← Tom Bilyeu's Impact Theory
Tom Bilyeu's Impact Theory
The Ultimate Blueprint for Disrupting Industries: The Netflix Strategy | Marc Randolph (Archived Episode)
00:56:02
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- [00:00]
Kiana
I'm Kiana, and I leveled up my business with Shopify. Once I figured out that Shopify was a thing, I never turned back. I can create a site with my eyes closed. Shopify thinks ahead of us, you know, and it thinks about the customer more than anything. Every day I'm thinking about some other new business, but Shopify is doing it to me because it's so easy to use. It's like, I can't stop. I'm addicted.
- [00:26]
Tom Bilyeu
Start your free trial@shopify.com a vacation rental
- [00:30]
VRBO Narrator
should come with support, not surprises. That's why VRBO comes with a VRBoCare guarantee and 24. 7 life support from real people. So if something goes sideways, VRBoCare can help. If the host cancels Verbocare. If the listing says heated pool, but there's actually no pool to heat. Definitely a verbo care thing.
- [00:46]
Leslie (Teenager)
If my teenager starts calling me Leslie
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VRBO Narrator
instead of mom, that's a family thing. Leslie.
- [00:50]
Leslie (Teenager)
That makes sense.
- [00:51]
Tom Bilyeu
Sorry.
- [00:51]
VRBO Narrator
Book with support, not surprises. VRBoCare and 24. 7 Life Support. If you know you're VRBO, terms apply. See vrbo.com trust for details.
- [00:59]
Marc Randolph
What I'm trying to do is give people a whack on the head and go, stop thinking and start doing. The real brilliance behind entrepreneurs today is not how good their ideas are. It's how clever they can be about figuring out ways to test those ideas, to try them, to, as I say, collide them with reality. That is what separates an entrepreneur from a dreamer foreign.
- [01:30]
Tom Bilyeu
Welcome to another episode of Impact Theory. I am here with an extraordinary entrepreneur, Marc Randolph, the co founder of a little company you may have heard of called Netflix. Mark, welcome to the show.
- [01:42]
Marc Randolph
Well, thanks very much. Pleasure to be here, dude.
- [01:45]
Tom Bilyeu
I'm excited to talk to you. As I was saying before we started rolling, I am not a born entrepreneur. So talking to somebody like you that has just from the time they were a kid doing candy arbitrage and had the instincts of an entrepreneur. It's so exciting that you've both written the book and now doing the podcast that will Never Work, both under the same title is really cool. And I'm super glad that you're giving people a glimpse into the way you think. And where I want to start is with the idea that nobody knows anything. Why did people tell you that Netflix was never going to work?
- [02:23]
Marc Randolph
So, first of all, it's certainly not an uncommon thing because everyone's had that experience where you kind of wake up with the brilliant idea and then you rush downstairs and tell your best friend or Your spouse and run into the office, and they all say the same thing, which is, that will never work. And I heard it thousands of times, especially when I was pitching the idea that eventually became Netflix. I heard it from investors, from potential employees, heard it from my wife. But there's a reason why everyone says that will never work, and it's because it's impossible to tell a good idea from a bad idea. It's probably the most important thing I've Learned in my 40 years as an entrepreneur is that you can't tell by thinking about it that there's really only way to figure out whether it's a good idea or a bad idea, and that is to do it. And the sooner you recognize that you have no clue, as soon as you realize that the experts you're talking to have no clue, as soon as you realize that everybody has no idea if it's a good idea or a bad idea, the better off you are.
- [03:29]
Tom Bilyeu
Yeah. See, that, to me, is very interesting. One thing that I'm always telling my team is action cures all. So you can try and think your way to a solution, but the reality is, even just trying to overcome the anxiety of, is this going to work or is it not? Go take action. I'm not sure what to do next. Go try something. And in taking the action, you begin to get the data you need.
- [03:52]
Marc Randolph
Well, you were saying you're not a born entrepreneur, but that certainly is talking like one.
- [03:57]
Tom Bilyeu
Only because I fell on my face so many times. So you give an example. So your son is teaching how to skateboard, like, now?
- [04:04]
Marc Randolph
No, no, no. This was wild. This is years ago.
- [04:07]
Tom Bilyeu
How many years, though?
- [04:09]
Marc Randolph
Oh, my son learning how to skateboard.
- [04:10]
Tom Bilyeu
You. You were talking about dropping in?
- [04:12]
Marc Randolph
Oh, gosh, me, sure. Don't remind me. That's a very painful part of my past. No, it's true. This was, I don't know, maybe five years ago, six years ago. Because my son, he's pretty passionate about it. I mean, passionate enough that we built a huge half pipe in the backyard. And of course, you want to do things with your kids. And so I wanted to learn how to skateboard. And then one of those fundamental things you learn in skateboarding is that there's that act called dropping in, where you're standing on the edge of the half pipe and you've got to drop forward and roll down that slope. But it's something that if you hesitate, if you lean back, if you hedge your bets, you are guaranteed to end up in your ass. And the only way to do it is to fully commit, to lean forward, to put all your weight in that front foot, and down you go.
- [05:05]
Tom Bilyeu
Yeah, that, to me, is one of the most apt descriptions of what being an entrepreneur is like. And one, when you said that you were taking up skateboarding, I think you would have been in your 50s five years ago. So that's already very impressive. But that you likened it to, you know, you're going to be taking a risk as an entrepreneur, and obviously what you've built is so incredible. To take something from an idea that everybody thought was going to fail all the way to something that's worth hundreds of billions of dollars is really quite extraordinary. And that idea of, all right, you're standing at the top, it does look like it's going to fail. Even in your own mind, you're thinking, this is going to fail, and the only answer is to lean so far out over your board that it seems like you're going to crash and burn on your face. But what did your son tell you about leaning too far forward?
- [05:54]
Marc Randolph
Oh, I think he said that no one ever leans too far forward, that it's impossible to lean too far forward. That whatever your mind is saying, this is too far forward. You're. You're still probably too far backwards. In other words, don't worry about it. Go for it. Commit.
- [06:11]
Tom Bilyeu
Yeah. That is. So I've dropped in exactly three times in my life, and so I know what it's like to stand at the top of that ramp. And of course, that's exactly what you do. You try to hedge your bet. It's like you feel like you're going to fall in your face. It is the weirdest feeling ever. So as you were going down the path of starting Netflix, and how do you make sense of all of the trying? So you've committed, you're in, but now how do you actually turn that into a business? Because most things fail. And you talk a lot about how you sort of systematize your way through those early days.
- [06:46]
Marc Randolph
Well, you know, it's true that everyone says, you know, that will never work. And with Netflix, they go, that'll never work. And the thing is, they're right that the idea you start with, it didn't work, but it's a starting point. But once you start, you actually begin learning what might be the path to something that will work. I mean, in Netflix's case, it took a long time. But it doesn't mean that it's not a fun process or that it's a process in itself. You're actually moving forward, even though, you know, you haven't figured it out yet. I mean, it's certainly. When we started, Netflix was not streaming video. It was DVD. It was mailing DVDs. And for those people who might actually be familiar with the Netflix DVD service, now, it wasn't like it is now. It wasn't a subscription service, it was due dates, it was late fees. I mean, it was looking back on it. Ridiculous. And so, of course it didn't work. I mean, the occasional person would rent from us, but they wouldn't rent a second time. It was really hard to find someone who was willing to do it more than once. But we learned, we tried things, we tested things. And each time you do a test, even though it may not solve the problem completely, it does illuminate the path forward just a little bit. At the very least, you've learned what doesn't work and you can try a different direction. And little by little, in our case, took a year and a half. But eventually you finally, if you're lucky, stumble onto the business model that actually does work, that's repeatable and scalable, and where you can actually, lo and behold, charge more for it than it costs you to deliver the service.
- [08:29]
Tom Bilyeu
Yeah, that's one thing I hope that budding entrepreneurs really take seriously is that. And you talk a lot about how the founding stories and the tales of how a company ends up finding its working business model, they sound neat, but the reality is far more messy than that. And I've heard nobody's encapsulated it quite as powerfully as you, which is most people will say, hey, there's no bad ideas, right? Let's get them out on the table. And you flip that.
- [08:54]
Marc Randolph
Yeah, they're all bad ideas, but still get them out in the table. Just don't be searching for that one perfect one because they're all going to be bad.
- [09:04]
Tom Bilyeu
See, that strikes me as the secret to entrepreneurship. And as soon as I heard you say it, I was like, wow, I've never allowed myself to go that far and just say there are no good ideas. But if you operate from the framework of there are no good ideas, it's only execution that feels like a key tenet to being an entrepreneur. Is that something that you, because you now have the podcast, you're literally coaching in real time entrepreneurs. Is that something you're trying to convey to them?
- [09:31]
Marc Randolph
Well, of course. I mean, first of all, the reason I'm doing the podcast is because there are patterns to this. There's classic mistakes people make and certainly in 40 years as an entrepreneur, I have made my share of them, but I've also kind of learned some of the things that do go into making an effective company. And in the podcast, I'm working with normal people. I am not interviewing successful business founders. I'm interviewing people who are in the midst of it, who are trying to turn their side hustle into a real business, or at least take this crazy idea in their head and make it real. But the reason, what's so interesting is probably the single most fundamental problem is what I call the failure to start. You have this idea, and you love this idea. It's an amazing idea. And the more you think about it, the more amazing it seems. And of course, nestled safe and warm in your head, of course it's a good idea, because there's no reality there. And there you're allowed to envision getting 100 million downloads and imagine when everyone's using it, how powerful it's going to be. But of course, the minute you actually try and make it real, all of a sudden, wham, you bump into reality. And all those assumptions, well, they're wrong. And so what I'm trying to do is give people a whack on the head and go, stop thinking and start doing. The real brilliance behind entrepreneurs today is not how good their ideas are. It's how clever they can be about figuring out ways to test those ideas, to. To try them, to, as I say, collide them with reality. That is what separates an entrepreneur from a dreamer.
- [11:13]
Tom Bilyeu
Yeah, well said. One of the things that I, in hearing you talk about when you were really focused on angel investing and you realized, you say you're bad at it, I'll just say it's essentially impossible. So I think everybody's basically going to be bad at it. But you talked about how there was a thing that you would look for in an entrepreneur to find out if they were sort of on. On the right track, and that was that sort of aggressive willingness to go take that idea and batter it against reality and see what happened. How do people do that? Like, if somebody has an idea right now, what would you advise them to do? How do they get out there and start battle testing this?
- [11:50]
Marc Randolph
So the first thing is you have to make sure that your idea is scaled to your aspirations. So if you're thinking, wouldn't it be incredible to invent a portable CAT scan device? Well, you would better have spent 30 years as a physicist and in the medical field. But most people don't have ideas like that. They do have ideas that can be validated easily and quickly and cheaply. And I don't mean this overwrought, minimal viable product stuff. I mean way more minimal, way less viable.
- [12:23]
Tom Bilyeu
I thought you were going to go the other way.
- [12:25]
Marc Randolph
No. God no. Again, it's how quickly and cheaply and easily can I collide the idea? But listen, we're talking abstractly, so let me give you two specific examples and I'll give you the quick one, which is the Netflix example, which is, you know, Reed Hastings and I, my co founder, were brainstorming ideas for businesses. We were not movie buffs. We had crazy ideas. We had ideas to do personalized dog food and custom shampoo and personal sporting goods, all kinds of crazy stuff. And one of the ideas was this idea to do video rental by mail. And at the time, video was on VHS cassette. This is back in 1996, 97. So that idea was a non starter. And one day in the car, Reid mentioned he'd heard about this technology called the DVD this Thin light. And the idea popped into our heads that maybe we could make our video rental by mail business work with a dvd. We could just mail it. So here's where you separate the entrepreneur from the dreamer. Rather than going, what a great idea and rushing to the office and working on the pitch deck or going home and writing the business plan or applying to be on Shark Tank or something, we said, let's immediately try and collide this idea with some reality. And in our case, we just turned the car around and drove back down to town. We lived to buy a dvd, but of course there weren't any. It was in test market. So we said, well, close enough. We bought a music CD and we just mailed it to Reid's house and we found out in 24 hours whether the fundamental premise of our idea would work. We collided it with reality within an hour of having the idea. But let me give you one more example if we have a moment here.
- [14:17]
Tom Bilyeu
Yeah, please.
- [14:18]
Marc Randolph
And just because people are going, oh, that works if you have a dv, but it works for anything. So I was working with a young woman and she had an interesting idea and her idea was to do peer to peer clothing rental. She's saying, I have this closet full of clothes. I don't wear them that often. I'd kind of like to borrow my friend's clothes. I wonder if there was an app that lists all everyone's clothes and we could borrow each other's clothes. And then she was talking to me about the thing that aspiring entrepreneurs Do? How do I raise money? How do I find a technical co founder? How do I build an app? Blah, blah, blah, dreaming. And I said, whoa, whoa, whoa, whoa, stop. Do you have a piece of paper? And she goes, yes. I go, how about a Sharpie? She goes, yeah, that too. And some tape. And I said, write on a piece of paper. Want to borrow my clothes? Question mark. Knock and tape it to your dorm room door. And you're going to find out today whether your idea has any merit. Because if nobody knocks, well, you've learned something right there. But let's say they do knock and they let them in. You're going to find out about taste and about fit. Now, let's say they do find something they like and that fits. Then you're going to find out a few days later how you feel about your favorite blouse coming back stained. You're going to find out about the cost of dry cleaning. You're going to find out so much. And you're going to do it with a Sharpie and paper and tape. And you're going to do this for as long as it takes by hand to learn the fundamental premise, which is, is there a there there? And once you've done that, then it's easy to attract someone to help you with the technical aspects. It's easy to raise money, because then when someone says, what's your idea? You're not saying, imagine if you will. You're saying, look what I've discovered, look what I found out, look what I know. And you can demonstrate your idea is a good one. And that's the trick is you don't need to build an app, you don't need to start a business, you don't need to raise money. You just need to figure out a way to quickly take your idea and collide it with some reality.
- [16:26]
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- [16:56]
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- [17:26]
Tom Bilyeu
That strikes me as so self evident as being just great advice. Everybody that's ever started a company should have thought of that and tried that. But people don't like that is about as far from what the average person does as you're going to get. Why do you think that is?
- [17:41]
Marc Randolph
You know, I'm not sure. I think there's a couple things. The lamentable one is that there's this glorification of entrepreneurship which is that people think that what an entrepreneur does is start businesses and they pitch for money and they hire people. I mean, they think that's what you do. And so of course they believe that that is the mechanism for starting a company. But I actually think the other reason is there's something psychologically deep seated in all of us which is this fear of having something not work. And so we want to do every single thing we possibly can to try and make sure we've taken our best swing at it. And this is not everyone has that issue. And I had that issue, you know, back when I was saying that we initially had these ideas that didn't work and Netflix wasn't working. There was no shortage of ideas. The problem is I was a perfectionist too. And I was designing these tests that were works of art that would take weeks to do because they'd have, you know, custom photography and we'd have arguments about everywhere to copy and we'd stress test the site and then three weeks later you launch your test and it fails and you go, we gotta better go a bit faster. You do a test in a week and it fails and you go faster in two days then a day and then multiple tests in a single day. And things are getting really crappy. You have dead links and you're crashing the site and misspellings and all that stuff. But here's the punchline is it doesn't make a difference that no matter how much you polish something, if it's a bad idea, it's still not going to work. And if it's a good idea, then even something completely half assed people will immediately raise their hands, they'll shine the spotlight and you know what to fix. And so people go into this the same way. They say, I really have this idea and the only way to know if it's going to work is if I fully execute it and they build the app and they raise the money and then they find that it doesn't work, but it's now 12 months in and a million dollars later and they're stuck.
- [19:52]
Tom Bilyeu
Man, that. That is such good advice. That advice is so good, in fact, that when my own team encountered your book and you talk about that idea in the book, we immediately implemented that here at impacther just because you really can. First of all, different people in different departments have ownership, right? So the guy that creates the landing pages, his identity is tied up in making that landing page beautiful. So he doesn't want you doing an ugly test. Oh, but you know, Tom, come on, look, it looks broken. How can we do this? And not realizing that, that's why I come back to, man, you've said a lot of brilliant things, dude. I'm not trying to diminish all the full range. But when you say there are no good ideas, that to me is so foundational. It actually orients people in the way that they need to be oriented to figure something out. Have you found, like, so if, you know, you fall prey to this, do you have rules that you lack, live by or that you pass on to young teams that maybe haven't taken this in yet so that they don't get trapped by that?
- [20:53]
Marc Randolph
Yeah, it's like any skill, you have to practice, and you have to practice taking small steps. I'm certainly a professional risk taker now. I've been doing it for 40 years. But you listen when I give. I do a lot of keynote speaking now and I speak in front of big audiences and I still get nervous backstage. The difference is one part of my brain is going, mark, you are nervous. I know you're nervous and you're panicking and you're terrified to go out there. But remember, the second you get out there, you know from previous experience that you're going to feel fine. And I could push through it. And the same thing goes, when I test something which is completely half assed, I go, oh, God, this is so bad. And the little voice goes, mark, you've done this a million times. You know, it doesn't make a difference that the speed getting it out there fast is so much more important. And I do it. So when I'm working with young people, when I'm coaching people on the podcast, it's really saying, take a small step. Try something, you know, don't. Don't gamble. Something which is hugely consequential. Take a small step. You'll find out directly that it's not going to make a big difference if it doesn't work. In fact, boy, you got me rolling here now. So you know that this little guy, Jeff Bezos, you've probably heard of him.
- [22:13]
Tom Bilyeu
I've been once or twice, yeah.
- [22:15]
Marc Randolph
He has this wonderful thing he talks about, he calls them one way doors and two way doors. And he goes that decisions are like one way doors and two way doors dot sometimes when you're making a decision, you decide to do something and you walk through the one way door and it slams shut and locks behind you, you can't get back. He goes, well, before you go through a one way door, you had better really understand the step you're taking. He goes, but most ideas are not one way doors. Most things are two way doors that you can step through. Look around and if you don't like what you see, you just step right back. And that once you've recognized, trained your ability to know a one way door from a two way door, then man, you just blast through that door because you know, oh, if I don't like what I see, I can step right back, no harm, no foul. And it's teaching people to see that, it's training them to have comfort doing that and it's giving them a little bit of encouragement that this is going to be fine.
- [23:20]
Tom Bilyeu
It's interesting to me that both you and Bezos talk about the need to test, test, test, test, test. Like that there is no crystal ball, there is no such thing as being like such a business genius that you're just going to get it right. And, and that it is about that risk tolerance, it's about culturally building in a willingness to move quickly to ascertain whether it worked. That to me is really powerful. How do you get people to quantify that? So, okay, we ran 30 tests and not just be running tests because hey, culturally we run tests like how do you then make sense of what happens?
- [23:57]
Marc Randolph
Before I became a tech Entrepreneur, I spent 15 years as a direct marketing guy. Junk mail, you know, mail, direct mail, direct response, television, catalogs, magazine circulation. So my entire training was about testing. And I learned this really interesting fundamental truth about testing is that testing is fantastic for finding out after the fact which thing did better. But not very often does it tell you exactly what it is you should test. And in some ways, knowing that I can determine beyond a shadow of a doubt which shade of blue performs better. But there's a thousand shades of blue and what am I going to spend all my time testing? All of them. And so I've learned you've got to combine instinct and intuition with this ability to measure afterwards so that you're not just randomly fumbling around. And that's really what I try and help people do, is you need to understand what you're trying to accomplish. And the ideas you come up with have to have some possible bearing on that problem you're trying to solve. I mean, the classic one that most E commerce companies try and solve is the whole landing page problem like you were describing on your team. I mean, you have to clearly say we're trying to test is how do we get a higher percentage of people to move from one page to another? But you have to go deeper than that. You go, but wait a minute, we want them to move to the next page. And if they sign up, I want people who are going to stick around, not just randomly come through and there's a million dimensions. So it's this combination of defining in advance what it is I'm trying to understand, coming up with hypotheses of what tests might possibly get me there and then being very, very deliberate about looking after the fact and go, how did we do?
- [25:53]
Tom Bilyeu
There was one test that you guys ran that I think of as a one way door. I'll be curious to see if you think of it the same way. That, man, I don't know how you guys had the cojones to do it. So walk people through when you guys decided to shut off the DVD sales portion and let people know how much of your revenue that made up at the time that you did that.
- [26:18]
Marc Randolph
Yeah, that's not a, that wasn't a test, unfortunately, that was a commitment. But going back when we launched the company, as I mentioned before, there wasn't a lot of business model innovation. You know, we had due dates, we had late fees, and as an afterthought we said we've gone to all this trouble to find copies of every single DVD available at the time, so we may as well sell them too. And so when we launched Netflix, you could rent DVDs and you could buy DVDs. And at the end of our first month in business, we had this great news and this terrible news. And the great news was we had $100,000 in sales, more or less. So million dollar plus run rate, fantastic outcome. The bad news is that 98% of it, almost all that revenue came from selling DVDs. And this was bad for a few fundamental reasons. The first one was that it was just a matter of time before we had competition. There was that little company, Amazon, which back in 1998 only sold books. But even then, it made no secret of the fact that it was going to be the everything store. And we knew the next category was going to be music and video. And we could just see our margins being dissolved. Now, rental had potential because it was defensible, had good margins. The problem was no one did it. But here was the real problem. The problem is that doing both of them at the same time was brutal. It was confusing to customers about what Netflix stood for. Our checkout process was complicated because you had discs you wanted to rent and disks you wanted to buy. The shipping and receiving. Like half the inventory went out and stayed out and half would go out and come back. And inventory management, all of our analytics were complicated. I mean, we realized that if we were going to get something right, we had to focus on one of these two parts of the business. And that was a brutal decision because if we had focused on selling DVDs, we would have had a great business for a while, until eventually we didn't. But if we bet everything on rental, that could potentially be a huge business. It's an $8 billion category, but certainly from where we stood at the time, you could see no possible route to getting there. But I think fundamentally, as a risk taker, we decided that it was way better to take this long shot at a great success than to take this pretty sure path to mediocrity and eventually going out of business. And so we, in one single day without a test, just pulled the plug and focused everything we had on getting rental to work.
- [29:16]
Tom Bilyeu
How do you think about the ability to think through problems? So obviously we've already talked about action is going to be way better than sitting around thinking about it. But something like that, you really do just have to think through. Do you think you're naturally gifted at that or is that a process like, hey, ask these three or four questions of yourself whenever you're making a big decision like that. Do you have some sort of framework like that?
- [29:40]
Marc Randolph
No, I don't. I mean, I would never say I'm naturally gifted at anything because most of the stuff I try doesn't work. But there's a couple of things that I'm good at and I've realized over the years I'm good at. And one of them is this ability to be focused in the foreground and the distance at the same time. You know, I've used the analogy that it's a little bit like riding my mountain bike downhill on a steep trail that You've got your hands on the handlebars and you are looking 10ft in front of you, and that's the only thing that keeps you and the bike together. But occasionally you do have to look up and see where you're going and make some fundamental decisions of what's the right path. And a startup is just like that. And it turns out I've got a pretty good sense for that, which is that I could see that this sales thing was just not going to go anywhere with this confidence and this ability to say I can focus on the thing that's most important. And if I get that right, the rest of the problems are go away. But I spend a lot of time working with people on focus. It's really kind of the entrepreneur's secret weapon. It's just the nature of the beast that there's always a hundred things on fire and that if you try and put all the fires out, you're going to exhaust yourself and really never accomplish anything. And that the real skill is being able to pick the two or three things that if you focus on them, the rest won't make the difference. But what makes that devilishly hard is those two or three things aren't the ones that are burning the hottest or that are screaming the loudest. It's this intuitive sense that that's the one I've got to fix. And then being able to block everything else out and focus on that.
- [31:32]
Tom Bilyeu
Yeah, focus, I know, was a big part of how you guys were able to be successful. I think the classic story you always tell with that is what we just talked about, which is, you know, cutting out the sales. But you also talk about the Canada situation problem, the Canada principal, walk people through that. Because that is like you guys, what you did is so textbook for like just making the right decisions at the right time. And I get it, survivorship bias and all that. But when you look back, you've got an uncanny ability to say, no, no, no, we made this decision and this is why it worked. And maybe it wasn't self evident at the time, but you really are able to with mess included, but sort of walk people through it. So what's the Canada principle? How does somebody trying to accomplish anything in life bring that into their own being?
- [32:19]
Marc Randolph
Yeah, as I've said, I'm a focus guy and I've always learned that if you spend 95% of your time on 5% of your problems, that is usually going to be more effective than spreading it equally. And a particular thing happened early at Netflix, which is we were United States only for a long time. And there was always this chorus of people who were saying, we should get into Canada, we should be in business in Canada. It's easy and it's right next door. It's a 10% bump that is significant. And, you know, maybe they're right about the 10% bump because, you know, Canada is approximately 10% the market size of the United States. But where we were pretty sure they were missing the mark was on the it's easy part because for one, you have a border you have to cross, you have a different currency. DVDs at the time were persnickety in that they had zones and that they didn't always work in every country independently. You have a different language spoken in parts of Canada. But fundamentally what you realize is that if you take the effort that was required to get into Canada, if you take the effort and the distraction to get you 10% increase in sales and took that effort and applied it to your core business, how would you do? And the answer is, you do way better than a 10% bump. And you always have to make that call. And it comes up over and over and over again. And we use the Canada principle as a shorthand to remind us to ask ourselves, is the effort that we're putting into something new, if we took that effort and that distraction and that manpower and applied it in the things we're already doing, would that be a bigger bump? I mean, it came up when, for example, we were starting to really roll in the United States and you began seeing competitors spring up. You see someone doing DVD rental by mail in the UK and in Australia and in Italy, and the temptation is, let's get over there and put out that fire. We'll stomp them right out. And it takes some discipline to say, stick to the knitting. The effort that we're putting into making this company strong, to learning our processes, to figuring out how to be more efficient. When we eventually do enter the UK and Italy and Australia, we'll have no problem. Even when they're stronger, even if there's more of them.
- [34:52]
Tom Bilyeu
There's a lot of sort of self awareness to you and the way that you approach business. You talked about, you know, what you're good at, you know, what you're not. You've got sort of business fundamentals that you stay to. And even if something is sexy or exciting or the, you know, easy 10% bump, you're, you're able to stay focused. In the book, you go into a moment that I was due to breathtaking. So Reid ends up coming to you. He's not working actively in the business at the time, comes to you and says, hey, I don't think you're in your strong suit anymore. I want to come in as CEO. That moment implodes 99.999% of business relationships. And I'm curious, how did you not. And obviously then from you not imploding, the world gets this absolute behemoth. But had you made a different decision at that moment, I mean, not to over dramatize, but like, the history of the way that we consume media would have changed.
- [35:50]
Marc Randolph
Yeah, it's funny putting that much weight on it. It certainly was a. Had I known then. No, it certainly was a. It was a very, very intense time. And this was reasonably early at the company. And when we started the company together, you know, Reid was not active full time. I mean, he was my chairman, he was my angel investor, but he was going to school, and I was running the company, starting and running the company. But, you know, he was involved, and it was great to have a sounding board. And we talked all the time. And so it wasn't unusual for him to stop in to the office on his way home in the evening. And he stopped in one night and, you know, Knox, and basically says, you know, Mark, we've got to talk. Anyone who's heard those words before, you know that this is not going to necessarily go too well. And as you pointed out, Reid was concerned. He was concerned about the business, and more specifically, he was concerned about my judgment. And these weren't necessarily big things he was seeing, but he was seeing patterns that he was concerned that as the company got bigger, as we moved faster, would become problems. And this was brutal because Reid and I have had this incredibly powerful, honest relationship from the moment I've met him. We have not minced words at all. There's been no ulterior motives when we say things to each other. And so for him to say that for someone I deeply respect and who is so smart, I had to take seriously that maybe he was right. And what was worse is I thought he was firing me. He had more stock than I did. But what I learned as we talked some more was he was saying something very different. He was really saying that this company would be stronger if we ran it together. And he was proposing that he joined the company full time and he'd come in as CEO, that I'd move over as president, and we'd do it together. And it was a hard ego moment because you Know, when you start a company, you have these dreams, and the dream is that you can see yourself running this successful company. And now I kind of realize there was actually two dreams here. There was the dream of me running the company, then there was the dream of the big successful company. And those were different. And more importantly, the dream of the big successful company wasn't just my dream anymore. It was the dream of my employees. It was the dream of my customers. It was the dream of my investors. I had to really think, was I willing to compromise one dream for the other? And I can't say that I just went, okay. So, you know, this was hard. You know, there was a lot of wine drunk on the porch with my wife as we kind of worked through this. But fundamentally, I realized, you know, Reid was right, that it was almost inarguable the company would be stronger with the two of us doing it together. And certainly, seriously, looking back on all the decisions that I ever made before or after at Netflix, that probably was the best decision I ever made, because certainly in the years that followed was the renaissance at Netflix. Almost all of the unbelievable things that transformed the company came during that period where Reid and I were running it together. And certainly looking at where Reid has taken the company since I left, it is just remarkable. So I look back at that and say, mark, you did good. And it's one of the things that I counsel other entrepreneurs all the time, is that you have to be self aware enough to recognize are you the right person for this job. And as you pointed out, it sinks so many companies when a company is successful. But that just means that the problems change, the management stresses change, the requirements change. And it's extremely rare that the person who had the skill set to start something, to grow something is the same person who takes it the rest of the way. I mean, you can really count those people on the fingers of probably two hands. And I'm delighted to say I'm not one of them.
- [40:45]
Tom Bilyeu
Yeah, it's that story. There's another piece to it which makes it even more powerful, which is that Reid said, hey, if this doesn't sit right with you, then we'll just sell. We've been successful enough. We can get our money back. We'll make our investors whole. And so it really wasn't a decision that had to be made that way. You made that decision after setting the ego aside. And the really interesting way that you teased out that there are two dreams here. One is me running a big company, and the other is me building a big company. And I've been in enough situations, seen enough entrepreneurs, enough companies, enough teams to know that that moment is extraordinarily rare and that most people cannot do that and that that ends in a super ugly way. You talk very warmly of Reid in the book and I don't know, man, it was just that, that to me, like, there's so many pieces of your story and what you talk about that are really breathtaking in their usability in that, like you talk about in the book and in podcasts and just now that there are phases that a company goes through. And so one moment, a person might be right. And one of the most brutally difficult things as an entrepreneur is to have worked your ass off to hire somebody to convince them to leave, you know, their comfortable, high paying job to come with you. And then you get to a point where they don't make sense in the company anymore. Not that they're a bad person, not that they're not talented, it's just that the company's changed so much that they don't make sense anymore. That's already hard. But to then have to reflect on yourself and say, actually, I need to retool my own position. It's pretty extraordinary.
- [42:27]
Marc Randolph
It's funny. I mean, it's the methodology I use to coach people that way. Because you start with coaching someone, being able to recognize that this person who did join them early on, who gave everything, who's a good friend now, is not the right person for what the company needs. And it takes a while to get a founder comfortable with that. And then the next step is to say, and you need to every so often apply that exact same filter to yourself. And if you fundamentally believe the most important thing you can do to create this legacy of something you've built is recognize that you may not be the person who takes it all the way, and that people will remember the company way longer than they will remember your role in it.
- [43:12]
Tom Bilyeu
Yeah, that's super interesting. What's been important to you in this whole journey? You have, I would say, a pretty atypical look on what really matters in life is probably the right way to say it.
- [43:24]
Marc Randolph
Yes, it is funny. I mean, I wrote that will never work, like 16 years after I left Netflix. And so I've had this benefit of kind of looking back with what I think is pretty good honesty about what really was my role here and what were the pieces that go into it. But probably I think what you're alluding to is the fact that I was lucky enough to learn early on that business was not everything for me, that I had other things that were important and that the challenge was not can I build an amazing business? The challenge was can I build an amazing business and stay married to my best friend and have my kids know me and like me and be able to pursue the activities which I know make me whole, which for me is things like climbing and backcountry skiing and those sort of things. And that has really been the challenge of my life, is how do I build a life which can do all three of those things? And looking back, that's probably the thing that I'm most proud of. Actually. It's not Netflix, it's not the other six companies. It's doing that while I've been able to have this, what I would consider a balanced life. And you know, like any of these things, it's not an easy thing. It's just something that if you. I forgot who said this, but maybe even someone like Tony Robbins. But you know, if you don't have a clear something clearly in mind, what you're trying to achieve, the odds you're going to achieve it are pretty low. And you know, probably when I was in my late 20s, early 30s, I really said to myself, I need to be able to have all three of these things take place. And the classic one, the one I talk about in the book was realizing this is even before Netflix, that it was just not fair to expect my girlfriend at the time to be there, even though I was gone all the time. And if I was going to maintain the relationship, I had to make it clear it was a priority to me. But at the same time I was building businesses. And the way that I worked this out is we had this date night and it was every Tuesday at 5:00 period. I would leave, she'd get a sitter, we would go out and we'd spend time just the two of us. And at first that's really hard because there's, you know, startups don't stop at 5 o'. Clock. But you know, I was stubborn. You know, I said, listen, if there is a crisis, well, we're going to solve it by five. And if you absolutely have to talk to me, we're going to talk in way to the car. But the cool thing is that after a few months of being an absolute hard ass about this, it stopped happening, which is people realized mark serious about this and they stopped asking. And then an even better thing happened, which is they began taking time to spend with their family. And it goes to the show that culture isn't what you say, it's what you do. And then I could have said until I was blue in the face, oh, it's important to have balance. But by modeling that behavior you're demonstrating you really do believe that's important.
- [46:41]
Tom Bilyeu
Like you, my marriage is my number one priority. It's far more important to me than business. But can you articulate why, why did you care so much about protecting that relationship? Because it's not the norm.
- [46:54]
Marc Randolph
Yeah, I don't know what I mean. I have, my catchy way of saying it is. I really, I decided I did not want to be on my sixth start up and my sixth wife. I wanted, you know, I wanted, this is my best friend. I wanted to spend time with them. I didn't want to have this be, you know, this side gig or something like that. And by making it the priority, you work everything else around it. And one of the big revelations for me is that you can do that. I'll tell another dumb story if I have a second here.
- [47:27]
Tom Bilyeu
Absolutely.
- [47:28]
Marc Randolph
So I worked in Europe for about a year and a half running marketing for an international company. And I had meetings four times a week in other countries. You know, so I'd fly to Munich one day, the next day I'd be flying to Milan. Then I'd be flying to the UK from Paris. And so I was flying all the time. And you know, Paris traffic is a nightmare, so I'd be late more times than not and I'd be huffing it through the airport. And I learned something really important about running for planes, which is that about 50% of the time you run for the plane and you make it anyway. You're sitting on the plane sweating through your coat. 49% of the time you don't make it. You come rushing up and the door's been shut and you can see the plane taxiing away. 1% of the time running for the plane made the difference between making it and not making it, if that. And I realized that that kind of applies to business too. Like I decided then and there I'm never going to run for a plane. And all these meetings that you have to be in, all those calls you have to return, all those decisions, which, you know, I could make it better than that person, I should review their work. Maybe, you know, maybe you could do better than they could. But is that going to make the difference? No. So chill. Don't be so self important that you have to be in every single meeting. Take time with your family, or in my case, you know, my passion, as I mentioned before, is outdoor stuff. And unfortunately most of the things that thrill me are not stuff that I can squeeze in between my 11 o' clock call and my 2 o' clock meeting. I need to block out enough time to go fly up to Alaska and do some crazy ass thing. And that's only going to happen if I make it a priority and only going to happen if I block out the time and construct a life that lets that happen.
- [49:25]
Tom Bilyeu
What is it about the great outdoors? Flying out to Alaska, carving out the time, climbing mountains, sleeping outside. What does that do for you? Give to you? How does it shape your mind? Like what's its importance?
- [49:38]
Marc Randolph
Oh, wow, that's. I spent a lot of time thinking about that and I. So this is going to be dissecting the joke, which is, you know, you can do it after the fact and I have no idea if it's really real, but I do. For me, most of those activities are in the moment. I mean, you're not thinking about the past, you're not thinking about the future. You are in it right in that instant, slow state kind of thing. Yes, yes, exactly. It's a form of meditation in a way. And there's something that does to how your brain is wired to do that. So that probably for me is the common denominator about all these things I do. The second thing is that there's an adrenaline aspect to it. Our lives have become fairly comfortable and there is nothing like fearing for your life, but in a controlled way, in a good way. I mean, doing a very, very hard rock climb where you're using your full strength and concentration to keep from falling. That is such a focusing moment that when you come through it, there is this incredible rush of. I don't even know what to call it, but it's a fun feeling. And the third thing is there's a remarkable aesthetic to being outside. There's a tranquility, there's a beauty. But when you combine all three of those things, I'm drawn to it every minute that I can, I try and put myself in a position where I can be doing something like that.
- [51:17]
Tom Bilyeu
Mark, you have lived an extraordinary life. You've taken a very unconventional and, dare I say, healthy approach to it all. That brings me to Randolph's Rules for Success, which are not what even you expected when your father gave them to you. How would you categorize them?
- [51:39]
Marc Randolph
See, my father was a banker. And on the evening before I was to start my first job, he called me into the family room and Handed me a little handwritten notepad on which he'd written the Randolph Rules of Success that I was to get from him on the day before my first job. And, you know, he was a banker. And so these rules could have been, you know, buy low, sell high, or happiness is positive cash flow, or, you know, some. Some kind of business rules. But when you read them, these were simple rules. This was like, you know, stick to constructive criticism, you know, or don't knock, don't complain, be prompt, you know, quantify when necessary. I mean, these were instructions to be a decent person. And what that said about him was so interesting was that he believed the rules to success were being a decent person. And you're right, though, it led to something which was probably the biggest revelation of my life. That you don't need to be a dick. That you don't need to be a hard ass. You don't need to sacrifice your marriage, you don't need to submerge your hobbies. That you can be a good person and have a decent life and still create some great things.
- [53:04]
Tom Bilyeu
Now, have you passed on the exact eight rules to your kids, or have you added some things to the mix?
- [53:12]
Marc Randolph
I have absolutely passed it on. The original I have framed in my bathroom where I can see it every morning and every evening when I brush my teeth. But I also did copies up for all of my kids. And they. Which is so touching. They love them. I mean, they take them to heart. For me, it goes, oh, my dad. But they're going, these are really, really cool. And I think, you know, they are in the book. And it's funny, they have touched a lot of people, which is surprising, surprising to me.
- [53:41]
Tom Bilyeu
Now, they're really good rules. The one that I couldn't parse on my own was don't knock, don't complain. I get the don't complain. What did don't knock mean?
- [53:50]
Marc Randolph
It means just, you know, don't. It's just don't knock people. Don't. Don't put people down. You know, it's. It's just a synonym for complaining, and that's not helpful. Got plenty, plenty of people. It's easy, easy to find the problems.
- [54:11]
Tom Bilyeu
Now, as you were raising your kids, what were like, core principles you wanted to instill still in them?
- [54:17]
Marc Randolph
Wow. Joy. Really, you know, you try to expose them to a lot of things because you're hoping they're going to find their passion. Risk taking. Certainly one of the most interesting lessons that I've taught my kids is the power of not taking no for an answer. And not in a rude way, but just the power of persistence. And it's so remarkable watching what my kids have done with that and how it's this magic power which once you learn how to do it, it just opens doors. I mean I'll give you one completely ridiculous example. Not to get too personal in my kids lives about it, but my daughter is an extremely accomplished mountaineer. You know, even when she was 17 years old, I think you know, she had extensive climbing experience, extensive leadership experience, extensive wilderness first aid experience. But when she went to apply for jobs as leaders at some of a lot of these outdoor leadership places, too young go, minimum age 21 and she's going, oh, this stinks. I'm going to have to work at summer camps. And I go, no. What can hurt? What are they going to say? No apply. And it's amazing. Every single place said we're going to overlook the 21 too. And when I went to and it's like magic. I could go on forever with these. Another great one. My kids went to kind of these little elite liberal arts schools where it's very hard to get classes. And so what one of my kids will they nameless would do, they just go to a sold out class and just sit there and at the end and this teacher would see everyone sitting there who wasn't in the class, say, just want you to know this class is full. I am not taking anybody off the wait list. We're done. And 95% of the people in the back would get up and leave and my kid would sit there and the next day they go, I see some of you are still coming back. But I gotta say this is a closed class, we're not taking anyone in. And they'd sit there and they do it for a week and the teacher would let them in every time, every time.
- [56:39]
Tom Bilyeu
I love that. That is a very good lesson in a sea of good lessons. Mark, the fact that you are doing a podcast now, I cannot tell you how excited I am about it. I've listened to the episodes that are out already. I will just tell anybody out there whether you want to be an entrepreneur or just want to get better at thinking through things, at developing self awareness, whatever it is amazing it's called, that will never work. Of course. Where else can people connect with you?
- [57:07]
Marc Randolph
So certainly the podcast is available any place you get your podcasts. I am talking to normal people. This is not miracle solutions or secret techniques. It's basic common sense about how to take your idea and make it real. But the other place is to find me@markrandolph.com that's where you'll find all things Randolph. Or I'm on Twitter, Instagram, et cetera, et cetera. But you can find that at the website.
- [57:31]
Tom Bilyeu
I love it, dude. Thank you so much for joining me today. Reading the book, listening to the podcast, all of it, researching you has been a real joy, man. You've got a very specific take on how to do things, and it's incredible. So thank you for sharing it with me and everybody else.
- [57:47]
Marc Randolph
And thank you so much for letting me speak with you and kind of tell people you're not that special. Anyone can do this.
- [57:55]
Tom Bilyeu
I love that. All right, guys, if you haven't already, be sure to subscribe. And until next time, my friends, be legendary. Take care of.