr., Lee Kuan Yew, and Deng Xiaoping. Bill Gates has been a shaper in both business and philanthropy, as was Andrew Carnegie. Mike Bloomberg has been a shaper in business, philanthropy, and government. Einstein, Freud, Darwin, and Newton were giant shapers in the sciences. Christ, Muhammad, and the Buddha were religious shapers. They all had original visions and successfully built them out.

The Fearless Organization, she explains that if you want to encourage innovation, you should develop an environment where people feel safe to dream, speak up, and take risks. The safer the atmosphere, the more innovation you will have.

If you have a team of five stunning employees and two adequate ones, the adequate ones will sap managers’ energy, so they have less time for the top performers, reduce the quality of group discussions, lowering the team’s overall IQ, force others to develop ways to work around them, reducing efficiency, drive staff who seek excellence to quit, and show the team you accept mediocrity, thus multiplying the problem.

ich kann nicht festhalten, aber noch weniger kann ich dich loslassen. Wieso hast du mich halb hiergelassen und halb mitgenommen?

Netflix treats employees like adults who can handle difficult information and I love that. This creates enormous feelings of commitment and buy-in from employees.

TALENT DENSITY: TALENTED PEOPLE MAKE ONE ANOTHER MORE EFFECTIVE

HIGH PERFORMANCE + SELFLESS CANDOR = EXTREMELY HIGH PERFORMANCE

In a fast and innovative company, ownership of critical, big-ticket decisions should be dispersed across the workforce at all different levels, not allocated according to hierarchical status.

Then I spoke with proven shapers I knew—Bill Gates, Elon Musk, Reed Hastings, Muhammad Yunus, Geoffrey Canada, Jack Dorsey (of Twitter), David Kelley (of IDEO), and more. They had all visualized remarkable concepts and built organizations to actualize them, and done that repeatedly and over long periods of time. I asked them to take an hour’s worth of personality assessments to discover their values, abilities, and approaches. While not perfect, these assessments have been invaluable. (In fact, I have been adapting and refining them to help us in our recruiting and management.) The answers these shapers provided to the standardized questions gave me objective and statistically measurable evidence about their similarities and differences. It turns out they have a lot in common. They are all independent thinkers who do not let anything or anyone stand in the way of achieving their audacious goals. They have very strong mental maps of how things should be done, and at the same time a willingness to test those mental maps in the world of reality and change the ways they do things to make them work better. They are extremely resilient, because their need to achieve what they envision is stronger than the pain they experience as they struggle to achieve it. Perhaps most interesting, they have a wider range of vision than most people, either because they have that vision themselves or because they know how to get it from others who can see what they can’t. All are able to see both big pictures and granular details (and levels in between) and synthesize the perspectives they gain at those different levels, whereas most people see just one or the other. They are simultaneously creative, systematic, and practical. They are assertive and open-minded at the same time. Above all, they are passionate about what they are doing, intolerant of people who work for them who aren’t excellent at what they do, and want to have a big, beneficial impact on the world.

above all you have to be humble, you have to be curious, and you have to remember to listen before you speak and to learn before you teach. With this approach, you can’t help but become more effective every day in this ever-fascinating multicultural world.

Humility is important in a leader and role model. When you succeed, speak about it softly or let others mention it for you. But when you make a mistake say it clearly and loudly, so that everyone can learn and profit from your errors. In other words, “Whisper wins and shout mistakes.

Du hast mir mal gesagt, nach dem Regen folgt immer Sonnenschein. Aber was mache ich, wenn der Regen nicht aufhört? Oh, ich weiß was du sagen würdest: Dann stell dich gefälligst rein! Tanzen kannst du überall.

My goal was to make employees feel like owners and, in turn, to increase the amount of responsibility they took for the company’s success. However, opening company secrets to employees had another outcome: it made our workforce smarter.

I recommend instead focusing first on something much more difficult: getting employees to give candid feedback to the boss. This can be accompanied by boss-to-employee feedback. But it’s when employees begin providing truthful feedback to their leaders that the big benefits of candor really take off.

This frail vessel thou emptiest again and again, and fillest it ever with fresh life. This little flute of a reed thou hast carried over hills and dales, and hast breathed through it melodies eternally new... Thy infinite gifts come to me only on those very small hand of mine. Ages pass, and still thou pourest, and still there is room to fill.

In 2007, Leslie Kilgore coined the expression “Lead with context, not control

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 more you and others in your company respond to all candid moments with belonging cues, the more courageous people will be in their candor.

Farm for dissent,” or “socialize” the idea. For a big idea, test it out. As the informed captain, make your bet. If it succeeds, celebrate. If it fails, sunshine it.

but we had one thing that Blockbuster did not: a culture that valued people over process, emphasized innovation over efficiency, and had very few controls.

that—no matter where you come from—when it comes to working across cultural differences, talk, talk, talk.

This is the nub of F&R. If your people choose to abuse the freedom you give them, you need to fire them and fire them loudly, so others understand the ramifications. Without this, freedom doesn’t work.

If you trust your people to handle appropriately sensitive information, the trust you demonstrate will instigate feelings of responsibility and your employees will show you just how trustworthy they are.

At Netflix, we emphasize that it’s fine to disagree with your manager and to implement an idea she dislikes. We don’t want people putting aside a great idea because the manager doesn’t see how great it is.

was not obvious at the time, even to me, but we had one thing that Blockbuster did not: a culture that valued people over process, emphasized innovation over efficiency, and had very few controls. Our culture, which focused on achieving top performance with talent density and leading employees with context not control, has allowed us to continually grow and change as the world, and our members’ needs, have likewise morphed around us.

That’s when we added a new element to our culture. We now say that it is disloyal to Netflix when you disagree with an idea and do not express that disagreement. By withholding your opinion, you are implicitly choosing to not help the company.

A fast and innovative workplace is made up of what we call “stunning colleagues”—highly talented people, of diverse backgrounds and perspectives, who are exceptionally creative, accomplish significant amounts of important work, and collaborate effectively.

Now Larry encourages his own staff to take those calls from the recruiters: “But I also don’t wait for them to come to me. If I see someone could make more money somewhere else, I give them the raise right away.” To retain your top employees, it’s always better to give them the raise before they get the offers.

We try to apply the Keeper Test to everyone, including ourselves. Would the company be better off with someone else in my role? The goal is to remove any shame for anyone let go from Netflix. Think of an Olympic team sport like hockey. To get cut from the team is very disappointing, but the person is admired for having had the guts and skill to make the squad in the first place. When someone is let go at Netflix, we hope for the same. We all stay friends and there is no shame.

She found a way to calculate how much money his moodiness was costing the business. She spoke to him in his own financial language, adding a shot of her infectious humor to the communication, and Barry was moved. He went back to his team, told them about the feedback he’d received, and asked them to call him out when his mood was influencing their actions. The results were remarkable. In the subsequent weeks and months, many on the finance team spoke to me and Patty about the positive change in Barry’s leadership.

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.

The fall of 2017, one of our leaders, who unbeknownst to us, struggled with alcohol addiction and fell off the wagon on a business trip. He immediately entered rehab. What should we tell his staff? His boss believed that we should follow the Netflix culture and tell everyone the truth. Human Resources insisted that he should have the right to choose what he shared about his personal challenges. In this case, I agreed with HR. When it comes to personal struggles, an individual’s right to privacy trumps an organization’s desire for transparency. Here we didn’t take the most transparent route. But we didn’t spin either. We told everyone that the guy had taken two weeks off for personal reasons. It was up to him to share more details if he chose.

symphony isn’t what you’re going for. Leave the conductor and the sheet music behind. Build a jazz band instead. Jazz emphasizes individual spontaneity. The musicians know the overall structure of the song but have the freedom to improvise, riffing off one another other, creating incredible music. Of course, you can’t just remove the rules and processes, tell your team to be a jazz band, and expect it to be so. Without the right conditions, chaos will ensue. But now, after reading this book, you have a map. Once you begin to hear the music, keep focused. Culture isn’t something you can build up and then ignore. At Netflix, we are constantly debating our culture and expecting it will continually evolve. To build a team that is innovative, fast, and flexible, keep things a little bit loose. Welcome constant change. Operate a little closer toward the edge of chaos. Don’t provide a musical score and build a symphonic orchestra. Work on creating those jazz conditions and hire the type of employees who long to be part of an improvisational band. When it all comes together, the music is beautiful.

Brian Chesky of Airbnb defines culture in a simple and concise way: “a shared way of doing things.” Clearly defining the way an organization does things matters, because blitzscaling requires aggressive, focused action, and unclear, hazy cultures get in the way of actually implementing strategy. Netflix cofounder and CEO Reed Hastings told me, “Weak cultures are diffuse; people act differently, and don’t understand each other, and it becomes political.” Mark Zuckerberg and Sheryl Sandberg have done many wonderful things at Facebook, and one of them is building a unified culture that is devoted to aggressive experimentation and data-driven decision making, as summarized by Mark’s original motto “Move fast and break things.” Facebook’s culture helps employees understand that they shouldn’t be afraid to try things that might fail. This allows Facebook to move faster, and to move on from failed experiments quickly. Imagine if someone asked a random employee from your start-up the following questions: What is your organization trying to do? How are you trying to achieve those goals? What acceptable risks are you incurring to achieve those goals more quickly? When you have to trade off certain values, which ones take priority? What kind of behavior do you hire, promote, or fire for?

Moreover, Netflix produces exactly what it knows its customers want based on their past viewing habits, eliminating the waste of all those pilots, and only loses customers when they make a proactive decision to cancel their subscription. The more a person uses Netflix, the better Netflix gets at providing exactly what that person wants. And increasingly, what people want is the original content that is exclusive to Netflix. The legendary screenwriter William Goldman famously wrote of Hollywood, “Nobody knows anything.” To which Reed Hastings replies, “Netflix does.” And all this came about because Hastings had the insight and persistence to wait nearly a decade for Moore’s Law to turn his long-term vision from an impossible pipe dream into one of the most successful media companies in history. Moore’s Law has worked its magic many other times, enabling new technologies ranging from computer animation (Pixar) to online file storage (Dropbox) to smartphones (Apple). Each of those technologies followed the same path from pipe dream to world-conquering reality, all driven by Gordon Moore’s 1965 insight.

The success of Netflix is founded on these types of unlikely stories: small teams consisting exclusively of significantly above-average performers—what Reed refers to as dream teams—working on big hairy problems.

In the book ‘That Will Never Work’ by Marc Randolph, Reed Hastings gives Marc advice on starting a new company: You need the same people to return and use your product. You need something that is consumed; once a movie is done you need another one. The market of new customers is limited. There is no way you can succeed if you must keep finding new customers. - Reed Hastings, CEO of Netflix

I’ve also found having a lean workforce has side advantages. Managing people well is hard and takes a lot of effort. Managing mediocre-performing employees is harder and more time consuming. By keeping our organization small and our teams lean, each manager has fewer people to manage and can therefore do a better job at it. When

The downside to a high-performance culture is the fear employees may feel that their jobs are on the line. To reduce fear, encourage employees to use the Keeper Test Prompt with their managers: “How hard would you work to change my mind if I were thinking of leaving?

Most interesting of all, unlike the vast majority of firms that fail when the industry shifts,

We now say that it is disloyal to Netflix when you disagree with an idea and do not express that disagreement. By withholding your opinion, you are implicitly choosing to not help the company.

Only give feedback when someone asks you for it” and “Praise in public, criticize in private.

For many years, one of America’s biggest corporations proudly exhibited the following list of values in the lobby of its headquarters: “Integrity. Communication. Respect. Excellence.” The company? Enron. It boasted about having lofty values right up to the moment it came crashing down in one of history’s biggest cases of corporate fraud and corruption.

Felps first found that, even when other team members were exceptionally talented and intelligent, one individual’s bad behavior brought down the effectiveness of the entire team. In dozens of trials, conducted over month-long periods, groups with one underperformer did worse than other teams by a whopping 30 to 40 percent.

If you are promoting a culture of candor on your team, you have to get rid of the jerks. Many may think, “This guy is so brilliant, we can’t afford to lose him.” But it doesn’t matter how brilliant your jerk is, if you keep him on the team you can’t benefit from candor. The cost of jerkiness to effective teamwork is too high. Jerks are likely to rip your organization apart from the inside. And their favorite way to do that is often by stabbing their colleagues in the front and then offering, “I was just being candid.

If the CEO is taking only two weeks’ vacation, of course his employees feel the unlimited plan doesn’t give them much freedom. They’re bound to take more time off with three allotted weeks than with an indefinite number and a boss who models just two. In the absence of a policy, the amount of vacation people take largely reflects what they see their boss and colleagues taking. Which is why, if you want to remove your vacation policy, start by getting all leaders to take significant amounts of vacation and talk a lot about it.

Rochelle’s feedback was frank but thoughtful and genuinely intended to help Reed improve. But the big risk in fostering a climate of candor is all the ways people may both purposely and accidentally misuse it.

AIM TO ASSIST: Feedback must be given with positive intent. Giving feedback in order to get frustration off your chest, intentionally hurting the other person, or furthering your political agenda is not tolerated. Clearly explain how a specific behavior change will help the individual or the company, not how it will help you.

ACTIONABLE: Your feedback must focus on what the recipient can do differently.

APPRECIATE: Natural human inclination is to provide a defense or excuse when receiving criticism; we all reflexively seek to protect our egos and reputation. When you receive feedback, you need to fight this natural reaction and instead ask yourself, “How can I show appreciation for this feedback by listening carefully, considering the message with an open mind, and becoming neither defensive nor angry?

In most organizations, shouting criticism out in front of a group, while that person is in the middle of a presentation, would be considered inappropriate and unhelpful. But if you manage to inculcate an effective culture of candor, all involved would recognize that this feedback from Bianca was a gift.

When considering whether to give feedback, people often feel torn between two competing issues: they don’t want to hurt the recipient’s feelings, yet they want to help that person succeed. The goal at Netflix is to help each other succeed, even if that means feelings occasionally get hurt. More important, we’ve found that in the right environment, with the right approach, we can give the feedback without hurting feelings.

Paula did not feel she was being a jerk, just that she was living the Netflix culture with her honest feedback. Yet because of her difficult behavior, Paula no longer works at Netflix. A culture of candor does not mean that you can speak your mind without concern for how it will impact others. On the contrary, it requires that everyone think carefully about the 4A guidelines.

Policies and control processes became so foundational to our work that those who were great at coloring within the lines were promoted, while many creative mavericks felt stifled and went to work elsewhere. I was sorry to see them go, but I believed that this was what happens when a company grows up. Then two things occurred. The first is that we failed to innovate quickly. We had become increasingly efficient and decreasingly creative. In order to grow we had to purchase other companies that did have innovative products. That led to more business complexity, which in turn led to more rules and process. The second is that the market shifted from C++ to Java. To survive, we needed to change. But we had selected and conditioned our employees to follow process, not to think freshly or shift fast. We were unable to adapt and, in 1997, ended up selling the company to our largest competitor.

If you give employees more freedom instead of developing processes to prevent them from exercising their own judgment, they will make better decisions and it’s easier to hold them accountable. This also makes for a happier, more motivated workforce as well as a more nimble company. But to develop a foundation that enables this level of freedom you need to first increase two other elements: + Build up talent density. At most companies, policies and control processes are put in place to deal with employees who exhibit sloppy, unprofessional, or irresponsible behavior. But if you avoid or move out these people, you don’t need the rules. If you build an organization made up of high performers, you can eliminate most controls. The denser the talent, the greater the freedom you can offer. + Increase candor. Talented employees have an enormous amount to learn from one another. But the normal polite human protocols often prevent employees from providing the feedback necessary to take performance to another level. When talented staff members get into the feedback habit, they all get better at what they do while becoming implicitly accountable to one another, further reducing the need for traditional controls.

With these two elements in place you can now . . . - Reduce controls. Start by ripping pages from the employee handbook. Travel policies, expense policies, vacation policies—these can all go. Later, as talent becomes increasingly denser and feedback more frequent and candid, you can remove approval processes throughout the organization, teaching your managers principles like, “Lead with context, not control,” and coaching your employees using such guidelines as, “Don’t seek to please your boss.

ACCEPT OR DISCARD: You will receive lots of feedback from lots of people while at Netflix. You are required to listen and consider all feedback provided. You are not required to follow it. Say “thank you” with sincerity. But both you and the provider must understand that the decision to react to the feedback is entirely up to the recipient.

The only remaining question is when and where to give feedback—and the answer is anywhere and anytime.

Those who were exceptionally creative, did great work, and collaborated well with others went immediately into the “keepers” pile.

Every employee has some talent. When we’d been 120 people, we had some employees who were extremely talented and others who were mildly talented. Overall we had a fair amount of talent dispersed across the workforce. After the layoffs, with only the most talented eighty people, we had a smaller amount of talent overall, but the amount of talent per employee was greater. Our talent “density” had increased. We learned that a company with really dense talent is a company everyone wants to work for. High performers especially thrive in environments where the overall talent density is high.

But with a lot of brilliant people running around, you run a risk. Sometimes really talented people have heard for so long how great they are, they begin to feel they really are better than everybody else. They might smirk at ideas they find unintelligent, roll their eyes when people are inarticulate, and insult those they feel are less gifted than they are. In other words, these people are jerks.

After the 2001 layoffs, we realized that at Netflix we also had a handful of people who had created an undesirable work climate. Many weren’t great at their jobs in myriad little ways, which suggested to others that mediocre performance was acceptable, and brought down the performance of everyone in the office.

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.

Greg Peters, who replaced Neil Hunt as chief product officer in 2017, is one example. Greg gets to work at the normal hour of 8:00 a.m. and leaves the office by 6:00 p.m. to be home for dinner with his children. Greg makes a point of taking big vacations, including visiting his wife’s family in Tokyo, and encourages his staff to do the same. “What we say as leaders is only half the equation,” Greg explains. “Our employees are also looking at what we do. If I say, ‘I want you to find a sustainable and healthy work-life balance,’ but I’m in the office twelve hours a day, people will imitate my actions, not follow my words.

This is the great benefit to the Netflix vacation freedom,” she explained. “Not that you can take more or less days off, but that you can organize your life in any crazy way you like—and as long as you do great work nobody bats an eyelid.

In the absence of written policy, every manager must spend time speaking to the team about what behaviors fall within the realm of the acceptable and appropriate

The Netflix ethos is that one superstar is better than two average people.

We’d found a way to give our high performers a little more control over their lives, and that control made everybody feel a little freer. Because of our high-talent density, our employees were already conscientious and responsible. Because of our culture of candor, if anyone abused the system or took advantage of the freedom allotted, others would call them out directly and explain the undesirable impact of their actions.

Giving employees more freedom led them to take more ownership and behave more responsibly. That’s when Patty and I coined the term “Freedom and Responsibility.” It’s not just that you need to have them both; it’s that one leads to the other. It began to dawn on me. Freedom is not the opposite of accountability, as I’d previously considered. Instead, it is a path toward it.

When you find people abusing the system, fire them and speak about the abuse openly—even when they are star performers in other ways. This is necessary so that others understand the ramifications of behaving irresponsibly.

Manipulating your message to make the organization, yourself, or another employee appear better than reality is so common across the business world that many leaders don’t even realize they’re doing it. We “spin” by selectively sharing the facts, overemphasizing the positive, minimizing the negative, all in an attempt to shape the perception of others.

Spinning the truth is one of the most common ways leaders erode trust. I can’t say this clearly enough: don’t do this. Your people are not stupid. When you try to spin them, they see it, and it makes you look like a fraud. Speak plainly, without trying to make bad situations seem good, and your employees will learn you tell the truth.

Since then, every time I feel I’ve made a mistake, I talk about it fully, publicly, and frequently. I quickly came to see the biggest advantage of sunshining a leader’s errors is to encourage everyone to think of making mistakes as normal. This in turn encourages employees to take risks when success is uncertain . . . which leads to greater innovation across the company. Self-disclosure builds trust, seeking help boosts learning, admitting mistakes fosters forgiveness, and broadcasting failures encourages your people to act courageously.

The pratfall effect is the tendency for someone’s appeal to increase or decrease after making a mistake, depending on his or her perceived ability to perform well in general.

a leader who has demonstrated competence and is liked by her team will build trust and prompt risk-taking when she widely sunshines her own mistakes. Her company benefits. The one exception is for a leader considered unproven or untrusted. In these cases you’ll want to build trust in your competency before shouting your mistakes.

Ted, your job is not to try to make me happy or to make the decision you think I’d most approve of. It’s to do what’s right for the business. You are not allowed to let me drive this company off a cliff!” At most companies, the boss is there to approve or block the decisions of employees. This is a surefire way to limit innovation and slow down growth. At Netflix, we emphasize that it’s fine to disagree with your manager and to implement an idea she dislikes.

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

We don’t emulate these top-down models, because we believe we are fastest and most innovative when employees throughout the company make and own decisions. At Netflix, we strive to develop good decision-making muscles everywhere in our company—and we pride ourselves on how few decisions senior management makes.

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).

The reason the rock-star engineer is so much more valuable than his counterparts isn’t unique to programming. The great software engineer is incredibly creative and can see conceptual patterns that others can’t. She has an adjustable perspective, so when she gets stuck in a specific way of thinking, she has ways to push, pull, or prod herself to look beyond. These are the same skills needed in any creative job. Patty McCord and I started to look at where exactly the rock-star principle might apply within Netflix. We divided jobs into operational and creative roles.

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.

These are all creative jobs and they all follow the rock-star principle.

But for all creative jobs we would pay one incredible employee at the top of her personal market, instead of using that same money to hire a dozen or more adequate performers.

I’ve also found having a lean workforce has side advantages. Managing people well is hard and takes a lot of effort. Managing mediocre-performing employees is harder and more time consuming. By keeping our organization small and our teams lean, each manager has fewer people to manage and can therefore do a better job at it. When those lean teams are exclusively made up of exceptional-performing employees, the managers do better, the employees do better, and the entire team works better—and faster.

That’s why I don’t have my own office or even a cubicle with drawers that close. During the day, I might grab a conference room for some discussions, but my assistant knows to book most of my meetings in other people’s work spaces. I always try to go to the work spot of the person I’m seeing, instead of making them come to me. One of my preferences is to hold walking meetings, where I often come across other employees meeting out in the open.

João makes a strong case. So why do companies still follow the normal raise methods? Reed’s theory is that the raise pools and salary bands used at most companies worked well when employment was often for life and an individual’s market value wasn’t likely to skyrocket in a matter of months. But clearly those conditions don’t apply anymore, given how fast people switch jobs today and the changing nature of our modern economy.

For our employees, transparency has become the biggest symbol of how much we trust them to act responsibly. The trust we demonstrate in them in turn generates feelings of ownership, commitment, and responsibility

It’s up to the leader to live the message of transparency by sharing as much as possible with everybody. Big things, small things, whether good or bad—if your first instinct is to put most information out there, others will do the same. At Netflix, we call this “sunshining,” and we make an effort to do a lot of it.

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.

My goal was to make employees feel like owners and, in turn, to increase the amount of responsibility they took for the company’s success. However, opening company secrets to employees had another outcome: it made our workforce smarter. When you give low-level employees access to information that is generally reserved for high-level executives, they get more done on their own. They work faster without stopping to ask for information and approval. They make better decisions without needing input from the top.

But when one employee abuses your trust, deal with the individual case and double your commitment to continue transparency with the others. Do not punish the majority for the poor behavior of a few.

When removing travel and expense policies, encourage managers to set context about how to spend money up front and to check employee receipts at the back end. If people overspend, set more context.

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.