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The Knowledge Project
Netflix Founder Reed Hastings on Scaling High-Trust Culture & Bold Judgment
01:10:25
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- [00:01]
Reed Hastings
During my 25 years of Netflix, that was the dominant non family thing in my life. I think the big struggle we had in the early days was the contrast of loyalty and what that meant versus performance. And we realized, okay, professional sports teams have a clear bargain of you're sort of playing for your position each season and it is a performance culture, but the team can be quite close and can be very supportive of each other. And we came to think of loyalty as a stabilizer but that ultimately it was about performance and that helped us clarify our own values, that we were more valuing growth and achievement. And then when you get that and everybody's working towards the company's success, it's very powerful force.
- [01:01]
Shane Parrish
Welcome to the Knowledge Project. I'm your host Shane Parrish. In a world where knowledge is power, this podcast is your toolkit for mastering the best of what other people have already figured out. Today's guest is Reed Hastings, mathematician, Peace Corps teacher, serial founder, and the contrarian behind Netflix. In 1997, he mailed a single CD to himself to test a hunch. Over the next 25 years, he led Netflix from postage stamp DVD experiments to a streaming powerhouse that rebuffed an early Amazon buyout, published the viral 127 slide culture deck that codified radical freedoms and the Keeper test and placed audacious bets from $100 million commitment on house of Cards with no pilot episodes to green lighting Squid Games, which became Netflix most watched series on record. Since stepping back as co CEO in 2023, Hastings has applied the same playbook to Utah's Powder Mountain, branding it the uncrowded MO while doubling down on charter schools and AI tutors he calls venture capital for kids. Throughout it all, he insists that culture is the true engine of scale and resilience. Discover in this conversation how he builds and protects a player cultures outflanks giants by rewriting the rules and ports Silicon Valley principles into brick and mortar ventures and classrooms alike. I really enjoyed this conversation with Reid and I hope you do too. It's time to to listen and learn.
- [02:37]
Unknown
I want to start with what you're obsessed with lately.
- [02:40]
Reed Hastings
Well, let's see. Several things. So I would say during my 25 years of Netflix that was the dominant non family thing in my life and that was like one big thing with tiny little stuff around the edge. And now my life is more varied. So I have a big chunk of focus on charter schools. I'm on a half dozen nonprofits been working on charter schools in US Education for two decades. Big chunk on Powder Mountain, which is incredibly joyful, and then smaller chunks on a bunch of other philanthropic projects.
- [03:19]
Unknown
I want to get into all of that. Let's start with Powder Mountain. You first visited in 2016, I believe.
- [03:24]
Reed Hastings
Yep, that's right. We had a house in Park City for 20 years, loved skiing there, and then got very, very crowded, as the whole industry has. And Powder Moun is not in the Epic Icon ecosystem. And so it was uncrowded and blissful. So it's become a great place for me to both enjoy. So we went there in 2016 and then built a house that completed in 21, and then I retired in 23 and then crazily bought the mountain.
- [04:00]
Unknown
How do we make that leap? It's really hard for independent mountains to compete, I would imagine, especially in the era of Epic Pass. How do you go from casually skiing to buying a mountain?
- [04:12]
Reed Hastings
I wasn't looking to do another capitalist thing. It was definitely a save the mountain because I lived there expression, and we haven't done it yet. So you're right that Epic and Icon are fascinating because they're great businesses and they've made skiing for 1100 bucks. You get a range of options. So it's really popular with skiers. They sell 2 million passes a piece. They generate a lot of the visitation, and they're becoming bigger and bigger. So from a commercial standpoint, it's what people want. So think of it as the Costco of skiing. You pay a fee and then you get great value. And it's been very successful. So I don't really have any critique of it, but there's a sector of the market, maybe more like Whole Foods is to Costco, that's a little more specialty. So people willing to pay for uncrowded skiing, and then that's super fun, and you get wide open slopes and low lift lines, but it costs a little more.
- [05:16]
Unknown
Do you think that that's the future for independent ski hills? Like, you're either going to be one or the other. You're going to be like the mass market supermarket almost, or you're going to be niche high end.
- [05:25]
Reed Hastings
Yeah. I think Powder and the other independents need to strongly counter position or just become part of Epic Icon. But you're not going to live as you were because you lose a third of your revenue and all of your profit to the epic Icon family. And partially depend depends where you are geographically. But as a general rule, you've got to counter position quite strongly.
- [05:49]
Unknown
Do you think that that sort of eventually becomes self defeating? If we walk through maybe a Decade from now, and you go to the mountain and the lines are too long, the food stations are crowded, you don't have a good experience anymore. Not even to mention the skiing. There's no fresh tracks, there's no sort of. And so people will opt out of skiing in general, or do you think.
- [06:12]
Reed Hastings
No, I mean, again, if you're historic skier and a purist, you might say, oh, Park City is really crowded now, but it's also a great value and you've got this great icon or epic pass. And so far the money does the talking and people are showing up and visitation is continuing to grow. So it's been a very successful model of broadening the skier base.
- [06:37]
Unknown
You've always set culture as a founder. So first with Pure and then with Netflix. What's it like coming into an existing organization and either changing or enhancing culture?
- [06:48]
Reed Hastings
So in Powder Mountain and running that it's small enough, 150 full time employees. When I took over that, it's pretty intimate. It's not like taking over a substantial business. So I suppose it's a little different, but not materially.
- [07:04]
Unknown
And what changes have you sort of made with culture with respect to taking your learnings from Pure and Netflix? And we'll get into this a little more later.
- [07:11]
Reed Hastings
Sure. I mean, for the Powder story, we've done many changes on kind of the positioning, created a private skiing option. We've upgraded the employee compensation, sense of mission, sense of winning, many aspects of it.
- [07:29]
Unknown
And have you brought the almost meritocratic focus of Netflix into the culture that you were famous for there into Powder Mountain?
- [07:38]
Reed Hastings
Yeah, substantially so. Powder. I would say we've done, in my opinion, a slightly better job of it from the lessons that we've learned in Netflix. There was the meritocracy and outsiders thought it was cutthroat, thought it was Hunger Games, but inside it really wasn't. People looked out for each other, helped each other quite a lot. But in the words we used to describe it were not warm and loving enough. And so it came across as brutal from the outside. And so we were never really able to shake that kind of perception. And in Powder, we started with big hearted champions who pick up the trash. And so big hearted, of course, loving and generous as the lead word in our kind of employee motivation. Champions like, no, we really do care about performance. That's that meritocracy aspect. Very driven keeper test all the things that we had at Netflix and then who pick up the trash is a symbol of self responsibility and everything is my job. And people really do pick up the trash in both metaphor and actual ways.
- [08:53]
Unknown
I always find that interesting. I used to watch people when I worked in the government and they would push down into the trash, they would do anything possible instead of literally just taking the bag out of the trash. And they would spend five minutes doing this and things would fall out and they'd pick it up. And I'm just like, what is wrong? Just wrap the bag up and put a new bag in.
- [09:16]
Reed Hastings
Yeah, everybody takes care of the trash at home. And only some people do that at work.
- [09:21]
Unknown
Let's dive into a little bit of culture. But I mean, it starts with hiring. And this applies to Powder Mountain, Netflix and all the companies and even the schools that you're involved in. How do you go about finding the right people?
- [09:33]
Reed Hastings
I would say pretty imperfectly. You spend five or ten hours of interviews with someone and it's just hard to tell sometimes. So I'm pretty open minded. We'll take a chance on people and then again if it doesn't work out, we give them a package and move on. So some people say all the focus should be on the hiring process and maybe they're able to do that incredibly well. I've found it's hard to differentiate and so I'm willing to give people chances and let it be a little more instinctual. And then you're with them for months and then you can really tell their performance as opposed to from the five or ten hours of interviews.
- [10:21]
Unknown
How long is it before you really form that first intuition? Is it with somebody working directly with you? Is it like a week, two weeks into the job, three months, six months? At what point are you like, okay, this isn't going to work?
- [10:33]
Reed Hastings
Well, it's rarely initially, so almost always we're in honeymoon for three months. And then you might see some of the cracks start to appear of things and some of it is coachable and some of it is not. So you first lean in on that aspect and are communicative and clear. And so that's tended to work very well.
- [10:59]
Unknown
What was the highest value aspect of interviewing people or doing reference checks? What was the one thing that you would say is the 80, 20 of that?
- [11:08]
Reed Hastings
I would say almost always I'll have a meal with them. And it's sort of how they interact with the service staff, the food, athletes. Aspects of humanity and character might be one of the most telling.
- [11:30]
Unknown
That's a really good way to do it. A friend of mine also travels with them. He'll go on a trip and see how they deal with the airport and the security line, are they thinking in advance? Are they frustrated by delays? I always think that that's interesting. How do you go about evaluating persistence or character?
- [11:48]
Reed Hastings
Mostly by track record. I mean, if they've moved jobs every 18, that's one pattern. And if they've been six years and then three years and then seven years with someone you can sort of see that's their orientation, they dig in and try to make it work. So the past, again, for a more senior employee, where there's a long enough run to be able to see those, makes a real difference.
- [12:17]
Unknown
I remember listening to an interview, I think it was even last night right before I was going to bed and you had mentioned reference checks. How do you go with doing a reference check?
- [12:25]
Reed Hastings
Yeah, I mean we rarely ask people for references because those are so anodyne. So then it's climbing through LinkedIn histories, finding cross things, going to quite some lengths to get references that are more loyal to me than they are to the candidate. Because again, if you ultimately do all that and you end up with a candidate's brother, they're just going to say nice things. So you gotta find intermediates when you can, sometimes you can't.
- [12:59]
Unknown
Are there any tips or tricks for doing that that you've learned over the years? Do you go on LinkedIn and who do we have in common?
- [13:06]
Reed Hastings
Well, for sure, but I'll go to their prior. Generally they're currently employed and that's not a safe place to go for them. So then I'll look at the prior employer and then try to comb through and try to find people who work there who are probably new, the candid candidate. And then I'll reach out and try to get a conversation going and then only after there's a little conversation going, reveal that I'm calling as a reference.
- [13:37]
Unknown
Is there any particular question you find yourself asking over and over again?
- [13:41]
Reed Hastings
Mostly it's the would they hire them.
- [13:43]
Unknown
Again if they wanted to come back? And then once you hire somebody, what's the onboarding process like?
- [13:49]
Reed Hastings
Not differentiated. I mean, we don't try to really specialize in making that great. Hopefully they get a laptop and an account and that all works, but it's sort of, I don't think there's much to do, right or wrong in that first week. It's sort of just a full on.
- [14:08]
Unknown
Immersion and you sort of take or don't, I guess. Right. Almost like a transplant.
- [14:13]
Reed Hastings
Well, we're very invested. Once we've hired someone that they do take and their manager is invested in it, But I haven't seen anything really go wrong in the first week. So it doesn't feel very error prone.
- [14:24]
Unknown
I don't know what year you put out your first. The deck that got released, I don't know if it was released or somebody.
- [14:30]
Reed Hastings
2009, I was like, man, I want to work there.
- [14:34]
Unknown
I was like, this is the exact type of call. So it almost has a selection bias, too, because I imagine people see that and then they opt in. They want to be part of this meritocracy. They want to be part of this culture of no rules and high trust and high agency.
- [14:49]
Reed Hastings
Sure. Well, we had an internal slide deck, and I would meet once a month with all the new employees as a group. Group, and then go through it. So this is 2006, 2007, et cetera. And most of the time, their managers had, well, briefed them before they hired them on what we thought was important. But once in a while, we'd get people who were in total shock. And I realized, oh, it's kind of unfair to this person that they got into something they didn't particularly want and that it would be better to give all the candidates the slide deck, sort of going through the culture. And then we realized, of course, once we're giving it to all the candidates, it's going to get public at some point. So let's go ahead and just make it easy for the candidates by making it public. And that's what led to that release. But the reason it looked so unofficial is because it was just an internal comms deck to the new employee. Welcome.
- [15:53]
Unknown
But it made sense to put it out there so people knew what to expect.
- [15:57]
Reed Hastings
That's right. And then it had exactly the effect you referred to, which is the people who fundamentally wanted job security over growth were repelled. And the people who wanted growth and willing to trade off job security loved it. And so then we selected a very creative type of person who, again, was into performance and taking risks.
- [16:27]
Shane Parrish
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- [17:15]
Unknown
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- [17:17]
Shane Parrish
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- [17:26]
Unknown
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- [17:27]
Shane Parrish
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- [18:03]
Reed Hastings
The new McCrispy strip is here. Dip approved by Ketchup Tangy Barbecue Honey Mustard honey mustard Sprite McFlurry Big Mac sauce Double dipped in Buffalo and Ranch More ranch and creamy chili McCrispy strip dip now at McDonald's.
- [18:19]
Unknown
One of the key ideas was talent density. Talk to me about what that means and how you thought about it throughout the organization.
- [18:27]
Reed Hastings
Yeah, I mean, I think the big struggle we had in the early days was the contrast of loyalty and what that meant versus performance. And you know, everybody wants loyalty and they want performance and their attention. And so as we sorted through that, we realized, okay, professional sports teams have a clear bargain of you're sort of playing for your position each season and it is a performance culture, but the team can be quite close and can be very supportive of each other. And so that wrestling with we came to think of loyalty as a stabilizer. So loyalty gives you, you know, if you have a bad day, you don't get instantly fired or your boss has a bad day, you don't quit instantly. You sort of think things through solidly over a couple months, but that ultimately it was about performance. And that helped us clarify our own values, that we were more valuing growth and achievement than we were, say, lifetime loyalty. Which is different than a family, company or other relationships that we have where we value loyalty in our friendships, in our marriage and other things. We Value loyalty over performance.
- [19:52]
Unknown
I remember an interview, I think it was Jamie Dimon who gave it, and he said, I want loyalty, but loyalty to the company first and loyalty to people second.
- [20:02]
Reed Hastings
Yeah, I mean, what he's getting at there is not a personal loyalty like political factions where you look after your boss or something like that, but you care about the organization. And I do believe he's right, that that creates a very powerful force and it only works if they see the leader. In that case, Jamie, or was myself at Netflix, are clearly willing to sacrifice their self for the benefit of the company. And then when you get that and everybody's working towards the company's success, it's very powerful force.
- [20:39]
Unknown
How do you think about the notion? Bill Belichick said, I'm not collecting talent, I'm building a team team. I'm building the best team, not the most talent. What's your initial reaction to that?
- [20:50]
Reed Hastings
It's 20 sum. I would say it's a little more of both. But what he's trying to get the point across is building the team is a distinct operation. But if you build the team from a bunch of high school football players, that's not.
- [21:07]
Unknown
He still can't compete.
- [21:10]
Reed Hastings
But again, he's saying it dramatically to make a point. It's like saying only the paranoid survive. And when Andy Grove said that for two decades, that was like the phrase. But it's not literally true, because the paranoid are delusional and they see everything as a crazy threat and they can't differentiate what's an important threat and what's not and what's reality. But here it was a provocative and memorable statement to try to get people to be business leaders, to be more worried about what could happen to them.
- [21:49]
Unknown
Talent density isn't just about bringing in talent. It's also about removing people who maybe the role has changed, they're no longer suitable, or they were never suitable to begin with. How did you go about identifying and then removing? I mean, one of the things that I think you did was severance packages. But you said, correct me if I'm wrong here, that the severance packages were for managers. They weren't for the employees because it gave the managers almost permission to remove people.
- [22:17]
Reed Hastings
Sure, the money goes to the employee, it doesn't go to the manager. But managers are generally selected because they have good human skills and they like people. And so it's very hard for them to let people go. And so if you are giving the terminated employee a big severance package, it makes it easier on every. Everyone and so that's one of the hidden benefits of it. The other is getting a release. So Netflix has let go many people. And I mean maybe there's a few employee lawsuits, but hardly any again because the severance package is bigger. And then we generally don't do performance improvement plans, which are sort of a way to document the employee's poor performance so that you can win a suit. Instead, why not just give them a check? And there's so few people who get put on a PIP that then turn around. I think it's a false system of legal protections that doesn't work. And again, it's better to give them a generous severance package, have them sign a release and help them onto their next challenge.
- [23:27]
Unknown
Is there anyone that was either on a PIP that you know of that turned around, or anybody that you had formed an impression of after three months that was like this isn't going to work out and then it turned out to work out spectacular?
- [23:42]
Reed Hastings
Well, again, we didn't use pips. But I would say are there people who got into a rough spot and got out of it? Absolutely. And the more someone was a longer term employee, the more the rough spot was sort of taken in context. And we would try to say, okay, let's see if we can shift them into some other role and see if they can get back to being miraculous in that room.
- [24:10]
Unknown
Role you've said. And correct me if I'm wrong, processes can be the death of innovation. Yet every company needs some structure as it scales. How do you decide which processes to add and which to remove?
- [24:23]
Reed Hastings
Yeah, I mean that sounds like a long quote. I would say let's tighten it up of manufacturing provided most of the GDP growth from the beginning industrial age, so 1800 through to, I don't know, 1990, so 200 years. Manufacturing is providing the GDP growth. And manufacturing is about consistency, about driving out error, about incredible process attention, replication, perfection. And it's not that they weren't ad agencies in the 1950s that were kind of kooky and crazy. They were, but it was a tiny part of the economy. So the metaphors that we all picked up around process think of way classrooms are basically organized like factories. Lots of things are organized like factories because it was the prevailing metaphor. And then the economy shifted a lot and higher value things were creative work and inventive and intellectual. And for those things that are inventive errors an inherent part of the process. So think of it as in manufacturing you want to drive out variation and in innovation you want to increase variation. And so process really is the language and model of driving out variation and getting to consistency. And if you're in a safety critical business like an airline, it's a good thing. And if you're an inventive, creative business where your main threats are that someone else is going to invent something nearby you, then you want to minimize that and maximize the innovation.
- [26:14]
Unknown
A large part of the CEO's job seems to be rooting out bureaucracy. How did you go about preventing that from creeping in?
- [26:23]
Reed Hastings
Well, once you have, let's take expense policies, most companies have policies. You can spend $250 in certain cities and more in Tokyo and less in Omaha. And they're trying to save money and they're trying to be careful with expense. And then you've got to have a whole bureaucracy to administer that, to make sure people comply with that, to educate them and whatever. And we got rid of all of that and we just had to travel as you would on your own nickel. And I'm sure there's occasionally some expense that gets done that shouldn't be. But compared to the cost of enforcement, it's tiny. So again, that's more of our freedom and responsibility approach.
- [27:10]
Unknown
I like that approach better because it treats people like adults.
- [27:13]
Reed Hastings
Yes. And in treating people like adults, you want to set some context of kind of what we mean by that and give some principles and examples. But yes, again, it's getting away. It's moving from the industrial model to the knowledge worker model. And yet many of our corporate forms haven't adjusted fast enough to the basic work.
- [27:39]
Unknown
How did you go about recognizing good judgment?
- [27:42]
Reed Hastings
I mean, I think people take bets about what's going to work. And if they do end up working, then we say they had good judgment. So I think we recognize it by them making unusual choices and having those be quite successful.
- [28:00]
Unknown
I think of it like advantageous divergence. You go against the crowd and you're correct.
- [28:05]
Reed Hastings
That's right.
- [28:06]
Unknown
And in those moments, do you think judgment can be taught?
- [28:09]
Reed Hastings
I think so, to varying degrees. It's kind of like music or something, which is everybody can learn some music, probably only some people become fantastic at it. But you need some teaching in it for sure. It's not like spoken language where it's so wired into our biology. Everybody learns to say speak.
- [28:33]
Unknown
Let's talk about Netflix for a second. You left the co CEO role. You're now on the board. How hard has that been? To walk away from something that you created and not be hands on and not be in the weeds and sort of like to be sitting on the board.
- [28:51]
Reed Hastings
It hasn't been hard at all, partially because Greg and Ted were with me for 20 years and they were very ready. And so it was exciting for them to get the opportunity that I had to have the responsibility and to manage so much global complexity. So I was excited for them and they've done a great job these last two years, so that helps. And then in terms of my own time, it was nice just decompressing and then spreading my focus around these different philanthropic and then powder mountain efforts.
- [29:31]
Unknown
Can you maybe riff a little bit on the competitive landscape of online streaming?
- [29:37]
Reed Hastings
Well, it's very broad. Everything from YouTube to HBO and then in every nation it's a little bit different. There's a lot of national networks and so Netflix earns, depending on the country like 5 to 10% of television viewing. And so we got a long way to go. And as we say inside, we lose most of the time. We don't win the majority of television screen time. So then it's like, okay, what are the types of entertainment that we can do and how well can we do them to earn more time?
- [30:18]
Unknown
And is that part of the move into gaming?
- [30:21]
Reed Hastings
It's moving in gaming unscripted content. Initially we were just film and not even in tv. So yes, we've expanded category by category to see where can we earn more time or, you know, do a better job than anyone else in entertaining our members.
- [30:40]
Unknown
Do you think it's inevitable that live sports becomes part of that?
- [30:44]
Reed Hastings
Well, on Christmas we had two NFL games, so I would say it is part of that. It's one of the things that Greg and Ted have done because I was always very skeptical, not of course of the, of the viewing, but that there could be a good long term proposition there. And they've proven me wrong and have found good models where it makes sense for Netflix, the company, and of course for all the members.
- [31:12]
Unknown
One of the interesting shows that you guys did about F1 drive to survive. Is that what it was called?
- [31:19]
Reed Hastings
Correct.
- [31:20]
Unknown
You turned a whole country really onto an industry. It's so interesting to me because you, you single handedly change the trajectory of F1 across the world. Not that it was bad before, but you definitely increased the slope of adoption and interest and you captured so little value of that on a value basis, like billions of dollars accrued to F1. And I'm positive you guys didn't make billions of dollars out of that show. How do you think about that and your role in driving eyeballs and attention?
- [31:59]
Reed Hastings
Well, look, F1's been working hard for 50, maybe 100 years, building up. So they deserve that lion chill at it.
- [32:08]
Unknown
Totally.
- [32:08]
Reed Hastings
It is certainly true that when we set a show in a context and then the show works as strive to survive did, then it popularizes that thing. But if we. It doesn't bother us that they profit from. From it any more than if we did a show that was set in farming and then all these people are growing apples, it's like, okay, in other words, we're looking to have incredible entertainment, and F1's an incredible context for that. So doesn't bother us that they bet on us and then we delivered.
- [32:46]
Unknown
I guess where I was thinking about that is like, do you envision any future in the next 20 or 50 years where. Where maybe you actually buy a sports team or a franchise? Or you could have bought F1 before this and then made the show and then captured that advantage to. You also had exclusive broadcasting rights and all of these other things that tie together.
- [33:08]
Reed Hastings
Well, you'd have to ask Greg and Ted about that. They will be the ones trying to figure out, does that make sense in our continued growth and stimulating entertainment or not.
- [33:19]
Unknown
The other show that I want to talk about is the Dave Chappelle caused a lot of controversy. How is that handled internally inside Netflix, and how do you see your role in terms of what you air or don't air?
- [33:32]
Reed Hastings
Sure. Back in 2018, 2019. Let's see. We probably did our first chappelle special in 2015 or 14. So we had a great relationship with Dave and had done a number of his standups, and they were. Were super popular, some of our most popular standup shows. On the same hand, we were trying to be very inclusive and to have many people be able to thrive at Netflix's employees, including our transgender employees. And so the tension became. We said to our trans employees and their allies, hey, we're very trans friendly. If you're fantastic at your job, job again, it's great. And we're an inclusive place of work. Then some of them felt that in doing the Dave Chappelle show, which had some trans jokes, which I don't believe that Dave is anti trans, but he definitely takes on some of the issues that they were being undercut as employees, and we were creating a hostile work environment which got them to protest internally. So that was the storm in maybe 2019, and it was good for us to realize that we were not resolving this conflict between customer entertainment and employee values. So, for example, in many of our shows, people have guns and blow people up and shoot people. And yet we don't want a workplace that's filled like that. And so we realized entertainment is an escape where various things get said and done that are not. Not endorsing that as workplace behaviors, but we hadn't really clarified that. And so we sat down and we did an amendment to the Culture memo and tried to really explain that entertainment is not always going to be stuff that you love or that you emulate or is admirable. There's lots of stuff in entertainment that's not admirable. And if you don't want to be in the entertainment business, that's, that's fine. But if you do, this is a core part of entertainment. And then because we clarified all those expectations, a few people left, but for the most part, everyone understood that makes sense. That's the rules. And we move forward together.
- [35:52]
Unknown
Maybe just riff on how you see the inclusiveness DEI playing out in the workplace and how it could be better incorporated because there seems to almost be an anti DEI movement at the same time now that's going on politically or within companies where people are questioning whether people deserve their roles just because they might be a minority or underrepresented. How do you think about all of this?
- [36:20]
Reed Hastings
Yeah, I mean there's certainly the US federal government is leading this anti DEI push. I don't know how much it's affected Netflix. Again, you'd have to ask Greg and Ted about that. But I would say in general for us, we always focused on inclusion. We never called it DEI for us is we want everyone who's a Netflix employee to be able to contribute at their highest ability because that's in our commercial interest. So perhaps we can go as far out on a limb as some companies did. But our inclusion efforts have remained strong and again, we want people to feel comfortable so that they can contribute at their highest level. Level.
- [37:04]
Shane Parrish
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- [38:10]
Reed Hastings
Ryan Reynolds here from Mint Mobile. With the price of just about everything.
- [38:13]
Shane Parrish
Going up, we thought we'd bring our prices down. So to help us, we brought in a reverse auctioneer, which is a apparently a thing.
- [38:20]
Unknown
Mint Mobile Unlimited Premium Wireless.
- [38:23]
Reed Hastings
Get 30, 30.
- [38:23]
Shane Parrish
Get 30.
- [38:24]
Reed Hastings
Better get 20, 20, 20.
- [38:25]
Unknown
Get 20, 20.
- [38:26]
Reed Hastings
Get 15 15, 15, 15.
- [38:27]
Unknown
Just 15 bucks a month.
- [38:29]
Reed Hastings
Sold.
- [38:29]
Shane Parrish
Give it a try@mintmobile.com Switch upfront payment.
- [38:33]
Reed Hastings
Of $45 for three month plan equivalent to $15 per month required new customer offer for first three months only. Speed slow after 35 gigabytes of network's busy taxes and fees extra.
- [38:39]
Unknown
See mint mobile.com I love this quote from you. I have two religions, customer satisfaction and operations, operating income. Everything else is a tactic. Talk to me about that.
- [38:50]
Reed Hastings
Yeah, I mean there's another way to say customer satisfaction. There is revenue, that's the top line and the operating income is the bottom line. So you want to be, I think Bezos is the one who said this best be very firm about certain principles and then very flexible on the tactics. And then this is a specific application of the that which is let's try to think through things that grow customer happiness and also grow operating income. It's quite hard to do both of those. It's easy to do one or the other at the cost of each other. But the art of business is doing both of those better than your competitors do.
- [39:36]
Unknown
You put $100 million bet on house of Cards. Having never watched the podcast pilot, what gave you the confidence that that was going to work out? And I think you beat out HBO for the show. What data did you use? How did you make that decision? That was a big bet at the time.
- [39:53]
Reed Hastings
Well, that's 100% credit to Ted Sarandos. So Ted had been working with David Fincher and trying to develop some of these ideas. The show was up for bid and then Ted put in this two season bid, which was unheard of at the time. HBO had a precedent where they don't do that, so they didn't match. And then that team Media Rights Capital went with us and it turned out fantastic. But really, all of that bravery is due to Ted Sarandos.
- [40:32]
Unknown
What data goes into those decisions? I mean, how did Ted make that decision decision?
- [40:37]
Reed Hastings
There's some data, but I would say it's instinct that the thing. You've got a partial script, you've got some casting, and you have to guess how good is that show going to be to figure out what it's going to comp against in terms of your data. So there's no real data that tells you that was an instinct call.
- [40:59]
Unknown
Is it harder to create content that hits or buy content that hits? Hits?
- [41:04]
Reed Hastings
Well, if you. By buy content that hits, you're implying that it's never been shown. So the later it is in the pipeline, the more it's just a sketch, boy, it's hard to tell. The more it's a complete script, you can tell a little bit more. The more it's a script and a cast, you can see a little bit more. The more it's a script and a cast and some dailies, you can see a little bit more, the more it's an edited, completed thing, then you can really take a guess. But you still don't have that much public reaction. The more you've done test screenings, you can tell. So at each stage you get more information and you're more likely to be right. But in all of the stages, it's a lot of judgment. So a simple case would be squid game. So we knew squid game would be big in Korea, or we highly suspected it would be. But the fact that it took off globally was a surprise to us and we'd been doing it for 20 years. So again, there are some surprises in there, but you're increasing the odds each time you do these things of learning. And the team's gotten better and better at learning which things are going to get really popular.
- [42:17]
Unknown
How do you go about using data, obviously to inform what you're creating, but also allowing for serendipity and unexpectedness and variation, as you would tell if you're only using. We know people will like this based on their viewing habits, how much they watch, where they stop all of this stuff? We can create more of this pretty easily. How do you think of that in terms of variation and surprise and new innovative shows or ideas?
- [42:44]
Reed Hastings
We stimulate a lot of judgment of people trying new things, and sometimes we celebrate the failures that don't quite work because again, you got to be willing to have people try things. It doesn't really work in entertainment to say, let's do a show just like that. That Rarely ends up success, successful. So there's not much risk of going for that because it's not a good commercial path.
- [43:09]
Unknown
How much data do you collect on what I watch?
- [43:12]
Reed Hastings
You know, we have some basics, but it doesn't help us with the next show. So the thing that's helpful is at the end of a Netflix show, you give a double thumbs up, single thumbs, or thumbs down. We know you finished it, but maybe you thought it sucked. And so we really want to know what you thought of it. So that's probably the piece of data that helps the most.
- [43:36]
Unknown
I just want to let you know, my kids go in and they often mess up these little thumbs up, thumbs down things. Sometimes I see these recommendations, you know, when they were younger and I'm like, transform. I don't watch Transformers. Like what?
- [43:48]
Reed Hastings
Yeah, well, as kids evolve, us adults don't evolve that fast in our taste, but kids do so well.
- [43:54]
Unknown
They do it on purpose. And they totally hijack my YouTube too. All these recommended videos. I'm like, what is going on here? Talk to me a little bit about AI and maybe riff on how you're seeing it used today and how you see it being applicable and just walk me through a little bit of your thoughts on that.
- [44:15]
Reed Hastings
Well, let's see. In a Netflix context, Ted and Greg really lead that work. Ted's important quote about a year ago was, you're not going to lose your job to AI. You're going to lose your job to a producer who uses AI. And it's a tool for people to use and hopefully everybody will use it and raise the level of performance just as they did with, say, digital filmmaking. At Powder Mountain, we haven't found very many uses for AI yet. So we use AI a little bit in marketing copy, but it's pretty minimal. So I think there'll be a number of businesses that are impacted a lot and other ones that are impacted much less.
- [45:03]
Unknown
How are you using it, personally, as a search replacement?
- [45:08]
Reed Hastings
So I tend to use Claude or Gemini or OpenAI where I would have you search. So in the ski industry, I've been learning a lot of things about lifts and lift cable strengths and other things like that, and water systems. And I'll be educating myself essentially through AI, through posing a bunch of AI questions.
- [45:33]
Unknown
Has it changed how you go about learning about these things? Because skiing is an entirely new industry when it comes to lifts and cable strengths and sort of, yeah.
- [45:42]
Reed Hastings
I mean, I think 20 or 40 years ago you'd probably have to go to some engineering textbooks or was very opaque about how to do that. The rate of learning is much higher now because of AI. AI, you know, first search and that that made a big difference for 20 years and and then AI is really improving that you do a lot of.
- [46:04]
Unknown
Work with charter schools. I want to come a little bit higher level in a second. But how do you see AI playing out in the classroom and and learning?
- [46:12]
Reed Hastings
Absolutely. I mean I think AI for teaching kids is a awesome application. You know, generally you're in a classroom with 20 or 30 kids and it's very hard for the teacher. The kids are all at different levels and it' industrialized model. All third graders are going to learn the same thing today. And that really again that's for the convenience of the operator of the school and for being able to handle mass education. And AI offers the potential of every kid gets their own tutor, goes at their own pace. So there's a lot of efforts going on now on the board of Khan Academy, a nonprofit that's really pioneering a lot of stuff with Khan Media Ego helping other for profits like Lo E L L O that does a reading app that's amazing. So if you have a five to seven year old, it really helps the kid develop a confident reader. The AI is very patient and will listen to the kid and then correct them and then help them get stronger and stronger in their reading. And we're scratching the surface. So in the next 10 years you'll be be able to have a complete K12 and probably university education with AI on a phone or tablet. That will be really change learning. So think of it as AI is getting more impactful in society. The standards of what people need to know and can know is much higher. So we've really got to do this pivot to individualized education from mass classroom lecture style communication.
- [47:49]
Unknown
How do you see the role of the teacher changing?
- [47:52]
Reed Hastings
Well, a teacher will evolve to be a little more like a social worker and a motivator. So they're not actually giving the instruction in that long term case. All the AI is doing that and they're doing the social emotional learning. Okay, so how do you interact with other students? How do you do the project? How do you sit still? So think of them as becoming social emotional experts and that they're pretty good at that already and less subject matter what happened in 12th century and England and they regurgitating the facts which is a lot of what they have to know now. So it's them becoming again specialized in the social emotional side. And then you've got this huge numbers of Companies now are trying to do AI for education. So it's a big scramble, a lot of competition. Very exciting.
- [48:42]
Unknown
Yeah. I think it's going to be really interesting to watch how it plays out. Synthesis tutor just got a state on board, signed on to teach math and a whole country, I think El Salvador starting in September, their whole country in past September. And the results are staggering. Kids are learning faster, better, they understand more.
- [49:03]
Reed Hastings
Yeah. And again, the classroom model has so many inefficiencies in how it's organized, how little learning happens, that it's a great AI application to take on. And then also young people are very adept at new technologies, so it's got a double win. So I think education will be one of the big areas transformed and everyone will be able to get a better education.
- [49:26]
Unknown
Just as an aside, I tell my 14 year old I think he could be a mid level employee in most companies if they never saw him, just based on his output alone. Because for him AI is his arm. He's been using it since he was young and it's just second nature and he knows how to work that.
- [49:45]
Reed Hastings
And the danger for a 14 year old like that is then they sit in a class classroom and they can get pretty bored and then they can act out and then they can get labeled in various ways.
- [49:54]
Unknown
Totally.
- [49:54]
Reed Hastings
So it's why again the industrial education system is slowly adapting in good ways is to avoid that outcome. And then charter schools are US form of school governance where public school is a non profit and they get to be independent and operate under their own rules, but they operate as a nonprofit focused on the kids and they're a little more flexible than the government run schools because they don't have the civil service orientation. And there's quite a range of them. There's no one learning style for charter schools. So it's more like a governance change again where they're run by a nonprofit.
- [50:42]
Unknown
Why is education so important to you?
- [50:44]
Reed Hastings
I mean it's important to everybody, you know, so I don't think.
- [50:46]
Unknown
Yeah, but not everybody dedicates their time to it.
- [50:49]
Reed Hastings
Sure. I could be working on environment or aquaculture, lots of things. Right out of university I became a math teacher. I was a Peace Corps math teacher in Swaziland, which is between South Africa and Mozambique, and spent two and a half years teaching. And so later in life when I became a philanthropist, it was the thing I knew a little bit about. So I would have to say it's a bit random in that way. But then what I counsel people is all the problems that we have in society today are the ones our parents and grandparents couldn't solve. They're selected to be quite challenging. So if you dig yourself into one major societal problem and spend your life on that, that's a great outcome to try to make a difference in one of these hard problems. Problems.
- [51:38]
Unknown
And why charter schools? Why not tackle it through the Department of Education or a different way? Why did you pick that vector?
- [51:45]
Reed Hastings
Well, I came to believe that the government running the schools was sort of the essence of the problem and that it would be better and more effective to have nonprofits. Like, if you look at the university sector and all of our top universities, they're all nonprofits. And so it's modeling on that. So it's a shift from kind of more government bureaucrats control to nonprofit control.
- [52:12]
Unknown
One thing I think we both agree on is equality of opportunity. And it's not always that way. In the education system, your zip code or your postal code or wherever you live can dictate the quality of education you get. How do we go about increasing equality of opportunity?
- [52:27]
Reed Hastings
Well, I think tech is probably the biggest driver of that, which is if we can have AI tutors that are like in Khan Academy Scholars, case free or low cost in other cases on tablets that are widely available, I think that's an incredibly great way to expand the franchise of learning.
- [52:52]
Unknown
If you were to take over education in charge of the country almost from a specific vector, what policies would you change? What would you change in the classroom? What would you include? What would you. What would you take away?
- [53:04]
Reed Hastings
Mostly I'd focus on school choice and giving teachers the tools to create a school because you get that flourishing of. There's lots of teachers who have very good ideas about what would be the perfect public school, at least for some sector of kids. But they have no way to do that in the current system. So it's then allowing them, supporting them to create a nonprofit, to create a school, and then to give the parents the choice to join that school or not. So the whole model of teachers getting to create lots of new schools and then parents choosing which of those schools they want to go to is something I think would be transformative in a positive way for kids outcomes.
- [53:49]
Unknown
What do you think goes into the decisions to transfer? I'm thinking as a parent, what would cause me to transfer? Charter schools, maybe it offers the hope of better education and better teachers. And. And maybe it also deviates to the negative. Not all of them are going to be successful. So there's a risk involved in that. How do you Think about that from the parents perspective.
- [54:12]
Reed Hastings
Yeah, I mean, it's a little like for parents who send their kids to university, they have the same thing. Some universities seem good, but aren't really. Or it can be a good university and you have a bad experience. So there's no perfect outcome in that. And then in general for charter schools in wealthy areas where the schools are practical, pretty good, the existing government schools, there's not much incentive to change, basically. So for example, in Palo Alto, California, there's no charter schools. But in East Palo Alto, which is quite poor, right next door, there's a bunch of charter schools because the parents are desperate for change and options. So the charters have really focused on the lowest income kids because they, they don't have great government schools and they're willing to take a chance and try the new charter school. And some of them of those charter schools have worked out fantastically.
- [55:10]
Unknown
That's awesome. If you could shadow one CEO for a month, who would it be?
- [55:15]
Reed Hastings
In the old days for me it was Jeff Bezos, but now he's retired, so probably would be Jamie Dimon at this point. Since he's still active and such a broad intellectual, it'd be fascinating to sort of be on his shoulder for a week.
- [55:36]
Unknown
I think he's well known, but also underappreciated for all the things he's done and all the crises he's managed through in banking. He's becoming a lot more vocal too, which I think is a good thing. Whether you agree with his vocalness or not, I do love the fact that CEOs are becoming more vocal about things that they're passionate in. They feel like they can share their opinions now.
- [56:02]
Reed Hastings
Yeah.
- [56:04]
Unknown
What's the biggest misconception that you think other people have about you?
- [56:08]
Reed Hastings
I really don't know that they have any misconception or I'm not confident of what their perception is. I would say for now I'm focusing on turning around this cool ski area as a passion project and making it this fantastic and unique place, continuing the charter school work that helps get kids more opportunity. So I would say if people have opportunity, it's that I'm trying to do things that are a balance of fun and good. And powder is 90% fun and 10% good. And the charter school work is 30% fun and 70% good. So it's a range of different projects that way.
- [56:55]
Unknown
You said one of the philanthropists you admire is Bill Gates.
- [56:59]
Reed Hastings
For sure.
- [57:00]
Unknown
Why is that?
- [57:02]
Reed Hastings
His basic approach is a technocratic approach to human welfare. To sit down and try to think, okay, what are the causes of human misery and how do I knock them down one by one and takes bold, ambitious bets. Curing disease, many others, other things, energy, so very long term oriented. He'll work on, give you an example. There's a terrible virus that affects cassava in Africa. And cassava is like potato, but it's the main crop, main calorie crop of many countries and people. And this virus is continuing to spread, maybe naturally, maybe through climate change. And he's been working for more than a decade to find genetically modified variants that don't suffer from this virus. And they're now in field trials. And I was at one of the field trials recently and it's stunning. I mean, basically the plants with this genetic modification don't get the virus and instead of getting a 10 or 20% yield that a farmer gets, because the virus has taken 80 or 90%, they get a 95% yield. So it's like five or 10 times more food produced. But the foresight that Bill's team had to have to figure out what to back early is amazing. That kind of deep science for again, improved human welfare is very inspiring.
- [58:33]
Unknown
When you were running Netflix and pure software, how did you think about, I don't want to use the word balance, but it's probably the one most people understand between running a business, being ambitious, being all in on that, also family, friends, health, all these other competing things for your time and attention.
- [58:55]
Reed Hastings
Yeah, I think of it as work life integration. When you have a bad example of work life integration is pulling up your phone in the middle of dinner with your family. And a good example is you might come home at 5, 30, 30 and cook dinner and hang out with your kids, and then at 8 maybe they're watching TV and you go do an hour or two of work. So the flexibility of what modern technology offers provides you an opportunity to do great integration. Another would be while you're running, listening to a podcast. So there's a bunch of clever life hacks to improve integration, but because most of us want a great family life and a great professional life. And when you're into the balance metaphor, it's sort of more of one, less of another. It's zero sum in the metaphor. And I think that's unsatisfying. There's a degree of truth to it, but it's unsatisfying. And so it's better to think of it as how do you improve work life integration where you have again, a great professional life and a strong family. Family life, the ones that get pushed to the side are sort of, how much friendships do you develop between, again, depending on your family situation, between family and work, that can be pretty all consuming. So that tends to get less. And sometimes health and diet and exercise do. But of course, as everyone knows, if you put some time into that, you'll be better at the other things.
- [60:30]
Unknown
Are there things that you gave up that you regret in the pursuit of your goals? I was talking to Brian Halligan about this on the podcast. Podcast, and he said, look, I was focused on HubSpot. That was my baby. That got all 90% of my attention. And I was like, well, that's interesting. Right now, looking back, do you regret? And he's like, not at all. I don't regret that at all. If anything, I probably spent too much time with friends and family and I should have spent more time on the business. How do you think looking back now about how you integrated all of these different things and if anything, you would change?
- [61:04]
Reed Hastings
Yeah, I mean, I don't have any big regrets. I'm glad that I retired at 62 and I think, oh, should I have done it at 55 and had more of life in this new kind of multifaceted state versus the obsessive state? But I loved my 25 years on Netflix. It was fantastic. And I'm so happy now, now that Greg and Ted are doing such a good job on it and enjoying it. So it's all coming together. So I can't think of any significant lessons or regret. You do have to feel your way along, and there are a few people who work. Warren Buffett, he does one thing until he's 95, but I'm not really critical of that. It's not what I would want for my life, but it's up to him how he wanted to live of his life.
- [61:59]
Unknown
You mentioned the word obsessive. Go deeper on that.
- [62:02]
Reed Hastings
Well, I think to be world class at anything, whether that's sports, cooking, business, you have to be pretty maniacal and obsessive and intense. And it's not easy. So I don't want to kid anyone that it's an easy life. You have to definitely push hard and give a tremendous amount of energy, as I did to Netflix, which is part of why it's great at 62 to hand it over to people who are a decade younger and they're super obsessive.
- [62:39]
Unknown
Now I want to come back to culture for a sec. There's one question I didn't ask. What was the keeper test and how did it apply?
- [62:48]
Reed Hastings
The Keeper test is a Netflix shorthand for asking yourself, if one of your employees working quitting, how hard would you work to keep them to stay? Would you try to change their mind? And if you wouldn't, then you should proactively give them a generous severance package and try to recruit someone who you would feel that you would really try to keep them. And so the typical employee test that people use is, did they screw up enough that they deserve firing? So they have to really fail to deserve firing firing. And we want to change that presumption to be no, it's the people that you would fight to keep, those are the ones that you stay in. If someone is not in that, then you should give them a package and move on. And of course, the more nuanced one is to have a conversation with them like, I wouldn't fight that hard. And let's try to change that and try to not surprise them and be honest with them. But it's shifting at the standard industrial model is like, you nearly have to commit a crime to get fired. As opposed to the athletic team case, which is, I think I can upgrade. I wouldn't fight to keep you.
- [64:04]
Unknown
You're fighting for a roster spot because.
- [64:06]
Reed Hastings
I want to win the championship.
- [64:08]
Unknown
At Pure, you IPO'd, I think you went through five head of sales in five years. What was that like and what did you learn from that? Experience?
- [64:17]
Reed Hastings
Experience, sure. Pure Software was like 91 to 97. And we went public in 1995, strangely, the week before Netscape. So for one week, we were the hot tech ipo, but it was challenging. I didn't really understand how to run enterprise sales, and so I kept picking the wrong person. That held us back for sure. We could have grown faster, better, and be a more successful company if I had more of an adept hand at enterprise sales. So we had incredible products because we doubled our sales every year, despite the fact of turning over the sales team every year. But again, if I had done a better job of sales, we could have been even much more successful. So I don't know, take like Atlassian in the modern era here, that's been a phenomenal software tools company.
- [65:18]
Unknown
How did you know you had the wrong head of sales? When you're doubling sales every year, that seems like a pretty good outcome. But you're like, it's not fast enough, not enough velocity, or just the wrong fit.
- [65:28]
Reed Hastings
Yeah, I mean, each case was a little bit unique and it's possible that I made the wrong calls and I should have just Kept the first, first one the whole time. So you know, again, but it was my bad decisions, you know, either on the hiring or the firing in this one area, sales, whereas in this other area developing the product, we were very shorthanded and we had, you know, the hottest products of that time.
- [65:57]
Unknown
Was there a moment at Pure Software where you wanted to give up or you found yourself sort of like feeling sorry for yourself or, or what was that like? And how did you get out of it?
- [66:08]
Reed Hastings
Yeah, I don't think I felt sorry for myself but I did feel like I was hurting the company back to these sales turnovers and back to caring more about the company than myself. So I wanted the company to succeed more than I cared about myself. And so twice I went to the board of and said look, you should hire a CEO who's got a surehand in sales and I'll do product and it's fine. And both times they rejected that idea. And it's like yeah, you are making mistakes. They were clear about that. But overall we'd rather be investors in this company that you're doing than make that change. And for me it was a little bit, it's like confession because I felt so guilty about those sales mistakes that then offering my role and sacrifice would sort of cleanse that wound and then I'd get up and live to fight another day.
- [67:09]
Unknown
Do you think that there's a difference for the role of the board on a founder led company versus maybe a professional manager or non large founder I guess involved in the company?
- [67:22]
Reed Hastings
There's a lot of talk about that founder led companies and not and I'm not sure that I buy into that very much. There are some very bad founder led companies, there's some very good professional led companies and there might be some correlation that founder led ones are extraordinary. But Microsoft under Saja Nadella has done.
- [67:48]
Unknown
Incredibly well, created the most value out of any company ever. Right?
- [67:52]
Reed Hastings
Sundar Pichai? I mean it's like I'm not sure that it's such a strict correlation so I'm thrilled that Mark Zuckerberg's doing so well. But again there's lots of other companies that have other managers or leaders and everyone's going to eventually that do well.
- [68:12]
Unknown
So do you think the role of the board is different when there's a founder as the CEO versus versus a non founder CEO?
- [68:20]
Reed Hastings
I did a little venture capital in the mid-90s after Pure and I sucked at it. I would say I would defer to my venture capital colleagues who would comment to you professionally and thoughtfully, I only know my one or two little board experiences. And I would say I'm not that deep in this area.
- [68:40]
Unknown
Who's the best venture capitalist, you know, from an investing point of view and identifying talent.
- [68:47]
Reed Hastings
I'm not that broad in the area, so I don't have a comprehensive view. But Ben Horowitz has always seemed to me just phenomenal, and he's never been on one of my boards. But just from watching and talking with.
- [69:00]
Unknown
Him, is there a moment that stands out as a defining moment in your life?
- [69:05]
Reed Hastings
No, I don't remember any kind of Damascus Road experience where I suddenly change. I would say I've always been open to new experience and trying new things. And I'm quite surprised that then I succeeded at business. I never really thought that much about business. And so I was content to try many things. And I did accompany pure software only because I got excited about a certain product and I needed to a company to get that product out. So I was always led by my passions and it worked out super well.
- [69:44]
Unknown
The first product you got excited about was a foot mouse, was it not?
- [69:48]
Reed Hastings
Well, that's true. I mean, let's see if we go way back in middle school, I was selling cinnamon sticks and things like that. But when I was a grad student at STANFORD in the mid-80s, I thought that the big idea was to have a mouse that was controlled by your foot, so you keep your hands on the keyboard. Keyboard. And you could type and point at the same time. And I almost dropped out of school to do it. I got so excited about it and did a bunch of research on the original mouse and how it came to be and this kind of thing. But once we started using the prototypes, two problems really became glaring. One is it's very dirty on the floor. So after like three or four days, it was very gross cleaning it out. And then two, your leg cramped and it just did not have the fine muscle control that your hands have. And so if you tried to do any fine movement with a mouse, it was a big problem. And so luckily I did not go forward with that idea.
- [70:49]
Unknown
I want to wrap up. We always ask the same question. What is success for you?
- [70:54]
Reed Hastings
I would say success is having a positive impact on other people. And that could be through religion, that could be through a nonprofit, that could be through government service, that could be through business. But doing good for others would be my fundamental core definition of success.
- [71:18]
Shane Parrish
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