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Stanford Graduate School of BusinessStanford Graduate School of Business

Reed Hastings, Chairman and Co-Founder of Netflix

In this View From The Top interview, Katie Harris, MBA ’24, speaks with Reed Hastings, MSCS '88, Chairman and Co-Founder of Netflix.

Katie HarrishostReed Hastingsguest
Feb 24, 202458mWatch on YouTube

Summaries, chapters, transcripts, and FAQs on this page are made by uListen, not YouTube.

Transcript

  1. 0:00 – 0:05

    Intro

    1. KH

      [upbeat music]

  2. 0:05 – 3:24

    Stanford welcome + the “Stanford Game” parody trailer

    1. KH

      Reed, welcome back to Stanford.

    2. RH

      Excited.

    3. KH

      We are so excited to have you here at the GSB. 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?

    4. RH

      Lowly engineer.

    5. KH

      [laughs]

    6. RH

      Like, you know. Yeah, I was, uh, uh... 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, uh, but I did not make the cut. Um, and so I've always had this aspirational relationship where I wanna come back and now I kind of belong halfway, so.

    7. KH

      Well, Reed, it turns out the joke's on us because people at the GSB really just wanna be in a Netflix show.

    8. RH

      Ah, that's true. No one, no one could tell then that I was gonna be a media executive.

    9. KH

      Exactly.

    10. RH

      That was easy to see. Yeah.

    11. KH

      Yeah. But I mean it. I mean, so much so we actually put together our very own version of one of Netflix's biggest hits. Can we show you the preview?

    12. RH

      Let's see it. Let's hear it.

    13. KH

      All right. Let's do it.

    14. RH

      There's a pitch.

    15. KH

      [laughs] [drumbeat] [ominous music] [laughs]

    16. RH

      All right. Yeah.

    17. SP

      At a school where the only achievement greater than becoming a founder is joining a VC that funds founders.

    18. KH

      [laughs]

    19. SP

      [drumbeats] A secret society of free market fanatics-

    20. SP

      A green triangle?

    21. SP

      Has devised the ultimate competition [upbeat music] that will push them to their limits. [light switch clicks]

    22. SP

      Get downstairs.

    23. SP

      Eight MBAs-

    24. KH

      [laughs]

    25. SP

      Are chosen to face off against each other in a series of challenges.

    26. KH

      Student two, is the market big enough?

    27. SP

      I didn't do the reading.

    28. KH

      [laughs]

    29. SP

      But only one can walk away with the grand prize, a big tech offer in a cold job market. From trauma dumping- Like, I still don't have a job. [sobs]

    30. KH

      [laughs]

  3. 3:24 – 4:58

    Early entrepreneurship instincts: cinnamon sticks and the failed “foot mouse”

    1. RH

      Uh, probably junior high school, um, selling cinnamon sticks. We'd take toothpicks and soak 'em in, uh, cinnamon oil and sell 'em for a nickel a piece. Um, so it was those kinds of experiences that, uh, made me want to create things.

    2. KH

      Hmm.

    3. RH

      Um, and only later did I realize you have to sell them. Um, but, uh, that was early on.

    4. KH

      Okay. Was that a unique experience, or did that kind of happen throughout your early life?

    5. RH

      Um, no, I would say I was always, uh, doing little projects, uh, most of which ended up being non-commercial. Uh, but as an example, uh, when I was here at Stanford, so this is, uh, mid-'80s, and back then you had a keyboard and then a computer, uh, and a mouse, and you'd have to take your hand off this to use the terminal, and then, like, it slows you down a lot doing this, and I realized, "Oh, my God, there's a big market in a foot mouse," and you could kinda do this and control it.

    6. KH

      [laughs]

    7. RH

      And I almost dropped out of school to pursue the foot mouse.

    8. KH

      [laughs]

    9. RH

      Um, and I got a mechanical engineering student here to help design it and everything, and I was totally committed. This thing was gonna be a monster.

    10. KH

      [laughs]

    11. RH

      But it, it turns out that, A, your leg cramps, and B, it's very dirty environment. And so after, like, two days, it's gross as heck.

    12. KH

      Oh, yeah.

    13. RH

      Um, and it was a terrible idea, but I was equally committed to that terrible idea as I was to Netflix.

    14. KH

      Okay.

    15. RH

      So, you know, al- always ahead. Discerning, not so much.

  4. 4:58 – 6:47

    Pure Software: product strength, organizational chaos, and why culture mattered later

    1. KH

      Okay. That sounds painful, but, but ultimately fruitful for, in, in other ways. Um, so you started... Before we get to Netflix, you started your first company, Pure Software.

    2. RH

      Yep.

    3. KH

      What were some of the early lessons you learned from that experience that helped prepare you to start Netflix?

    4. RH

      Um, so, uh, Pure Software was a technical company. We did C and C++ programming tools. Um, and, uh, I would say I only had one gear, which is working hard, so I had no sophistication. And so anytime things got hard, w- I would just try to work harder, um, and s- and so I was programming all night, trying to be CEO during the day. Looked and smelled like shit, and, um, you know, but I didn't know any way other than that to cope with the stress. Um, 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. I mean, it was like a disaster. We could've been so much more. Um, so but I honestly just didn't know anything about business or organizations, and so I would concentrate on product and trying to do that. And ultimately, you know, we bought a bunch of companies. Morgan Stanley took us public. Like, you know, in the day of 1995, it was a big success, but it could have been so much more. Uh, and so I, I learned a ton of lessons of, like, doing things wrong. And again, fortunately, we had amazing enough products that the company continued to grow despite the internal chaos. Uh, but, uh, the lessons I learned is why we spend so much time in culture on Netflix wanting to be different, you know, than the first company.

  5. 6:47 – 8:22

    Why Netflix started with DVDs by mail while aiming for streaming

    1. KH

      Mm-hmm. We will get to culture, don't, don't you worry about that. But, um, you ... So 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. Um, so Netflix starts in 1997, and from the beginning you were hyper-focused on the customer. How did you know or, or figure out, you know, what your customer actually wanted, especially as their needs evolved?

    2. RH

      Well, in, in '97, Amazon was off and running, and it was clear that they were likely to dominate buying and selling of things. Um, but rental was a two-way logistics 'cause you had to return the, the, in those days, the VHS cassette. Um, and so I was looking at this 'cause, uh, Pure Software had been acquired, so I had some money and some time, so looking for a set of ideas. Um, and then a friend told me about DVD, uh, which was very small, and you could mail it for one stamp. And so that turned into our digital distribution network, uh, 'cause it's five gigabytes of data, and you could mail it overnight. Um, and so it was really built around the idea of streaming eventually. You know, we knew the internet was getting faster and faster, uh, but it was gonna take some time, and DVD was a temporary device, which is why we named the company Netflix, you know, internet movies, rather than DVDByMail.com, you know, which was like the Pets.com. It was the thing of that day. Um, so always thinking about eventually, uh, getting to streaming.

  6. 8:22 – 13:01

    2011 DVD/streaming split: pushing too early and surviving a traumatic correction

    1. KH

      Sure. And there was a unique moment where, um, you had some challenges in, in 2011 when you thought about the decision point between DVDs and streaming. Um, so for, for those who don't know, you made the decision-

    2. RH

      Yeah

    3. KH

      ... to separate DVD and streaming services, and there was some pushback. Um, at the time, your stock dropped pretty significantly. Um, customers canceled their subscriptions because prices doubled. So what did you learn from that decision?

    4. RH

      So to set some context, we, uh, were a DVD-by-mail business. In 2002, we went public. Um, Blockbuster, uh, attacked us, as they should. They were a little bit late, [clears throat] but we really were executing well. Uh, they eventually declared bankruptcy, uh, first chapter nine, and then wonderfully chapter seven, uh, and that was, um, in 2009. Um, so we're, like, full of steam energy. We're getting into streaming. We're opening up new countries. Um, we're, like, running ahead, and we realize, oh my God, this DVD thing is gonna hold us back. Um, we had been thinking about streaming for 15 years, okay? Since starting in '97. This was our moment, and we were gonna be the one. If you, 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? Well, obviously everyone's too conservative, so we realized we had to be so aggressive that it should make the hair on the back of our neck stand up, okay? 'Cause human nature is conservative, and most very good management teams were too conservative. So the most radical thing we could think of was to dump the DVD business, and so ... And it was 80% of our consumption 'cause the internet was so slow back then, and we didn't have streaming to the television. You know, there was a number of limiters. Um, but we came up with this idea, and we knew it was gonna be difficult because, um, you know, we cared about the customers. We could see that, but we thought it was still the right thing to do.

    5. KH

      Mm-hmm.

    6. RH

      Um, and now there's a good test case where a management team was too aggressive about leaning into the future, um, and that was us. So we, we leaned in, and you're right, the most customers did not care about streaming, did not have streaming, couldn't watch it on the television, and so it was just too early.

    7. KH

      Yeah.

    8. RH

      Um, and ultimately the idea basically worked, which is Netflix became streaming and DVD shrunk year by year by year. Um, but we overcorrected, and we were overconfident. You know, we had had all these battles and various things and naysayers, 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, "Ah, whatever, we've seen this before," and this time it was too much. Uh-

    9. KH

      Mm

    10. RH

      ... and, and it was traumatic. Uh, it felt roughly like you're driving and you get distracted reading a text and you crash, and your kid in the back seat's in the hospital, like the kid being the company. It wasn't dead, but, uh, it was severely wounded. Our stock, yeah, was down 75%. We had our first big layoffs. Uh, it was everything. That was horrible guilt, uh, that should be, um, 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.

    11. KH

      Mm. 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.

    12. RH

      You know, you'd love to say you could do everything right, but I would say the r- the same aggressiveness that made us take on Blockbuster, figure out these things, got us into streaming, got us in original content, that aggressiveness, part and parcel of it was you're going to go too hard some of the time. So you just wanna make sure you have a balance sheet and a board of directors that can handle that.

    13. KH

      Mm-hmm.

    14. RH

      Um, so I don't think it's a fair... Sure, I wish we could have not made that mistake.

    15. KH

      Sure.

    16. RH

      Think of it like then we would've won the Olympics and stuck the landing.

    17. KH

      [laughs]

    18. RH

      Okay? And we didn't stick the landing.

    19. KH

      Yeah.

    20. RH

      Okay? Uh, but we got through it, and we won. And so the one of the big things we had to do was not over-correct. Like, you know, the company and employees were t- and the shareholders were traumatized. Um, so we did have to go a little bit more cautious in the short term, uh, but pretty quickly we got back to, you know, this is our play to run, and we've gotta run it. Um, and I think that was the right strategy, even though it means that occasionally you're gonna make a, an egregious mistake because you're moving so fast.

    21. KH

      Mm-hmm. Yeah, that makes a lot of sense. And I mean, it's clear that it all worked out okay.

    22. RH

      Yep.

  7. 13:01 – 15:02

    Freedom & Responsibility culture: “team, not family” and excellence as the organizing principle

    1. KH

      Um, thankfully, looking at where we are now. Many of us here aspire to lead and build companies like Netflix, and one of the most differentiated elements of Netflix is its culture, to your earlier point. Um, very early on, you put together a deck for your entire company called Freedom and Responsibility, and it caught a lot of attention. How did you come up with this unique culture?

    2. RH

      You know, um, I think everyone in this room is pretty dedicated to excellence and to creating an amazing set of teammates, uh, to then go build some business. 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? 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. And in professional sports, if you're gonna win the Stanley Cup, it's because you've assembled the most amazing group of hockey players that have ever been together, and viewing our task in building organizations like a championship team. 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. 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? And it's only this patina of corporations, and that's a thin layer over that that's different. And so we were the first ones to just lay it out there, to say, adequate performance gets a generous severance package. So 15 years ago, that was a shocking statement to make.

    3. KH

      Mm-hmm.

    4. RH

      Okay? And so then I think the deck really am, amby... Which again, is true in professional sports, right? You know, so, um, we were just the first ones to say it upfront, uh, that I think made the, made the difference.

  8. 15:02 – 16:32

    Pushback and moral tension: loyalty vs performance in the workplace

    1. KH

      So when you initially said it up front, it sounds like you did get a lot of pushback. What were s- what were some of the initial reactions, I mean, that people had when, when you-

    2. RH

      Sure

    3. KH

      ... first put this out there?

    4. RH

      I mean, we humans value things in our kids. So for example, we value loyalty, and you would hate to see, like, your kids be disloyal, okay? And it's, like, a really human value. And so what does it mean if someone's working hard but isn't very effective? What does it mean to push them out? You know, is that a immoral or a disloyal act? So those were some of the tensions, and we had to get people to see us, not judge us like a family. In a family, you look after your siblings, your parents, your kids, no matter what. They go to jail, they do whatever, right? You're with them, okay? And then we have to recognize that's one sphere that's very important to us, of relationship, then there's another sphere, which is the workplace. And many workplaces are family businesses, and that's fine. Sometimes they're as dysfunctional as Ozark. Um-

    5. KH

      [laughs]

    6. RH

      ... you know, and then it's like, oh, okay. But, uh, again, there's nothing wrong with it. 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.

    7. KH

      Mm-hmm.

    8. RH

      Um, but it was really around performance. Uh, and again, I, I think a lot of firms were already doing this. Uh, we were just direct in stating it.

  9. 16:32 – 22:08

    The keeper test and a live firing role-play: direct, empathetic, and practical

    1. KH

      Yes. And one of the examples of this direct, um, culture is the keeper test. So you have this keeper test that managers use. Why don't you tell us a little bit about it?

    2. RH

      Um, it's pretty straightforward, which is, uh, we had managers think through would they fight to keep someone if that employee of theirs was thinking of leaving. And if they didn't pass this keeper test, we suggested giving them a severance package now and trying to draw a new card of someone that you really would fight to keep. So ultimately, it's the manager's judgment. We didn't have them, like, score people or rank people. It's a manager's judgment on would they fight to keep this person 'cause of what they added to the company.

    3. KH

      Mm-hmm. 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. So I would love to just kind of workshop this with you quickly, if we can.

    4. RH

      [laughs]

    5. KH

      If I were the person you needed to let go, can you demonstrate for the audience how you'd fire me?

    6. SP

      [laughs]

    7. RH

      Can I hire you instead out of the-

    8. KH

      [laughs]

    9. SP

      [laughs]

    10. RH

      [clears throat] Uh, [clears throat] let's think. Uh, okay. What, uh, what job do you have?

    11. KH

      Oh, okay.

    12. RH

      Just to set some context for me.

    13. KH

      I am the vice president-

    14. SP

      [laughs]

    15. KH

      ... of content strategy.

    16. RH

      Okay. I'll do a little bit shorter version for, uh, time. But, um, Katie, uh, I can see that you're really working hard and trying to make a big difference here. Uh, if I'm really honest with you, if you, uh, quit to go somewhere else, I wouldn't try to change your mind. And-

    17. KH

      Oh. Oh

    18. RH

      ... the, the reason that that is is because of this type of thing, the people that you've been hiring. I'd give you, you know, maybe a minute of detail.

    19. KH

      Okay.

    20. RH

      So enough that you can feel like there's something there, but not like a club beating up. I'll call that a minute. Um, and I'd say, "You know, this is really, uh, hard for you, Katie, I understand that. Um, but my commitment to the, you know, the company is that if I wouldn't go to change your mind, um, then I have to give you a severance package. And the severance package is this, and, you know, it's, it's relatively generous." Uh, typically like nine months of compensation these days, so it's a lot.

    21. KH

      Wow.

    22. RH

      Um, and, uh, you know, if you think about person X or Y, um, that are no longer, you know, at Netflix, we all have great relationships with them, and it's kind of like a professional sports team-

    23. KH

      Mm

    24. RH

      ... where it really sucks to get cut from the team, but it's not an ethical judgment or a moral judgment or a judgment of you as a person.

    25. KH

      Okay. Well. [laughing] Thank you. Okay.

    26. RH

      So the ... At least in my theory, what we're trying to do is get away from you suck.

    27. KH

      Yeah.

    28. RH

      Okay? And, like, you're a great person. Um, in this particular situation, um, I'm being honest as opposed to being hurtful. So one of the hardest things is to get managers to do the job.

    29. KH

      Mm.

    30. RH

      Which is why we ended up doing big severance packages. The severance package is a bribe to the manager to get the job done because managers, almost by definition, like people. They're good people people. So they really don't like firing people. Uh, but if there's a generous severance package, then it's not so bad, and certainly that helps too on the person being let go. Um, but again, the subtle part is it's tricky in your firm to get managers to apply the keeper test.

  10. 22:08 – 24:19

    What the culture missed: adding “love” and redefining the shorthand

    1. KH

      Okay. Very helpful. And you actually have released your book on culture, No Rules Rules: Netflix and the Culture of Reinvention. 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, you've talked a lot about what's worked. Is there anything that didn't?

    2. RH

      I don't think we talked enough about love.

    3. KH

      Mm.

    4. RH

      I think that great teams, the players love each other, uh, and are warm and embracing, and so it came across, uh, as very narrow and judgmental as opposed to, uh, kind of very loving and caring. And so, um, if I were to find a shorthand that I think would work even better-

    5. KH

      Mm-hmm

    6. RH

      ... it would be big-hearted champions who pick up the trash.

    7. KH

      Mm.

    8. RH

      So the big-hearted is 'cause we wanna be around people who are generous of spirit and have a big heart, and they do all kinds of things for people all the time. And a champion is someone who's going to do the discipline to become great at their field and demands excellence, okay? Someone who doesn't just wanna pass through life but wants to achieve something. And then the who picks up the trash is the whole thing about responsibility. So in your house, you pick up the trash. Uh, in a public restroom, you know, in a city you don't.

    9. KH

      Mm-hmm.

    10. RH

      And where do you wanna define the workplace? And we wanna be in a workplace where you feel a strong sense of responsibility. 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, that you're the kind of person who does that. Um, and that shifts the expectations.

    11. KH

      Sure.

    12. RH

      So again, if I were starting from scratch, it would be big-hearted champions who pick up the trash, and I think if you can get people who aspire to that, uh, you'll be able to build a very strong and resilient organization.

    13. KH

      Mm. It sounds like there's just so much power in, in working with people who have those same values and who are willing to do what others won't, essentially.

    14. RH

      That's right.

  11. 24:19 – 27:02

    Content responsibility and internal conflict: prioritizing entertainment over value-signaling

    1. KH

      Yeah. Um, well, Reed, I know we only scratched the surface on culture. There is so much more we could have gotten to, but I do wanna talk a little bit about the future. So as a global company, the stories that Netflix chooses to share will have an impact everywhere. How do you think about that responsibility when deciding which stories to tell?

    2. RH

      Our primary responsibility is to our customers to entertain them. I mean, life, uh, for you guys, life is great.

    3. KH

      [laughs]

    4. RH

      But as you well know, uh, you know, most people work 'cause they need the money. Um, and they get done with work, and they kinda just wanna unwind and relax, okay? And our job is to provide the whole world entertainment, and we take that responsibility very seriously, and that's the biggest North Star we have. And then, you know, about, uh, four years ago we had a big controversy with Dave Chappelle, um, and some of his humor, uh, uh, feels, um, very threatening to trans people. And from their point of view, he's a evil force, um, to oversimplify. Uh, and from his point of view, he's a truth teller, you know, poking fun at things, which is what comedians do.

    5. KH

      Yeah.

    6. RH

      Um, and that was very splitting in the company because we had not yet really clarified, um, our priorities. But through that exercise, uh, of the various protests, um, we solidified that we need to build employees who are proud that we entertain very effectively, uh, and not to make them think that every show was a reflection of our values. Um, and, uh, so you know, that was, uh, tumultuous at the time, but we got to a good place, uh, where we can really focus on incredible entertainment-

    7. KH

      Mm-hmm

    8. RH

      ... um, as the, uh, main aspect of what we do, and not about does this reflect our values. So for example, in a show there might be a lot of gun play or a lot of N-word or a lot of other things. That doesn't mean that those things, 'cause they're on the show, are okay in the office, okay? Shows, um, and, and films are often explorations of fantasies, both positive and negative in all kinds of ways, and people are able to separate them, you know? I remember when, you know, my kids were growing up and they were playing the first person shooter video games, and I thought, "Oh my God, this is like, you know, ninth grade. They're gonna turn into killers." And they're not, and it's kind of amazing how we humans are able to separate that intense, uh, fiction or fantasy, uh, from reality.

  12. 27:02 – 29:10

    How Netflix worked through the controversy: dialogue, dissent tolerance, and leadership in the process

    1. KH

      Mm-hmm. So when you all were in this tumultuous place, it sounds like you got to this... Y- you recognize your values, you recognize, you know, you as Netflix what your stance is. How did you get to that?

    2. RH

      Yeah, a lot of long, painful, tearful, uh... We had, um, made a real point of recruiting trans employees and being trans friendly. This is like 2015 to 2019 roughly. Um, and we're proud of it and, and, and were amazing employees, and they felt as a whole that we had promised Shangri-La, and now we were, uh, betraying them. So there was an intense sense of betrayal, uh, amongst this group of employees and their allies. Um, and, and the other thing I think is that we had really built up allyship. Uh, and that's an important aspect of being a good ally, uh, but what it can lead to is not thinking, uh, for yourself. You know, either it's a litmus test, you're an ally with... Today it would be your Palestinian or Jewish friends. Um, you know, and if, again, if you're required to be an ally to one or the other of them, uh, it can force a lot of divisions.

    3. KH

      Mm-hmm.

    4. RH

      So I think we should have always set it up as people thinking for themself and being able to tolerate dissent internally. Um, but again, we and the culture were going through a lot at that time. Uh, and you know, 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. Each situation is different, and so I think, you know, it's a lot of discussion and dialogue. Um, and that was an important tool in it. Uh, and really, uh, my successor, uh... I've got two successors, Greg and Ted, 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, uh, and later, uh, you know, to everyone's regret.

  13. 29:10 – 34:09

    AI, VR/AR, and gaming: tools for creativity, skepticism about isolating devices, and building a games studio

    1. KH

      Mm-hmm. So another force that is shaping the stories we tell is AI. AI-

    2. RH

      Yeah

    3. KH

      ... you studied it. It's very big now. Um, maybe always has been. Some would say maybe not. Um, but years ago when you were asked who is Netflix's biggest competition, you famously joked that it was sleep. Now it's been a little bit different, most notably other streaming services. But just last week, OpenAI launched their very first video model, Sora. Is AI-generated content an existential threat to your business?

    4. RH

      Well, AI will help us be more creative, okay? And so we'll be able to produce more shows, uh, using those tools. So, uh, again, it's an authoring, essentially, accelerant. If it means that Disney does a better job at us because they do better at AI than we do, um, then sure, there would be a shift in competitive strength.

    5. KH

      Mm-hmm.

    6. RH

      Um, so we're super focused in the company about using AI in all these aggressive scenarios, as, as you would expect, um, to tell better stories. Um, so, uh, that's the kind of big evolution of it. Now, in the long term, to the degree that AI replaces humanity and then we're entertaining AIs instead of you, you know, there are some big changes.

    7. KH

      Sure.

    8. RH

      Okay? But they're sort of beyond the scope of our corporate planning. Um, and so-

    9. SP

      [laughs]

    10. RH

      ... we tend to use AI as just, like, a better Photoshop, you know?

    11. KH

      Right.

    12. RH

      And, um, trying to create, uh, movies, especially prototyping. 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.

    13. KH

      Do you see yourself using it in the final production stage?

    14. RH

      Yeah, absolutely. And so it will, uh, all the low-level tasks-

    15. KH

      Mm-hmm

    16. RH

      ... will get transformed. And in general, whether this is the legal field or it- in the legal field first, it's the par- first it's search like LexisNexis, and then it's the paralegals, and then it's the first-year attorneys, and then the er- junior partners, and eventually AI's coming for the senior partners.

    17. KH

      Right. [laughs]

    18. RH

      So, you know, think of it as moving up the stack as it gets more sophisticated. Um, and it's the same thing, you know, we've, we've had a lot of people who draw, you know, uh, animation and, you know, that's one of the first areas that gets hit, and then it moves up the stack in more and more creative areas, uh, as we and others can use those tools for better entertainment.

    19. KH

      Mm-hmm. Another trend in media and entertainment right now is gaming. Gaming is a $200 billion industry and is getting more and more of consumer time. Other production companies have tried to enter the space and have failed. So what bet is Netflix making on gaming, and how do you think you'll win?

    20. RH

      Yeah. Um, we started in film, uh, expanded to television. Now we're, uh, big in television, big in film, and, uh, we've got about three years in on our, uh, gaming efforts. And we have to be the most creative gaming studio that produces games that everyone is, you know, dying to play and interact with. Uh, and we're getting little pockets of success in that, um, but not yet, you know, something equivalent of, uh, the Crown or something like that. Um, so we're continuing to work on it. Um, gaming, like series and films, you have to put 50 to 500 million in upfront to do an incredible production job, and then you release it to a lot of people, and then there's a community around it.

    21. KH

      Mm-hmm.

    22. RH

      Um, so it's got very similar attributes, uh, to film and television. So you know, it'll take us a couple years to build up that DNA of what type of ch- creative choices, how do we make those, and how do we win against, uh, pure gaming companies.

    23. KH

      Sure.

    24. RH

      Um, uh, but again, in the same way in the old world there was film studios and television studios and they were distinct, and for us, you know, it's all creativity. Uh, I'm confident we'll be able to do that.

    25. KH

      Okay.

    26. RH

      Um, the challenge that we do worry about is user-generated content, so YouTube and TikTok. 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. Um, so, uh, it is entertainment and it's incredibly addictive. You know, w- our storytelling is more measured, built up, uh, and it's a different rhythm. And again, you know, your taste and the next generation's taste, if they shift towards, uh, user-generated content, you know, that's a threat. Uh, and what we have to do is really, uh, lead on the professional content and continue to raise the bar on that so that part of your entertainment every month is Netflix-

    27. KH

      I see

    28. RH

      ... uh, whether it's film, series, or gaming. Uh, and so that's why we're investing so much there.

  14. 34:09 – 37:16

    Leadership model and trust: co-CEOs, candid-and-caring culture, and workplace intimacy without obsession

    1. KH

      Yeah. Hearing you talk about this, it's just so fascinating seeing how much has changed since you first served as CEO of Netflix. Um, you've served as CEO for over two decades, and toward the end of that journey, Ted Sarandos joined you as your co-CEO. Now it's Ted and Greg Peters in those roles. Fewer than 10 companies in the Fortune 500 have a co-CEO model. So how did it work for you, and what should we think about as we build our own models of leadership?

    2. RH

      Yeah, I would say it's not a general technique that I'm out pitching. Um, I would say if you've got two people that have worked together for 18 years now, uh, it's a high-performance technique. Um, and then, you know, they work so well together and they can leverage each other's strengths and, um, so... Uh, but if I think of the next 100 years of Netflix, there may be only twice when it's a co-CEO model-

    3. KH

      Sure

    4. RH

      ... versus... So it's not like we've discovered something magical and this is the way to go. Um, it's a optimization for two very unique, uh, people who trust each other deeply and have complementary skill sets, so it's fantastic for us.

    5. KH

      Mm-hmm.

    6. RH

      Um, but it, it's, uh, like one recipe in the recipe book. It's not the general, uh, model.

    7. KH

      Sure. How do you-

    8. RH

      I, I will say that it's probably selection bias, but if you look in S&P over the last 50 years, those companies with, uh, co-CEOs, uh, considerably outperform all other companies. But I think that's because only healthy companies dare do it.

    9. KH

      Yeah. [laughs]

    10. RH

      Okay? So again, it's a, it's a selection bias more than it is a driver, or there's no way to separate those.

    11. KH

      Sure. How do you cultivate that trust relationship? I'd imagine it's something similar with a co-founder relationship. Like, how do you actually build that trust?

    12. RH

      You know, you have to earn it. Um, you have to set a culture where people are very candid but also caring. You know, you don't wanna be candid and cruel 'cause it shuts down human interactions. You wanna be candid and caring. Um, and so we spend a lot of time on, um, going through issues and, uh, you know, may not be quite as intense. I've been learning some about your touchy-feely course-

    13. KH

      [laughs]

    14. RH

      ... um, uh, and the, uh, rate of affairs that it generated. Um-

    15. SP

      [laughs]

    16. RH

      So it does seem to have some- ... uh, tricky aspects. Uh, so what we do is, uh, maybe similar but damped down a little bit, or maybe we're older compared to when you guys when you take those things. But, uh, it's, um... You, you really do wanna create a lot of intimacy at work. You want people to really care for each other, in some cases to love each other, uh, but not... to have that accelerate learning and trust, uh, rather than have it, uh, become obsessive, where, you know, your whole life is there.

    17. KH

      Sure. So really, really valuing that relationship, showing up with intimacy, showing up with care, it sounds like is, is one way to build that trust.

    18. RH

      Yep.

  15. 37:16 – 44:09

    Philanthropy and societal change: DEI backlash, anti-Blackness history, climate optimism, and hope

    1. KH

      So something you care a lot about in addition to cultivating those relationships and culture is your philanthropic work. Um, and one of the areas you've invested a lot in is, um, diversity, equity, and inclusion. Recently, we've sort of seen this big blowback on DEI. So specifically, big tech companies are cutting funding for DEI teams. We've seen less investment in underrepresented founders. Um, it feels like just as underrepresented minorities and women were sort of starting to have headway, we're now facing a blocker. From your perspective, what's going on and what do we do about it?

    2. RH

      You know, I think if, if you look over the last 100 years of civil rights, um, there was a lot of people saying to Black Americans, "Yeah, we agree with your goals, but wait, you know, you're going too fast," this kind of thing. And it's awfully irritating, uh, when you feel the, the burden of discrimination to be told, "Wait, we're moving too fast"-

    3. KH

      Yeah

    4. RH

      ... that kind of thing. Um, I do think that companies, uh, rushed into, uh, post-George Floyd, um, into doing something 'cause they genuinely cared. Um, 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, uh, and frankly of capitalism and of freedom. Uh, and so it gets us all excited to work on achieving that dream, which, you know, we know for most groups is not fully there. Um, but there's a lot of commitment to making the meritocracy work, um, as opposed to abandoning the meritocracy, which would be the, the, the hard edge. Um, but I do think that not many Americans really understand anti-Blackness, which is separate and distinct and worse than most of the other, uh, exclusion classes. And you guys are all capitalists, so you would understand that morality often follows profits. Um, and so if you think of manifest destiny and this idea that European Americans should take over all of the continental US 'cause it was our destiny, right? This, this whole philosophy grew because it empowered people to, you know, take over land. Um, and what happened is a Portuguese figured out sailing in the 1400s and could g-get to Africa and to the US and Brazil, and they discovered a very rich source of profits, which is trading in Black bodies and capturing them and selling them. And to do that, you had to brand them, and you had to buy them and sell them, and this was, like, morally difficult 'cause 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. Uh, and so the shorthand is slavery was 400 years the reigning ethos 'cause it was so profitable to do. And then, yeah, the Civil War, and that's great, but it doesn't, like, unwind the psychology. Um, 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 in Black people, too. Um, and this taxes everything that we do.

    5. KH

      Mm-hmm.

    6. RH

      And for me, the cure is Black excellence and really focusing on amazing achievement and, um, you know, those kinds of programs. Uh, and so Kenya Barris, a great creator in LA, often says, "It's all about slavery." And I used to get kinda tired of his constantly saying this, and then I realized, oh, shit, it's true. Um, so you know, companies are, I think, leaning into this and trying to figure out what can we do, uh, to be more inclusive, you know, on every dimension, not just Black/white. Um, 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, that comes out of basically the for-profit aspect, uh, creating a morality.

    7. KH

      Sure. So what does it look like for us then as future leaders to kind of cultivate that Black excellence?

    8. RH

      Um, you know, there's-- People are naturally want to be excellent, Black, white-

    9. KH

      Yeah

    10. RH

      ... Indian, whatever. So I don't think there's, uh, that much to do on that front. It's being able to have more honest conversations about, you know, 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? It's not better as much as we want, uh, so it's like we gotta continue to lean in to achieve the dream of, uh, equal opportunity. Um, but I think in general things are going well in, in, in, in that dimension. I would say it's appears that on climate we may have overcorrected. So Al Gore and others were worried about climate, and so they told us the world's gonna end, you know, unless we change, and it seems like a lot of people think the world's gonna end. And, um, we have many problems in society, there's no question. Uh, but of all of them, climate is one of the most amenable with science. Like, we can science our way out of climate, where, you know, we've pumped a trillion tons of carbon into the atmosphere, uh, now we gotta go capture it and put it back in. Um, there's a lot of science technique that we're all learning. I mean, there's EVs on one dimension, there's others. So I think the chance that, um, climate ends 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.

    11. KH

      Hmm.

    12. RH

      Okay? Whereas getting, again, amazing solar panels, nuclear fusion, whatever you guys invent, uh, there, there is, there are science approaches to climate which I think will bail us out, 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-

    13. KH

      Sure

    14. RH

      ... because we humans are evolving very slowly, and we see in the current time a lot of war. So becoming, wrapping it up, I think on climate, people are too negative.

    15. KH

      Sure.

    16. RH

      Um, and it, and it makes them think the world's gonna end. So as long as, to answer your question of, like, how do we make progress, hope is the big driver of human behavior. Um, 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, um, but hope for our society to achieve a lot of its dreams.

  16. 44:09 – 58:29

    Life as chairman, employee giving, and rapid-fire wrap-up

    1. KH

      Sure. And it's really inspiring, Reed, to hear you, um, so passionate about this, so thank you so much for, for sharing. Um, I have two more quick questions for you. The first is, you are now in this new-ish role of chairman as of-

    2. RH

      Yep

    3. KH

      ... late last year. Um, what's life like for you now? What are you up to?

    4. RH

      Um, well, the good news is at Netflix, things are going super well with Greg and Ted, and so, uh, as long as the company continues to grow, the role of a board is pretty minimal.

    5. KH

      Mm-hmm.

    6. RH

      Um, and so, uh, they're, they're off and running and, you know, I know a lot what's going on, but I give hardly any advice. So you wanna be, I think as a board member, highly informed about the opportunity and the execution, um, but you're not doing it day-to-day and, you know, like the, uh, WWE deal, you know, they did, I have, like, hardly anything to do with that and... Or nothing to do with it, to be honest. And I didn't even approve it-

    7. KH

      [laughs]

    8. RH

      ... I just read about it. So it's like that's the way it should be. Um, so anyway, that's a small part of the time. Uh, mostly philanthropy, you know, I'd love to be baby Bill Gates, by which I mean sort of a, a technocratic orientation to improving human welfare.

    9. KH

      Mm-hmm.

    10. RH

      Um, and you know, he's incredible because he knows and has learned so much. Uh, I'm more narrow, and so I'm trying to do a lot around, uh, African economy and, uh, various technological interventions there, mobile networks, solar, these kinds of things. Uh, and then in the US, I work a lot on, uh, nonprofit public schools, uh, generally called charter schools, uh, 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.

    11. KH

      Sure.

    12. RH

      Um, so those are the two big areas.

    13. KH

      Very exciting. I'm, I'm excited to see how, how that goes. It sounds like you're very passionate about all of those, which is really cool.

    14. RH

      You know, uh, I think we all are passionate about making a difference. You guys have worked super hard to get to where you are here.

    15. KH

      Mm-hmm.

    16. RH

      Um, and you're developing tools and, uh, you know, near term, you're gonna either go into great firms or create great firms. Uh, but as you do that, you also wanna make a difference in the world, and you're all, uh, you know, I think gonna be very talented at that.

    17. KH

      Thank you. Reed, this has been a fantastic conversation. Before I open it up to the audience for questions, I have one final question for you. Our View From The Top theme this year is Redefining Tomorrow. So Reed, as Chairman of the Board at Netflix, if there's one change you could make to redefine tomorrow, what would it be?

    18. RH

      You know, I think if you guys think about the age of abundance, um, and what's going to be possible with technology, there's sort of... Again, if you look over 10,000 years, there's two big drivers of positive change that have happened. Uh, one has been technology, and you guys are well aware of, like, all the things that are different, whether it's antibiotics, driving a car, et cetera, than 5,000 years ago. But the other one is the moral ethical systems, the notion of identity, um, that we need a continued amount of progress on. I call that story.

    19. KH

      Mm-hmm.

    20. RH

      What's the story that gets us to trust each other? What's the story that makes us who we identify with? Um, and a simple example is the New Testament versus the Old. In the New Testament, it was turn the other cheek, love thy neighbor. These were radically different things than the Old Testament with eye for an eye. Okay? So that's an example of moral progress-

    21. KH

      Sure

    22. RH

      ... about identity. Uh, another one is consent to the governed, you know, that the original idea was the people don't matter, it's the kings, and it's hereditary, and you're close to God. And then over a couple hundred years, we developed this idea underlying democracy that the consent of the governed was the way to, to rule. But these kind of big ideas come along, you know, infrequently and have tremendous impact in human society. And so again, when you look back over 500 or 5,000 years, uh, a, a bunch of us will work on technology, um, and that drives a lot of human progress. And the other aspect is we all contribute to the human ideas, and what are the big ideas that connect us, that make us, uh, a better society and a better world? And those things can have huge improvement, too, it's just they're multi-generational 'cause our psychology evolves very slowly.

    23. KH

      Hmm. Thank you so much, Reed. Well, with that, I will now open it up to the audience for Q&A.

    24. SP

      Hi, my name is Andrew, and I'm a first-year MBA student. Um, it was great that Katie touched on culture and responsibility, and my question is about a little bit of, um, how they relate. So specifically honing in on employee giving, so this is a really interesting aspect of Netflix benefits. Um, 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. And I'm curious, um, how do you think about that benefit and how it can help solve some of the issues that business itself cannot purely solve?

    25. RH

      The obvious answer is, um, oh, because it gets employees to give and feel good, and the company matches, and it's a better society. Uh, the less obvious answer is, without that, all the employees say the company should donate to Gaza. The company should donate to the flood. The company... It's people love giving away other people's money.

    26. KH

      [laughs]

    27. RH

      So the more that you make it an employee match, um, and focus on that as what the company does, the more it's realistic because then people give, you know, three hundred dollars here, five hundred dollars there to important causes, okay? So you can think of it as wh- when an organization, whether that's a company or a university, has to take positions, it's divisive because even if ninety percent of the people agree, ten percent don't, and it's partially their money, okay? And that's certainly true with customers, right? And some of our customers like this cause versus that cause. So as a company, we'd like to stay away from that. So by, uh, 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." And the relative costs in, uh, the benefits to us in harmony are very high because the employee match is a less coercive mechanism than the em- than the company deciding what to give to and what not to give to.

    28. SP

      Thank you, Reed, so much for coming back. I really appreciate your time.

    29. RH

      Yeah.

    30. SP

      I'm Lexi Ling. I'm MBA one at GSB, and I'm doing also the joint degree with education school. And I'm especially interested in the interdisciplinary area between ed- entertainment and education. 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. Also, I'm curious about, uh, do you have any strategies or in-house initiatives that Netflix have to ensure its content actually de-deliver good values, educational influence, and good social impact in the world to all the age groups you cover. Thank you so much.

Episode duration: 58:49

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