Moment 193: Hard Work Doesn't Equal Success…Try This Instead...: Former Netflix CEO

0:03What about hard work? Does it matter?

0:11Well, since you ask it so simply, I'd say no. Or it certainly is not the most important thing. In fact, I think hard work leading to success is a myth that...and let me give you two examples. The first is to qualify what I mean. I work with a lot of...as he spoke earlier before we actually began the session about how younger people are different places in their life than older people, especially with career and how they think about it. And earlier in my life, I used to do triathlons. You know, the race is the combined swimming and then biking and then running. And back when I used to do them, they don't do it quite the same way anymore.

1:03It would be a mass water start. You have four or five hundred people who are the gun sounds and all five hundred of them plow into the water simultaneously, not a phase start. And as you can imagine, it is a shit show. You mean you're getting kicked and your goggles are being knocked off and you're being held under water and you quickly realize that if you want to be able to survive in this mass start, you're going to sprint for those first four or five, six hundred yards to get yourself far enough in the front of the pack that you have open water. And in my opinion, work life is kind of like that.

1:43When you're younger, when you don't really know what you're doing, when you have to go down a lot of false ends because you're not sure the productive, you have better work you're asked off, you better sprint, you better work three times harder than everybody else in the company. So it's essential. But ideally, you get yourself far enough ahead that you recognize, I can't go at this pace for the entire tea of the triathlon. I needed to to get myself some breathing room, but now I can back off. So yeah, at certain points in your career, you need hard work. At certain points in the trajectory of your business, you need hard work.

2:22Your fundraising, you can't say, we're closing the round, I'm taking vacation for two weeks. We're doing M &A. I'm going to be, I'm only going to work a couple of hours. No, you're going to have to grind it. But that's not the answer. All right, one more little story, which is part two to this, which is why I say that it's a myth for hard work. So during one part of my career, I lived in Europe. I was doing international marketing for a big software company. We had an office in Paris. I lived in Paris. I was meeting every week with the marketing people in our other branches. So probably four days out of five, I was flying.

3:08I fly to Copenhagen one day, then I'd fly to Milan, then I might fly to London, then I might fly to Madrid in one week. So I spent a lot of time at the airport.

3:20Because I'm sometimes not that organized, I'd be late. And you would find me just sprinting down the concourse in my blazer and my wool coat, trying to desperately make the plane. And what I found out was that probably 49 % of the time, I'd pull up to the gate and the plane was delayed. And I'd have to wander onto the plane. No problem at all. I could have made it on crutches. And instead, I'd sit there marinating in my sweat for another hour before the plane took off. Or the other 49 % of the time, I'd come sprinting down the concourse and you'd see the plane halfway out in the runway about to take off.

4:05And what I realized is it didn't make a difference whether you ran for a plane or not that you're either going to make it or you weren't going to make it and that running didn't make the difference. And I vowed, then in there, I'd never run for a plane again and I never have. And I'm telling you that story because some metaphor in that so many entrepreneurs spend all this time running for planes. They are up all night polishing their deck. They're reviewing the work of people to make sure the spelling is correct. They're double checking every detail. They are working so hard. But I know from experience that it's like running for the plane.

4:47Most of the time doesn't make a difference. You don't lose the deal at two o 'clock that morning because you didn't check the fonts. You lost that deal four weeks ago when you didn't have some fundamentals right. Or you just weren't the right company to begin with. No matter how hard you worked, you weren't going to change the outcome. And that is the key to having some balance in your life as an entrepreneur. Is this recognition that if you're smart about the things that you choose to focus on, you make 99 % of the difference. And that all that extra work does not really change the outcome any.

5:25And in that analogy running for the plane is the key thing to have just better prepared further upstream. If we stick to the analogy, just have made a better decision to leave the house at a better time. Yes, it does absolutely. I mean, if you want to make the plane, you leave earlier. And again, this year you're going to stroll down the concourse. You don't need to run. And if the plane left on time running is not going to make the difference. If the plane's late, running didn't make the difference. Either way you made it or didn't make it. The amount of times that running for it was the gating item between whether you made it or not is like infinitesimal.

6:01So what's the point of running? And that's a set. And I really fundamentally believe that is that if I can be really smart about my which problems I choose to focus on, I'll make the difference. I do not need to get everything right because most things don't make a difference. Some things do. Some things do. And some of the small things that made a difference to your business seem to have been discovered through a process of sort of experimentation and failure. When I look back through your story, you try to get sort of Netflix to work and get product market fit. You referenced it a second ago.

6:35This idea of no late fees seem to be quite pivotal. The idea you had to remove the late fees. I find this interesting because there's going to be entrepreneurs that build their idea and then bang their head against the wall and it doesn't work. And then I hear so often whether it's from Brian Chesky at Airbnb or from someone else, Daniel at Spotify, that there seemed to be this one change that was quite pivotal to their business at some point. So my question becomes like, how do I know? How do I find the thing? So can you explain to me why this no late fees thing and any of these other small changes that change the game?

7:09And how was the system that led you to them? You know, we're talking about really finding product market fit. Product market fit, if I have to give a definition, is when you recognize you finally have something that customers actually do want. And it's recognized because all of a sudden the momentum of your business dramatically shifts. All of a sudden things go into high gear. All of a sudden acquiring customers is so much easier. All of a sudden they're sticking around. It's just instantaneous. Oh my God, we found it. And up until that point, it is this constant struggle of trying one thing after another, trying to increment your way closer and closer and closer.

7:56You know, when I mentioned that, you know, at the beginning, there wasn't a lot of business model innovation with Netflix. We, if you ordered them a desk, we mailed it to you. We charged you a due date. If you missed the due date, we had late fees. And the reality is, the idea was ridiculous. It didn't work. Nobody would rent from us. And if you did rent from us once, you didn't rent from us again. And we kind of had this realization that, okay, we got to begin figuring things out. And thus began this year and a half long process of trying to figure out some way to get people to rent DVDs by mail from us.

8:36And we tried almost everything you could think of hundreds of things. And I kind of talk about this a bunch that I had no shortage of ideas. I mean, I had lots of things I wanted to try. And if there was any, if there was a problem that I had, it was that I was a bit of a perfectionist back then. And so all these tests that I'd want to run, I'd want them to be perfect. So we would, you know, we lovingly argue over every word of copy. And we would do custom photography. And we would check every link. And we'd stress test the site. And it might take us three weeks for a month to prepare for this test.

9:17And we'd test this new idea. And then it would not work. We wouldn't do anything. And we'd kind of look at each other and go, we just wasted a month. So, okay, faster. When then we'd do a test in two weeks. And it would still fail. Okay, okay, faster. And we'd do it in a week faster. We eventually started getting to the point we could do a test every day or multiple tests every day. And it turns out that once you go that fast, things get very, very sloppy. So we would have the wrong image or it would have the watermark on it or the pages we had greaked would still be greaked. You know, not we'd have bad links.

9:57We'd crash the site. And then, but that was such an incredibly big insight for us. Because it turns out that it didn't make a difference. That if it was a bad idea, even spending a month crafting this perfect test, it wasn't going to make it a good idea. But if it had even an inkling of being a good idea, no matter how bad the test was, it's shown through. Customers would immediately perk their head up. They'd raise their hand. They would fight to do it. They'd call us. They'd reboot the site. It was this incredibly loud signal that there was something there. And it goes back to what we said before, which is that it's not about having a good idea.

10:42It's about building this whole process and this culture and this system to try lots of bad ideas. And we got really, really good at trying lots of bad ideas. One after another, hundreds of them. Each one informing us to some little some little bit about what to try next. And eventually we got to this point where we had these two big ideas left. And one of them was at that point, Netflix was pretty big. We had probably in our warehouse several hundred thousand DVDs. And I remember one day we were read an I were in the warehouse and looking at all these DVDs and going, it's such a shame that all these DVDs are here in the warehouse where they're not doing anywhere any good.

11:31I wonder if there's a way to store them at our customers houses. Let them keep them. And then when they're done, they mail it back. Well, let's replace it. And rather than having them have to pay each time they replace it, let's just have a monthly fee, a subscription. And they can rent as often as they want. There's no due dates and no late fees. And it was a ridiculous idea. But when we tested it, it was that mythical product market fit. It it worked. People loved it. They couldn't get enough of it. They told their friends. They did not cancel their subscriptions.

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