That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea

by Marc Randolph

I know what’s behind that look: a rapid-fire evaluation of pros and cons, a high-speed cost-benefit analysis, a near-instantaneous predictive model about possible risks and scalability.

Behind his back, I’ve heard people compare Reed to Spock. I don’t think they mean it as a compliment, but they should. In Star Trek, Spock is almost always right. And Reed is, too. If he thinks something won’t work, it probably won’t.

Epiphanies are rare. And when they appear in origin stories, they’re often oversimplified or just plain false. We like these tales because they align with a romantic idea about inspiration and genius. We want our Isaac Newtons to be sitting under the apple tree when the apple falls. We want Archimedes in his bathtub. But the truth is usually more complicated than that. The truth is that for every good idea, there are a thousand bad ones. And sometimes it can be hard to tell the difference.

This is a story about how we went from personalized shampoo to Netflix. But it’s also a story about the amazing life of an idea: from dream to concept to shared reality.

The best ideas rarely come on a mountaintop in a flash of lightning. They don’t even come to you on the side of a mountain, when you’re stuck in traffic behind a sand truck. They make themselves apparent more slowly, gradually, over weeks and months. And in fact, when you finally have one, you might not realize it for a long time.

if I ever wanted to look at my destiny on a piece of paper, all I had to do was look at my birth certificate. Marc Bernays Randolph. Marketing was my middle name.

Christina was a project manager. A little buttoned-up, with her dark hair pulled back into a simple ponytail, she had years of experience turning visionary ideas into tangible products. Along with a sharp eye for detail, she had a real genius for scheduling, and a ruthless ability to get things done on deadline—even if she had to kill someone to make it happen. She was well versed in the art of translating a visionary idea out of the realm of possibility and into reality.

“You want something where the effort it takes to sell a dozen is identical to the effort it takes to sell just one. And while you’re at it, try and find something that’s more than just a onetime sale, so that once you’ve found a customer, you’ll be able to sell to them over and over again.”

unless tapes got cheaper, or the post office got faster, renting movies through the mail would be almost impossible. “Back to the drawing board,”

Nobody has a DVD player yet, so it’s going to be a while before the video stores even start carrying DVDs.

“If people can’t find a DVD in a store anyway, they won’t mind waiting as much.”

When you start a company, what you’re really doing is getting other people to latch on to an idea. You have to convince your future employees, investors, business partners, and board members that your idea is worth spending money, reputation, and time on. Nowadays, you do that by validating your product ahead of time. You build a website or a prototype, you create the product, you measure traffic or early sales—all so that when you go to potential investors, palm outstretched, you have numbers to prove that what you’re trying to do isn’t just a good idea, but already exists and works.

But back in 1997, you could raise $2 million with a PowerPoint. In fact, you had to. There are a lot of reasons for that, but the most fundamental had to do with time. In 1997 there was no Squarespace. No Stripe, no AdSense. No Optimizely. No cloud. If you wanted to build a website, you had to have engineers and programmers build it for you.

Reed wanted to be our angel investor because, even though he was leaving Silicon Valley for the education world, he wanted a way to stay connected to it. Funding us was his way of keeping his toe in the water.

and simple. I decided not to put any money in. For one thing, I’d just had my third child—my son Hunter. And, unlike Reed, I’d be donating a lot of time to the project. My risk was my time. His was his money.

If I stood to lose a million dollars—and not just my job—I’m not sure I ever would have been able to take some of the imaginative leaps that were so crucial in the early going.

The truth is that no business plan survives a collision with a real customer. So the trick is to take your idea and set it on a collision course with reality as soon as possible.

secrecy was the least of our concerns. I’d realized by then that telling people about my idea was a good thing. The more people I told my idea to, the more I received good feedback, and the more I learned about previous failed efforts. Telling people helped me refine the idea—and it usually made people want to join the party.

I’m usually wary of title inflation—although it’s something that seems like it costs you nothing to give, it actually is far more expensive than it seems, since it causes a cascading series of overpromotions. For just this reason, I had already decided that no one would get a VP title—at least at first. Instead, they would all be directors, and their titles would reflect what they actually did, not what they wanted to do.

what really fascinated me was his deep knowledge of movies and his even deeper connection with his renters. He paid attention to what they liked, what they asked for, and what they wanted. He was a movie buff, and he wanted to help his customers find the kinds of movies they’d love. That meant giving them not only what they thought they wanted but what they didn’t even know they wanted.

Every booth at Buck’s bears the residue of venture financing. The napkins there have felt the imprints of thousands of pens, sketching out improbable ideas that just might work. In a way, it’s the VSDA of Silicon Valley—a crazy, slightly hallucinogenic place that seems engineered to confound outsiders.

“You want to know the most important principle of starting a company? It’s OPM.” Sometimes you’ll hear it as a cautionary warning: “I know you’re confident, but please stick to OPM.”

Other People’s Money.

Convincing someone to part with their money tends to separate those who are blindly supportive (“I love that idea!”) from those who are supporting you with their eyes wide open. I often counsel young entrepreneurs to start by asking people what they think, but then immediately follow up the inevitable “I love it” reply with the ask: “Can I count on you to invest a few thousand dollars?”

It made me feel low when people said no. But by far the most difficult thing to bear was the invisibility. Mustering up all your courage and desperation, then debasing yourself in front of a stranger, only to be totally ignored—that was worst of all.

All day I’d find myself working on an idea I’d come up with, in the pleasant company of a team of people I’d handpicked for their obvious talents.

That’s one of the great pleasures of being at the helm of a startup in the planning stages. The company is small enough that everyone in it has to wear multiple hats, but big enough that you never have to wear one that doesn’t fit properly.

I firmly believe that a healthy startup culture arises from the values and choices made by the startup’s founders. Culture is a reflection of who you are and what you do—it doesn’t come from carefully worded mission statements and committee meetings.

While our salaries at that point were well below what might be available elsewhere, each of those early employees received a large stake in the business in the form of stock options. They wouldn’t be making a lot up front—but we were betting on ourselves that the eventual payoff would be huge.

Now, of course, Netflix’s culture is famous. There’s a much-downloaded PowerPoint presentation given to all new employees. But the truth is, it wasn’t the product of meetings or careful planning or roundtable discussions. It arose organically, through a shared set of values among a team of people who had been through their fair share of offices—

Culture isn’t what you say. It’s what you do.

We didn’t have set hours for work. You could come in when you wanted, leave when you wanted. You were being judged by what you could accomplish. As long as you were solving problems and getting things done, I didn’t care where you were, how hard you worked, or how long you stayed.

what I love about backpacking trips are the people I take with me. When you’re out in the woods, you’re separate from the rest of human society. And as a result, you have the opportunity to form a new culture, with its own rules and laws and traditions. You really get to know people when you’re sleeping on the ground, eating simple food you prepare yourself, and smelling like you haven’t showered in a week (since usually you haven’t). Some of my greatest friendships have been forged in the wilderness. And the bonds with my family have been strengthened immeasurably by our time together on a river, climbing a peak, or surfing a remote reef break.

as a leader, the best way to ensure that everyone arrives at the campsite is to tell them where to go, not how to get there. Give them clear coordinates and let them figure it out.

Real innovation comes not from top-down pronouncements and narrowly defined tasks. It comes from hiring innovators focused on the big picture who can orient themselves within a problem and solve it without having their hand held the whole time. We call it being loosely coupled but tightly aligned.

If we were supplying our employees with fine dining, a fitness center, and an Olympic-size pool and they were still complaining, what are the factors that really drive employee satisfaction? Or more importantly, what does it take to get other people to sign on to help you with your dream—and be happy doing it?

People want to be treated like adults. They want to have a mission they believe in, a problem to solve, and space to solve it. They want to be surrounded by other adults whose abilities they respect.

People don’t want hot tubs—not really. They don’t want free snacks or Ping-Pong tables or kombucha on tap. What they really want is freedom and responsibility. They want to be loosely coupled but tightly aligned.

It was a given that once we started working to make Netflix a reality, the hours would be long. All of us knew that, because all of us were Silicon Valley veterans. We’d done the fifty- or sixty- or seventy-hour workweek before. The difference was that this time, we were choosing to do it. We weren’t working for someone else’s dream. We were working for ourselves.

Once I’d instituted Tuesday date night, I was fiercely protective of it. Five o’clock was a hard deadline. The moment the second hand hit the 12, I was out of there. Last-minute crisis? Too bad. An emergency meeting that could only be held at 4:30? Better make it short. Need to talk to me about something at 4:55? It would have to be on the walk to my car.

But no matter how high I’d climbed, or how many steps I saw ahead of me, I always left the office at 5:00 p.m. sharp on Tuesdays. I didn’t want to be one of those successful entrepreneurs who are on their second or third startup but also on their second or third spouse. Saving a night for my wife kept both of us sane and in tune with each other.

Christina and I had written two columns on the whiteboard. One was filled with words related to the internet. The other was filled with words related to movies. We’d decided that the best name for our company would combine two words: one related to movies, one related to the internet.

you need something catchy, something that rolls off the tongue and is easy to remember. One- or two-syllable words are best—and ideally, the emphasis be should on the first syllable.

Too many syllables, too many letters, and you run the risk of people misspelling your website. Too few letters, and you risk them forgetting the name. And then there’s the issue of what’s available. It doesn’t matter if you find the perfect name, if someone else already owns the domain or the trademark.

we all agreed: we were NetFlix.com. It wasn’t perfect. It sounded a little porn-y. But it was the best we could do.

when it was all said and done, we were a website that gave people access to DVDs. We weren’t changing the world like Reed was.

Steve saw the cover. “Oh, right, Boogie Nights! I remember hearing that was good.” “Worth a shot,” I said. I felt good: relaxed, full of wine and seafood and the reassurances of a friend. I sat down in one of the front-row recliners, next to Lorraine. Steve took the money seat, next to Karen. Reed took the row behind them. The lights went down, the curtain went up, and we watched Dirk Diggler let it all hang out in crystalline, DVD-quality resolution, across an eight-foot screen. At first I was horrified. Then I laughed until I cried. “Let’s hope your content team knows more about your inventory than you do,” Lorraine said.

there was only so much he could do without the pressure of real orders coming from the site. And one of the big problems was that we had no clue how many orders we’d get on launch day. Five or ten? Twenty or thirty? A hundred?

Everything worked fine—the site was up and running, the orders were flying in—for about forty-five minutes. Then the servers crashed. Again.

Pushing a shopping cart directly to the computer department, then dealing with the same checkout person as they discussed among themselves whose credit card to use. That clerk had probably seen this exact thing happen dozens of times, with dozens of startups. We were in Silicon Valley, after all.