Marc Randolph - Co-Founder & First CEO of Netflix | Building a $100 Billion Dollar Company

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About The Guest

Marc Randolph is a veteran Silicon Valley entrepreneur, advisor, investor, and keynote speaker. Marc was co-founder of the online movie and television streaming service Netflix, serving as their founding CEO, as the executive producer of their website, and as a member of their board of directors until his retirement in 2004. 

Although best known for starting Netflix, Marc’s career as an entrepreneur spans more than four decades. He’s been a founder of more than half a dozen other successful start-ups, a mentor to hundreds of early-stage entrepreneurs, and an investor in numerous successful (and an even larger number of unsuccessful) tech ventures.

Talking Points

  • 00:00 — Intro
  • 02:02 — Marc Randolph’s origin story
  • 05:15 — The origin story of Netflix
  • 08:26 — Marc’s Co-Founder relationship with Reed Hastings
  • 13:30 — How did Marc validate the first iteration of Netflix was a viable business option?
  • 19:01 — What is Marc Randolph’s core theme?
  • 20:51 — What is the concept of “no ideas are good ideas”?
  • 24:30 — What does Marc think about why a lot of entrepreneurs over-iterate the MVP?
  • 32:57 — How to balance chasing after attractive products and giving up on a viable business idea?
  • 47:22 — While creating Netflix, what was the culture and how did Marc survive?
  • 50:22 — Why did Marc Randolph leave Netflix and move on to something else?
  • 53:09 — Was Marc Randolph always self-aware of what he was doing throughout his career?
  • 55:59 — What is Marc Randolph doing nowadays and what is the role of his podcast?
  • 58:36 — What was the biggest challenge Marc faced in his life?
  • 1:00:00 — What would Marc tell his 20-year-old self?
  • 1:00:42 — Most impactful person in Marc’s life
  • 1:02:00 — Marc’s book or podcast recommendation
  • 1:02:45 — What does success mean to Marc Randolph?
  • 1:04:27 — How can people connect to Marc Randolph?

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What is the Success Story Podcast?

On this podcast, you’ll find interviews, Q&A, keynote presentations & conversations on sales, marketing, business, startups, and entrepreneurship.

The podcast is hosted by entrepreneur, business executive, author, educator & speaker, Scott D. Clary.

Scott will discuss some of the lessons he’s learned over his own career, as well as have candid interviews with execs, celebrities, notable figures, and politicians. All who have achieved success through both wins and losses, to learn more about their life, their ideas, and insights.

He sits down with leaders and mentors and unpacks their stories to help pass those lessons on to others through both experiences and tactical strategies for business professionals, entrepreneurs, and everyone in between.

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Machine Generated Transcript

SUMMARY KEYWORDS

people, Netflix, company, business, entrepreneurs, idea, building, problem, startup, podcast, sudden, find, recognize, entrepreneurship, fact, big, reid, mail, book, learned

SPEAKERS

Marc Randolph, Scott D Clary

 

00:00

The new film 13 lives is coming to Prime Video. Well boys and their coach are trapped in a flooded cave from Academy Award winning director Ron Howard. How we got to get those kids out just too crazy. I said only chance. Experience the incredible true story. How sad is this? I’ve never done before. Nobody has that united the world today. Mr. 13 lives rated PG 13 maybe inappropriate for children under 13 and streaming August 5 Only on Prime Video.

 

Scott D Clary  00:30

Welcome to success story, the most useful podcast in the world. I’m your host Scott D. Clary. The success story podcast is part of the blue wire podcast network as well as the HubSpot Podcast Network about Podcast Network has other great podcasts like marketing made simple hosted by Dr. JJ Peterson. Now Marketing made simple brings you practical tips to make your marketing easy, and more importantly, make it work. If you like any of these topics, you definitely want to go check out the show how to write and deliver a captivating speech, how to market yourself into a new job, how design can help and also hurt your revenue, creating a social media ad strategy that actually works. If these topics resonate with you. Go check out marketing made simple wherever you get your podcasts. Today, my guest is Marc Randolph, Mark is a veteran Silicon Valley entrepreneur, advisor, investor and keynote speaker. He was the co founder of the online movie and television streaming service Netflix serving as their founding CEO, as the executive producer of their website, and as a member of their board of directors until his retirement in 2004. Although he is best known for starting Netflix, Mark’s career as an entrepreneur spans more than four decades, he’s been a founder of more than half a dozen other successful startups, a mentor to hundreds of early stage entrepreneurs, and an investor in numerous successful as well as a large number of unsuccessful tech ventures. So we spoke about him building Netflix from the ground up, we spoke about why no ideas are good ideas. We spoke about issues with over iterating on an MVP, we spoke about the importance of self awareness, chasing shiny objects, when to give up and a million other entrepreneurial lessons.

 

Marc Randolph  02:33

Well, you know, I probably wouldn’t describe it as having been pushed toward entrepreneurship, I think it’s a little bit closer to being drawn to it. And it’s perhaps better even to realize that back when I started, you know, this was 4050 years ago, this whole entrepreneurship thing, wasn’t the thing. I mean, you know, there were people, of course, who started companies, there were entrepreneurs, but no one talked about it, they weren’t glorified, there weren’t TV shows, movies podcasts to be. So I was not growing up, like you grew up you wanting to be a fireman or a doctor or something like that. I was just someone who is kind of always trying to solve problems, or I’d see something that I thought needed doing. And I’d begin wondering, is there a way to do it. I mean, and even going back to as a little kid, you know, I had this job when I was probably eight or 10. And I was a door to door salesman selling seeds, you know, like you plant in the garden, like vegetable seeds and flower seeds. And it was really some kind of child labor exploit exploitation. Because, you know, I think the premise was, if you could sell 6000 packs of seeds, you would earn a whistle, or, you know, something ridiculous like that. Nonetheless, I did, oh, yeah. Numerous laws. But it would involve going up knocking on a door and 999 times out of 100. Nothing would happen either. They wouldn’t answer the door, they answered the door and shut the door. But I imagine most of the kids who would do this would say, okay, to hell with this, and then back to the couch to watch my three sons or whatever, TV shows, back in the in the 60s. But for some reason, you know, I was intrigued. I would go, I’ve got to figure this out. And then somebody would actually buy something and I go, that was awesome. Now what can I do to try and repeat that? Or what can I do to try and get a bigger order? Or how can I put things together? In other words, I was just drawn to try and figure out better ways to do something. And that never stopped. So this is not like all of a sudden I went to school for entrepreneurship and studied business. And then when I got out to let’s start a company, it’s this natural progression. I mean, school, I started clubs, started magazines, put on plays, just saw something that looked interesting and said, I wonder if I can figure out a way to do it. And in many ways that I was lucky that entrepreneurship actually ended up being something that you can make a living at. Because otherwise, I think someone who was as distracted as I was, would be chronically unemployed,

 

Scott D Clary  05:45

serious problem solver. These are these are classic traits of anybody who has found some success in building their own thing. But you were you were building things before it was cool. And before entrepreneurship is glorified. And I think that’s also something that you speak about quite often, but Okay, so let’s, we’ll go into we’ll go into what entrepreneurship is and what entrepreneurship isn’t, in a bit. But when when did you decide to build your own thing versus getting another job? What was the what was the origin story of the Netflix? You know, how it started with DVD, while

 

Marc Randolph  06:28

Netflix wasn’t? Why

 

Scott D Clary  06:29

did that happen?

 

Marc Randolph  06:30

It wasn’t like I was oh, I was working in Safeway as a bagger. And I said, I’m, I’m gonna do now. Netflix was startup number six. And so, and the first ones, you know, they just kind of come along. Netflix, though, I had already gotten in pretty deep. I mean, I already realized that I love doing this. And so when the company that I was working at a company that acquired my fifth startup, and a company that happened to have been started and was currently being run by Reed Hastings, when we sold that company, and I realized I was going to be out of a job. It was a fairly natural thing to say, Okay, I’m gonna start another one. And the question, of course, was what? What am I going to start? Because this was not like, I was a movie guy, you know that I was lifelong passion. I wasn’t like a Quentin Tarantino who had grown up in a video store or something like that. I had certain things that intrigued me. I certainly wanted to do something with the internet, which was still pretty early back then. I was really sure I wanted to do something in E commerce, I was pretty sure I wanted to do something that involves deep personalization. But other than that, I was I was open, you know, and at the time, Reed, who was at running the company were selling, he was going to be out of a job to he didn’t want to start another company. He was gonna go back to school. But you know, once you’re an entrepreneur, you’re always an entrepreneur. And he wanted to try and keep a hand in the startup game. And so we kind of came to this agreement, that he’d be my angel investor, that he would be the chair of the board. We would come up with an idea together, and then I would start it and run it. And that was the plan. And then from there just began this long cycle of brainstorming and idea validation, that eventually did land on something that’s ended up being interesting

 

Scott D Clary  08:56

before we speak about idea validation and how you validated Netflix. How did you build this relationship with Reid, that allowed you to get to the point where he was saying, Whatever you start, I want to be the partner, I want to invest in it walk me through that co founder relationship.

 

Marc Randolph  09:18

So I got to Google back to startup number five, which was pretty geeky tech product. I mean, it was doing quality assurance software, the tools that the QA department would use, and we were early. I mean, we had maybe a dozen employees, maybe less, maybe 10 employees, when Reed’s company bought us. And so I was plunged from a company which was really pre product. I mean, we were still in beta, to all of a sudden, the rest of the team, the engineers, they all went down into the bay basement of this big building to form a business unit to sell that product. And then Reid grabbed me and said, I need a head of corporate marketing. And so all of a sudden, I was taken out of this little 10 person cerebral startup and plunged into this 1000 Plus employee, international, massive software company. But the lucky break, besides the fact we got to sell a company and got to work was that Reid and I lived in the same town. And so Reid and I began carpooling to work every day. And we had six months of carpooling, back and forth, to get to know each other. We also we work together. In fact, one of the very, very, very first things projects he had was he had a big speech to a sales meeting or something like that. And he goes, alright, let’s start. But you got to help me with this. And as you can, as you know, sometimes when you’re working on a speech with someone, you spend a lot of time kind of at the whiteboard, going through ideas, helping them practice helping them rehearse. And I remember him going well, he, I think he looked askance a little bit at marketing people. You know, he’s a mathematician, he’s an engineer. And I think he kind of was watching how I was working with him on putting together this keynote. And going, well, wow, you were actually pretty good at this. Because I was at the very beginning, we had six months to get to know each other. And we hit it off immediately. I mean, I think we shared a couple of common cultural ingredients that we recognized each other that I think we recognize, we’re reasonably rare. I mean, one is that read now we’re always unsparingly honest with each other. Both of us just coincidentally, have never been people who kind of mince words, or shade the truth or avoid saying something because we don’t want to hurt someone’s feelings. We just kind of say it. We also loved arguing and loved arguing in this totally egoless way where we’re you quickly realize you’re both arguing, not because you’re trying to prove that you’re right. For the sake of you being the one that’s right, because you’re arguing in his desire to try and find a right answer.

 

Scott D Clary  12:35

That radical candor in Canada, that’s something that go ahead. And as I said, something that I see very effective. And I guess that’s, you know, before Kim Scott wrote that book, that’s what you were living and breathing at, with Reed and then eventually, through Netflix, and I think that that’s still to this day, part of the culture, which I think is very, an important ingredient.

 

Marc Randolph  12:58

And that, you know, culture springs from who you are. But in other words, those are the think read, and I did establish both a friendship, professional respect, and this appreciation for entrepreneurship. You know, I had started a bunch of companies he had started and was running this by now very large public company. And so part of the fun game in the car, is why isn’t there a? Or Why Can’t We? It’s the game that all entrepreneurs play where they have no intention of sarolea starting it, but you go to lunch, and you begin just throwing ideas back and forth, because that’s just such an interesting intellectual exercise. And I think that’s why that when all of a sudden, we sold Reed’s company and the dust began to settle. It was not this Oh, no, what am I going to do? It was a little bit of Glee in that. Cool, we get to, we get to do it again.

 

Scott D Clary  14:01

All right. So you and Reid are in whatever it is you’re doing next together? How do you how do you validate that? The first iteration of Netflix is a viable business that you want to dive into?

 

Marc Randolph  14:21

The exercise that reed and I would go through is he picked me up at my house. And we had maybe a 40 minute commute, sometimes a little bit less frequently, quite a bit more. And besides the usual back and forth, I would pitch ideas to him. So I get in the car and say okay, I got one for you. And boom, here we go. And you know, one of the ones I pitched kind of famously was this personalized shampoo idea where you’d cut off a lock of your hair, you would mail it to us and our team of ACE hair scientists would formulate a custom blend just for you, Scott. And then you would subscribe to it. And then you’d pitch the idea. And Reid would sit there. And he’s driving and just staring out the window not saying anything. And a minute would go by, and then maybe a minute and a half or two minutes. And for those who would be unaccustomed to this, it’d be an awkward silence. But I’m, you know, I’ve been through this before. Because eventually I know what’s going to happen, he’s going to turn, he’s gonna go, that’ll never work. And here’s why. And he lays it into me. And, you know, here’s why the markets wrong. Here’s why it’s too expensive. Here’s why we have government regulation. All the reasons. That’s a bad idea. But he doesn’t expect that to be the end of the conversation. And it wouldn’t be because I’m no, you know, I’m no shrinking violet as I come right back at him and go, No, you’re wrong. I’ve done some research. And, and that’s we go into this big long, one of our famous problem solving arguments. And then I’d get to the office and I have all this time. Because I didn’t really have much to do, because we were in kind of due diligence for that closing the business. And I do all the research on it, and try and figure out other flaws that I’ve seen someone else done this before. And more often than not, we’d find there was some huge hole we hadn’t anticipated. And that goes out the window, and the next morning and no big deal. I’m ready to go again. Okay, read custom dog food, you know, or personalized sporting goods, we’re gonna make either baseball bats or surfboards on a computer driven milling machine. And then one of them was okay, read video rental by mail. We’re gonna let people have a slice of a single video store, we will have all the videos available to rent, and we will mail you the movie. And of course, that had all kinds of flaws. And probably the biggest fundamental flaw of that idea was the fact that back then this is a 1997. Video came on VHS, cassette, you know, those big and heavy, plastic, expensive, fragile things. And so that idea quickly turned out not to work. I mean, I had a lot of mail order experience. So I knew what it cost to ship things around the country using DHL and Federal Express. And so that one got abandoned and ended up in a pile on the side of the road. And what actually broke this one open was when one morning read mentioned, he’d heard about this technology called the DVD, and wondered if maybe that would be something that might help us with that idea we had had a while ago about the video rental by mail. And then here’s a guest has a long meandering story to get into the whole validation phase. And this one that because the thing is, when Reid and I had ideas, we did not that we liked, it wasn’t like we all said, Great. Let’s start working on a business plan. Let’s not imagine all the things we can do. Let’s not work on a pitch deck. We were always shifting gears quickly and saying how can we validate whether this idea has merit or not? Short of building the whole company. And in this case, we said listen, the fundamental premise here is that we can mail DVDs, we can use the US Mail way cheaper. And then you get into this argument, will it was that going to work? Is it just gonna break? What’s it gonna cost, we go screw it, let’s just find out. And so right in the middle of our commute, we turn the car around and drove down to Scotts Valley where we where we started down to Santa Cruz tried to buy a DVD. Of course, there wasn’t any it was a test market. So settled for a used music CD, and pop that into a little pink gift envelope. Like you put a greeting card in and mailed it to Reed’s house in Santa Cruz. And the very next morning, when he came to pick me up, he had a unbroken CD in a little envelope that had gotten to his house in less than 24 hours for the price of first class stamp. And that probably was the moment we realized this actually might be worth giving it a shot.

 

Scott D Clary  19:32

So that was the that was the first iteration of of Netflix and I want to pick up on some themes that have sort of permeated that process. But also things that obviously you speak about now. So before we go down that story even further, the concept of it will never work the game that you played. Why is that your core theme? What does that mean? Why is it so important? Is it an entrepreneurial lesson?

 

Marc Randolph  19:57

Well on the surface every single A person who has an idea who fancies themselves an entrepreneur hears that. It’s what everybody says, When you come rushing with great excitement into the office to tell them this new idea. It’s what your wife says to you. It’s what your investors say to you. It’s what your employees say to you. It is the universal response to, I’ve got an idea. But I’ve realized that nobody has any clue whether it’s going to work or not, that in fact, there is no possible way to really know in advance whether an idea is a good idea or a bad idea without trying it. So that will never work. You know, it’s the name of the book. That’s the name of the podcast, it’s the name of the clubhouse room, all the things I do revolve around, that will never work, because it’s a reminder to me. And I hope to everybody that it’s just unknowable. And that if you let someone set film and tells you that will never work, and you walk away from that going, Oh, I guess it won’t work. You’ve made a grave mistake, that what you have to do is go well, we’ll see. And then move to that next phase of saying we’re going to figure out some way to find out.

 

Scott D Clary  21:21

But that also ties in to another theme that you speak about, quite often, where no ideas are good ideas. So it’s it’s almost at a high level without understanding it’s conflicting. But walk me through the the know ideas are good ideas concept as well.

 

Marc Randolph  21:37

So anyone who’s worked in any kind of corporate setting is sat in a brainstorming meeting, where the well meaning moderator gets up in front of the group, and goes, Okay, let’s get some ground rules here. Rule number one for this brainstorming session is there’s no such thing as a bad idea. And I call bullshit on that. I think, in fact, there’s plenty of bad ideas. In fact, I’ll go out on a limb and say, they’re all bad ideas. In fact, there’s no such thing as a good idea. Every idea is fluid. They’re all not going to work. There’s always something wrong, I have never found a successful company that became successful doing the thing they originally envisioned. And if you recognize that no such thing as a good idea, they’re all bad ideas. What you recognize is It’s futile to keep searching for this perfect idea. That in fact, what I’ve got to do is recognize the skill here is not coming up with good ideas, the skill is figuring out a clever way to try something to quickly and cheaply and easily collide your idea with reality. That’s why I harp on the fact that there’s no such thing as a good idea. I don’t want people to get stuck. In this rut I’ve got if I keep finding flaws, and listen, forget it, stop thinking about it, start doing something, take the idea. And as soon as you can collide with reality, and you are going to find out that it’s a bad idea. But that’s fine. But the important thing is not that it’s bad. The idea is why is it bad? Because usually in association with all the reasons you realize it’s not going to work as you envisioned, it informs your intuition, you get some insight into what might work. And you can Oh, okay, let’s try this. And let’s try this. And it’s that process of iteration of jumping from stepping stone to stepping stone that ultimately does lead you to a place which is interesting. And you know, I’ve worked with so many companies, you know, the size the companies that I’ve done, but since I left Netflix, which was you know, 15 plus years ago, I’ve now had a chance to work with hundreds of early stage companies and 1000s of entrepreneurs. And over and over and over again. The things that finally work are never the first thing you try. It’s always this really interesting process of starting and seeing where those collisions with real people lead you.

 

Scott D Clary  24:20

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Marc Randolph  25:23

I think, listen, if you’re building, if you’re building an MVP, you’re building a minimal viable product, you’re building too much. And the problem, and it’s whether it’s an MVP, whether it’s actually raising money, all these things that people do, because they think that’s how this works, you get emotionally invested in an approach. And the more effort you put into that approach, the harder it is for you to acknowledge it’s not working, the harder it is to walk away from it. I mean, even a minimal viable product sometimes takes weeks, or months, or 10s of 1000s, or hundreds of 1000s of dollars. And so you’re not about to go Oh, didn’t work. Okay, abandon this, let’s try something new. Which is why you’ve got to figure out ways to do it super cheaply, super simply, super quickly. And it’s parsing it apart, you want to build a minimal unviable product. And in this, like, I gotta give you a very concrete a couple of concrete examples here. You do not need to test all the components of your idea. Because most of the components of your idea if you begin parsing it apart are not don’t need to be tested. You don’t need to say can we build an app you don’t need to worry is someone going to trust me with their credit card, you don’t need to worry about whether your app can know where you are. mean, this stuff has been generated, not just that it’s technically possible, but that customers accept all these things. And you begin to isolate in on what’s the one piece of it that I truly don’t understand. Well, listen, rather than wasting time with Kenny gives high level, Instagram worthy, quote, tile bullshit. meant to give you

 

Scott D Clary  27:09

specials are also good, but I mean,

 

Marc Randolph  27:12

yeah, they wouldn’t, you know, it’s like, but it’s like junk food, you nod your head and go, Oh, that’s so interesting. And then you go back and go, wait, wait, what? How? How do I? How do I do this? In fact,

 

Scott D Clary  27:22

okay, so let’s have some real examples. Let’s have something

 

Marc Randolph  27:25

emotional aspect here. It’s the point of the podcast that I do, which is, I could certainly go on social media and say, you know, the trick is to quickly easily clutter the reality and it won’t nod. But then it’s missing the how. And so on the podcast, I’ll sit down with someone for half an hour an hour, who has an idea, and we’ll brainstorm through how, and you see how this works. But let me give you an example. You do it right now, this is from two or three years ago, a bit more than that, actually. And as a young woman, in college, and I had an idea, and I do a bunch of mentoring work at universities. And she goes, I have this great idea of quote, unquote, she wants to do peer to peer clothing sharing. She goes, I have all this stuff in my closet that I never wear. I know all my friends have stuff that they don’t wear. Wouldn’t it be great if we had this huge network of people who were all showing us your clothes, we could all borrow each other’s clothes? And I go, Okay, pretty cool. What are you? What are you worrying about? And she goes, Well, I should I quit school to do this. How do I raise money when I’m just a student? Or how do I find a technical co founder to build this app for me? And I’m like, Whoa, slow down. Or, more importantly, speed up? I go, let’s figure out quickly, cheaply and easily. Whether your ideas are good idea or not your piece of paper? And she goes, Yes, I’m a college student, I have paper and you’ll find, do you have a Sharpie shows I can find a Sharpie. A great, so I want you to do is hit the paper I want you to write in the paper. Want to borrow my clothes, knock. And I want you to tape it right now to your dorm room door. And we’re going to start this experiment now. And you’re going to find something out either no one’s going to knock well then you’ve learned something pretty important right there. But let’s say people do knock well, you’re going to learn the next phase. Okay, first of all, there’s interest. But now what happens other problems with fit? Are the problems with style are the problems with taste. And let’s say there is a match that way. Now you’re going to find out the next thing. How do you feel and your blouse comes back stained or torn? How do you think about the fact enough to bring everything to the dry cleaners and all of a sudden this begins costing you more? Let’s say it all works. And all of a sudden you’re going to start this process of learning and recognize how many times you someone Repeat? How do I find people to do this? And you’re going to do all of this not by building an app, not by raising money, not by starting a company, you’re going to do it with three by five cards or a yellow pad. You’re going to do this in a non repeatable, non scalable way, because you’re going to figure it out on the ground. But the point was, her problem wasn’t. What can I make an app? How do I get credit cards? How do I Yes, those are things she would have to do if she was to make it a real business. But she narrowed it down to the fundamental problem was anyone care. And I can find that out with a piece of paper and a Sharpie. Okay, no wonder the problems would fit and taste and style, I can find that out on a very, very small scale test of people who live in my hall. And then what will happen is hopefully, after six months of doing this, out of her dorm room with three by five cards and a yellow pad, and going crazy, because it’s so manual, and so labor intensive, it’s so inefficient. But that’s great. Because then when it comes time to say, I think I might like to make this a real business, and you go to raise money or not waving your arms and going imagine, if you will, you’re able to say, I understand now what the repeat rate is, I know what the average order size is, I know what my churn is, I know my acquisition costs are. Or even more importantly, rather than going to an engineering friend and saying, I want you to build my idea, which I can assure you, as the marketing guy never works. You sit down and go, let me show you what I’m doing. And I’m doing it all with paper, I’m doing the three by five cards. And, and that’s when people lean in and go, Oh, that’s so cool. Maybe we could do it this way or this way, and they get pulled into the problem. So it solves so many problems. But the fundamental one is, rather than dreaming about it, you do it quickly and easily and cheaply by parsing out, what’s the one thing that you really need to test. And once you figured out that one thing, usually that one thing can be tried without technology without raising money. without other people without an office without quitting school without leaving your day job without mortgaging your house. You can do it on the side, you can do it quickly, cheaply and easily. It’s the trick, the thing, that’s the most important thing, I believe for an entrepreneur is starting something. And what I look for in the entrepreneurs that I want to work with is not how good their idea is. Because, as we mentioned, I fundamentally believe all ideas are bad ideas. What I’m looking for is do I think this person has the creativity and the persistence to say, I’m going to figure out quick, cheap and easy ways to try this. And keep trying things until I finally stumbled on something that actually does work. You mentioned why people stick with their Mbps for too long, because they put so much time and effort into it, they’re not willing to walk away. But if you stick something on the front of your dorm room you wrote in a piece of paper. And that doesn’t work. When you want it up, you throw it in the trash and you write something different the next day. And then you wash that up and throw that in the trash and try something different the third day and eventually someone knocks that’s the process.

 

Scott D Clary  33:29

For an entrepreneur, when is the point when they’re chasing the new shiny object versus giving up on a potentially viable business idea too soon, or holding on to it too long? Because there’s a there’s a balancing act they have to have and I know that I’ve even you know, even one lesson from Netflix is your decision to enter or not enter Canada. That’s at a macro scale is tiny out object syndrome. But how do you how do you how do you walk work through that problem so that you’re not just chasing the next thing because you’ve given up too quick?

 

Marc Randolph  34:12

Trying to think what what the best way to answer this is I think that when do you know when it’s time to give up? Is an artificial question. I really don’t think people ever say that to themselves. I at least I mean, it’s it’s an interesting thought experiment. But when you’re in the trenches, you almost never give up because you just don’t give up. And I’m not saying it’s because you’re so persistent and bullheaded, but how many entrepreneurs do you know who give up? Almost always, you’re forced to give up. You run out of money or Are you run out of time, or the things just quite frankly, don’t work, but you don’t like say, oh, all done, you try something else. And that’s not to say, you stick with the same thing. In some ways I give up all the time I’m giving up constantly, I never get wedded to my ideas. I’ll what’s not working fine in the trash it goes, and I’ll try something completely differently. And I’m even willing to do that, when the thing I’m giving up is working, it’s just not going to be the thing I need to do to be successful in the future. I’m willing to walk away from current success. To do what I know the customer is going to do, even if they’re totally separate. That your your, what you’re talking about is somewhat different than the shiny object problem, which is I think, different. That’s a focus. That’s a focus problem. Okay, so, yeah,

 

Scott D Clary  36:07

okay. That’s fair, that’s fair. But that’s still I want to, I want to get your input on that as well. So let’s, let’s separate those two problems. So that the being forced to give up maybe that is a thought experiment. And maybe you’re right, if somebody is truly entrepreneurial, they will not give up, but

 

Marc Randolph  36:21

tons of them don’t get it. You know, I got lots of people who have failed companies. And that’s no, you know, no badge of shame. But it’s not like they all of a sudden go, well guess there’s no more good ideas, I guess we’re done. Or boy is just not working. I’m gonna stop. And it’s the reason is because for most people, this is a dangerous thing to say you were in it for the right reasons. This sucks success part of it is not what they’re looking for. As you mentioned, as you recognize me at the very beginning, it’s all about curiosity and solving problems. And the fact that stuff keeps not working, just makes you more curious. But what is going to work less every failed experiment teaches you something, you become so educated about your problem, it isn’t like you give up on the problem, you give up on the idea and a second, that’s why they’re all bad ideas. But that problem that never really goes away. But the focus is a different one. Because there absolutely is a shiny object problem. And there’s two types of these shiny object problems. One is the fact that when you start, you’re dramatically under resourced, you have a hammer, you have just you in your dorm room to use the example from before, or even once you start a company, you have just a handful of people, you have limited dollars, you have limited amounts of time. And there’s 100 things that need doing. And to do all of them well, is resources so far beyond what you have. And you have to recognize, I can’t, it’s impossible. And the mistake people make is they feel they have to do everything. And so as a result, they do everything to the 20 or 30% level. You know, they say we’re gonna have a marketing program, that’s 20 There’s no sales breakthroughs percent or website 20 30%, pr 20, they have this huge list, we’re going to need to have a Human Resources policies to get ready to write down our company culture, because everything is shitty,

 

Scott D Clary  38:39

and fast and not done well.

 

Marc Randolph  38:41

And yeah, it’s just like, because they think, Oh, I have to have all these things done. Or all of a sudden you launch and you’ve got your customers saying, we need this feature, we need this feature, this feature this service, this many different price plans, we need this geography. And you can’t do all those things. Well, it’s the so many things conspire against the startup, that if you going in with everything at this 20 to 30% level, you’re you’re doomed. So the focus piece is recognizing that fundamentally, there’s probably just one or two things, that if you get them right, all the rest takes care of itself. That it really is this triage where of all the things that are on fire? A bunch of them? Well, listen, no matter what you do, they’re still gonna be poor. So that doesn’t help and a bunch of them, there’s gonna be fine no matter what you do. But there’s a few that your time and attention will make the difference between success and failure. And the skill of an entrepreneur is to recognize what are those two or three things and then have the discipline to focus their time attention and the company’s resources on those handful of things. It’s really really hard to do. But it’s such a critical skill. And like you said, there’s always things that are tempting you. And the one you alluded to, of course, Netflix early days was what we call the, you know, the Canada problem, which is that people say you should, wow, you’re trying to grow, you just expanded to Canada. That’s about an almost instant 10%. Pop, you know that market size is about 1/10 of the United States. It’s easy. And one of the lessons, of course, is that this so called low hanging fruit. Rarely is that what seems easy, once you begin getting into it ends up having all kinds of weird intricacies to it, you know, it’s a different language. In parts of Canada, they have a different currency. There’s different rights for some of the movies you’re selling, and renting and the time and attention to get that right, for 10% revenue bank gain, that if you took all the time and attention, you’re spending focusing on going after Canada, and focus it on your internal business, you would reap way more than a 10% gain. And you have to be willing to wait another one was, all of a sudden people as we begin to get some success. Competitors come up, you know, someone launches a Netflix clone in the UK. And believe me, the temptation is huge to say we better jump into the UK to nip this in the bud. But you have to say no, taking our very, very best people and keeping them focused on our internal problem here is going to be much, much more valuable. Because eventually when we do enter the UK in two or three years, we’ll be in such a stronger position. We can’t let ourselves get distracted, we can’t allow ourselves to get spread too thin. And the now we’re getting deep on this one. The other hidden trap is that not only is there a distraction of doing two things at the same time. But those two things cut against each other. In other words, it’s not just taking resources and putting it on Canada. But what that does, fundamentally is make it worse with your intent with your core market. Because they conflict in many ways. All of a sudden you go we have to structure it this way compatible. And all of a sudden, you’re going no, no, that’s not what’s best for the customer here in the US. I know, I know. But we need to compromise a little bit to make it work. Yeah. At the very beginning, when we launched Netflix, this is back in 1998. It doesn’t look anything like it does. Now, you know, we were mailing movies to people, it was no no streaming. If you wanted a movie, we mailed it to you in a little red envelope. And we didn’t just rent movies, we sold them and sold a ton of movies. And it ended up being something like 95% of our revenue. And this was kind of a version of the candidate principle. But in reverse is here we had this phenomenal sales business, but kind of recognized strategically this was a bad idea. You know that eventually Amazon was going to come in because back then they were just doing books that eventually Walmart is going to come in and Kmart. I don’t know Petsmart they’re all going to begin selling DVDs. And then we’re toast. But to the point I was just making that problem is that doing both was making everything more difficult. It was confusing the customers, the all of our, all of our metrics, were hard to interpret because there was two types of customers and our checkout process was more complicated than it needed to be to accommodate that some people were renting some were buying our inventory management. I mean, everything was being made more difficult. And we said we’re gonna have to focus, we’re gonna have to pick one of these, which would be hard enough to get right. And that the big strategic challenge and challenge, of course was Which one do you focus on and you focus on selling movies, which is 95 plus percent of your revenue, but it’s eventually gonna go out of business. Where do you focus on rental, which is a tiny piece, but if you can get it right, has the potential of being huge. And so it requires this courage to say I’m willing to walk away from this, this case, huge, shiny, huge, extremely shiny object to say fundamentally, I know what I have to do for the future. And I know that every minute that I maintain two lines of business is just making it less likely that the one that fundamentally is my future is ever going to see the future

 

Scott D Clary  45:00

It’s interesting that you had to go through that, because I see that many, many companies seem to launch more products and customers than they have customers. So it seems so simple at its core. But you you took the executive decision, you made the executive decision, you’ve cut off all the sales business. And you weathered that storm. When I guess, I don’t really have a question, I’m just more curious about the the, the culture of the company, how they survive that how, you know, what was the living and breathing that day in day out as you went through that process?

 

Marc Randolph  45:44

It’s terrifying. I mean, it’s it, you all of a sudden go from having 90, you know, a certain revenue level down to 5% of that revenue, revenue level level. And part of your role as a leader is to be able to communicate with clarity and confidence. We’re going this way. And here’s why. Even if in fact, in some cases, you’re not quite clear that confidence internally, that this is the right, right path. But it’s also because in a startup, when you begin building that team, in my opinion, you’re less interested in finding people with deep, specific task expertise. you’re surrounding yourself with people who have the right mindset, to be in a startup, who are totally comfortable with the idea that you’re going to be constantly trying things and when they demonstrate they’re not working, you’re going to walk away from them, that you’re going to come into work each day maybe doing something completely different than you did the previous day. So this wasn’t like the challenges that a lot of big companies face when they have to pivot like this. That is brutal. This was I won’t say it’s easy. But I think a lot of people can be shown that, fundamentally, our future is in that case rental. And that even though the sales is quote, unquote, working, can’t you see how it’s getting in the way of us fundamentally doing the right thing. And it’s not like everyone just all of a sudden goes, okay, and off you go. There’s a lot of people, of course, who were invested in certain ways of doing it, it takes a while to come around. But this is not. It’s it’s a courage thing. More than anything, it’s recognizing that you’re willing to walk away from something which is, quote unquote, successful. Because you see that no, the future is somewhere else. And Netflix has done that over and over again. You know,

 

Scott D Clary  47:52

it Well, that seems to be again, like this, this culture that is ingrained in Netflix is what has led to their success. And part of it is part of it is the ability to make these decisions. The candor, the transparency, like all this stuff, is what obviously, look at the end result, it’s the story tells itself. But that’s that’s these are the lessons that entrepreneurs have to internalize when they’re starting their own thing. And these are things that are built into the company from day one

 

Marc Randolph  48:19

is that, you know, this is that culture is so so critical, because the you can do it when there’s, you know, I think when we did that walking away from selling DVDs, you know, what were 30 people, 40 people, that’s reasonably straightforward. But when it’s 400 people or 4000 people, it’s, it’s a very, very different story. And unless you have this cultural sense that that’s the way to approach problems. It’s really, really hard. And I think it’s what gets big companies in trouble, which is that you all of a sudden, become successful. You all of a sudden find your repeatable, scalable business model. And you realize, wow, I can actually see pretty far into the future, I can see that it’s going to go up and up and up and up. And then you say, well, let’s begin, maybe we should begin trying to shorten our supply chains, maybe we should try and shave some margin points, maybe we should become more efficient. And there’s very specialized people who are phenomenally good at that, who are experts in these certain functions. And the people who are generalists who are just not super talented in a specific task, leave and are replaced by specialists, but then the world changes. And those specialists are not the right people who are comfortable coming to work the next day doing something completely different. And you get you get locked in. It’s a very, very dangerous situation and the culture I think that Netflix built was In some ways based on this realization, which was We never wanted that to happen. We wanted to never lose that flexibility, that experimentation, that very risk taking of a startup no matter how big the company got. And I think to some degree, they’ve been very successful at that. And it’s a big piece of their success.

 

Scott D Clary  50:19

Very smart. Okay, this was a, I don’t want to I don’t want to run you too long. But I what I want to do is I want to finish up the Netflix story, I want to speak about the stuff that you’re working on. Now. I know I didn’t say finish up the Netflix story. It’s like you have four hours like, no, no, we’ll try. We’ll try and wrap up the Netflix story, what you’re working on now. And then I have rapid fire questions for you if that’s okay.

 

Marc Randolph  50:43

Okay. I’ll pontificate a little bit less than No, it’s great.

 

Scott D Clary  50:47

Listen, this is this is your this is your moment. So you, you left Netflix. Why did you feel it was right to leave Netflix, and move on to something else? That was sort of wrapping up a major point in your career? Obviously.

 

Marc Randolph  51:06

Yeah, it’s, you know, as you mentioned, Netflix was, you know, number six, so I had been doing it for a long time. And I had learned, obviously a ton of stuff about entrepreneurship and business. But I learned something else pretty fundamentally critical, which is I learned, what I liked. And I love to do and I learned what I was good at. And both of those were the same thing, which was this early stage, company, business, I love that problem solving, I love coming in and going, how are we going to find the path, something that will work, I love sitting around the table with all the really smart people solving really hard problems. And, you know, by the time I left, which was in 2002, Netflix was no longer a small company. I mean, we had our IPO, we had found the repeatable, scalable model. We were growing like crazy. And at the time, of course, I love the company in you love it, like you love a child. Sure, baby. But I slowly came to the realization that A, I didn’t really like what I was working on. These were not early stage company problems, these were not starting problems. And perhaps more importantly, I began to realize I’m not very good at it. I’m not a big company, guy. And you realize, well, in some ways, that’s what success is all about is being able to spend your time working on things that you enjoy, and that you’re good at. And that startups and so I made my decision, this is probably a good time to go. Um, it took a long time took almost a year to little by little transitional responsibilities that other people, so that didn’t impact the company. But I have zero regrets about leaving. I have gotten the chance to work with lots of early stage companies, I started another company after Netflix. I’m happy as a clam. You know, and, and Reid, he is running that company, and has done an unbelievable job way better than I could ever have done. Taking it from where it was when I left to the amazing company that it is today. He’s happy as a clam. This worked out great for everybody. One thing

 

Scott D Clary  53:39

you’re one thing, obviously you’re you’re very good at is being as self aware as being self aware. Excuse me, that’s another you know, I think this was like a, a laundry list of all the right things to do or be as an entrepreneur in the past hour. And that’s just another it’s another thing you know, no, no, what you’re good at know your strengths and your weaknesses. Is that was that intuitive? Was that something that you’ve always been aware of? Or is it something you had to learn over your career?

 

Marc Randolph  54:07

You have to learn it over your career. You listen you I didn’t probably figure some of those important things that about myself until I was late 20s, maybe even early 30s. I mean, I was lucky. I started Netflix and I was 38. So I had learned the hard way, a lot of things about myself. I had been in jobs that I hated. I had made big mistakes. Certainly, in fact, one of the reasons that I kind of do what I do, which is where I mentor entrepreneurs, right, do the podcast and do these things is I’m trying to show people this is not magic. That it’s not like all of a sudden I was born as this miraculous startup person. No, I just I started early and I just kept sticking at it and I learned as I went and the things that I’ve learned are not beyond the ability of anybody to pick up As long as you’re willing to try, long as you take your idea, get it out of your head and collide it with reality. I mean, as long as you’re willing to start, you’ll learn. And yeah, self awareness is important. It’s like a lead, follow or get out of the way thing. Most people do don’t recognize that. And unfortunately, a lot of company founders don’t recognize that. They, to them, the company’s success and their role in the company are inextricably tied together. And I think if you’re truly self aware, you go, Okay, I’m phenomenally good at starting companies. But I’m might not be the right person to take this company to the next level. And at some point, you have to recognize that and say, I’m willing to find someone who can, the number of people who can go from zero to 1000 is extremely small, you know, kind of my two hands probably. And, you know, even Steve Jobs, screwed up royally. But, you know, let you go the reed, Hastings, Elon Musk, maybe Jeff Bezos? There’s not a lot of people who I mean, it’s not there are more of course, but who can have the skill to be an early stage guy and the late stage person? Pretty rare.

 

Scott D Clary  56:25

Okay, so a few last last point, and I’ll do some rapid fire. So what are you working on? Now? What’s the goal of the podcast probably is reflected in the book as well. So walk me through that.

 

Marc Randolph  56:38

Yeah, that there. It’s all part of the same thing, which is kind of, I’ve learned over this 40 years that all these tips and tricks and secrets that I’ve learned in my own career, as an entrepreneur, are great for starting companies. But they’re really the same thing as you would do. If you had any idea you wanted to make real. You know, whether it’s starting a company, whether it’s just getting a better job in an established company, or whether it’s doing something else with your life, it all starts with figuring out breaking down the problem and saying, How do I take those first steps? And I’ve really said my whole purpose in life now is to help get people to take those steps to take the idea and try and make it real? Or if they have it as a side gig, how do you turn the side gig into a real thing? Or if you have a real thing? How do you build that to the next level? And how do you do it in a way that you have a life? How do you find balance? How do you work with your co founders? How do you build a board that supports you? And there’s all these pieces to it that they don’t teach? Everyone says, Follow your dreams, but then that no one ever teaches you? What how do you how do we follow your dreams? And that’s what I’m really trying to do. I mean, I the book. Yes, it’s all the untold stories about starting and growing a company, but it really is me trying to pass along all these things that I’ve learned about entrepreneurship and how to apply that to business into your life. You know, I do the podcast where, right now it’d be two weeks soon to be every week. You know, I sit down with an entrepreneur and spend an hour with them. Trying to help coach them through these are not interviews with celebrity entrepreneurs, these are not how I built this episodes, these are, let’s see if we can solve a problem together. And that’s become pretty much what I spend my time now. I still work very closely with a handful of companies as a mentor to the founding teams, I never want to be the guy who talks about stuff that he’s not actually doing. And it’s my fix. You know, I I, like I said, I love the whole startup game. And this is my chance to sit down with that handful of really smart people solving really interesting problems. And then I get to go home at five and they stay up all night. Trying to solve those problems. Yes, the

 

Scott D Clary  59:04

best of both worlds, right. All right, um, biggest, biggest personal challenge in your career? How did you overcome it?

 

Marc Randolph  59:12

Balanced? You know, I recognized pretty early on I didn’t want to be one of those guys who was on their sixth or seventh startup but also in their sixth or seventh wife. My personal fulfillment as a for myself, is it outdoor stuff, you know, so this is doing things which are not the couple of activities you can squeeze in between an 11 o’clock phone call and a two o’clock meeting. They require multiple bush plane flights to get back to some river for kayaking it or even full days of climbing. So, bow if I wanted to have those things in my life and do startups which tend to be seven by 24 pursuits, I would have to really figure out a way to do that. And I’m actually pretty proud that I think I have done I’m perhaps prouder of the fact not that I started all these companies, I’m proud of the fact that I was able to do that while getting out to the woods going surfing, going mountain biking, going back country skiing, and, you know, staying married and best friends with the same woman for all these years. So there’s that that was my biggest challenge.

 

Scott D Clary  1:00:23

That’s, that’s a good way to overcome it. Challenge challenges successfully completed. Okay, so looking at your Yeah, of course, if you could tell your 20 year old self one thing, what would it be?

 

Marc Randolph  1:00:41

Trust your trust your gut, on people trust your gut, on direction. That took me 10 years to figure out and I wish I had done that a little bit sooner. The whole The reason I’m hammering on, nobody knows anything. The reason I’m hammering on that will never work, is to try and give people the confidence that No, no, your intuitions are good. You should follow them about people and about ideas.

 

Scott D Clary  1:01:13

And if you had to choose one person in your life, it could be personal or, you know, career that had a big impact on you. Who was it? And what did they teach you?

 

Marc Randolph  1:01:22

I’ve really been incredibly lucky that I’ve worked with three amazing entrepreneurs early. And just what I got a chance to do was watch. Sorry, I didn’t have you know, all the bells and whistles going off in my, in my ear? Well, yeah, so I’ve been really incredibly fortunate to have had a chance to work with some really amazing entrepreneurs just getting to watch them. One was a guy named Peter Godfrey, who hired me to help start a magazine with him. And seeing how he worked was amazing. I worked with a guy named Philippe Kahn founded a company called Borland, who I worked with, and there is something that comes from seeing how amazing entrepreneurs work that imprints yourself, which is why I think apprenticeships too powerful thing is getting a chance to get a front row seat. With someone who really is good at this is invaluable. Very good.

 

Scott D Clary  1:02:33

A book or podcast outside of your own, that you’d recommend people to check out.

 

Marc Randolph  1:02:41

I’m not good at recommending that. I don’t I don’t I do listen to a lot of podcasts but not for professional stuff. I don’t learn it that way. It’s a it’s just honest, I don’t I’m not a big voracious business book reader or a business.

 

Scott D Clary  1:02:58

Oh, it doesn’t have to be it doesn’t have to be it would be something that just sits inspired you that that you think other people could benefit from? It’s,

 

Marc Randolph  1:03:06

I pass? Okay,

 

Scott D Clary  1:03:08

I’ll pass on that one. And then obviously, you’re gonna, you’re gonna

 

Marc Randolph  1:03:12

speak about things you don’t know much about.

 

Scott D Clary  1:03:15

That’s fine. And last question, what does success mean to you?

 

Marc Randolph  1:03:23

Yeah, that’s a good one. And in some ways, I answered it earlier, I’ve really come to believe that success is this ability to spend your time working on things that you really liked doing, and that you really enjoy. Because if you can put yourself in a position where that’s what you get to do, as the old saying goes, it’s not work anymore. And if you’re driving yourself to work hard for some externality, like, money or position or something like that, it’s just unsustainable. But if you can find the thing that you really love doing it, you’re good at. Success isn’t going to come success is already there. But I will close with probably the thing that I’m the most proud of which is the success of not just having multiple companies which had been successful. It’s the fact that I was able to do that while staying whole. While I still do, continually I was able to get out and do the things I knew that personally fulfilled me all my outdoor stuff. I was able to stay married to the same woman. She’s still my best friend. I have three kids who have grown up knowing me and especially I can tell liking me and I can’t think of anything. I can’t think of it being more successful and having that be the case.

 

Scott D Clary  1:04:58

And then where should people will go to connect with you social, get your book website all of that.

 

Marc Randolph  1:05:05

Well the first thing of course is to remember that that will never work because it’s the name of the book. That will never works the name of the podcast, I do a clubhouse, where I do live mentoring for people from the audience every Tuesday at five o’clock pm pacific called that will never work. But the real hub for all things. Mark Randolph is Mark randolph.com That’s where people can find all my blogs. Sign up for my email list with entrepreneurial advice they can get the podcasts that get the book set up plus, if you don’t have attention span for a 30 or 40 minute podcast or a 300 page book you can find it whatever size fits you on Twitter or Instagram or Tiktok even know that there isn’t there isn’t a there is an adventure it is still trying to find my way that’s a different beast. But that’s the fun thing isn’t it? Was we’re still learning you know, it never gets old

 

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