Netflix CEO Reed Hastings Talks About Scaling A Business (ft Reid Hoffman)

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Netflix CEO Reed Hastings Talks About Scaling A Business (ft Reid Hoffman)
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Netflix CEO Reed Hastings Talks About Scaling A Business (ft Reid Hoffman)

Published on Aug 13, 2016

Co-Founder and CEO of Netflix – Reed Hastings – Speaks on Scaling a business (Blitzscaling Lecture w/ Reid Hoffman of LinkedIn)

Entrepreneur(s) Reed Hastings and Reid Hoffman (Paypal, LinkedIn, etc) lecture at Stanford on growing a business and bringing it to speed and scale – with commentary

Here’s what Charlie Munger had to say at the Daily Journal meeting

Charlie MungerCharlie Munger spoke at the Daily Journal Corporation's Annual Meeting of Shareholders today. Although Warren Buffett is the more well-known Berkshire Hathaway chief, Munger has been at his side through much of his investing career. Q4 2020 hedge fund letters, conferences and more Charlie Munger's speech at the Daily Journal meeting was live-streamed on Yahoo Read More


0:00about eight years ago we were getting tired of new employees joining and i
0:06would meet with all the new employees and go through this hundred-page slide
0:09deck and two out of three really got it and understood and their managers had
0:15properly described to the netflix and one out of three were in shock because
0:19the deck has some aggressive statements like adequate performance gets a
0:23generous severance package and we’re Team not a family and so if you know
0:28that going in
0:29you can love it but if you don’t know it and you didn’t expect it you feel bait
0:34and switched and so the big driver was we realized every candidate should get

0:39it and then of course if every candidates going to get it’s going to be
0:42public so let’s just make it public now as you’re doing scale to kind of keep a
0:46cultural norm as you scale was that was that one of the central tools for doing
0:50that
0:51yes I wouldn’t quite say keep a cultural norm but it was to share and debate one
0:56of the great things are putting things in writing is that makes it more
1:00debatable and so it’s not just hearing a sermon and it’s like okay that’s nice
1:04but you can comment on you know this part here that we wrote down doesn’t
1:08really seem appropriate or doesn’t seem what we do or you know to some degree
1:12it’s a bill of rights for employees which is here’s a set of things that we
1:16the company want to an aspire to operate by and if we don’t you can call us on it
1:22and then we’ll either fix the articulation because it’s too easy to
1:25misunderstand or live up to what we want to so in some ways it’s aspirational and
1:30then by putting it in writing which probably started five years before that
1:35it allows all the people in the company to collaborate on it and to suggest
1:40improvements
1:41what other things do you do to keep a healthy culture at scale
1:45what are the other kind of techniques in addition to the definition of the
1:49onboarding yeah i mean i would say in our first couple years so we’re found
1:54about 20 years ago in 97 to $YEAR when we were in public in 2002 all we were
2:01concerned with is not going bankrupt because the first big internet recession
2:05was 2001 and so we had built up a big expense rate and you know contingent on
2:11future financing and
2:13aztec felt 75% that year and all the venture capitals felt over leveraged
2:17they were barely going to be able to support their existing investments
2:20certainly no one want to take on new ones and so while the year before in
2:252002 raise money was as easy as taking a tin can and shaking it and you know like
2:3150 million dollars would show up in the canyons incredible never seen anything
2:34like it until last year and then the following year after the crash
2:40you know you take your tin-can out and shake it and someone would steal the can
2:43and so was it enormously sharpen shortchange which is why you see so much
2:49talk today about bubble is the memory of no one cares about the bubble they care
2:53about the fall so suddenly we didn’t have enough money we had to lay up a
2:59third of the company in 2001 and we eat into profitability and survived and but
3:09until that point we really spend all the time just on how are we going to get the
3:13business to be brought over dvd-by-mail at the time so how is it going to be
3:17profitable and only after 2002 we realized wow we’re going to survive that
3:23we started think she try to figure out what cultural attributes were there of
3:27what we wanted to work in we didn’t set out to try to say like what’s the most
3:32theoretically efficient culture
3:33what’s the you know in some abstract sense it was literally about us and we
3:39realized that we valued most even more than success was working with really
3:44talented people in a productive way that that joy of excellence was incredible
3:51and of course if you can get that joy of people excellence and talent density
3:57then you’re very likely to win so you know they come together but at the core
4:02was about having dense talent and part of it was after we did this one third
4:06layout it was a hundred and twenty people 280 we had expected to basically
4:10grind to a halt bi and really not be able to make any improvements because it
4:14would take 80 people just to keep the lights on but in fact we got more done
4:19with only 80 people we tried to figure out why and we realized now there was no
4:24more
4:25there was no dummy proofing
4:26necessary and so it was just everybody was going fast and everything was right
4:31we realized with the right density of talent you know there’s very little
4:35process needed and that that was the joyful thing so at first we said well
4:39let’s do a one-third lay off every year that was the key and a and a long-term
4:45winning strategy that’s a long time when you get it might be you know back to the
4:48Blitz Kaylee know and then realized no drinking habits drinking what you want
4:54your gross adds to be doing a hundred percent and you just can’t add to less
4:57like talent density matters so much so then we figured it was not do a layout
5:02every year like that let’s just do continued focus and the big evolution we
5:07came to us for managers they have to each year testify for each of their
5:12people that if that person were trying to quit
5:15they would try to change their mind and so it’s up to the manager to decide you
5:19know yes I would want to change their mind but sometimes you find that you
5:24have people working for you and if they quit you’ll be like out that’s pretty
5:27good and and that’s the case we wanted to proactively not wait for them to quit
5:33but proactively give them a generous severance package performance what what
5:38would the key things about establishing that culture which enabled you to scale
5:42because this is the you know highly aligned loosely coupled part of your
5:47version 2 of the deck so I think you know Pete when we went public we were
5:52150 people buy them in people worried internally now that we’re public
5:59everything’s gonna you know go to shit because so many companies had done that
6:03put in a lot of process be very cautious etc and we’ve made great progress really
6:10every year of pushing back on that and doing something either symbolic a real
6:16that increased employee freedom essentially in scented more variants and
6:22in what we’re doing and we realized if we’re going to run really loose like
6:27very little rules then you do want to set a broad context so we set context
6:32and this is what reads referring to which is we added essentially a chapter
6:37to our slide deck which is context not come
6:40roll and so we try to get managers to inspire and lead people rather than
6:46micromanage them and they inspire and lead them through cut setting the
6:50contact what are we trying to do what are the constraints you know is that a
6:54really big problem or a little problem must be done right or we do an
6:58approximate version fix later there’s a lot of context to any problem area and
7:03if you get good at setting context then you don’t have to direct the micro
7:07specifics but it’s an art so their context of the problem and then there’s
7:11context about behavior which is really the the culture which is one of the
7:16behavioral norms in terms of honesty and sharing and forthrightness but people
7:21usually want to be able to do something like to like a bold new innovation
7:25usually require somebody going this is my like this is my idea i’m driving it
7:30home
7:31how does the setting the context than that kind of innovation how those line
7:35up and what do you do about that
7:37well I think you might be mixing with the manager shares a lot of context but
7:41a lot of people make decisions and so you know and we definitely have decision
7:46owners there’s almost nothing by consensus but you gotta know the context
7:50and then you make decisions and have a lot of things happen that I don’t even
7:54know about about different deals are different things or hiring you guys are
7:59gonna get lucky and and meet with Marissa in a week or two and one of the
8:04things that saddened me when she went to yahoo which was very brave of her to do
8:08was this idea that she was going to review every resume you know to raise
8:12the bar on hiring to me that’s a suicidal methodology for a senior
8:17executives you got a thousand people and you’re so tactically buried trying to
8:21you know do a thousand resumes and I think what she was going for and you can
8:26ask her is a symbol of I care about the details but it would you a better way to
8:31do this there are there are better ways to do symbols and so like I don’t review
8:36resumes I don’t block hires i look at it it’s my job is to evangelize the
8:41benefits of super great talent density but we don’t even try to hire perfectly
8:46because you know your when you are interviewing at six or eight hours with
8:50someone you know it’s something
8:52but you know them so much better after they’ve been in for three months so I’m
8:56like you know if you have an instinct you want to try try take the person in
8:59if it doesn’t work out we’ll give them a severance package will move on you know

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