0:00
[MUSIC] Reed, welcome back to Stanford. >> I'm excited.
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>> We are so excited to have you here at the GSB.
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Actually, I heard a rumor that when you were here pursuing your master's in computer science, you also tried to enroll at the GSB. What happened. >> Lonely engineer.
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>> [LAUGH] >> Yeah, I got a degree in computer science and I was fascinated by what you guys have here and at the time you had an ability to cross list occasionally.
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But I did not make the cut and so I've always had this aspirational relationship where I want to come back through now I kind of along halfway.
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>> Well, turns out the joke's on us because people at the GSB really just want to be in a Netflix show. >> That's true.
0:49
No one could tell them that I was going to be a media executive. >> Exactly. >> It was easy to say. >> Yeah, but I mean it.
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I mean, so much so, we actually put together our very own version of one of Netflix's biggest hit.
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Can we show you the preview? >> Yeah, let's here it.
1:03
>> All right, let's do it. >> There's a pitch.
1:05
>> [LAUGH] [SOUND] >> At a school, where the only achievement greater than becoming a founder is joining a VC that funds founders A secret society of free market fanatics. >> A green triangle.
1:32
>> Has devised the ultimate competition that will push them to their limits. >> Get downstairs.
1:47
>> Eight MBAs are chosen to face off against each other in a series of challenges.
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>> Student two is the market big enough?
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>> I didn't do any reading.
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>> But only one can walk away with the grand prize, a big tech offer in a cold job market from trauma dumping.
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>> Right, I do have a job.
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[SOUND] >> To calendar blocking.
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>> Five minutes are not to establish an authentic relationship via Coffee Chat >> Only one can reach the view from the top.
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Welcome to the Stanford game.
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[MUSIC] >> Which of you will change lives, change organizations, and change the world.
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>> [APPLAUSE] >> Okay, bravo GSB, you took the indictment of inequality and you turned it into your own anthem.
2:59
Totally get it, brilliant. >> My gosh.
3:02
Well, Reed, thank you for indulging us.
3:05
That was a lot of fun to watch and to watch you watch.
3:09
But in all seriousness read it has been so incredibly inspiring to see what you've built with Netflix and I know that's only part of your story.
3:17
So let's start a little bit earlier.
3:19
When did you know you wanted to be an entrepreneur?
3:24
>> Probably junior high school, selling cinnamon sticks.
3:29
You'd take toothpicks and soak them in cinnamon oil and sell them for a nickel a piece.
3:34
So it was those kinds of experiences that made me want to create things.
3:42
And only later did I realize you have to sell them, but that was early on.
3:48
>> Okay, was that a unique experience or did that kind of happen throughout your early life?
3:54
>> No, I would say I'd say I was always doing little projects, most of which ended up being non-commercial.
4:04
But as an example, when I was here at Stanford, so this is mid 80s.
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And back then, you had a keyboard and a computer and a mouse.
4:15
And you'd have to take your hand off this to use the terminal and like it slows you down a lot doing this and I realized, my god, there's a big market and the foot mouse, and you could kind of do this and control it.
4:26
>> [LAUGH] >> And I almost dropped out of school to pursue the foot mouse.
4:31
And I got a mechanical engineering student here to help design it and everything and I was totally committed, this thing was going to be a monster.
4:38
>> [LAUGH] >> But it turns out that A, your leg cramps, and B, it's very dirty environment.
4:44
And so after two days it's gross as heck.
4:47
And it was a terrible idea, but I was equally committed to that terrible idea as I was to Netflix. >> Okay.
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>> So always` ahead discerning not so much.
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>> Okay, that sounds painful, but ultimately fruitful in other ways.
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So you started before we get to Netflix, you started your first company Pure Software. >> Yeah.
5:09
>> What were some of the early lessons you learned from that experience that helped prepare you to start Netflix?
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>> So, Pure Software was a technical company, we did C and C++ programming tools.
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And I would say I only had one gear which is working hard so I had no sophistication.
5:30
And so anytime things got hard, I would just try to work harder and I was programming all night trying to be CEO during the day, looked and smelled like shit.
5:42
But I didn't know any way other than that to cope with the stress.
5:49
And it was the products were excellent and the sales doubled every year, but we replaced the head of sales every year for five years in a row for an enterprise software company. It was like a disaster.
6:02
We could have been so much more.
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But I honestly just didn't know anything about business or organizations.
6:10
And so, I would concentrate on product and trying to do that.
6:14
And ultimately, we bought a bunch of companies, Morgan Stanley took us public, in the day of 1995 it was a big success, but it could have been so much more.
6:24
And so, I learned a ton of lessons of doing things wrong and again, fortunately we had amazing enough products that the company continued to grow despite the internal chaos.
6:37
But the lessons I learned is why we spent so much time and culture on Netflix wanting to be different then the first company.
6:47
>> We will get to culture don't you worry about that.
6:50
But, I guess let's transition to how Netflix came to be not necessarily the full story, but some of the things that happened early on.
7:00
So Netflix starts in 1997 and from the beginning you were hyper focused on the customer, how did you know, or figure out, what your customer actually wanted, especially as their needs evolved.
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>> Well in in 97 Amazon was off and running, and it was clear that they were likely to dominate buying and selling of things.
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But rental was a two-way logistics, because you had to return, in those days, the VHS cassette.
7:29
And so I was looking at this as Pure Software had been acquired.
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So I had some money and some time.
7:36
So looking for a set of ideas, and then a friend told me about DVD, which was very small, and you could mail it for one stamp.
7:46
And so that turned into our digital distribution network because it's five gigabytes of data and you could mail it overnight.
7:54
And so it was really built around the idea of streaming eventually, we knew the internet was getting Getting faster and faster.
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But it was going to take some time, and DVD was a temporary device, which is why we name the company Netflix, Internet movies, rather than DVD by mail. com. It was like the pets.
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com, it was the thing of that day.
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So always thinking about eventually getting to streaming.
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>> Sure, and there was a unique moment where you had some challenges in 2011 when you thought about the decision point between DVDs and streaming.
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So for those who don't know, you made the decision to separate DVD and streaming services, and there was some pushback.
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At the time, your stock dropped pretty significantly, customers canceled their subscriptions because prices doubled.
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So what did you learn from that decision?
8:51
>> So to set some context, we were a DVD by mail business.
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In 2002, we went public..
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Blockbuster attacked us as they should, they were a little bit late, [COUGH] but we really were executing well.
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They eventually declared bankruptcy, first Chapter 9 and then, wonderfully, Chapter 7, and that was in 2009.
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So we're full of steam energy.
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We're getting into streaming, we're opening up new countries, we're running ahead, and we realized, my God, this DVD thing is going to hold us back.
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We had been thinking about streaming for 15 years, okay, since starting in 97.
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This was our moment and we were going to be the one.
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If you think of all management teams, how many are too cautious at preserving the current business and how many are too aggressive at pushing into the new business?
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Well, obviously, everyone's too conservative.
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So we realized we had to be so aggressive that it should make the hair on the back of our neck stand up, okay?
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because human nature is conservative, and most very good management teams were too conservative.
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So the most radical thing we could think of was to dump the DVD business.
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And it was 80% of our consumption because the Internet was so slow back then and we didn't have streaming to the television.
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There was a number of limiters.
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But we came up with this idea, and we knew it was going to be difficult, because we cared about the customers, we could see that, but we thought it was still the right thing to do.
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[COUGH] And now there's a good test case where a management team was too aggressive about leaning into the future, and that was us. So we leaned in.
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And you're right that most customers did not care about streaming, did not have streaming, couldn't watch it on the television.
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And so it was just too early. >> Yeah.
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>> And ultimately, the idea basically worked, which is Netflix became streaming and DVD shrunk year by year by year.
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But we overcorrected and we were overconfident.
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We had had all these battles and various things and naysayers.
11:00
And so when you've had a lot of naysayers, and then you were proven right, then the next round of naysaying comes in, and you're like, whatever, we've seen this before.
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And this time, it was too much, and it was traumatic.
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It felt roughly like you're driving, and you get distracted reading a text, and you crash, and your kid in the backseat's in the hospital.
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The kid being the company, it wasn't dead, but it was severely wounded.
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Our stock was down 75%, we had our first big layoffs.
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It was everything that was horrible guilt, that should be, of, again, trying to learn the lessons that most management teams are too conservative, so therefore, we knew we had to push it to the edge.
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>> So it sounds like something you might have done differently is really understanding the balance of when to be a little bit more conservative versus not.
11:55
>> You'd love to say you could do everything right, but I would say the same aggressiveness that made us take on Blockbuster, figure out these things, got us into streaming, got us into original content.
12:07
That aggressiveness, part and parcel of it was you're going to go too hard some of the time.
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So you just want to make sure you have a balance sheet and a board of directors that can handle that.
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So I don't think it's a fair, sure, I wish we could have not made that mistake.
12:20
Think of it like, then we would've won the Olympics and stuck the landing, okay?
12:24
And we didn't stick the landing. >> Yeah.
12:26
>> Okay, but we got through it and we won.
12:29
And so one of the big things we had to do was not overcorrect.
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The company and employees and the shareholders were traumatized, so we did have to go a little bit more cautious in the short term.
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But pretty quickly, we got back to, this is our play to run and we've gotta run it.
12:49
And I think that was the right strategy, even though it means that occasionally you're going to make an egregious mistake because you're moving so fast.
12:56
>> Mm-hm, yeah, that makes a lot of sense.
12:58
And I mean, it's clear that it all worked out okay. >> Yeah.
13:01
>> Thankfully, looking at where we are now.
13:04
Many of us here aspire to lead and build companies like Netflix.
13:07
And one of the most differentiated elements of Netflix is its culture, to your earlier point.
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Very early on, you put together a deck for your entire company called Freedom and Responsibility, and it caught a lot of attention.
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How did you come up with this unique culture?
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>> I think everyone in this room is pretty dedicated to excellence and to creating an amazing set of teammates to then go build some business.
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So I don't think it really wasn't uncommon, it's that we were early in labeling it and saying, team, not family, okay?
13:47
And saying, no, specifically, you should organize around this idea that everyone has to fight for their job every year, like it is in professional sports.
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And in professional sports, if you're going to win the Stanley Cup, it's because you've assembled the most amazing group of hockey players that have ever been together.
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And viewing our task in building organizations like a championship team.
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And for 10,000 years, the primary organizational unit of society has been family, okay, all the way through kings and companies and family companies.
14:22
So, so many assumptions we have are built around this 10,000 years of human history where organizations and families are the same thing, okay?
14:31
And it's only this patina of corporations, and that's a thin layer over that that's different.
14:37
And so we were the first ones to just lay it out there, to say adequate performance gets a generous severance package.
14:45
So 15 years ago, that was a shocking statement to make, okay?
14:49
And so then I think the deck really, which, again, is true in professional sports, right?
14:55
So we were just the first ones to say it up front, that I think made the difference.
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>> So when you initially set it up front, it sounds like you did get a lot of pushback.
15:06
What were some of the initial reactions, I mean, that people had when you first put this out there?
15:11
>> I mean, we humans value things in our kids.
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So, for example, we value loyalty.
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And you would hate to see your kids be disloyal, okay, and it's a really human value.
15:23
And so what does it mean that someone's working hard, but isn't very effective?
15:27
What does it mean to push them out?
15:30
Is that a immoral or a disloyal act?
15:33
So those were some of the tensions.
15:35
And we have to get people to not judge us like a family.
15:38
In a family, you look after your siblings, your parents, your kids, no matter what.
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They go to jail, they do whatever, right, you're with them, okay?
15:48
And then we have to recognize that's one sphere that's very important to us of relationship.
15:53
Then there's another sphere, which is the workplace.
15:56
And many workplaces are family businesses.
15:59
And that's That's fine, sometimes they're as dysfunctional as Ozark.
16:03
It's like okay, but again there's nothing wrong with it.
16:09
We just want to be a different kind of organization one whose primary value was excellence and we wanted to be honest and fair and inclusive and thoughtful about how that got applied, but it was really around performance.
16:25
And again I think a lot of firms are already doing this, we were just direct in stating it.
16:32
>> Yes, and one of the examples of this direct culture is the keeper test.
16:39
So you have this keeper test that managers use, why don't you tell us a little bit about it.
16:44
>> It's pretty straightforward, which is we had managers think through would they fight to keep someone if that employee of theirs was thinking of leaving.
16:53
And if they didn't pass this keeper test we suggested giving them a severance package now.
17:00
And trying to draw a new card of someone that you really would fight to keep.
17:05
So ultimately, it's a manager's judgement.
17:07
We didn't have them like score people or rank people.
17:11
It's a manager's judgement on what they fight to keep this person because of what they added to the company >> Okay, so I understand that there's this keeper test and that adequate performance gets a great severance package, but firing someone in a respectful way can be really hard.
17:28
So I would love to just kind of workshop this with you quickly if we can.
17:33
If I were the person you needed to let go, can you demonstrate for the audience how you'd fire me?
17:37
>> [APPLAUSE] >> Can I hire you instead?
17:41
>> [LAUGH] >> [COUGH] Let's think, okay, what job do you have?
17:47
>> Okay, I'm the vice president of content strategy.
17:55
>> Okay, I'll do a little bit shorter version for the time.
18:00
But Katie, I can see that you're really working hard and trying to make a big difference here.
18:09
If I'm really honest with you, if you quit to go somewhere else, I wouldn't try to change your mind.
18:17
And the reason that is, is because of this type of thing, the people that you've been hiring, it'd give you maybe a minute of detail. >> Okay.
18:29
>> So enough that you can feel like there's something there, but not like a club beating up, I'll call that a minute.
18:35
And say, this is really hard for you, Katie.
18:41
I understand that, but my commitment to the company is that if I wouldn't go to change your mind, then I have to give you a severance package.
18:49
And the severance package is this, it's relatively generous, typically like nine months of compensation these days, so it's a lot much.
19:00
And if you think about person X or Y, that are no longer at Netflix, we all have great relationships with them.
19:10
And it's kind of like a professional sports team, where it really sucks to get cut from the team but it's not an ethical judgment or moral judgment or judgment of you as a person. >> Okay, wow.
19:23
>> [LAUGH] >> Thank you, okay.
19:26
>> [APPLAUSE] >> At least in my theory, what we're trying to do is get away from you suck. >> Yeah.
19:35
>> Okay, and like you're a great person in this particular situation.
19:40
I'm being honest as opposed to being hurtful.
19:44
So one of the hardest things is to get managers to do the job, which is why we ended up doing big severance packages.
19:51
The severance package is a bribe to the manager to get the job done, because managers almost by definition, like people.
20:00
They're good people people.
20:02
So they really don't like firing people.
20:05
But if there's a generous severance package then it's not so bad.
20:09
It's certainly that helps too on the person being let go.
20:12
But again the subtle part is it's tricky in your firm to get managers to apply the keeper test.
20:19
>> Yeah, it felt very empathetic, but also direct, and I could imagine how the severance package really helps with that.
20:29
Do you have a perspective on, a lot of people have said it should always be very concise, straight to the point.
20:34
Do you have a perspective on, like, in general, how long these conversations should typically last or if there are other things you may avoid in conversations like these?
20:43
>> It depends on how much of a surprise it is and almost always it is a surprise because the person will have some protective layer, where the manager thinks they've given lots of hints and, but the person is still surprised.
20:59
And then it takes probably five or 10 minutes and then it's time to let them absorb for a little while and then they'll come back the next day with questions about okay.
21:07
If I had done this contract versus this, or if I had done that, they're sort of trying to understand it more.
21:13
But I would say for the initial communication, pretty short is good. >> Okay, very helpful.
21:18
Well, thank you so much for that demonstration, Reed.
21:20
I think just even looking at today's climate, layoffs in tech are on the rise.
21:27
And so it's really important for us as future leaders to know both how to hire well and also how to fire well, so really appreciate that demonstration.
21:33
Let's give a round of applause.
21:34
>> [APPLAUSE] >> It's also so great to tell stories of people who were let go and then change the industry.
21:44
Mike Bloomberg is probably one of the best known of that.
21:46
Got pushed out of Salma brothers and then formed Bloomberg.
21:51
So right in the same industry.
21:52
And so the more it's socialized with all of you as if it was in sport.
21:59
Well, it's where it's not as much of a life kind of thing, it's a performance kind of thing at that situation, the better. >> Okay, very helpful.
22:09
And you actually have released your book on culture, No Rules Rules, Netflix and the Culture of Reinvention.
22:15
Now that you've kind of had a look back at what this culture has been and you've continued to have it happen in Netflix.
22:22
You've talked a lot about what's worked, is there anything that didn't?
22:26
>> I don't think we talked enough about love.
22:29
I think that great teams, the players love each other and are warm and embracing.
22:37
And so it came across, as very narrow and judgmental, as opposed to kind of very loving and caring.
22:48
And so if I were to find a shorthand that I think would work even better, it would be big hearted champions, who pick up the trash.
23:01
So the big hearted is coz we want to be around people who are generous of spirit and have a big heart.
23:08
And they do all kinds of things for people all the time.
23:11
And a champion is someone who's going to do the discipline to become great at their field and demands excellence, okay?
23:19
Someone who doesn't just want to pass through life, but wants to achieve something.
23:25
And then who picks up the trash is the whole thing about responsibility.
23:30
So in your house you pick up the trash, in a public restroom, in a city you don't.
23:37
And where do you want to define the workplace?
23:40
And we want to be in a workplace where you feel a strong sense of responsibility.
23:45
And so of course, narrowly you pick up a piece of trash, but more broadly you do the right thing even when no one's looking.
23:51
That you're the kind of person who does that, and that shifts the expectations.
23:56
So again, if I were starting from scratch, it would be Big hearted champions who pick up the trash.
24:02
And I think if you can get people who aspire to that, you'll be able to build a very strong and resilient organization.
24:10
>> It sounds like there's just so much power in working with people who have those same values and who are willing to do what others won't, essentially. >> That's right. >> Yeah.
24:20
Well Reed, I know we only scratched the surface on culture.
24:22
There's so much more we could have gotten to.
24:24
But I do want to talk a little bit about the future.
24:27
So as a global company, the stories that Netflix chooses to share will have an impact everywhere.
24:33
How do you think about that responsibility when deciding which stories to tell?
24:38
>> Our primary responsibility is to our customers to entertain them.
24:43
I mean, for you guys life is great, but as you well know most people work because they need the money and they get done with work and they kind of just want to unwind and relax, okay?
24:59
And our job is to provide the whole world entertainment.
25:02
And we take that responsibility very seriously.
25:06
And that's the biggest Northstar we have.
25:08
And about four years ago we had a big controversy with Dave Chappelle and some of his humor feels very threatening to trans people.
25:22
And from their point of view he's an evil force to oversimplify.
25:29
And from his point of view he's a truth teller poking fun at things which is what comedians do.
25:36
And that was very splitting in the company because we had not yet really clarified our priorities.
25:44
But through that exercise of the various protests, we solidified that we need to build employees who are proud that we entertain very effectively, and not to make them think that every show was a reflection of our values.
26:02
And so that was tumultuous at the time, but we got to a good place, where we can really focus on incredible entertainment, as the main aspect of what we do, and not about does this reflect our values.
26:20
So for example in a show there might be a lot of gunplay or a lot of n-word or a lot of other things that doesn't mean that those things because they're on the show, are okay in the office, okay?
26:31
Shows and films are often explorations of fantasies both positive and negative in all kinds of ways and people are able to separate them.
26:42
I remember when my kids were growing up and they were playing the first person shooter video games.
26:47
And I thought, my god, this is like ninth grade, they're going to turn into killers. And they're not.
26:53
And it's kind of amazing how we humans are able to separate that intense fiction or fantasy from reality.
27:03
>> So when you all were in this tumultuous place, it sounds like you've got this you recognize your values, you recognize, you as Netflix what your stance is, how did you get to that?
27:15
>> Yeah, a lot of long, painful tearful, we had made a real point of recruiting trans employees and being trans-friendly.
27:26
This is 2015 to 2019, roughly.
27:31
And we're proud of it and were amazing employees.
27:35
And they felt as a whole that we had promised Shangri-La and now we were betraying them.
27:42
So there was an intense sense of betrayal amongst this group of employees and their allies, and the other thing I think is that we had really built up ally ship and that's an important aspect of being a good ally but what it can lead to is not thinking for yourself.
28:03
Either it's a litmus test you're an ally with today it would be your Palestinian or Jewish friends.
28:11
And if again, if you're required to be an ally to one or the other of them it can force a lot of divisions.
28:18
So I think we should have always set it up as people thinking for themselves and being able to tolerate descent internally.
28:28
But again, we and the culture were going through a lot at that time and again, I think we came out in a good place, which is really focused on the entertainment value and you asked about the process of it.
28:41
Each situation is different and so I think, it's a lot of discussion and dialogue and that was an important tool in it and really, my successor, I've got two successors, Greg and Ted.
28:55
But Ted really led in that discussion and he was really grounded in the artistic values and was so literate in places that artists had been suppressed, and later, to everyone's regret.
29:12
>> So another force that is shaping the stories we tell is AI.
29:17
AI, you studied it, it's very big now.
29:21
Maybe always has been some would say maybe not.
29:24
But years ago when you were asked who is Netflix's biggest competition, you famously joked that it was sleep.
29:32
Now, it's been a little bit different, most notably other streaming services.
29:37
But just last week open AI launched their very first video model Surah, is AI generated content an existential threat to your business.
29:45
>> Well AI will help us be more creative, okay?
29:49
And so we'll be able to produce more shows using those tools.
29:55
So again, it's an authoring essentially accelerant.
30:01
If it means that Disney does a better job at us because they do better at AI than we do, then sure there would be a shift in competitive strength.
30:10
So we're super focused in the company about using AI and all these aggressive scenarios as you would expect to tell better stories.
30:20
So, that's the kind of big evolution of it.
30:24
Now in the long term, to the degree that AI replaces humanity, and then we're entertaining AIs instead of you, there are some big changes. >> Sure.
30:34
>> Okay, but they're sort of beyond the scope of our corporate planning.
30:39
And so we tend to use AI as just like a better Photoshop and trying to create movies, especially prototyping.
30:49
We haven't used it really in final production at this point, but it's pretty incredible at the prototyping level to be able to imagine the scenes.
30:56
>> Do you see yourself using it in the final production stage?
31:00
>> Yeah, absolutely, and all the low level tasks will get transformed.
31:08
And in general, whether this is the legal field or in the legal field first it's the parent first its search like LexisNexis.
31:14
And then it's the paralegals, and then it's the first year attorneys, or junior partners and eventually AI is coming from the senior partner. >> Right.
31:22
[LAUGH] >> Think of it as moving up the stack as it gets more sophisticated.
31:28
And it's the same thing, we've had a lot of people who draw animation and that's one of the first areas that gets hit and then it moves up the stack and more and more creative areas as we and others can use those tools for better entertainment.
31:45
>> Another trend in media and entertainment right now is gaming.
31:48
Gaming is a $200 billion industry and is getting more and more of consumer time.
31:54
Other production companies have tried to enter the space and have failed.
31:58
So what that is Netflix making on Gaming, and how do you think you'll win?
32:02
>> Yeah, we started in film, expanded to television, now we're big in television, big in film.
32:09
And we've got about three years in on our gaming effort.
32:13
And we have to be the most creative gaming studio that produces games that everyone is dying to play and interact with.
32:21
And we're getting little pockets of success in that, but not yet something equivalent of The Crown or something like that.
32:30
So we're continuing to work on it.
32:33
Gaming, like series and films, you have to put 50 to 500 million in up front to do an incredible production job, and then you release it to a lot of people, and then there's a community around it.
32:47
So it's got very similar attributes to film and television.
32:51
So it'll take us a couple of years to build up that DNA of what type of creative choices, how do we make those, and how do we win against pure gaming companies?
33:03
But again, in the same way in the old world there was film studios and television studios, and they were distinct.
33:10
And for us, it's all creativity.
33:13
I'm confident we'll be able to do that.
33:16
The challenge that we do worry about is user-generated content, so YouTube and TikTok.
33:21
So to the degree that you all and your kids eventually all are happy with YouTube and TikTok, there's less time to watch Netflix.
33:31
So it is entertainment, it's incredibly addictive.
33:36
Our storytelling is more measured, built up, and it's a different rhythm.
33:42
And again, your taste and the next generation's taste, if they shift towards user-generated content, that's a threat.
33:51
And what we have to do is really lead on the professional content and continue to raise the bar on that so that part of your entertainment every month is Netflix, whether it's film, series, or gaming.
34:08
And so that's why we're investing so much there.
34:11
>> Yeah, hearing you talk about this, it's just so fascinating seeing how much has changed since you first served as CEO of Netflix.
34:18
You've served as CEO for over two decades, and toward the end of that journey, Ted Sarandos joined you as your co-CEO.
34:26
Now it's Ted and Greg Peters in those roles.
34:29
Fewer than ten companies in the Fortune 500 have a co-CEO model.
34:32
So how did it work for you and what should we think about as we build our own models of leadership?
34:37
>> Yeah, I would say it's not a general technique that I'm out pitching.
34:42
I would say if you've got two people that have worked together for 18 years now, it's a high performance technique.
34:50
And then they work so well together and they can leverage each other's strengths.
34:56
But if I think of the next 100 years of Netflix, there may be only twice when it's a co-CEO model. >> Sure.
35:03
>> So it's not like we've discovered something magical and this is the way to go.
35:09
It's optimization for two very unique people who trust each other deeply and have complementary skill sets.
35:15
So it's fantastic for us.
35:18
But it's like one recipe in a recipe book, it's not the general model.
35:24
>> Sure, how do you- >> I will say that it's probably selection bias.
35:28
But if you look in S&P over the last 50 years, those companies with co-CEOs considerably outperform all other companies.
35:37
But I think that's because only healthy the companies dare do it. >> Yeah.
35:40
[LAUGH] >> Okay, so, again, it's a selection bias more than it is a driver, or there's no way to separate those.
35:46
>> Sure, how do you cultivate that trust relationship?
35:49
I'd imagine it's something similar with a co-founder relationship.
35:52
How do you actually build that trust? >> You have to earn it.
35:59
You have to set a culture where people are very candid but also caring.
36:05
You don't want to be candid and cruel because it shuts down human interactions.
36:11
You want to be candid and caring.
36:14
And so we spend a lot of time on going through issues, and may not be quite as intensive in learning some about your touchy-feely course and the rate of affairs that it generated.
36:32
So it does seem to have some tricky aspects.
36:36
So what we do is maybe similar but damped down a little bit.
36:42
Or maybe we're older compared to you guys when you take those things.
36:46
But you really do want to create a lot of intimacy at work.
36:52
You want people to really care for each other, in some cases, to love each other, but to have that accelerate learning and trust, rather than have it become obsessive where your whole life is there.
37:08
>> Sure, so really, really valuing that relationship, showing up with intimacy, showing up with care, it sounds like is one way to build that trust. >> Yeah.
37:16
>> So something you care a lot about, in addition to cultivating those relationships and culture, is your philanthropic work.
37:24
And one of the areas you've invested a lot in is diversity, equity, and inclusion.
37:31
Recently, we've sort of seen this big blowback on DEI.
37:34
So specifically, big tech companies are cutting funding for DEI teams.
37:39
We've seen less investment in underrepresented founders.
37:42
It feels like just as underrepresented minorities and women were sort of starting to have headway, we're now facing a blocker.
37:50
From your perspective, what's going on, and what do we do about it?
37:54
>> I think if you look over the last 100 years of civil rights, there was a lot of people saying to black Americans, yeah, we agree with your goals, but wait, you're going too fast, this kind of thing.
38:07
And it's awfully irritating when you feel the burden of discrimination to be told, wait, we're moving too fast, that kind of thing.
38:16
I do think that companies rushed into, post George Floyd, into doing something because they genuinely cared.
38:25
And there is some blowback on DEI, for sure, but I think the general idea of inclusion and giving everybody a fair shot has been the aspirational side of America.
38:38
And frankly, of capitalism and of freedom, and so it gets us all excited to work on achieving that dream, which we know for most groups is not fully there.
38:51
But there's a lot of commitment to making the meritocracy work, as opposed to abandoning the meritocracy, which would be the hard edge.
39:02
But I do think that not many Americans really understand anti-blackness, which is separate and distinct and worse than most of the other exclusion classes.
39:16
And you guys are all capitalists, so you would understand that morality often follows prophets.
39:22
And so if you think of manifest destiny and this idea that European Americans should take over all of the continental US because it was our destiny, right, this whole philosophy grew because it empowered people to take over land.
39:38
And what happened is a Portuguese figured out sailing in the 1400s and could get to Africa and to US and Brazil, and they discovered a very rich source of profits, which is trading in black bodies, and capturing them and selling them.
39:53
And to do that, you had to brand them and you had to buy them and sell them.
39:58
And this was like, Morally difficult, because they were clearly human beings, so they invented this idea that black people were subhuman, and because of that it was morally acceptable to do slavery.
40:12
And so the shorthand is slavery was 400 years the reigning ethos, because it was so profitable to do, and then, yeah, Civil War, and that's great, but it doesn't unwind the psychology.
40:25
And so, this idea of black inferiority is sadly deeply enmeshed in ways that are hard to tease apart, of course in white people, but sometimes the black people too, and this taxes everything that we do.
40:42
And for me the cure is black excellence and really focusing on amazing achievement and those kinds of programs.
40:51
And so, Kenya Barris, great creator in LA, often says it's all about slavery, and I used to get kind of tired of constantly saying this, and I realized, shit, it's true.
41:03
So, companies are, I think, leaning into this and trying to figure out what can we do to be more inclusive on every dimension, not just black white.
41:13
But I do think that as a society, if we can focus more on black excellence, we can rise out of this kind of crippling disease that comes out of basically the for profit aspect creating a morality.
41:27
>> Sure, so what does it look like for us then as future leaders to kind of cultivate that black excellence?
41:36
>> People are naturally want to be excellent, black white. >> Yeah.
41:39
>> That ever, so I don't think there's that much to do on that front.
41:44
It's being able to have more honest conversations about, again, race, gender, sexual orientation, all those things, which again you guys compared to you know when I was around here 25 years ago, it's so much better, okay?
41:57
It's not better as much as we want, so it's like we got to continue to lean in to achieve the dream of equal opportunity.
42:06
But I think in general things are going well, and in that dimension, I would say it's appears that on climate we may have overcorrected.
42:16
So, Al Gore and others were worried about climate and so they told us that the world's going to end unless we change, and it seems like a lot of people think the world's going to end.
42:26
And we have many problems in society, there's no question, but of all of them climate is one of the most amenable science, we can science our way out of climate.
42:37
We've pumped a trillion tons of carbon into the atmosphere, now we've got to go capture it put it back in.
42:44
There's a lot of science technique that we're all learning, I mean there's EVs on one dimension, there's others.
42:51
So I think the chance that climate and society is extremely small, and that there are other threats that are again politics, countries going to war, this kind of thing, that are not amenable to science solutions, okay?
43:05
Whereas getting, again, amazing solar panels, nuclear, fusion, whatever you guys invent, there are science approaches to climate which I think will bail us out.
43:17
Not easily and not free, but again science will work, whereas the science on human psychology like the idea of countries or religions or wars, I don't have the solution for that because we humans are evolving very slowly, and we see in the current time, a lot of war.
43:35
So, becoming rapid it up I think on climate people are too negative. >> Sure.
43:40
>> And it makes them think the world's going to end.
43:43
So as long as to answer your question of like, how do we make progress, hope is the big driver of human behavior.
43:51
And the fact that we all have hope and have had hope and continue to lean into hope is incredibly important, inspiring, and powerful, and so I hope you guys are able to, of course, have hope not just for your startup, but hope for our society to achieve a lot of its dreams.
44:09
>> Sure, and it's really inspiring, Reed, to hear you so passionate about this, so thank you so much for sharing.
44:16
I have two more quick questions for you, the first is, you are now in this new-ish role of chairman as of late last year, what's life like for you now? What are you up to?
44:29
>> Well, the good news is that Netflix things are going super well with Greg and Ted, and so as long as the company continues to grow, the role of a board is pretty minimal.
44:40
And so, they're off and running, and I know a lot what's going on, but I give hardly any advice.
44:47
So you want to be, I think, as a board member, highly informed about the opportunity and the execution, but you're not doing it day to day.
44:55
And like the WWE deal they did, I've hardly anything to do with that, or nothing to do with it, to be honest, and I didn't even approve it, I just read about it, so it's like, that's the way it should be.
45:08
So anyway, that's a small part of the time, mostly philanthropy, I'd love to be baby Bill Gates, by which I mean sort of a technocratic orientation to improving human welfare.
45:22
And he's incredible because he knows and has learned so much, I'm more narrow, and so I'm trying to do a lot around African economy and various technological interventions, their mobile networks, solar, these kinds of things.
45:37
And then in the US I work a lot on nonprofit public schools, generally called charter schools, to help them grow because organizationally, when they're successful, they're really excellent and they stay excellent, which is not what we see in the kind of unevenness of school districts. >> Sure.
45:57
>> So those are the two big areas.
45:59
>> Very exciting, I'm excited to see how that goes, it sounds like you're very passionate about all of those which is really cool.
46:05
>> I think we all are passionate about making a difference.
46:09
You guys have worked super hard to get to where you are here, and you're developing tools and near term you'll either go into great firms or create great firms.
46:21
But as you do that, you also want to make a difference in the world and you're all, I think going to be very talented at that. >> Thank you.
46:31
Reed, this has been a fantastic conversation.
46:34
Before I open it up to the audience for questions, I have one final question for you.
46:38
Our view from the top theme this year is redefining tomorrow.
46:41
So, Reed, as chairman of the board at Netflix, if there's one change you could make to redefine tomorrow, what would it be?
46:51
>> I think if you guys think about the age of abundance and what's going to be possible with technology, there sort of, again, if you look over 10,000 years, there's two big drivers of positive change that have happened.
47:06
One has been technology, and you guys are well aware of all the things that are different, whether it's antibiotics, driving a car, etc. , than 5,000 years ago.
47:16
But the other one is the moral ethical systems, the notion of identity that we need to continue to amount of progress on, I call that story.
47:25
What's the story that gets us to trust each other?
47:28
What's the story that makes us who we identify with?
47:32
And a simple example is the New Testament versus the old, in the New Testament it was turned the other cheek, love thy neighbor, these were radically different things than the Old Testament with eye for an eye, okay?
47:44
So that's an example of moral progress about identity.
47:49
Another one is consent to the governed.
47:52
That the original idea was the people don't matter, it's the kings, and it's hereditary and you're close to God, then over a couple hundred years.
48:00
As we developed this idea underlying democracy, that the consent of the governed was the way to rule.
48:06
But these kind of big ideas come along infrequently and have tremendous impact in human society.
48:13
And so, again, when you look back over 500 or 5,000 years, a bunch of us will work on technology, and that drives a lot of human progress.
48:25
And the other aspect is we all contribute to the human ideas, and what are the big ideas that connect us that make us a better society and a better world?
48:35
And those things can have huge improvement too.
48:38
It's just they're multi-generational because our psychology evolves very slowly.
48:44
>> Thank you so much, Reed.
48:45
Well, with that, I will now open it up to the audience for Q&A.
48:49
>> Hi, my name is Andrew, and I'm a first-year MBA student.
48:52
It was great that Katie touched on culture and responsibility.
48:56
And my question is about a little bit of how they relate.
48:59
So specifically honing in on employee giving.
49:02
So this is a really interesting aspect of Netflix's benefits.
49:06
At a time, you even increased employee giving to two for one, and that would seem temporary and maybe it will become permanent in the future.
49:13
And I'm curious, how do you think about that benefit and how it can help solve some of the issues that business itself cannot purely solve?
49:22
>> Obvious answer is, because it gets employees to give and feel good and the company matches and it's a better society.
49:32
The less obvious answer is without that, all the employees say the company should donate to God.
49:40
The company should donate to the flood.
49:44
It's people love giving away other people's money. >> [LAUGH].
49:48
>> So the more that you make it an employee match and focus on that as what the company does, the more it's realistic, because then people give $300 a year, $500, there are two important causes, okay?
50:04
So you can think of it as when an organization whether that's a company or university has to take positions, it's divisive because even if 90% of the people agree 10% don't and it's partially their money, Okay?
50:20
And that's certainly true with customers, right?
50:22
And some of our customers like this cause versus that cause.
50:25
So as a company, we'd like to stay away from that.
50:29
So by really putting the focus on employee giving, we're like yes if you're passionate about this topic, give a lot of your money, and we will match it.
50:40
And the relative costs in, the benefits to us in Harmony are very high because the employee match is a less coercive mechanism than the company deciding what to give to and what not to give to.
50:56
>> Thank you so much for coming back.
50:58
I really appreciate your time.
50:59
I'm Lexi Ling, MBA 1 at Yale GSB, and I'm doing also the degree with education school.
51:04
And I'm especially interested in the interdisciplinary area between entertainment and education.
51:09
And given your strong exposure in education, like from Peace Corps, math teacher to California State Board of Education, I'm really curious about your view on the educational social impact of entertainment.
51:21
Also, I'm curious about, do you have any strategies or in-house initiatives that Netflix has to ensure its content actually delivers good values, educational influence, and good social impact in the world to all the age groups you cover? Thank you so much.
51:37
>> Yeah, it's a fascinating irony that here I do all this work in education.
51:41
And then in Netflix, we focus on entertainment.
51:45
And I'm a super big focus guy, you can only do things great if you focus.
51:50
And so Netflix is very focused on entertaining and giving you those guilty experiences.
51:57
And it may not make you a better person, it may not teach you how to do this or that, we don't even have cooking videos.
52:06
So I would say I've always kept those worlds separate.
52:10
Now within education, people are figuring out Duolingo is probably the most sophisticated at it.
52:17
How to use gamification to have fun at learnings to give off those psychic rewards as you continue.
52:25
So all the things that the social networking companies learned are applied in Duolingo.
52:30
So that's a great example of using essentially human behavioral observations of learning in an education game.
52:40
But again, that's really different from trying to be entertaining.
52:43
How do we create characters that you care about more than you care about those people at Disney or HBO or others?
52:50
And so we keep the Netflix one very focused on how much do you connect with those characters and want to see the next episode or the rest of the film. >> Hi Reed. I'm Ana, I'm an MBA two.
53:04
I love your thoughts on AI and how it will help enhance our creativity.
53:09
Would you talk a bit about your thoughts and predictions on immersive technologies such as VR and AR?
53:19
>> Entertainment is often pretty connecting that you watch with someone that's important to you, a spouse, a date, a parent, a child.
53:30
And you know the joy of it is somewhat the experience of the moment and somewhat it's about talking about it.
53:40
Either the people that watch.
53:41
And so all of that connection-oriented aspect of entertainment means that these isolating devices probably won't play a big role.
53:54
Now if these devices, actually because you've got other people in your view, that might not be physically in your presence find ways to connect you, then they'll have broad impact not just in entertainment, but across many areas.
54:09
But so far, they've all been relatively isolating once you immerse into them.
54:17
So people are working on it, but I would say I'm somewhat skeptical and it's change of entertainment because so much of what we do as humans is the reason we're watching the show is because it's with someone else and so it's a joint experience.
54:36
So if I had to guess I would say not a huge impact on storytelling.
54:43
Potentially a pretty big impact in gaming where you know you put on your gear and then you're immersed in some you know interaction or world as opposed to the storyteller to you. >> I am Jack Stone.
54:57
I'm a first-year MBA here.
54:59
I'm in interested to hear how you balance things like encouraging people to your point, take out the trash when people aren't looking, versus something like a yearly performance review where you are focused on optics and looking, well, to your managers and higher-ups, and how those two thing could come into conflict?
55:24
The annual performance review is rarely done well.
55:31
I think we have it in place in most companies because otherwise, the person might not get any feedback.
55:37
So it might be a necessary device but it's so much better to help coach people throughout the year around.
55:48
But you know after this meeting those kinds of things.
55:51
And so what we try to do is really lift up the gift of feedback and to make feedback so continuous and expected people walk Around Netflix and say, do you have some feedback for me?
56:03
And they're just all the time asking for feedback.
56:06
And I think if you can set up a culture where that's expected and valued, that's kind of like brushing and flossing every day, and that's the stuff that really helps on dental or emotional hygiene.
56:20
And then when you do the once a year to the dentist, there's I didn't find anything, okay?
56:25
So you might say there's a once a year review, but it's basically all these interactions.
56:29
So think of it, you want to have feedback be like brushing and flossing so that it's an everyday activity, it's a little more interactive between people so I suppose that's a little bit of a difference.
56:42
But think of it as that's the maintenance and try to get everyone in your organization to always be asking for feedback.
56:49
And of course as a leader then you're constantly talking about the feedback that you've gotten, you find a set of devices to make sure that feedback either In the moment, or like say shortly after an interaction, is much more useful and constructive than the annual performance review aspect. >> Wonderful.
57:13
Okay, Reed, before I let you go, it's view from The Top Tradition to finish every interview with a series of rapid-fire questions.
57:19
So I'm going to make some statements and then you'll fill in the blank with the first thing that comes to mind. Sound good? Favorite Netflix series. >> Beef.
57:29
>> Hardest mountain you've ever skied or snowboarded. >> Palisades KT22. >> Okay.
57:40
Biggest lesson from your time in the Peace Corps.
57:48
>> It's fun to be independent.
57:51
>> Favorite way to spend time with your family. >> Cooking.
57:56
>> And what are the odds that Stanford game gets added to Netflix's 2024 original series list, >> [LAUGH].
58:03
>> I wish I had come in my green Squid Game. >> [LAUGH].
58:07
>> That would have been a perfect, if I had known.
58:10
You guys have so much potential, maybe not so much in acting, but. >> [LAUGH].
58:16
>> In business, you crush it.
58:18
>> [LAUGH] Thank you so much, Reed, this has been so fun. Reed Hastings. >> [APPLAUSE]. >> Thank you. >> [APPLAUSE]. [MUSIC]