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Speaker 1: I was thinking about Netflix, you know, with all the

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Speaker 1: pandemic binge watching and everything. Yeah, everybody is there. David

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Speaker 1: Rubinstein had a chance talk with co CEO Read Hastings

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Speaker 1: on the David Rubinstein Show, Peer to Peer Conversations. You

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Speaker 1: know at Netflix went public in two thousand two, right,

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Speaker 1: and the market cap is up more than eighty thousand percent,

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Speaker 1: And I checked the math and that's definitely the case.

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Speaker 1: And the stock is up more than forty percent since then.

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Speaker 1: Oh boy. Yeah. And David had a chance to ask

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Speaker 1: Hastings if he ever expected this kind of success, why

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Speaker 1: don't we listen in the company now which went public

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Speaker 1: in two thousand two. The market cap is up about

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Speaker 1: eighties six thousand percent, stock is up about forty one

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Speaker 1: percent since then. Did you ever think that it would

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Speaker 1: become that big and that's successful? Well now, because then

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Speaker 1: I would have never sold a share, So you never

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Speaker 1: know on on that and you know, honestly, there's been

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Speaker 1: a lot of luck along the way to UM. Blockbuster

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Speaker 1: could have wiped us out many times. UM. When Viacom

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Speaker 1: spun off Blockbuster in two thousand and four, they saddled

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Speaker 1: them with a billion dollars of debt as their good

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Speaker 1: by kiss. And you know that the covenants on that

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Speaker 1: debt severely limited Blockbuster when they attacked us. So that

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Speaker 1: was one. Another one is Blockbuster had us on the ropes.

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Speaker 1: And then Carl I com got elected um to the

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Speaker 1: board of directors by the shareholders of Blockbuster, uh, and

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Speaker 1: he fired the CEO over some you know, silly bonus issue,

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Speaker 1: and then they completely changed strategies. And so all these

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Speaker 1: things have been incredibly you know, lucky strokes. And so

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Speaker 1: you need both skill and luck, which I'm sure you've

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Speaker 1: experienced too. I've had a lot of luck, for sure.

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Speaker 1: So let me ask you though, for those who may

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Speaker 1: not be familiar with a new book you're coming out

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Speaker 1: with called No Rules Rules. Uh. In that book you

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Speaker 1: described that you actually, at one point one of the

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Speaker 1: go to Blockbuster and sell them the company for I think,

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Speaker 1: uh some modest amount today fifty million dollars absolutely um.

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Speaker 1: And uh. You know, in the early days, we were like,

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Speaker 1: Blockbuster is going to wreck us as soon as we

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Speaker 1: get big um. And we were almost right about that.

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Speaker 1: And so we went to see them and and you know,

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Speaker 1: they were very polite, but they were not interested. And

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Speaker 1: had they bought the company. Where do you think Blockbuster

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Speaker 1: would be today? And where do you think Netflix would

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Speaker 1: be today? It's always hard to tell, but I think

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Speaker 1: we could have made Blockbuster modern brand. You have a

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Speaker 1: culture you describe in your book which is very unique.

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Speaker 1: And let me just go through a couple of things

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Speaker 1: that you say that I found studying as somebody who's

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Speaker 1: helped to run accompany myself as publicly traded. For example,

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Speaker 1: you have a system where, um, people can take whatever

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Speaker 1: vacation they want to take. There's no limit. People can

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Speaker 1: take any time off they want, no limit. Um, where

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Speaker 1: did you get that idea from? Well, in the industrial economy,

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Speaker 1: like factories, we measured people by how many hours they

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Speaker 1: did on the job nine to five, eight to six,

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Speaker 1: whatever that is. And we really want people to focus

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Speaker 1: on ideas, on generating important work. And so you know,

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Speaker 1: we don't measure them during the day. We don't clock

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Speaker 1: our people in. And if we're not going to tell

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Speaker 1: whether someone is working five to nine or nine to five,

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Speaker 1: which is a two to one difference in hours, why

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Speaker 1: are we tracking whether they do fifty weeks or forty

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Speaker 1: eight weeks a year? Um, you know of work that's

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Speaker 1: in the noise, and so unlimited vacation. You know, it's

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Speaker 1: sort of like saying dress how you want, you know,

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Speaker 1: and then people still don't come to work naked. There's

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Speaker 1: some cultural assumptions about appropriate clothing for work, and we

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Speaker 1: don't need to specify that. And in the same way

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Speaker 1: with vacation, people understand getting work done and they get

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Speaker 1: to live more flexibly. Okay. Were you also say in

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Speaker 1: your book you don't have to please at your company

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Speaker 1: your boss. Other ways you can go ahead and do

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Speaker 1: what you think is best and your boss doesn't agree,

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Speaker 1: that's okay? Is that easy to run a company that way?

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Speaker 1: You know, again, we're really focused on inspiration over supervision.

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Speaker 1: So the traditional paradigm is that good management is close management,

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Speaker 1: set subjectives, manages tightly and all of that's appropriate and

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Speaker 1: safety critical environments airlines, producing vaccines, etcetera. But in a

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Speaker 1: creative business, you don't care so much about what goes wrong.

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Speaker 1: You care about enough of the right things get done.

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Speaker 1: Um And so we really focus on inspiring inspiring our

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Speaker 1: people and having it the very open and collaborative and

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Speaker 1: from that you get amazing technical innovation and you get

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Speaker 1: amazing content innovation. You point out in the book that

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Speaker 1: if people do a reasonably good job, they still might

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Speaker 1: lose their job if they haven't done a spectacular job,

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Speaker 1: and therefore they get a very good set but not

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Speaker 1: a continue job. Can you explain that theory? Yeah, and

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Speaker 1: again in the traditional industrial paradigm, you know you have

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Speaker 1: to do something wrong to get let go. You can

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Speaker 1: think of a job as sort of a property right,

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Speaker 1: you know, until you lose it by abusing your position.

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Speaker 1: But if you think about professional sports, you know, if

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Speaker 1: that team is going to win a championship, it has

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Speaker 1: to have a mix of the right players that work

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Speaker 1: well together, that are the absolute best in the world.

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Speaker 1: And so we try to model ourselves like a professional

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Speaker 1: sports team. So highly paid, but you've got to earn

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Speaker 1: your position every year, and it's about performance. And you

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Speaker 1: know that's not right for everybody. Some people care mostly

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Speaker 1: about job security. Other people care mostly about excellent colleagues,

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Speaker 1: and you know, playing great team ball to achieving something

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Speaker 1: important for the consumers. And you know we're attracting, you know,

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Speaker 1: that group of people who care about team excellence. So

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Speaker 1: I have no doubt your book will be a best

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Speaker 1: seller because it's a very interesting book. But I couldn't

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Speaker 1: understand exactly whether you were saying that your culture is

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Speaker 1: one that if other companies adopted, they would do better,

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Speaker 1: or it's just that you're explaining what is so unique

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Speaker 1: about your company and why it's successful. So which is

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Speaker 1: it or is it both? I think a certain type

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Speaker 1: of company, a company in a creative industry where there's

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Speaker 1: a lot of change, will do better by optimizing for

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Speaker 1: flexibility than efficiency, and other companies, like an airline or

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Speaker 1: a factory, wants to optimize either for safety or for

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Speaker 1: manufacturing yield. So again, highly consistent results. And that's not

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Speaker 1: for this Netflix culture, but for again a company that

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Speaker 1: wants to be inventive and create new things. I think

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Speaker 1: this offers a lot of fresh ideas for people to

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Speaker 1: rethink the traditional industrial paradigm. Let's go back a little

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Speaker 1: bit to your background. So you grew up in the

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Speaker 1: Boston areas that right, Boston and d c U. And

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Speaker 1: you went to UH College at Bowden, which is a

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Speaker 1: great school. And after you graduated, what did you do?

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Speaker 1: I went in the US Peace Corps and I was

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Speaker 1: a high school math teacher UH in a very rural

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Speaker 1: part of southern Africa. And after that you decided that

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Speaker 1: you would go to business school at Stanford. What led

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Speaker 1: you to decide to go to business school? And at Stanford?

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Speaker 1: So I actually went into computer science UM, and I

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Speaker 1: tried to take a business class, but they rejected me. UM.

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Speaker 1: So Uh. In any case, UM, being at at Stanford

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Speaker 1: in the mid eighties was an incredible experience because you

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Speaker 1: learned so much entrepreneurial work from all your colleagues. Everyone's

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Speaker 1: bubbling with ideas UM. And that's still happening today forty

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Speaker 1: years later. So when you graduated from Stanford, you decided

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Speaker 1: to get into the computer industry and you were a

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Speaker 1: programmer for a while, is that right? Yeah? I was

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Speaker 1: a programmer at a couple different companies. UM. And then

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Speaker 1: I was fortunate and had an idea of something that

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Speaker 1: I really wanted to do. UM. That was in n

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Speaker 1: So he took a year off and consulted on the

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Speaker 1: side part time, and then wrote a program that ultimately

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Speaker 1: turned into a company which was a reasonable success. Uh.

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Speaker 1: Morgan Stanley took us public in it doubled every year. UH.

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Speaker 1: And that ultimately is the company that was so much

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Speaker 1: process that it got too rigid. So it was a

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Speaker 1: great learning lesson a right, So when you ultimately left

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Speaker 1: that company after taking a public and ultimately merging with

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Speaker 1: somebody else, you had the idea of starting what is

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Speaker 1: now on Netflix. Is that right? Yeah? I mean the

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Speaker 1: timing was shortly thereafter um that a colleague of mine

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Speaker 1: from uh pure Mark Randolph and I we're brainstorming on

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Speaker 1: different ideas and then, you know, like many people at

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Speaker 1: that point, I had had this terrific late fee and

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Speaker 1: so it was, you know, thinking it has to be

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Speaker 1: a better way. And then it's when this friend told

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Speaker 1: me about DVD that I realized, oh, you could mail

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Speaker 1: those cheaply, and that you could potentially build a business

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Speaker 1: there that was not in Amazon's direct interest because of

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Speaker 1: the return loop that you constantly returned these DVDs, which

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Speaker 1: was unlike Amazon's core. So it was e commerce, but

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Speaker 1: you know, a smaller market than what Amazon was going after.

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Speaker 1: The story is that you took out some DVDs I

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Speaker 1: guess from Blockbuster. You've found out that you had kept

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Speaker 1: them too long, you didn't like paying the late fee,

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Speaker 1: and that prompted you to think of something like this.

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Speaker 1: Is that fair or is that just apocryphal? No, that's

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Speaker 1: accurate Um, but it you know, sort of says every

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Speaker 1: time something goes wrong. The idea didn't pop into my

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Speaker 1: head right then. It was later, you know, when I

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Speaker 1: debating ideas that you know that the sting of that

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Speaker 1: stuck because it was a forty dollar late fee, so

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Speaker 1: you know, and it was all my fault, um, of

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Speaker 1: just not breaking it back. So originally you're you're mailing

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Speaker 1: DVDs back and forth. But the idea of streaming, who

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Speaker 1: came up with the idea that that would be better?

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Speaker 1: And was streaming that prevalent then or that common or

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Speaker 1: people knew what it was. Yeah, people knew what it was.

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Speaker 1: And you know, I had had the good fortune. Um.

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Speaker 1: The year I came back from the Peace Corps, so

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Speaker 1: that's mid eighties now, Um, I got a job serving

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Speaker 1: coffee at a company. And it turned out that that company,

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Speaker 1: a Computer Lab, was the very first dot com. So

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Speaker 1: there were no dot COM's at all, and then there

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Speaker 1: was the first one, and that was this company's Symbolics

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Speaker 1: dot com. And so this was a company out of

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Speaker 1: m I T that was like the hotbed of the Internet,

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Speaker 1: but nobody knew the internet, um, And so there I

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Speaker 1: was serving coffee soaking up the culture and how they thought.

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Speaker 1: And so when I eventually, you know, went on to Stanford, Uh,

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Speaker 1: you know, I was in the Internet thing um and

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Speaker 1: then had been part of that in tracking that for

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Speaker 1: a decade. Uh when it was a decade when Netscape

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Speaker 1: went public and everyone else tuned into it. So, I

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Speaker 1: mean some of that, again is just incredible serendipity of

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Speaker 1: you know, what's the company that I got a job

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Speaker 1: serving coffee in the computer lab. Well, originally you would

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Speaker 1: take programming that site Disney or NBC or ABC or

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Speaker 1: somebody had, and you would or movies and you would

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Speaker 1: put it up and people would pay for it, and

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Speaker 1: you would pay the the people who produced it, I

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Speaker 1: assumed some royalty. When did the lightbulb go off and

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Speaker 1: you said, no, we need to have original programming. Well,

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Speaker 1: Ted was intimately familiar with the history of cable television,

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Speaker 1: and right from the beginning he educated us on HBO's path,

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Speaker 1: which their first twenty years in the eighties and nine,

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Speaker 1: these they just had recycled programming, and then with shows

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Speaker 1: like Sopranos and The Wire, Uh, they moved into original programming.

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Speaker 1: And what a difference it made for them. So we

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Speaker 1: were very aware of that history, and then it was

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Speaker 1: just a matter of biding time until we got big enough.

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Speaker 1: So today the original programming that you have is that

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Speaker 1: more popular than the non original that you're in effect

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Speaker 1: renting from somebody else. Yeah, that's right. The original programming

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Speaker 1: um driving the Old Guard, our our newest movie, Kissing

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Speaker 1: Booth two, an amazing movie. Our series like India Matchmaking

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Speaker 1: or Umbrella Academy are all driving both the viewing and

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Speaker 1: the membership growth. So we're fundamentally an original content business

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Speaker 1: that supplements with licensed content around the world. Why is

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Speaker 1: it that on Netflix, you your your content is very popular,

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Speaker 1: but you don't do things like news or sports. How

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Speaker 1: come you haven't done those yet? Well those are great areas,

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Speaker 1: but they're well covered by other companies. And we have

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Speaker 1: so much more we want to do on series and films,

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Speaker 1: and we're you know, breaking in the animated films and series.

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Speaker 1: Now we've done really well with unscripted reality programming like

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Speaker 1: India Matchmaking that I mentioned and Love is Blind, Tiger King.

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Speaker 1: So our hands are just full. And again there's other

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Speaker 1: companies doing other things, and you know, we just want

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Speaker 1: to focus on entertainment and when House of Cards was

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Speaker 1: on Netflix. UM, did you suggest themes for it or

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Speaker 1: plot lines or did you ever get involved in that

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Speaker 1: or you stay away from what they're actually gonna do

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Speaker 1: on the on the show, our book really talks about

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Speaker 1: don't please the boss, do what's right for Netflix. And

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Speaker 1: because of that, Ted Sarandos when he was negotiating UM

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Speaker 1: with House of Cards with Kevin Spacey and David Fincher,

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Speaker 1: he was willing to do very bold things because he

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Speaker 1: was convinced it was right UM. And so he paid

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Speaker 1: a fortune and guarantee two seasons, which at that point

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Speaker 1: no one had done, and he only told me about

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Speaker 1: it later. And so his willingness to make big, independent

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Speaker 1: decisions it's what led to us getting House of Cards.

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Speaker 1: And of course he could have been wrong and it

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Speaker 1: could have been a disaster, but it was a great

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Speaker 1: series put us on the map. And that's again somewhat

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Speaker 1: testament to Ted's personal skill, but also to the culture

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Speaker 1: that allowed him to make those decisions. And so when

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Speaker 1: you started winning UM Academy Awards and Emmy Awards and

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Speaker 1: other things like that, was that a surprise to you

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Speaker 1: that you were getting it that kind of recognition. No, are.

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Speaker 1: We've always wanted to work with great talent, and right

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Speaker 1: from the beginning, UM, we knew that like with House

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Speaker 1: of Cards, that the talent that was involved in that,

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Speaker 1: Robin Right and Kevin Spacey. You know, we're potential to

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Speaker 1: win Emmy nominations for that. So if you if you

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Speaker 1: back great talent, they they will win a war and

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Speaker 1: it's you know, very life changing for them. For consumers, um,

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Speaker 1: you know, it doesn't matter as much they're not as visible,

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Speaker 1: but in the talent ecosystem, it's it's very significant. Recently,

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Speaker 1: you made an announcement that stunned a number of people,

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Speaker 1: which was that you were bringing in your chief Content Officer,

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Speaker 1: Ted Sarandos, who has been with you for twenty plus years,

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Speaker 1: almost from the beginning, and making him the co CEO.

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Speaker 1: Usually people who are CEOs and founders don't all of

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Speaker 1: a sudden give up a lot of power. So why

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Speaker 1: did you decide to do that and were you surprised

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Speaker 1: that the reaction was a bit of a surprise. You know,

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Speaker 1: Ted and I have worked together for twenty years and

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Speaker 1: we've been virtual co CEOs for the last several years. UM,

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Speaker 1: so we've been paid the same you know, we don't

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Speaker 1: do really do anything material without checking in with each other,

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Speaker 1: So this was just acknowledging and formalizing you know what

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Speaker 1: has been and so externally you know it's a change

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Speaker 1: and that helps on ted stature and ability to do

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Speaker 1: big deals. But internally it's really no change at all

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Speaker 1: from how we've been operating. At the time of the announcement,

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Speaker 1: you said you were good for another decade, so uh

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Speaker 1: and October, if I got it right, you'll turn the

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Speaker 1: big six. Oh, and that I'll mean by seventy you

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Speaker 1: might be ready to slow down. Is that a fair assessment? Well,

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Speaker 1: you tell me how, what's your experience in that of

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Speaker 1: uh sixty to seven? D right? I would say workaholics

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Speaker 1: don't really pay much attention to age, and so as

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Speaker 1: long as your health is good, I don't think you'll

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Speaker 1: change that much. But when you get seventy you might

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Speaker 1: look around and say, maybe i'll do something else. But

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Speaker 1: you've got a long ten years ahead of you. I

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Speaker 1: suspect I'm sure you'll be in great health to do it. Well.

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Speaker 1: I'm super excited about it. There's so much that we

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Speaker 1: can do in terms of bringing the world together, sharing

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Speaker 1: stories from around the world. Um and uh, you know

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Speaker 1: there's just as the Internet grows to you know, every

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Speaker 1: human being. I think there's just an amazing opportunity I had.

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Speaker 1: You and your wife recently made a contribution to United

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Speaker 1: Negro collec College Fund and to Morehouse College and a

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Speaker 1: Spellman College. Why did you decide to do that? Is

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Speaker 1: that not your largest philanthropic contribution anyone, uh gift, No,

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Speaker 1: it's not the largest, but it, um, it's the loudest

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Speaker 1: or sort of the most public. We tend to mostly

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Speaker 1: be very quiet about these things, but we wanted to

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Speaker 1: show solidarity, um, for black education, and black education is

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Speaker 1: so critical to economic mobility, political mobility, and you know,

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Speaker 1: the sense of belonging and the challenge you know, for

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Speaker 1: us as a culture is really the legacy of slavery

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Speaker 1: and it continues to be a tremendous scar across the

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Speaker 1: soul of America. Uh. And it's you know, awful, and

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Speaker 1: it's so bad that it's hard to look at and

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Speaker 1: talk about and it's so hard to look away. And

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Speaker 1: we really haven't come to terms with the legas see

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Speaker 1: of slavery in our country. So this you know, modest

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Speaker 1: donation again relative to the needs is really about, um,

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Speaker 1: you know, black economic gains and education. So the story

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Speaker 1: that I read was that you were originally considering a

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Speaker 1: gift of maybe one tenth at size, and then the

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Speaker 1: last minute you increased it. Uh. When you called the

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Speaker 1: head of the United Negro College Fund, was he surprised

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Speaker 1: or what made you change your mind? Well, I've known

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Speaker 1: the head of u n c F for a decade UM,

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Speaker 1: and he's taught me a lot about race in America. UM,

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Speaker 1: and we've been a donor for a number of years. UM.

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Speaker 1: But it was really the current time UM that got

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Speaker 1: us to make such a substantial and frankly public donation

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Speaker 1: UM to again bring attention to the role of the HBCUs,

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Speaker 1: the historically black colleges and universities UM like Morehouse and

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Speaker 1: Spellman UH, and to support their work because they do

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Speaker 1: develop UM you know, thousands and thousands of black leaders

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Speaker 1: throughout this country, and they're really positive part of our

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Speaker 1: education system. And because white capital tends to flow to

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Speaker 1: white organizations. UM. You know, there's relative capital isolation in

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Speaker 1: the same way that we have social isolation, and so UM,

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Speaker 1: you know, we wanted to be part of building those bridges.

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Speaker 1: Now the industry that I've been in. The financial service

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Speaker 1: industry is not replete with as much success as it

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Speaker 1: would like in terms of minority hiring, and the technology

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Speaker 1: industry is probably somewhat that way as well. Is there

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Speaker 1: something that you can do with Netflix to enhance your

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Speaker 1: minority hiring it among the executives and other employees. Well,

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Speaker 1: we we published the data and we've made every quarter

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Speaker 1: and we've made great progress, and we've doubled our number

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Speaker 1: of African American employees over the last three years. And

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Speaker 1: you know that's throughout the business, but in particular in

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Speaker 1: the media side. Our tech side is still underrepresented, you know,

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Speaker 1: as is in the field. Um, so we have a

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Speaker 1: long way to go, but we're you know, trying to

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Speaker 1: make those efforts not only again for African Americans, but

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Speaker 1: for many underrepresented groups both in America and frankly around

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Speaker 1: the world. So people who are watching this will say, Okay,

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Speaker 1: I want to be like Reed Hastings. I want to

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Speaker 1: build a great company. I want to be successful, have

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Speaker 1: a great family, philanthropically active. What would you say is

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Speaker 1: the key to leadership that enabled you to be what

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Speaker 1: you are today? It's about achievement of the company as

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Speaker 1: opposed to personal achievement. So you want to be super

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Speaker 1: proud of the organization and personally humble. So, UM, I

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Speaker 1: assume you hear from your high school classmates, your college classmates,

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Speaker 1: your Stanford classmates telling you they always knew you were

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Speaker 1: going to be successful and they weren't surprised and by

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Speaker 1: the way, they have a script for you or something

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Speaker 1: like that. Um. Do you hear from a lot of

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Speaker 1: people like that? Yeah, I stay in touch with a

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Speaker 1: lot of friends that way. Um. And you know, I

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Speaker 1: was definitely a late bloomer. Um. I don't think I

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Speaker 1: was one of those people that was marked at an

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Speaker 1: early age. And you know where you read about how

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Speaker 1: at age sixteen they were like unbelievable. Um. You know,

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Speaker 1: I was very average, run of the mill kid. Um.

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Speaker 1: And um. You know, I've been super fortunate with a

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Speaker 1: series of events in terms of my first company doing well,

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Speaker 1: having that idea, which then laddered into being able to

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Speaker 1: do Netflix. Um. So I feel incredibly fortunate, which is

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Speaker 1: part of why my wife Patty and I, you know,

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Speaker 1: were so dedicated on philanthropy. It's sort of looked, you know,

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Speaker 1: like it seems to us miraculous that you know, we

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Speaker 1: have this money and and of course we live a

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Speaker 1: very comfortable life, but it's really the excitement of using

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Speaker 1: that money to then help others. So let's suppose ten

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Speaker 1: years from now, when you say you might hang up

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Speaker 1: your spurs at Netflix, you might. You're not committed to it. Uh,

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Speaker 1: what might you do? Would you run for office? Do

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Speaker 1: you want to be president United States? You want to

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Speaker 1: be a senator, governor, philanthropy teaching? What do you think

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Speaker 1: you might want to do when you turn the right?

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Speaker 1: Bolt age of seventy? And I want to have my

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Speaker 1: own interview show? Um, well, I'm sure you could get

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Speaker 1: that anytime you want one. I know a good uh

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Speaker 1: company you could probably get on Netflix. That was read Hastings,

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Speaker 1: co CEO of Netflix, on the David Rubinstein Show Peer

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Speaker 1: to Peer Conversations. And that is it for Bloomberg Best.

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Speaker 1: I'm at Baxter and Denise Pelligrini and this is Bloomberg