we were in deep trouble at Netflix and

we had losses of about $50 million we

have got to sell this sucker fast Mark

Randol is an American Tech entrepreneur

the co-founder and first CEO of Netflix

with a career panning numerous startups

and Ventures marks expertise and

Innovation leadership and business

strategy is unparalleled August 1997

Netflix was founded yes and the reality

is the idea was ridiculous it didn't

work nobody would rent DVDs by mail but

with over 40 years of being an

entrepreneur I've learned every idea is

bad we just don't know why they're bad

yet the important thing is how clever

can you be to come up with a quick and

cheap way to test it for example we

thought let's just have a subscription

and no late fees it was a ridiculous

idea but when we tested it people loved

it the Netflix DVD service has changed

the world you explored selling Netflix

to Amazon 2 years after you'd launched

for probably 10 to15 million that's not

a bad return for 12 to 18 months work

but I thought it was much more

interesting to take the shot and see

what Netflix could become but all of a

sudden in a matter of a week or two in

Spring of 2000 we were going to go broke

being successful we tried going to

Blockbuster for months but they weren't

going to save us they were going to

compete with us Netflix wouldn't have

survived but there's a story which has

not really been told which took one of

Netflix's biggest impediments and turned

it into one of its biggest assets so

the DI of AO raffle is about to close

anyone that subscribes to the DI ofo

before we hit 7 million subscribers

which is probably going to be in a

couple of days time you will be included

in the raffle and on the day we hit 7

million subscribers we are giving away a

lot of money can't buy prizes to all of

you so hit the Subscribe button get in

before 7 million and I'll announce the

prizes and the winners in the comments

below when we hit 7 million subscribers

[Music]

Mark in this season of your life if you

could consolidate your mission and the

work that you're doing across the

content you produce the people you speak

to your professional Endeavors if if you

could consolidate that into a singular

focused Mission what exactly would that

mission be in this season of your life

for me at this point in my life it's all

about

mentorship um you know I've done seven

startups I kind of recognized quite a

while go I do not have uh the appetite

to do another one uh it's that 7 by

24 Focus that I don't want to do anymore

I have other things that I would love to

have uh spending time on but you can't

turn it off uh I've also realized that

over 40 years of being an entrepreneur

I've learned a few things about how to

actually play this game and so my

mission now is how do I pay that forward

how do I help other people um either

have a shot at it like I did or if

they're already playing the game how do

I try and increase their odds of success

you wrote this book called that will

never work why books are painful and

hard to write what is it that you want

someone who gets to the end of this book

to walk away with I've come to believe

that almost all of the information that

people receive from the General Media

about entrepreneurship is wrong um it

glorifies entrepreneurship in what I

think is a damaging way you watch these

movies that are about entrepreneurship

and it's all about driving around in the

fast cars and having the parties and

that's not it it's a very lonely

profession so in a simple answer the

reason I wrote the book is I wanted to

give people a true story of what it

really means to come up with a crazy

idea that everyone thinks is never going

to work and the struggle to make it real

and if someone reads that book and gets

to the end and goes this sounds great

then that's the exactly the right person

who should be an entrepreneur if someone

goes this sounds a lot harder than I

expected well then I've done a a service

in that way as well which is I've kept

someone from getting into this for all

the wrong

reasons when you when you look back on

your your journey to

Netflix do you you know I remember

hearing in Steve Jobs speak about the

decisions he made in

hindsight that in when he reflects on

his life resulted in him starting apple

and the decisions he made within Apple

so obviously you know things he's famous

for saying is that he went to a

typography class he dropped in and he

started learning about design and

typography and that shaped him what are

those early sort of experiences that in

hindsight fed into the creation of

Netflix probably the meta thing was the

fact that most of these Endeavors were

entrepreneurial so for example initially

my first foray into direct response

marketing was when uh

I asked if I could run the mail order

division of this sheet music company

that I was working for and so what it

meant to run the mail order division was

every day you got the mail and if you

found someone's asking for a list of

great song books you'd make a copy and

you'd mail it out and then if an order

came in you'd go to the warehouse and

pick pack and ship it and that spoke to

me and I began experimenting and said

okay now what happens if I do two pages

or do it in color what happens if I mail

it out and I built this mail order

division into a real mail order company

so it was this combination of direct

response but more importantly it was

building something it was creating a

company inside a company so there are

certainly those preparations from the

direct response side hugely formative

for at least

Netflix uh because if you think about it

what direct response marketing is about

is all about testing it's all about

analytics um and when the internet came

along and I saw what the internet was

what immediately popped into my head was

oh my gosh this would is the power to do

direct marketing but on steroids this is

so much more positive I'm doing this

personalization but it's very Brute

Force personalization I mean it's it's

dear Steven wouldn't your friends at 17

Crescent cir it's like this ridiculous

personalization what the internet let me

do is personalize every web page for one

person but one of the direct response

Endeavors that I did was I was a

circulation director for a magazine we

we launched a magazine and that's

subscription and so you go okay well

look at this you have someone who's

doing Direct marketing and there's

someone who's doing subscription and

then all of a sudden they're trying to

figure out how to do video rental better

it's not that big of a leap to say okay

it was subscription and it was direct

response on the internet so yeah these

things were pretty formative so

interesting so you on one hand you had

this business where you were physically

sending things in the post and then you

got involved in another business where

you were doing subscriptions and these

kind of I guess plant these sort of

seeds in your brain to IND industries

that you start to understand and it's

funny because when people think about

creativity I heard someone say before

that creativity is essentially

collecting lots of different clouds and

then connecting them in new new ways so

getting lots of different points of

inspiration in life and then connecting

them in new ways which create a new

thing and that kind of sounds like what

you're describing there it is and the

thing is at the time you don't

necessarily know um you're in the right

place at the right time because I

certainly wasn't the only person who

said wow the internet could be a

powerful force for selling things uh

Jeff Bezos was

one of the first people to recognize the

power could have to sell things when did

Amazon which at the time was only books

but there were a lot of different models

we could have looked at and so in terms

of Netflix going into video rental and

doing video rental by mail that was

entirely driven by the fact that I had

worked for so long in a catalog business

where I had mailed things in boxes and I

had seen I knew a lot about all the

shippers and I knew a lot about

fast shipping I mean I had this huge

repository of of information and

experience and I didn't know how it be

used but all of a sudden you're looking

at a problem and you're kind of in your

mind going through how could I possibly

solve this in different ways and one of

the things that comes up is something

you've experienced in the past you

launched this company Integrity QA

between sort of 96 and seven and that's

ultimately acquired by Reed Hastings by

pure by Reed Hastings company yes and

that's where you and re Hastings met yes

correct who's the other co-founder of

Netflix what was that like that first

meeting with Reed Hastings meeting Reed

was like this instant Junction of two

like

Minds uh we both recognize something in

each other one is that we both approach

problems very differently I was very

emotional about it I don't mean

emotional like I'm running crying from

the room I mean empathy that I'm a

marketing person

uh when I put something out there I can

almost intuitively sense how someone's

going to respond Reed his background is

mathematics and computer science much

more logical much more methodical and we

kind of realized as we begin solving

problems together how well those two

integrated but at the same time as

having these differences and approaches

we were very similar and that we both

shared this commitment to honest y not

because we both swore an oath just was

our nature that life was too short to

shade the truth that if you had

something to say you say it and you say

it in a respectful way in an empathetic

way and you don't have ulterior motives

um and we both were like that and it

allowed us to have these really intense

interesting conversations where we were

trying to find the truth out of

something but pushing each other and

challenging each each other and it ended

up being a very very powerful way to

solve problems and we were only at pure

Atria together for seven or eight months

and then lightning happened to struck

again where pure Atria was now being

acquired uh and this time um both Reed

and I were going to lose our jobs they

already had a CEO they already had a

senior VP of worldwide marketing so we

were going to be out of a job uh we had

six months and Reed was going to go back

to school get a higher degree in

education I was going to start my next

company and Reed wanted to keep a finger

in the pie here and we came to an

agreement that I would start the company

uh he would be my angel investor and

he'd be my board chair and all we needed

was the business

idea uh and all you needed was a

business idea exactly and only that yeah

just this that small manner of of

needing something to do and thus began

this process which went on for months of

Reed and I kind of searching for a

business idea and we we had a

methodology so don't uh don't think this

is

random um and Reed and I happened to

live in the same town we lived in Santa

Cruz California together and we had

gotten in the habit many months earlier

of commuting to work together and so

once we knew we were selling the company

once we were were losing our jobs we

still were commuting to work but now the

conversation in the car shifted and what

would happen is Reed would pick me up at

my house and we'd barely B my driveway

and I get okay Reed I've got one for you

personalized

shampoo you're going to cut off a lock

of your hair you're going to mail it to

us and we're going to have a team of

hair scientists who are going to

formulate a custom blend and people are

going to subscribe to it

and the same thing would happen no

matter what I pitched is there'd be

silence re would be staring out the

window just steering the car and you'd

think he hadn't even heard me but I knew

that kind of behind that stoic face all

the calculations were taking place like

you know the risk and reward and the

costs and the benefits and it might take

five minutes 10 minutes of silence but

then eventually he would turn to me and

go that will never work and he would lay

into me with all the reasons such a bad

idea but of course I could come prepared

and I'd come right back in him with all

the research I had done all the reasons

I was sure it was a good idea and we

would do one of these arguments all the

way to the office and if need be all the

way home and until we either decided

there was promise or no promise and

almost all of the time there was very

very little promise in these

ideas but next day I'd have another one

I could read personalized pet food

Uh custom Sporting Goods vitamins I mean

I pitched all those

ideas I pitched them on video rental by

mail people are going to come to the

website they're going to pick out a

movie we're going to mail them the movie

and they'll keep it for a week and then

they'll mail it back and at the time

though this was

1996 97 uh video rental you may remember

it was on VHS cassettes so there were

too big and too heavy and too expensive

and so that idea got trashed the exactly

the same way that the dog food and the

personalized shampoo did and kept on

searching and then the Breakthrough if

there was one came one morning or Reed

picked me up and I'm on my way out the

door out at the driveway I got one for

you and he stops me and goes I got to

tell you about something I read about

there's this technology that came out

it's called the DVD it's this little

disc that holds a movie

and it's thin and it's light and we

brainstormed that a little bit and

realized this could be the unlock for

that old video rental by mail idea we

had talked about six or eight weeks ago

and then we did this quintessentially

entrepreneurial thing which is midc

commute we turned the car around and

drove the car back into Santa Cruz to

try and validate this idea we did not go

to the office and do a business plan we

did not work on a pitch deck we tried to

collide the idea with real people that

day that day midc commute turned the car

around went down into Santa Cruz tried

to buy a DVD couldn't find one settled

for buying a used music CD same size

same weight then went two doors down and

bought a little envelope like you'd put

a greeting card in and put this CD in

the envelope addressed it to Reed's

house bought a stamp and dropped it in

the mail and went to work and that very

next morning when Reed picked me up he

held up a little pink envelope with an

unbroken CD in it that had got into his

house in less than 24 hours for the

price of a stamp and that was probably

the moment we said this actually might

work we can use the post office um and

that shifted everything and that's the

point we began saying this could be the

idea that we do together so many

entrepreneurs and aspiring entrepreneurs

are at that exact phase where they want

to leave their corporate job their brain

everywhere they go now because they W

they've wired themselves to be looking

for an idea is finding lots of random

ideas their dog or like throw up and

they'll be like oh new dog food or

whatever and they're going through that

process and I I think it's so important

to just pause there and try and

interrogate what the framework is for

knowing if you if you've got a winner or

not like how how did you CU presumably

you had got yourself passionate about

the um shampoo idea so like how do you

know when to drop an idea and how do you

know when to commit to an idea what was

the framework you're using the framework

is that every idea is stupid there is

everyone you know listen you probably

haven't had a corporate job yet in your

no thank God yes thank God is right

because there's this thing in corporate

uh I say Corporate America corporate

world and it's the brainstorming session

and they put everyone in a conference

room and they go we're going to

brainstorm and try to come up with an

idea for whatever it is and he goes but

first some ground rules for the

brainstorming rule number one there is

no such thing as a bad

idea and I call there's plenty

of bad ideas in fact there's no such

thing as a good idea every idea is bad

we just don't know why they're bad yet

and so the framework I approach I assume

all these ideas are ridiculous I assume

none of them are going to work but

here's the difference the reason I start

from that that uh position is I don't

want to commit the single worst thing

you can do as an entrepreneur which is

fall in love with your

idea and you talk about the person who

sees the dog throwing up and they go

I've got a great idea and then what

happens nothing they go home and they go

this is a great idea and they tell their

partner and their partner goes oh that's

brilliant I'd buy that

and so they go okay and they begin

working on a business plan and they

write this 10-page business plan and

they're dreaming about how they go

They're how amazing it's going to be

just think about we have this line of we

can do cats too and then giraffes you

know they've they've built this

incredibly ornate business in their head

all based on this feeling that this must

be a good idea and you've got to nip

that in the bud and the way you nip it

in the bud is you try rather than

dreaming how amazing this idea is the

first thing you think about the only

thing you think about is how can I

quickly cheaply and easily Collide this

idea with a real person and find out is

it in fact a good idea or a bad idea how

can I do some kind of hack that will

allow me to quickly find out whether

customers actually would want this or

not and almost always you build this

quick cheap down and dirty I don't mean

minimal viable product I mean

unviable something you can quickly do

like turn the car around and mail a CD

to yourself just to find out the the

basic premise of can I actually use the

US mail to send movies back and forth

because if that had failed well great on

to the next one and that's such a

critical critical step that's the

framework that everyone has to to have

it is not about having a good idea

having ideas is easy and trivial the

important thing is how clever can you be

to come up with a quick and cheap and

easy way to test it why because I know

you and me understand this but I didn't

understand this when I started my career

so I know that there's a lot of people

listening right now that are probably

right in the moment you've described

they've spent a year building up this

thing in their bedroom for anyone that

can't see he's got his head in his hands

um they' spent a year in their bedroom

building and working on this project why

is that a terrible idea it's such a

waste of time because what happens is

two things happen one is this or idea

becomes so large and ornate and

complicated in your head that you go

okay Mark I need to get started I need

to raise $5 million because it's going

to have to hire all these people to to

build this thing and they're probably

building the absolutely the wrong thing

uh you you can't you you can't just go

ahead and based on what you think is

going to happen you've got to start from

a position of real information listen

perhaps the cleanest way since we have a

bit of time is to give you an example I

do a lot of work with University

students and uh I was meeting with a

young woman who uh at the University and

she goes okay Mark I've got this idea um

what I want to do is peer-to-peer

clothing sharing in other words I've got

all this clothing in my closet that I

never wear or I don't wear very often

and I know my friends have a lot of

clothing in their closet and other

friends have clothes in their closet it'

be great if we had this website and we

could all post what we have and we could

borrow each other's clothes and and I'm

going okay that's interesting what can I

help you with she goes I'm trying to

figure out should I drop out of college

to do this uh how do I raise the money

to hire a team to build this for me and

I went whoa you know slow down here okay

interesting idea but let's figure out if

we can come up with a quick and cheap

and easy way to collide this idea with

the reality I said do you have a piece

of paper she goes yes smartass I'm a

college student I have a piece of paper

I go great all right do you have a magic

a marker she goes I have a marker do you

have a piece of tape she goes got a

piece of tape I go all right I want you

to write on the piece of paper would you

like to borrow my clothes

knock and I want you to tape that to the

outside of your dormatory room and we're

going to find out in the next 24 hours

whether the very very first principle

behind your idea is real is anyone going

to knock because if nobody knocks well

you've learned something very important

right there this thing you think is so

attractive might not be but let's let's

be optimistic let's assume a bunch of

people knock great you've learned

something but you're also going to learn

the next thing which is are there

problems with fit are there problems

with style are the people who knock and

look at your clothes actually going to

want any of them all right let's be even

more optimistic let's say they do find

out ones they want to borrow well you're

going to find out the next piece how do

you feel when your favorite blouse comes

back stained or torn you're going to

find out about the cost of doing dry

cleaning you're going to find out all of

these things and you're going to find

about all this for a piece with a piece

of paper a tape and a marker none of

this raising money dropping at a school

and doing any coding you're going to do

something very simple now is this

scalable no is this repeatable no but

that's fine you're going to do it all

with 3x5 cards or on a pad you're going

to do it manually and you're going to

start losing your mind but when you

finally get to the point where you are

ready to go and maybe raise money or

drop out of school you're going to know

what you're dropping at a school for

you're going to know what you're raising

money for you're going to be able to

tell someone here's my acquisition cost

here's my lifetime value here's my CAC

here's my you're going to know all of

these metrics you're going to know the

complexity you're going to a tried all

these different things you're going to

know what demographic and you found out

all of that for nothing except for your

time that's what I mean by figure out

some way to validation hack and that is

the key to being an entrepreneur you

have an idea quickly cheap and easy test

it find out it's ridiculous abandon it

go on to the next one it's funny because

uh obviously I'm a dragon on Dragon Den

which is basically a show like Shark

Tank where we see 100 pitches a year

from entrepreneurs and what I observe in

some of those pitches especially when

they're a little bit early on and they

haven't got product Market fit quite yet

there hasn't been evidence that the

market actually cares is a huge amount

of delusion to the point that you could

give someone some feedback but because

they've spent one two years of their

life and maybe mortgaged their house and

invested it into this

business they're they're now in the sunk

cost fallacy which is that sort of

cognitive bias where you've invested so

much in something that you're basically

Defending Your bad decision at all cost

and you can't see the light of day and

um and that you know my first business

was the death of my first business but

for many entrepreneurs that I meet it's

quite clearly the death of them because

if they don't have that humility if

they've got romantic they can't take any

feedback which is a con conflict with

what they want to believe it's it's

you're Stephen you're absolutely right

it is the single biggest reason that

either they don't start because they've

built this thing up in their head and

it's so big and complex that to get

started is almost impossible or they are

so far along they can't stop it's it's

tragic in in a lot of ways that which is

why you have to start from the belief

that your idea is a bad one uh because

that makes it easier to walk away from

it as soon as you realize you are right

um but what happens if you can get this

discipline of taking your idea and

immediately trying it is almost always

takes you in a New Direction yes your

original idea was terrible but oh my

gosh did you see how this person did

let's try this oh that doesn't work

let's try this and that is

entrepreneurship it is just leaping from

the back of one uh alligator to the next

and there those alligators just H long

enough to before they sink or before

they bite you and you jump to the next

one I I I think I found two sort of

species of entrepreneur and the real

distinction between them is how long

they've been doing it and one species of

entrepreneur that I know they care

entirely about being right which is

their initial hypothesis being correct

and that's typically the young

entrepreneur and then the the more

seasoned entrepreneur cares entire

entirely

about being successful regardless of

whether it's via their initial

hypothesis or not they care entirely

about like saving time and being

successful not being right and I think

it's interesting that tenure as an

entrepreneur seems to determine which

Camp you sit in it's also your

personality jumping back to our

conversation earlier about What

attracted Reed and I to each other was

that both of us were in that camp that

said we don't care whose idea it was we

just care about getting to the right

answer and part of this culture that we

had with each other and we built with

other people was you could argue like

cats and dogs and eventually you'll

arrive at what you think is the right

way to go and as soon as that happens

you all fall in behind and no one says I

was right I was wrong and you don't even

remember who was right and who was wrong

it's a big piece August 29 1997 Netflix

was founded by yourself in Reed

Hastings from from that day onwards did

did you know at the moment that Netflix

was going to ever become what it went on

to be what were you thinking it was

going to

be I am completely astounded and amazed

at the direction that Netflix has gone

never in a million years could I have

dreamed of the company that exists now

being the same one that we were thinking

about in in August of 1997 it's

astounding to me what's happened U and

it's the nature of Entrepreneurship you

can't predict where these things are

going to go uh that wasn't the point

though it wasn't like Reed and I were in

the car going uh okay when do we enter

the streaming war and when how do we

deal with ch no this was a very very

simple straightforward problem a video

rental in the United States is8 billion

a year um it's very unpleasant that the

P the company who has the The Lion Share

of that market is doing things which

customers hate there has to be

Blockbuster there has to be a better way

that's where it starts from that's the

problem you're trying to solve and

trying to solve the problem is this dual

thing which is how do you do something

that a customer might want solve the

problem for the customer but also how do

you make a business out of that and

that's all

consuming uh I remember we had a company

meeting early on maybe were two or three

months in and I remember getting up in

front of the uh company and laying out

what I thought was going to be this big

hairy audacious goal for us someday

we're going to be one of the top 10

largest video chains in the United

States which in retrospect was a

ridiculously trivial but from where we

stood then it may as well have been

saying we're going to ride our bicycles

up Mount Everest uh what

hubris uh because even the 10th largest

chain was many many many millions of

dollars a year bigger than we were at

the time but something to aim for and we

actually passed that one way faster than

we thought and then you set your goal

you know eventually we're going to be as

big as

Blockbuster in other

words if you were to set your goals to

be what Netflix is now I would be

locked up I would have been this most

ridiculous flight of fancy hallucination

you can imagine they would have thought

you were Psy gone psychotic or something

if you had ever done a presentation

saying Netflix would be as big as it is

now you um for people that don't know

because the world has moved on so much

and there's a generation of people that

are listening to this conversation right

now that probably don't even know what a

like a vcr and a cassette player is but

you launched the business at a time when

Blockbuster was the big incumbent and

Blockbuster was was a store where you

went to a physical location you rented a

like cassette VCR what do they call it

like a VCR v VHS VHS tape you took it

home and then you brought it back the

next day and your real Innovation was

that you were going to send these DVDs

to people in the post on a rental

basis that was the that was the Crux of

the business right that was the Crux of

the business and in fact when we

originally started there was not a lot

of business model Innovation there

either you know there was due dates and

there was late fees the Innovation was

it was one centralized store on the

internet that served the entire country

so that we could have every single movie

that was available on DVD we had perfect

inventory uh and unlike a video rental

store where you can picture it in like a

supermarket with rows of shelves each

movie could be placed in one place you

could either put it in the mystery aisle

or in the Alfred Hitchcock aisle

or in the new Rel you had to pick where

it was whereas on the internet you could

have that same movie listed in 30

different places based on finding movies

we thought finding movies would be

easier too we had a bunch of things we

thought would allow us to take on this

incumbent this huge huge huge company

but yes it was very very focused there

was no streaming if you wanted a movie

we mailed it to you we mailed it to you

on a little plastic disc it's funny cuz

in hindsight when I think about a lot of

these big breakthrough ideas that ended

up changing their industry you you you

learn in hindsight that there was some

big macro factors that caused the timing

to be right and I think about in the

case of your business Netflix there's a

bunch of big macro things that you've

already described things like DVDs the

internet is there is there any other

sort of big macro factors that made the

timing right for Netflix those were the

two big ones right is that the internet

was certainly the big one was that all

of a sudden there was this way to have a

single store which served the entire

country before for a bricks and mortar

as we call it business you want to serve

the entire country you've got to build

9,000 different stores and Blockbuster

did just that they had 9,000 different

stores and then you have to staff those

stores and they had 60,000

employees and we served the entire

country with one inventory and with a

group of 12 to 15 people so that was

certainly one big shift uh the DVD was a

bet which was at the time DVD was just

getting started and if the DVD had not

worked if it had not reached a full

household penetration this whole thing

never would have worked how many people

were watching DVDs at the time when you

launched Netflix there was fewer than

200 50,000 DVD players sold that was the

total addressable Market was

250,000 DVD players so is that like 1%

of America or something yeah there's 130

million households in the United States

so and of those 130 million households

movie uh but it was Tiny there it was

really it created all kinds of

interesting marketing challenges of how

do you launch a company when there's so

few eligible customers in September 99

you explored selling Netflix to Amazon

which is which is shy of two years after

you'd launched

um what was was that the first time you

met Jeff Bezos yes and how does that

come to be you know because he's he at

the time I guess was was fairly early in

the Amazon jour as well but yeah he was

and at the time to show you how early

Amazon was in its Journey they were only

a book seller so they sold nothing else

they were a bookstore but Jeff had made

no secret of the fact that his

aspirations went way beyond that that he

was going to be the everything store

that the things they had found about how

powerful it was selling books in the

internet applied to everything else and

it was pretty clear his next two

categories we're going to be music and

movies and we got a call from uh the CFO

at Amazon basically saying hey Jeff we'd

love to uh meet with you how about

coming on up to up to Seattle and having

a little sit down and Reed and I didn't

need to think too long to understand why

they might want to meet with us uh it

was pretty clear they were going to be

entering video and this was going to be

a make versus buy analysis would buying

Netflix accelerate their entry into

video cuz we had done a tremendous

amount of work about building out the

content and making those things work so

there was some value there not to

mention the people um and so we all flew

up to Amazon and were ushered into this

building which was pretty hard to

imagine that this was the headquarters

of this world changing e-commerce

company because it was a mess you know

people were jammed in under stairs and

in closets and there was pizza boxes

every place and dogs running around and

the desks were all the same they were

all made from doors that had been laid

supported by four wooden posts at Each

corner that everyone sat at these doors

and uh and in comes Jeff Bezos and we

begin to have this conversation about

what is Netflix and what's it all about

and uh it went went pretty well

and as the CFO is showing us to the door

at the end of the meeting um she Saidi

just want to set your

expectations that in the event we decide

to do something our offer is probably

going to be in the low eight

figures and and we guessed that was

probably going to be1 to15

million and at the time we had launched

in April of

98 and so

we were still pretty young and I

remember Reed and I kind of looking at

each other and going that's not a bad

return for 12 to 18 months

work but at the same time we felt we had

already solved the big problems we had

built a functioning e-commerce website

we had managed to Source every single

DVD that was available we had figured

out how to make movies go out to

customers and bring them back and we

weren't quite ready to let Jeff Bezos

take over and so in some ways it was

less about us going up and deciding

whether to sell or not it really ended

up being kind of like a commitment

ceremony where Reed and I looked at each

other in the eyes and said we can get

out if we want and I think both of us

decided no let's uh let's go for this

would that money have changed your life

at that

point 1999 you know $400

million that's a hard to say it this is

not like I was uh you know living in a

trailer uh and deeply in debt and you

know I I'd been working I was in my late

30s I'd been working in Silicon Valley

for a while and I'd had a number of

startups you know I had G through IPOs

before um so I I had I was comfortable

don't get me wrong this would have been

nice but I'm not sure this would have

dramatically changed my life in some

profound way I thought it was much more

interesting to take the shot and see

what Netflix could become than to walk

away what was Jeff like what you

remember in

1999 uh extremely unpolished really if

you see him now I mean he's really buff

and he's really thoughtful and someone

has definitely worked on his laugh it's

it's now very

controlled uh back then it was this

almost hysterical hyena like bark and

you could hear it from all over the

building I'm not going to try and

imitate it um but he was tremendously

enthusiastic like this bundle of energy

and I remember that um the two of us

were just going back and forth on all

this early startup stuff uh and one

thing I remember we had in common is

that um uh at our launch we had rigged

up a bell to ring every time an order

came in and I was telling him that he

was going ah we too we had a bell that

was ringing and we had we shared those

things and then we were also talking

about names and Netflix had started out

with a strange name which was kibble

kibble and he was saying oh yeah we

originally were called

Kadabra which he meant to sound like

Abracadabra like magic but their lawyer

said that Kadabra sounds a little bit

too much like kadaver and so therefore

Amazon but in other words it was this

really interesting us going back and

forth and I know Reed was very impatient

he just kind of wanted to get down to

business so finally I go okay Reed Reed

let's talk to the what we're really

talking about here enough enough startup

is the next big milestone in the Netflix

Journey the dot

crash for you

uh because there's a there's a problem

prob a more profound moment for me that

happened um before

that uh and that was this trans that was

this leadership transition at

Netflix uh and that was because the do

crash was in the spring of

2000 and this was probably in late

1999

um and Netflix was still young uh and as

I mentioned at the beginning the

arrangement that Reed and I had was that

he'd be the angel investor he'd be the

chair uh I'd be the CEO I'd start and

run the company um and I did that and

Reed had a day job somewhere

else um and one afternoon uh late that

year Reed poke his Pok his head in my

office uh late afternoon and said Mark

we have to

talk uh and as you probably can imagine

that never bodess well when someone says

we have to talk and it was right and he

came in and he had a PowerPoint

slideshow and he sat across my desk and

spun his computer around and began

walking me through a slideshow about how

he felt that I was doing as

CEO strengths but perhaps a little bit

disproportionately

weaknesses and I was a little taken back

by this and I I I kind of stopped him

and go re

I am not going to sit here and let you

pitch me on how much I

suck um and I think he was taken back by

that as well and so he closed the

computer but then proceeded to lay out

that he was

concerned that he had seen minor errors

in my judgment that he questioned some

of the hires I had made I mean he had

seen a lot of the other things i' had

done that were good but his point was

that we have to execute lawlessly and

we're at a point now where things are

beginning to accelerate and if there's

smoke at this level he was worried there

was going to be fire later on and uh

eventually he got to his point which is

that uh he wanted to come back to the

company fulltime and be

CEO and for a moment I thought he was

firing me uh CU Reed had more Equity

than I did since he was the uh uh

original

investor and but as I understood what he

was proposing it wasn't that he was

proposing that he come in as CEO that I

stay as coo and that we essentially run

the company

together and I remember as he finally he

left the office and he quietly closed

the door and I was so shocked that even

though the sun was going down I sat

there in the dark like without the

strength to the lights on and just kind

of crushed and all I could think at the

time was this is so unfair this is my

company you know I started this it was

my idea I hired the people I got us

going and how dare you you know all of a

sudden take this from

me but as I thought more about it I kind

of realized that there was another

Dynamic at work

here and like most

entrepreneurs when we started Netflix I

had this dream of being a successful CEO

of this big successful

company and I think as I sat there I

began to realize that maybe this wasn't

one dream maybe this was two different

dreams and that the dream of the big

successful company might be a different

dream than the one of me being CEO and I

had to really say to myself does Reed

coming in full-time as CEO increase our

chances of that happening and it was

really hard for me to argue with myself

otherwise and I'm not saying this was an

easy decision and I you know I went home

that night and sat outside in the porch

with my wife and we finished a bottle of

wine and I think by the time I went to

bed that night I kind of concluded that

he was right that if we really wanted to

give ourselves the best chances of being

successful that I should move over

I should step down as CEO and let Reed

come in as CEO and we should run the uh

the company

together

and looking back now this was 20 some

odd years

ago that decision to kind of put my ego

aside for a bit was probably the

smartest decision I ever made the entire

time I was at

Netflix because those years after that

when Reed and I did it together that was

the Renaissance at Netflix so many of

the things that shaped what the company

became over the next bunch of years came

during those years and certainly looking

at what Reed has done with the company

since then since I left the company was

uh even more

astounding and it's funny because one of

the roles of a CEO is you've got to make

sure the best people are in the right

seats which means say goodbye to a lot

of people you'll have someone You Who

Came at when you started the company and

they were your head of marketing and

they worked tirelessly they worked

weekend they work nights they did

everything you asked but as you get to a

different scale you recognize that

person is not the right person for what

we have to do next but you never think

you're going to have to turn that lens

onto

yourself um and I think a lot

of Founders need to ask themselves that

question question all the time I'm the

right person for yesterday I might even

be the right person for today but am I

the right person for tomorrow and the

number of Founders that I can think of

and I'll bet you you will Echo this when

you think about all the founders you've

spoken to who are great early stage

entrepreneurs and great late stage

entrepreneurs it's a very very small set

um and in my case uh I was very very

comfortable recognizing that this was

the right thing to do for the company

when you when you think back to that

moment and that conversation with Reed

where he comes into your office with

your hindsight and wisdom now do you

think there's a better way that he could

have approached the

situation of course Reed as I mentioned

before what made Reed and I work so well

together as we were left brain and right

brain and that's not Reed's strong suit

um that's my strong suit you know I

pitch I know how to frame things in the

right way I know how to deliver bad news

I know how to uh communicate effectively

and I can intuitively know what's going

to upset someone or not upset someone

that's not what Reed's great at but what

Reed has and what we share is he cares

Reed was doing

this not with some ulterior motive this

was not I want to push Mark out and

become CEO this was he genuinely

believed this was the right thing for

the company and because we had this

extremely strong relationship based on

trust I heard him that way and

fundamentally that's way more important

than the style in which the message was

delivered what was it that he thought he

had that would suit the company in the

next phase of the company's Journey that

he felt you didn't have he had already

taken a company through an IPO he had

already scaled a company from two

employees up to a thousand employees

from a local company to a multinational

company uh he had he had already shown

that he could hire extremely talented

people to work for him he wasn't saying

that he didn't think I it was impossible

for me to do this

and who knows would have happened this

was all about what increases our odds

for success and then perhaps if you want

to drill down to something which in the

big scheme of things is small but in the

time was large is we had to raise

money uh Netflix was a very very

expensive company to get started we

required large amounts of venture money

and Reed had this reputation of someone

who would already made a ton of money

for some VCS because of taking his prior

company public and they would bet on him

whereas I was a little bit more of an

unknown one of the things you talk about

in your book that he said to you in that

conversation is you don't appear tough

and candid enough to hold strong

people's

respect yeah it's um I'm better at that

now does that count uh it is the empathy

um

I as I said what makes direct marketing

Marketing in general is an interesting

discipline because it requires you to

send something out and you're not going

to ever see the person's face as they

react to it you're not going to be there

as they're reading this and either

getting confused or

excited you have to imagine those things

and as you're writing a direct response

letter you're picturing how is someone

going to react when they read these

things how are they going to react when

they're watching this direct response

television

commercial that's a it's it's a gift in

some ways and it's also a gift when it

comes to salesmanship and negotiation is

before I say something I know how it's

they're going to react and I can cater

that but what it does mean is that when

something's going to really hurt

somebody it's really hard for me it's

very painful for me to deliver very bad

news I've never considered that before

but it does appear to be completely true

that people who are great

marketeers um have therefore have

empathy and therefore struggle more with

delivering bad news because they just

have a better ability of putting

themselves in the other person's shoes

you feel it you feel it you know I've

and as I said I've gotten way better at

it um I'd say I'm good at it now um I'm

I can be a complete ass when I how does

someone train that muscle is there a way

to go you know if you think about how

you went from where you were with that

to where you are now is there anything

that's helped you stop being I guess a

bit of a people pleaser or caring a

little bit about people's feelings when

there's a big I've stopped searching for

a way to do it that doesn't

hurt and as as with most decisions a lot

of times people get caught in this

paralysis where they're trying to come

up with some Solution that's an Optimum

solution and this is one more example of

that is that you go this is going to

hurt it's going to hurt me I have to

just do it anyway there's no way to

avoid this and for example you know

jumping way ahead there was T after this

doc layoff which we'll talk about in

just I mean doc com crash which we'll

talk about maybe in a moment we had to

lay people off and I cry with every

single one of them but I bring them in

and I gotten very very good at telling

people uh it's time to go

but doesn't mean that I don't

hurt hardest

thing let's hope that if you're a

manager that's the hardest thing you

ever have to

do have you forgiven Reed

for that that moment that day the way he

delivered what he said

100% uh this is going to sound silly but

it came from love it didn't come from

Madness or jealousy or

anger it as much as it was possible for

something to hurt Reed in delivering bad

news that's got to have been one of

the toughest things he's had to do is

have that conversation with me and I

have so much respect for the fact that

he had the courage and discipline to say

I've thought of something I could I've

thought of a way to mail the DVDs more

inexpensively I've thought of a way to

the no he goes I've thought of a way to

make the company more successful but

it's really going to

hurt what is it about Reed then that

makes Reed successful because I asked

you the question about yourself but now

to turn that on Reed what is it that

makes him so unique see you used the

analogy for creativity earlier in our

conversation about having all these

clouds of information these clouds of

connections and seeing that there are

these interconnectivities between

them Reed sees that stuff so well I

consider myself really good at that he's

even better than I am he will have a

very complicated problem with many

moving pieces and he'll jump immediately

to we can do this and I won't see that

until a little bit later and then even

everyone else sees it it's just an

amazing ability to see how things might

shape about and which one is the right

path to take uh extremely

analytical um extremely

non emotionally driven can make very

very hard decisions because uh

less driven by that by the emotional

piece of it he's he's a he's he's

remarkable what about hard work does it

matter

well since you ask it so simply I'd say

no or it certainly is not the most

important thing in fact I think hard

work leading to success is a

myth that and let me let me give you two

examples

okay um the first is to qualify what I

mean um I work with a lot of as he spoke

earlier before we actually began the

session um about how younger people are

different places in their life than

older people especially with career and

how they think about it and um earlier

in my life I used to do triathlons you

know the races that combin swimming and

then biking and then

running and back when I used to do them

they don't do it quite the same way

anymore it would be a mass water start

you have four or 500 people who with the

gunun sounds and all 500 of them plow

into the water

simultaneously not a phase start and as

you can imagine it is a show you

mean you're getting kicked and your

goggles are being knocked off and you're

being held underwater and you quickly

realize that if you want to be able to

survive in this Mass Dart you're going

to Sprint for those first four five 600

yards to get yourself far enough in the

front of the pack that you have open

water and in my opinion work life is

kind of like that when you're younger

when you don't really know what you're

doing when you have to go down a lot of

false ends because you're not just

productive you better work your ass off

you better Sprint you better work three

times harder than everybody else in the

company so it's

essential but

ideally you get yourself far enough

ahead that you recognize I can't can't

go at this pace for the entire te of the

triathlon I needed to to get myself some

breathing room but now I can back off so

yeah at certain points in your career

you need hard work at certain points in

the trajectory of your business you need

hard work your

fundraising you can't say oh we're

closing around I'm taking vacation for

two weeks uh we're doing m&a I'm going

to be uh I'm only going to work a couple

hour no you're going to have to grind it

but that's not the answer all right one

more little story which is part two to

this which is why I say that it's a myth

for hard work um so during one part of

my career I lived in Europe uh I was

doing International marketing for a big

software company we had an office in

Paris uh I lived in Paris and but I was

meeting every week with the marketing

people in our other branches so probably

four days out of five I was flying fly

to Copenhagen one day then I'd fly down

to Milan then I might fly to London then

I might fly to Madrid in one week so I

spent a lot of time at the airport and

um because I'm sometimes not that

organized uh I'd be late and you would

find me just sprinting Down The

Concourse in my uh in my Blazer and my

wool coat trying to desperately make the

plane and what I found out

was that probably 49% of the time I'd

pull up to the gate and the plane was

delayed and i' have to wander onto the

plane no problem at all I could have

made it on crutches and instead I'd sit

there marinating in my sweat for another

hour before the plane took off or the

other 49% of the time I'd come sprinting

Down The Concourse and you'd see the

plane halfway out in the runway about to

take off and what I realized is didn't

make a difference whether you ran for a

plane or not that you're either going to

make it or you weren't going to make it

and that running didn't make the

difference and I vowed then and there

I'd never run for a plane again and I

never have and I'm telling you that

story because it's a metaphor in that so

many entrepreneurs spend all this time

running for planes they are up all night

polishing their deck they're reviewing

the work of people to make sure the

spelling is correct they're

double-checking every detail they are

working so hard but I know from

experience that it's like running for

the

plane most of the time doesn't make a

difference you don't lose the deal at 2

o'cl that morning because you didn't

check the fonts you lost that deal four

weeks ago when you didn't have some

fundamentals right or you just weren't

the right company to begin with no

matter how hard you worked you weren't

going to change the

outcome

and that is the key to having some

balance in your life as an entrepreneur

is this recognition that if you're smart

about the things that you choose to

focus on you make 99% of the difference

and that all that extra work does not

really change the outcome

any and in that analogy of running for

the plane is the is the key thing to

have just better prepared further

Upstream I you know if we stick to the

analogy just have made a better decision

to leave the house at a better time

yes it does absolutely I mean if you

want to make the plane you you know you

leave earlier and again it's not

sometime listen you're going to scroll

down The Concourse you not don't need to

run and if if the plane left on time

running's not going to make the

difference if the plane's late running

didn't make the difference either way

you made it or didn't make it the amount

of times that running for it was the

gating item between whether you made it

or not is like infantes so what's the

point of running and that's and I really

fundamentally believe that is that

if I can be really smart about my which

problems I choose to focus on I'll make

the difference I do not need to get

everything right because most things

don't make a difference some things do

some things do and some of the the small

things that made a difference to your

business seem to have been discovered

through a process of sort of

experimentation and failure when I look

back through your story at you trying to

get sort of Netflix to work and get

product Market fit you referenced it a

second ago this idea of no late fees

seem to be quite pivotal an idea you had

to remove the late fees I I find this

interesting because there's going to be

entrepreneurs that build their idea and

then bang their head against the wall

and it doesn't work and then I hear so

often whether it's from Brian chesky at

Airbnb or from someone else Daniel at

Spotify that there seemed to be this one

change that was quite pivotal to their

business at some point so my question

becomes like how do I know how do I find

the thing so can you explain to me why

this no late fees thing and and any of

these other small changes that change

the game and how what was the system

that led you to

them you know we're talking about really

finding product Market fit product

Market fit if I have to give a

definition is when you recognize you

finally have something that customers

actually do want and it's recognized

because all of a sudden the momentum of

your business dramatically shifts all of

a sudden things go into high gear all of

a sudden iring customers is so much

easier all of a sudden they're sticking

around it's just this instantaneous oh

my God we found it and up until that

point it is this constant struggle of

trying one thing after another trying to

increment your way closer and closer and

closer you know when I mentioned that um

you know at the beginning there wasn't a

lot of business model Innovation with

Netflix we if you ordered a disc we

mailed it to you we charge you a due

give you a due date if you missed the

due date we had late fees and the

reality is the idea was ridiculous it

didn't work um nobody would rent from us

and if you did rent from us once you

didn't rent from us again um and we kind

of had this realization that okay we got

to begin figuring things out and thus

began this year and a half long process

of trying to figure out some way to get

people to rent DVDs by mail from us and

and we tried almost everything you could

think of um hundreds of things and um I

kind of talk about this a bunch

that I had no shortage of ideas I mean I

had lots of things I wanted to try and

if there was any if there was a problem

that I had it was that I was a bit of a

perfectionist back then and so all these

tests that I'd want to run I'd want them

to be perfect so we would you know

lovingly argue over every word of copy

and we would do custom photography and

we would check every link and we'd

stress test the site and it might take

us three weeks or a month to prepare for

this test and we' test this new idea and

then it would not work wouldn't do

anything and we'd kind of look at each

other and go we just wasted a month so

okay faster and then we do a test in two

weeks and it would still fail okay okay

faster and we do it in a week and faster

we eventually started getting to the

point we could do do a test every day or

multiple tests every day and it turns

out that um once you go that fast things

get very very sloppy so we would have

the wrong image or it would have the

watermark on it or the pages we had

greed would still be greeked you know

not uh we'd have bad links we'd crash

the site and then but that was such an

incredibly big insight for us because it

turns out that it didn't make a

difference that if it was a bad idea

even spending a month crafting this

perfect test wasn't going to make it a

good idea but if it had even an inkling

of being a good idea no matter how bad

the test was it shown through customers

would immediately perk their head up

they'd raise their hand they fight to do

it they'd call us they'd reboot the site

it was this incredibly loud signal that

there was something there and it goes

back to what we said before which is

that it's not about having a good idea

it's about building this whole process

and this culture and this system to try

lots of bad ideas and we got really

really good at trying lots of bad ideas

one after another hundreds of them each

one informing us to some little some

little bit about what to try next and

eventually we got to this point where we

had these two big Ideas left and one of

them was uh at that point uh Netflix was

pretty big we had probably in our

warehouse several hundred thousand DVDs

and I remember one day we were Reed and

I were in the warehouse and looking at

all these DVDs and going it's such a

shame that all these DVDs are here in

the warehouse where they're not doing

anyone any good I wonder if there's a

way to store them at our customers

houses let them keep them and then when

they're done they mail it back we'll

just replace

it and rather than having them have to

pay each time they replace it let's just

have a monthly fee a subscription and

they can rent as often as they want

there's no due dates and no late fees

and it was a ridiculous idea but when we

tested it it was that mythical product

Market fit it it worked people loved it

they couldn't get enough of it they told

their friends they did not cancel their

subscriptions what part of it worked and

why did it work God knows yeah but in in

retrospect what it did was it

took one of Netflix's

biggest impediments and turned it into

one of its biggest

assets you know we referred to my book

it's called that will never work and

there was two reasons it's called that's

will never work work it it's because

that's what every single person told me

when I pitched the idea and they had two

reasons why they said it um and one of

course was uh streaming they said oh

it's a digital medium it's just a matter

of days before everyone's streaming

these who needs DVDs and we realized

that was not the case it was inevitable

but it could be years but the other

reason was was Blockbuster why on Earth

would anybody want to order a movie have

it mailed to them get it 3 days later uh

and then keep it a week and mail it back

when you can drive to a Blockbuster in

20 minutes and have the movie immediate

gratification and what happened when we

did the no due dates no late fees is it

shifted because before with an all a

cart system you would order it yeah you

get it three days later or you drive to

Blockbuster in 20 minutes but now when

it was no due dates no late fees you

could order your movies they'd sit on

top of your TV you keep them as long as

you want when you want to watch a movie

this lag time is

zero compared to 20 minutes to go to

Blockbuster because you could order a

couple I imagine three you could order

three okay and so you always had

something to watch when you're done you

put it in the mail and instantly you

know two days later another one replaces

it so all of a sudden we weren't two and

a half days slower than Blockbuster we

were faster faster than

Blockbuster and I think that was the

convenience and the thing is that when

we did the analysis at the beginning

about Blockbusters Achilles heel it was

the late fees everyone hated them uh

that was the single biggest thing that

people would say about Blockbuster I

hate the late fees and by being able to

get rid of that it was a huge

competitive advantage and it was baked

into the Blockbuster business model they

couldn't easily

get out of it again so for someone that

might not be aware of Blockbuster the

late fees are if I didn't bring back

this tape of this movie I would get

charged per hour or per day or something

yeah it's usually three or four dollars

a day okay which is a lot of money for a

DVD it's a huge amount of money for for

that but it was also this feeling of uh

I was okay paying the initial fee to

rent the movie because I want but now

I've watched the movie and I just

couldn't get it back in time and now oh

my God now I got to pay more just to

return it it just felt like this

unwarranted unpleasant punishment for

the customer I was thinking about

something that Daniel conman the famous

sort of psychologist um talked about in

his paper when he wrote about loss

aversion and the tldr of it the too long

didn't read part of this is that Daniel

Carman discovered that people have a

real disdain for feeling like they've

lost something and in his studies he

shows that if you drop $10 on the floor

you don't need to find $10 to make up

for the pain of losing 10 you'd actually

need to find 20 or 30 and and so he has

this wonderful graph where he talks

about that we just loss to us is so much

more painful than a gain so in the case

of Blockbuster a late fee is is is money

I literally lost for nothing right so

it's not losing $4 in in the context of

it's actually losing like $12 it's that

painful exactly it was it was a really

really hated aspect of the video rental

experience back then and also it made me

think about the peak and which is you

remember the uh which Uber discovered in

their Labs where they say that people

remember the peak in the end of an

experience and so if my end of an

experience with Blockbuster is getting

charged getting punished that's really

interesting I've never heard that before

but that fits entirely it was the

perfect denoma to having an experience

with Blockbuster is to go in and have

someone say thanks for returning your

movie now you owe us $8 or $12 just like

a horrible end experience custom and

that's why I think a no no due dates no

late fees

was so profoundly game-changing for us

and it marked the beginning of that that

was it that's what the company became

for the next five or six seven years and

it was more than just no duties late

fees but the transition to a

subscription business was huge and this

is you know now everything's a

subscription business every piece of

software you buy is a subscription every

everything subscription back then that

was not the case uh there was book clubs

which were subscription there was record

and tape clubs of subscription there was

magazines and that's all and in some

ways when you look back at what some of

the huge Netflix Innovations were one of

them was demonstrating you could apply

subscription to something which is

reasonably

unintuitive and it came from this fact

again this disconnected little piece of

my past that I happen to had a year and

a half of experience really

understanding subscription economics

when you were looking forward so I I'm

so fascinated by this test that you did

which which changed Netflix's fortunes

there's a couple of them that you've

described but when you did you know

looking forward that it would have that

much of an impact and I'm saying this

because that helps me to understand

whether I should just conduct a a lot

more tests or I should do what I think

most companies do where we sit in a

boardroom and we spend hours and hours

trying to find the perfect test is the

game just conduct more tests if I didn't

have to sit by the microphone I'd get up

and hit you upside the head for that

comment God no you should not be sitting

in the boardroom debating what to do you

should be running more tests you should

always be running more tests you don't

know you don't know I mean you

don't your customers do but they even

they don't know what they want and the

only way to figure it out is to throw

all kinds of things at them and see what

direction

they're interested in but so did I have

any idea subscription was a big thing

absolutely not and once it began to work

and it worked like crazy we still had no

idea how to optimize it and we Netflix

still 20 plus years later spends ungodly

amounts of time on testing all kinds of

things about subscription Dynamics what

does it take to get someone to do it

what does it take to get someone to stay

what influence is these it's

unbelievably complex but it's

unbelievably important but subscriptions

there's a reason why it's it's eating

the world it's an incredibly compelling

business model and uh the fact that we

stumbled onto it and that it worked so

well just was a very very positive uh

thing you know it's interesting on the

testing point just to close off there I

embodying the position of most companies

or employees or Founders listening to

this the reason why they don't want to

run tests or don't have a culture of it

is because it involves failure and

failure then in most companies results

in blame and blame makes people feel bad

so it disincentivizes them but creating

a culture where failing is a positive

and it's celebrated is quite a challenge

I guess oh it certainly is it's it's a

career for me I mean I uh I do a lot of

public speaking keynote speaking all

over the world and a lot of them are big

companies who are going our whole

world's being turned upside down our

whole Workforce is risk of

Mark get in here and help us figure out

how to make everyone a bit more risk

tolerant but you know what do they do uh

they'll go okay Mark your theme today is

we're trying to get everyone to be

bigger Risk Takers to take chances we

want to celebrate

risk uh so but before you go on we're

going to celebrate the sales leaders and

bring them up and reward them for the

trips to Hawaii it it's like you said

you have to let people know that

failling is not not only okay it's

expected and it's a good thing and we

found we we learn from it and I don't

even cons listen I don't even consider

it failures they're not failures they're

tests that didn't necessarily work but

they worked in the sense that you learn

something from them and you just keep

doing those over and over again and

again if you go back to this my first

principle is how do you learn how to do

tests which are quick cheap and easy you

can do tons of them talking about giving

speeches there just a week before the do

com Bubble Burst you gave a speech in um

New York City and your dad was there

yeah my dad was the anti-

entrepreneur uh he was extremely risk

averse uh he was an investment adviser

he worked for a uh managing money for

people in a company whose whole

principle was fundamentals long

long-term value he had no clue

whatsoever about why I was doing what I

was doing and this whole Venture world

it was just completely made no sense to

him um but that speech in New York City

was actually

fairly interesting because what I was

doing was speaking to the DVD

manufacturers Association I think it was

about what we' learned about more

effective ways to expand their

business and on one hand I think my dad

was extreme ex proud to see that all the

stuff that I'd been saying which he

thought was all a bunch of

hooie was actually important and

interesting to people but unfortunately

it was also um he happened to be in New

York that time to get treatment for a

brain tumor which he had just realized

he had and um so it kind of was this

beginning of this my dad understanding

for the first

time what I was good at

and at the same time the end

of not of our relationship but it marked

the beginning of this saying goodbye to

him so it was kind of this very very

Bittersweet uh Bittersweet

time in 2000 at 42 years old when you

were 42 years old um he just just one

week before the dot crash your father

passes away right I mean the timing is

is

um is is extremely unfortunate but also

just the impact that must have on one's

perspective to lose their father at that

that in that season of Life yeah I guess

it's part of you go well what else can

go wrong and you find out

plenty

but the tragic this is going to sound

tried I suppose but one of the tragic

things about my father dying before the

dot collapse is he missed seeing that he

was

right he missed seeing that in fact this

was a lot of hooie that this apparent

defying of Gravity by all of those do

companies commanding these ridiculous

valuations with no revenues and even

even less profit um which he thought he

could not understand how this could

possibly be real well as we all found

out a week later it wasn't real

and I think he would have really loved

seeing that in fact he was

right

um but it was kind of this double hit

for me you know reeling in fact from the

death of my dad and then all of a sudden

having to worry now about the death of

my

company did it change your perspective

losing your father on what matters in

life

I'm gonna say no

because what was great about my father

was that he was very true to

himself he was very comfortable being an

iconic clast about holding different

opinions uh even as we just mentioned

with the do

bubble when everyone else was saying

this was the next big thing and he's

going this makes no sense whatsoever and

he held to it and he lived his whole

life that

way and so in some ways when he died

there was this sense that it is possible

to

be true to yourself and um and be

fulfilled that you do not need to chase

the trends was reminding me that

that can

happen when I started my first job when

I was like um and I was probably

22 my first real job where I actually

had to go sit in an office uh my dad

called me into the

den um and tore a page off of a yellow

pad and on the page he had written in

pencil the Randolph rules of

success and he goes this these are the

things that I have learned over my

career as a business person and I think

I want you to see these as you start

your career as a business person and I

wasn't quite sure what to expect as I

was looking at them and what was

interesting was that these were not

business rules this wasn't like you know

Buy Low and sell high or happiness is

positive cash flow or anything like that

these were basically rules that said

it's possible to be a decent person and

still be successful I mean it was simple

things like you know do 10% more than

you're asked it was um

be

prompt it was um don't knock don't

complain stick to constructive serious

criticism it was don't express opinions

about things that you don't have the

facts

for I

mean that's who my dad was that he um

felt that those were the important

things to communicate to me which is

Mark be a mench

then the dotom bubble happens most of us

can't remember I think I was how old was

I must have been seven or seven or so

seven years old so I can't really

remember what happened yeah but I know

it was

bad well it was especially bad for us I

we were talking a moment ago about

subscriptions and how subscription

economics are amazing and what makes

them amazing is that you acquire your

customer and then that customer gives

you money for months after afterwards

ideally for years

afterwards but because a subscription

customer is willing to give you money

for years afterwards you can invest more

in acquiring that customer you can spend

$100 to bring that customer on board

with the confidence they're going to

give you $10 a month month after month

after month after month but it means in

month one you spent 100 and you made

10 so when you have a subscription

business which is booming which is going

crazy when customers are flooding in the

door well money is flooding out the door

the cash required to service those bring

those customers in for their first month

huge the revenue from them not so much