Okay, so today we're going to be talking about That Will Never Work. Oh, yeah, this is a good one. Yeah, it's the birth of Netflix.
And the amazing life of an idea. Yeah, it's by Mark Randolph. And so this isn't like just a boring business book.
This is like a really interesting story, like tons of surprising twists and like really human relatable struggles that come with like trying to bring any new idea, you know, life, yeah, like off the ground. And so it's really interesting to kind of like, go behind the curtain of a company that's like, changed how we watch everything. Yeah, it really has, hasn't it? Yeah.
Like, think about it. It's like, we consume entertainment in a totally different way now. Yeah.
Than we did like even five, 10 years ago, let alone like 20, 30 years ago. I know, it's crazy. And so it's not just like a history of like, you know, how this company came to be.
But it's really about like, the messy process of innovation. Like it's super uncertain, right? Yeah. And so we're going to be tracing this like kind of improbable journey from these very humble beginnings to the streaming giant that we all know today.
And so like, our mission for you today is to like, pull out the crucial lessons, like those aha moments that might just like spark something in you, like whatever you're working on or just like, if you're curious about like, how big things get started. Yeah. How do these things happen? How do you go from an idea like in the shower to like a multinational corporation? It's fascinating.
Right. Yeah. And so like, trust me, there are some seriously unexpected turns.
Oh, I bet. Yeah. Like, you know, they talk about like, personalized shampoo delivery.
I know. Like, can you imagine? No. And like, sending VHS tapes through the mail.
Yeah. Yeah. And so it's like so many bad ideas, so to speak, that we're actually stepping stones.
Right. You know, to the one that actually worked. Interesting.
Yeah. So like, okay, so let's unpack this, like right from the start. So the book kicks off with the initial spark of the Netflix idea, and it happened in a very like mundane setting.
Right. Yeah. I mean, that's often how these things happen, right? It's not like, you know, the bolt of lightning.
It's like, you're just, you know, going about your day, and then boom, an idea hits you. Yeah. So they were doing their daily carpool, Mark Randolph and Reed Hastings.
Oh, wow. Okay. Yeah.
And it's interesting, right? Because you get this feeling that it wasn't some like, grand, meticulously planned out strategy session. Right. But just like, casual brainstorming.
Sure. Throwing out possibilities. Yeah.
Yeah. And so it's just interesting, like how this DVD by mail concept emerged. Yeah.
So tell me more about that. Like, how did that idea come to be? Yeah. Well, it wasn't like this flash of genius, right? But they just kind of were talking about things, and they were like, hmm.
And I love how Randolph describes this initial experiment, just to see if it was even feasible. He says, let's just try it. Mail a CD to your place.
If it breaks, it breaks. And we know this idea could never work. If it gets there, you got someone to listen to on Tuesday night.
I love that. Yeah. Just like- So simple.
So simple. Low stakes. Right.
Just like, why not? Let's try it. So experimental. And so for you listening, like, you don't always need this massive investment to just like, test the fundamental assumption.
Totally. And that's a really key point for our listeners, I think. Like, so many times people get hung up on like, oh, I need funding.
I need to raise money. But like, often, you can test your idea in a really simple, low-cost way. Exactly.
That's so important. Yeah. So that simple act of mailing the CD successfully was like the first domino.
Domino. Right. But then, like, the path from that test to an actual viable business was like, far from smooth.
Right. And the book really details the hurdles they faced, like, in the early days. Like, give us some examples.
Yeah. So like, you have to appreciate the scale of their eventual success, right? Right. To kind of understand, like, what they had to overcome.
Okay. So help me understand that. Like, paint that picture for me.
Yeah. So like, first of all, you have the very limited selection of DVDs available at the time. Right.
Because this was, what, like, late 90s? Yeah. Okay. And so there were only like, 900 titles at their launch.
Wow. Which is, like, crazy to think about now. I know, right? Like, you go on Netflix now, there's like thousands.
I know. And thousands of things to choose from. Unlimited, basically.
Yeah. And then you have this, like, widespread skepticism from potential investors and partners. Right.
People just were not convinced that this mail order DVD thing could work. Yeah. It seems kind of crazy, right? Like, who would have thought that that would be the future of how we watch movies? Right.
And then, of course, you have the elephant in the room, which is Blockbuster. Blockbuster. They were the kings, right? I know.
Of video rentals. Yeah. And so to try to compete with them, it's like, that must have seemed crazy.
I know. And so for you thinking about entering a crowded market, like, this should give you some pause. Yeah, definitely.
But also, like, inspire you to think differently. You know? Right. Right.
How to differentiate yourself. So that context, it's so important for our listeners, right? Because it underscores, like, what an uphill battle they were facing. Totally.
It wasn't like they were entering this, like, brand new market where it was like, oh, here's this great new idea. Everyone's going to love it. No, there was a dominant player.
And most people probably thought they were foolish. Right. So to kind of, like, persevere through that, I'm curious, like, what do you think kept them going, despite all that skepticism? That's a great question.
And, you know, speaking of things that seemed foolish, like, the book doesn't shy away from our early failed business ideas. Oh, really? Tell me about that. Yeah.
And we're not just talking about, like, minor tweaks. We're talking about, like, completely different concepts, like personalized shampoo delivery. What? I know.
Shampoo? And custom baseball bats. Wow. OK.
Like, what? I would never have thought of that. Yeah. And so for you out there, you know, with your idea that might be struggling, it's a reminder that, like, the first direction isn't always the right one.
Yeah. You know. It's OK to iterate.
Exist. Yeah. Change.
But what's so fascinating is that Randolph doesn't frame these as just straight failures. OK. You know, he calls them crucial iterations in the learning process.
That's a good way to think about it. Right. And he says, you know, distrust epiphanies.
Great ideas develop gradually through hard work and iteration, not sudden inspiration. That's a good quote. Yeah.
I like that. And so these seemingly, you know, like, unrelated ventures actually taught them valuable lessons about logistics, customer demand, you know, and different business models. And so for you listening, it's like, these weren't dead ends, but actually, like, valuable data points.
Guiding them towards the right path. Exactly. That's a great way to put it.
So for you, with your idea, you know, it's like, not every attempt is going to be a home run. Right. And often the missteps teach you more than the successes.
That's so true. It's like you learn more from your failures than you do from your successes. Exactly.
Yeah. So it's about extracting those learnings and applying them to the next iteration, you know. And Netflix really honed in on a major customer pain point.
Oh, interesting. Didn't they? Tell me about it. Yeah.
The frustrations of the traditional video rental experience. Oh, yeah. I remember those days.
Oh, my gosh. Like going to Blockbuster. Yeah, exactly.
So for you listening, think about this. What were the biggest pain points back then? Late fees. Late fees.
Ugh, the worst. Oh, no. I remember like racking up so many late fees.
It's like, why? Yeah. It was terrible. Yeah.
It was just like an annoyance. Totally. And then like the selection at the local stores, like very limited.
Just so limited. Compared to what we have now. It's like, you'd go there and it's like, oh, if they don't have the movie I want, then you have to like browse around and it's like, ugh, I don't want to watch any of these.
Right. Exactly. And just like the act of having to go to the store, browse, and then return the tapes or DVDs.
So inconvenient. Yeah. So inconvenient.
It's like you have to like plan your whole evening around it. I know. And so Netflix directly tackled all of these issues.
Interesting. How so? Yeah. So like no late fees was obviously huge.
Right. And then you had this vast online catalog, which was like dwarfed what any physical store could offer. Yeah.
And then the convenience of home delivery and return via mail, it was like a game changer. Huge. Yeah.
And I love how Randolph quotes somebody. They say, people don't just like no late fees, a flat monthly rate, plus serialized delivery with a queue. They loved it.
That's a great quote. And that loved it is so key, right? Because they weren't just offering a slightly better service. It was a fundamentally more appealing experience.
Right. They were solving a real problem for people. Exactly.
And I think that's so important for businesses to understand. It's like you need to be solving a problem. Yeah.
If you're not solving a problem, then like what are you doing? Exactly. And so that leads directly into the power of the subscription model, which was truly revolutionary. Yeah.
That was huge. Like for the industry. Right.
So instead of paying per rental, customers paid this flat monthly fee. Right. And this had benefits for both the company and the customer.
Right. So for Netflix, it created this predictable recurring revenue stream. Which is like gold for any business.
I know. Because then you can forecast, you can invest. Exactly.
And for the customer, it removes this like psychological barrier of per rental costs. Yeah. Totally.
So you feel like you're getting good value. Yeah. And it encourages you to like watch more.
Exactly. Because you're like, well, I'm already paying for it. I know.
Might as well watch as much as they can. I know. Yeah.
So like for you out there, considering the subscription model, think about how it can benefit both your business and your customer. It's a win-win. It really is.
Yeah. And so it shifted this dynamic for you, the customer, right? You weren't penalized for keeping a movie a little longer. Yeah.
And you felt more freedom to just like explore the catalog. Yeah. But it wasn't just the business model.
Oh, okay. That contributed to their success. The book also delves into Netflix's unique company culture.
Interesting. Yeah. And this emphasis on radical honesty and freedom with responsibility really stood out.
Tell me more about that. Yeah. So like the idea of encouraging open communication where employees felt empowered to speak their minds and give direct feedback even to their superiors.
You know? That's pretty unusual. Well, I know. Especially like back then.
Yeah, I know. It's like companies were much more hierarchical. Yeah.
And so to have this culture of like, hey, anyone can speak up. I know. That's pretty amazing.
So interesting. Right. Yeah.
And so what's fascinating here for you, the listener, is that Randolph connects this culture directly to their success. He argues that it fostered innovation. It helped solve problems more efficiently.
Right. Because if you're not afraid to speak up, then you can like identify problems early on. Right.
And fix them. Exactly. And it reduced office politics.
Which could be so toxic. Oh, yeah. It can like really bog down a company.
Yeah, for sure. And then like this freedom and responsibility aspect, like things like no formal vacation policy. Wow.
It signaled this high degree of trust in their employees. Right. And that ultimately translates to better service for you.
Right. Because if the employees are happy, then they're going to treat the customers better. Exactly.
And, you know, Randolph points out, you know, he says, culture isn't what you say. It's what you do. Mm.
Right. Yeah, it's so true. So it's not just about like putting nice sounding phrases on a wall.
Right. You have to consistently act. Right.
You know, in a way that reinforces those values. And so this agility and this internal strength really helped them navigate some major shifts in the market. Didn't it? Yeah.
I mean, they had to adapt. Right. To survive.
Yeah. So, like, the book highlights several key moments where they had to adapt or risk becoming obsolete. Like what? Give me some examples.
Yeah. So, like, the initial transition from selling and renting DVDs, and then they focused solely on rentals. Right.
Okay. That was a big one. Yeah.
And then, of course, the even bigger shift towards the subscription model. Right. Right.
Huge. But then let's not forget their early bet on streaming technology. That was a huge gamble at the time.
Yeah. It was. But their foresight and recognizing the future of content delivery and investing in it early on was crucial.
It was. Yeah. And they were way ahead of the curve on that.
They were. Like, most companies were still focused on, like, DVDs and, like, physical media. Yeah.
And they were like, no. The future is streaming. Yeah.
And Randolph uses this great phrase. He says, ruthless streamlining, scraping barnacles off the hall. I love that.
Yeah. That's a great analogy. And so it's, like, this constant evaluation.
Right. And this willingness to shed what's not working was so key. Yeah.
And underpinning so much of their decision making was data. Data. Yeah.
Interesting. The book emphasizes, like, how important this was. Like, right from the early days, they were collecting and analyzing customer data.
To understand viewer habits. Exactly. And preferences.
Yeah. And so the CineMatch algorithm, you know, their recommendation engine. Yeah.
That's, like, a prime example of how they use data to enhance the user experience. And that was, like, pretty groundbreaking at the time, too. I love it.
It was like, oh, you watch this movie. You might also like this movie. Right.
Exactly. Yeah. And so it wasn't just a nice feature.
It was, like, a core part of their value proposition. Yeah. You know, helping you discover content that you would actually enjoy and increasing your engagement.
Yeah. For sure. And their extensive use of A-B testing for everything from website design to content presentation really shows a commitment to, like, continuous improvement.
Yeah. That's so important. Right.
To always be testing. Yeah. Always be iterating.
Exactly. Because you never know what's going to work best. Exactly.
But it wasn't all just, like, internal factors. Like, strategic partnerships played a significant role in their early growth. Interesting.
Like what? Yeah. So, like, the partnerships with DVD player manufacturers like Toshiba and Sony were brilliant. Yeah.
Why that smart? Right. Because it gave them direct access to new DVD player owners. Right.
People who are prime candidates for their service. Exactly. So it was the smart way to build brand awareness and acquire new customers.
Yeah. Right at the point of sale for the hardware. Yeah.
It's like, you buy a DVD player, oh, here's a free trial of Netflix. Like, why not? Yeah. I know.
Smart. And so those partnerships helped establish Netflix as a key player. Yeah.
In the DVD ecosystem. Right. That's true.
But even with all this growth and innovation, the book makes it clear that balancing that with financial sustainability was an ongoing challenge. Right. Because you can't just, like, spend money willy-nilly.
Right. You have to, like, be mindful of the bottom line. Exactly.
And so, like, investing in future technologies, like streaming, while maintaining the core DVD rental business, managing content acquisition costs, it's a delicate balancing act. It is. Right.
And it's something that I think a lot of businesses struggle with, is, like, how do you invest in the future? Yeah. While also, like, making sure that you're, you know, profitable today. Exactly.
And Randolph doesn't shy away from the financial pressures and the tough decisions that they had to make. Right. To ensure the company's long-term survival.
Yeah. And so, like, as we reflect on this journey, what are some of the core lessons that really jump out at you? Like, what can our listeners take away from Randolph's experience, whether they're building a business or just navigating their own projects? I think, like, the importance of adaptability is huge. Yeah.
That's so important. Right. The market is constantly changing.
And Netflix's ability to pivot and embrace new technologies was crucial. Yeah. And I think that's something that's really important for everyone to keep in mind, right? Yeah.
Is it, like, the world is changing so fast. Right. And if you're not willing to adapt, you're going to get left behind.
Totally. And then also, like, the value of a strong collaborative team, like, that really shines through. Right.
You know? Because you can't do it all yourself. No. You need a team of people who are, like, smart and passionate and who are all working towards the same goal.
Exactly. And then, of course, persistence. I mean, they faced so much skepticism.
So many setbacks. So many setbacks, but they kept going. Yeah.
And Randolph has this great quote. He says, Ooh. I like that.
And so it's, like, a good reminder to kind of balance passion with objective evaluation. Yeah. Yeah.
Don't get so married to your idea that you're not willing to, like, let it go. Exactly. If it's not working.
Or adapt it. Yeah. So those are all really critical takeaways.
Yeah. And I think the book really illustrates that building something significant is rarely a straight line. No.
It's messy. Yeah. There's going to be setbacks.
There's going to be failures. Yeah. But it's about, like, learning from those failures and iterating.
Yeah. And just, like, constantly, like, pushing forward. Exactly.
Yeah. And so, you know, reflecting on all this, like, what long-held assumption in your own field might be right for a radical rethink? Hmm. That's a great question.
Yeah. Something to think about. Yeah.
I'll have to ponder that one. Yeah. No, me too.
But for our listeners, I think that's a great question for everyone to consider. Yeah. And if you enjoyed this exploration into the beginnings of Netflix and want more insights into the stories behind groundbreaking ideas, be sure to subscribe to Book Bytes and leave us a five-star review.
Your support helps us bring you more big ideas in small bites. We'll see you next time.
