Building Netflix, Battling Blockbuster, Negotiating with Amazon/Bezos, and Scraping the Barnacles Off the Hull | Marc Randolph on The Tim Ferriss Show

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Key Takeaways

  • “I just have to say that when you have begged for spare change on the sidewalk then asking a VC for $50,000 is nothing.”Marc Randolph
  • Leadership is largely communication driven. To be a great leader, you have to be a great speaker and writer.
    • “When I look back at college, the two most valuable classes that I took was a writing class and a public speaking class, and I use both of those skills almost every single day.”Marc Randolph
  • If you have an idea, don’t keep it safely tucked away in your head. Instead, get it out into the world and see what happens.
    • “The one you think is great is terrible. The one you think is terrible is great. It’s impossible to know until you try it.” – Marc Randolph 
  • Naming a company is HARD. Some considerations when naming:
    • You want to make sure it evocative of what you’re doing
    • You want to make it easy to spell
    • You want to make sure it’s not an obscenity in another language
    • You want to make sure you can trademark it
    • You want to make sure you can get the social media handles
  • The key to success:
    • “I’ve realized that the key to being successful is not how good your ideas are, it’s how good you are at being able to find quick, cheap, and easy ways to try your ideas. That’s what I look for now in entrepreneurs, that’s what sets apart the good ones from the mediocre ones.” – Marc Randolph
  • Life is not about having more money:
    • “You can have all the money in the world but if you don’t have a strong relationship or you’re not doing the things that make you happy when you’re not at work, what’s the point?” – Marc Randolph

Intro

  • Marc Randolph‘s (@mbrandolph) is best known as the co-founder and first CEO of Netflix He also founded or co-founded half a dozen other successful start-ups, including, most recently, Looker Data Sciences, which he sold to Google in 2019 for $2.6B.  
  • Host: Tim Ferriss (@tferriss)

Books Mentioned

Early Fundraising & Leadership Lessons

  • When Marc was 21, he was being trained for a non-profit program that worked with adjudicated youth. As part of his training, he had to survive for 3 days without any money or ID.
    • Marc went to a local food court to ask people for their food and spare change:
      • “I just have to say that when you have begged for spare change on the sidewalk then asking a VC for $50,000 is nothing.”Marc Randolph
  • From about high school to college, Marc spent every summer working for the National Outdoor Leadership School. He says he learned almost everything there is to know about leadership from their program.
    • “Pretty much that taught me almost everything I know about leadership, and it was a very special way of learning leadership.” – Marc Randolph
      • Sometimes Marc would have to lead a group of 12-16 people out in the mountains. Those experiences taught him how to communicate with confidence and clarity, and when to ask the group for help
        • Every year, Marc was given more and more responsibility and was soon in charge of the entire group for 30 days 
  • Leadership is largely communication driven. To be a great leader, you have to be a great speaker and writer.
    • “When I look back at college, the two most valuable classes that I took was a writing class and a public speaking class, and I use both of those skills almost every single day.”Marc Randolph
      • You should always be trying to improve your writing and speaking skills
        • If you ever want to write a book or speak in front of 5,000+ people, you’re going to need those skills

No Good Ideas

  • Marc’s convinced there’s no such thing as a good idea and that every idea is a bad idea.
    • Why? No idea performs the way you expect until you collide it with reality. 
      • “That’s the only way I’m going to figure out whether it’s a good idea or a bad idea.” – Marc Randolph 
  • If you have an idea, don’t keep it safely tucked away in your head. Instead, get it out into the world and see what happens.
    • “The one you think is great is terrible. The one you think is terrible is great. It’s impossible to know until you try it.” – Marc Randolph 
  • One of Marc’s ideas: Rent DVDs to people via mail.
    • That idea eventually became Netflix
      • The reason Marc’s book is called That Will Never Work is that all his investors and friends said that to most of his ideas until he stumbled on the idea of a subscription DVD business
  • The key to success:
    • “I’ve realized that the key to being successful is not how good your ideas are, it’s how good you are at being able to find quick, cheap, and easy ways to try your ideas. That’s what I look for now in entrepreneurs, that’s what sets apart the good ones from the mediocre ones.” – Marc Randolph

Pivoting Netflix From Sales To Rentals

  • In the early days of Netflix, the company was making about $100,000 a month but that was all from selling DVDs. Only 2% of the revenue came from their rental business.
    • Why didn’t Netflix double down on selling DVDs? They didn’t want to compete with Amazon, Walmart, Kmart, etc.
      • Having a subscription and sales business was confusing both for customers and employees. So, Netflix decided one day to just stop selling DVDs and focus completely on its rental business. 
  • Netflix eventually came up with the idea of a new no due dates or late fees subscription video rental model and customers loved it

Almost Selling The Business (Twice)

  • Less than a year into business, Marc got a call from Jeff Bezos about Amazon buying Netflix
    • The offer was $10-15 million, which was great for a company that was less than 12 months old, but Marc and Reed Hasting were committed to building Netflix
  • There were 2 main reasons most people thought Netflix wouldn’t work:
    • 1) Blockbuster: The company had 9,000 stores and was doing $6 billion in revenue
    • 2) DVDs were going to be replaced with digital downloads and streaming
  • Because Netflix’s rental subscription model was struggling in the early days, they considered selling the company. One of the companies they approached was Blockbuster.
    • At the time, Netflix was making $5 million in revenue and asked for a sales price of $50 million. The team at Blockbuster said no.
      • Netflix is now worth about $250 billion while Blockbuster has one store left

Advice On Naming A Company

  • Naming a company is HARD:
    • You want to make sure it evocative of what you’re doing
    • You want to make it easy to spell
    • You want to make sure it’s not an obscenity in another language
    • You want to make sure you can trademark it
    • You want to make sure you can get the social media handles
  • Netflix’s beta name was Kibble.com
    • Other names the Netflix team were considering: Replay, CinemaCenter, Netflicks
      • The team decided to go with Netflix because it wasn’t trademarked domestically or internationally

 The Canada Principle

  • The Canada Principle is a reminder for Marc and his team to stay focused on their core business (USA) and not get distracted by other markets (Canada)
    • Instead of trying to expand Netflix into Canada to get a 10% bump in revenue, the team decided to apply that time and energy into their core market
      • “The real key is picking the two or three things that are the most important that if you get those right, nothing else matters, and allocate all of your resources to that.” – Marc Randolph
        • In other words, focus on your core market and growing there before trying to enter new markets

Life Advice

  • As an entrepreneur, make sure you make time for the important relationships in your life such as your friends, family, and significant other
    • Marc would leave the office at 5 pm every Tuesday to have a date night with his girlfriend
  • When starting a new habit, it’s much better to start small and be consistent than to aim high, never hit it, and give up on it
  • Life is not about having more money:
    • “You can have all the money in the world but if you don’t have a strong relationship or you’re not doing the things that make you happy when you’re not at work, what’s the point?” – Marc Randolph
  • To have a better life, try to answer these 2 questions:
    • What you’re good at?
    • What do you enjoy?

Additional Notes

  • Scraping the barnacles off the hull is the idea that sometimes you need to remove features from a product instead of adding them
    • “You have to consciously go into a meeting wherever you discuss what you’re going to do next, at the same time discuss what are we going to stop doing?” – Marc Randolph
  • “Culture is not what you say, it’s what you do” – Marc Randolph
  • On his podcast That Will Never Work, Marc advises entrepreneurs from all business areas and gives them advice on how to grow their company
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Notes By Alex Wiec

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