The David Rubenstein Show: Netflix Co-CEO Reed Hastings

[Music] [Applause] this is uh my kitchen table and also my filing system over much of the past three decades i've been an investor the highest calling of mankind i've often thought was private equity and then i started interviewing while i watch your interview i know how to do some interviews i've learned in doing my interviews how leaders make it to the top i asked him how much he wanted he said 250 i said fine i didn't negotiate with him i did no due diligence do i have something i'd like to sell and how they stay there how does it feel to get up in the morning and know that 330 million americans want to know the state of your health that day a few weeks ago reid hastings surprised the corporate world when he said even though he was the ceo and the founder of netflix he would give up that position become the co-ceo now i've been the co-ceo of a publicly traded company for a while it can work and it did work for me but it's very challenging to be the sole ceo and then become the co-co you know when you talk to reed hastings you realize he doesn't have a big ego he's willing to listen to other people i think it can work and i think it will work and i think it is working the company now which went public in 2002 the market cap is up about eighty six thousand percent stock is up about forty one 000 since then did you ever think that it would become that big that's successful well no because then i would have never sold a share so um you you never know on on that and you know honestly there's been a lot of luck along the way too blockbuster could have wiped us out many times um when viacom spun off blockbuster in 2004 they saddled them with a billion dollars of debt as their goodbye kiss and you know that the covenants on that debt severely limited blockbuster when they attacked us so that was one another one is blockbuster had us on the ropes and then carl icahn got elected um to the board of directors by the shareholders of blockbuster uh and he fired the ceo over some you know silly bonus issue and then they completely changed strategies and so all these things have been incredibly you know lucky strokes and so you need both skill and luck which i'm sure you've experienced too i've had a lot of luck for sure so uh let me ask you though for those who may not be familiar with a new book you're coming out with called no rules rules uh in that book uh you described that you actually at one point wanted to go to blockbuster and sell them the company for i think uh some modest amount today 50 million dollars yeah absolutely um and uh you know in the early days we were like blockbuster's gonna wreck us as soon as we get big um and we were almost right about that and so we went to see them and and you know they were very polite but they were not interested and uh had they bought the company where do you think uh blockbuster will be today and where do you think netflix would be today no it's always hard to tell but i think we could have made blockbuster a modern brand you have a culture you describe in your book which is very unique and let me just go through a couple of things you say that i found stunning as somebody who's helped to run a company myself that's publicly traded for example you have a system where people can take whatever vacation they want to take there's no limit people can take any time off they want no limit uh where did you get that idea from well in the industrial economy like factories we measured people by how many hours they did on the job nine to five eight to six whatever that is and we really want people to focus on ideas on generating important work and so you know we don't measure them during the day we don't clock our people in and if we're not gonna tell whether someone is working five to nine or nine to five which is a two to one difference in hours why are we tracking whether they do 50 weeks or 48 weeks a year um you know of work that's in the noise and so unlimited vacation you know is sort of like saying dress how you want you know and then people still don't come to work naked there's some cultural assumptions about appropriate clothing for work and we don't need to specify that and in the same way with vacation people understand getting work done and they get to live more flexibly okay well you also say in your book you don't have to please at your company your boss in other words you can go ahead and do what you think is best and your boss doesn't agree that's okay is that easy to run a company that way you know again we're really focused on inspiration over supervision so the traditional paradigm is that good management is close management sets objectives manages tightly and all of that's appropriate in safety critical environments airlines producing vaccines etc but in a creative business you don't care so much about what goes wrong you care about enough of the right things get done um and so we really focus on inspiring inspiring our people and having it be very open and collaborative and from that you get amazing technical innovation and you get amazing content innovation you point out in the book that if people do a reasonably good job they still might lose their job if they haven't done a spectacular job and therefore they get a very good severance but not a continued job can you explain that theory yeah and again in the traditional industrial paradigm you know you have to do something wrong to get let go you can think of a job as sort of a property right you know until you lose it by abusing your position but if you think about professional sports you know if that team is going to win a championship it has to have a mix of the right players that work well together that are the absolute best in the world and so we try to model ourselves like a professional sports team so highly paid but you got to earn your position every year and it's about performance and you know that's not right for everybody some people care mostly about job security other people care mostly about excellent colleagues and you know playing great team ball to achieving something important for the consumers and you know we're attracting you know that group of people who care about team excellence so i've no doubt your book will be a bestseller because it's a very interesting book but i couldn't understand exactly whether you were saying that your culture is one that if other companies adopted they would do better or it's just that you're explaining what's so unique about your company and why it's successful so which is it or is it both i think a certain type of company a company in a creative industry where there's a lot of change will do better by optimizing for flexibility then efficiency and other companies like a airline or a factory wants to optimize either for safety or for manufacturing yield so again highly consistent results and that's not for this netflix culture but for again a company that wants to be inventive and create new things i think this offers a lot of fresh ideas for people to rethink the traditional industrial paradigm recently you made an announcement that stunned a number of people which was that you were uh bringing in your chief content officer ted sarandos who has been with you for 20 plus years almost from the beginning and making him the co-ceo externally you know it's a change and that helps on ted's stature and ability to do big deals so let's go back a little bit to your background so you grew up in the boston area is that right uh boston and dc yeah and you went to uh college at bowdoin which is a great school and after you graduated what did you do i went in the usp score and i was a high school math teacher in a very rural part of southern africa and after that you decided that you would go to business school at stanford what led you to decide to go to business school and at stanford uh so i actually went into computer science um and i tried to take a business class but they rejected me um so uh in any case being at stanford in the mid 80s was a incredible experience because uh you learned so much entrepreneurial work from all your colleagues everyone's bubbling with ideas and that's still happening today 40 years later so when you graduated from stanford you decided to get into the computer industry and you were a uh programmer for a while is that right yeah i was a programmer at a couple different companies and then i was fortunate and had an idea of something that i really wanted to do um that was in 1990 uh so he took a year off and consulted on the side part-time and then wrote a program that ultimately turned into a company which was a reasonable success uh morgan stanley took us public in 1995 it doubled every year and that ultimately is the company that was so much process that it got too rigid so it was a great learning lesson all right so when you ultimately left that company after taking it public and ultimately merging with somebody else you had the idea of starting what is now netflix is that right yeah i mean the timing uh was shortly thereafter um that uh a colleague of mine uh from uh pure mark randolph and i were brainstorming on different ideas and then you know like many people at that point i had had this terrific late fee and so was uh you know thinking there has to be a better way and then it's when this friend told me about dvd that i realized oh you could mail those cheaply and that you could potentially build a business there that was not in amazon's direct interest because of the return loop that you constantly return these dvds which was unlike amazon's core so it was e-commerce but you know a smaller market than what amazon was going after the story is that you took out some dvds i guess from blockbuster you found out that you had kept them too long you didn't like paying the late fee and that prompted you to think of something like this is that fair or is that just apocryphal no that's accurate um but it you know sort of says every time something goes wrong the idea didn't pop into my head right then it was later you know when i was debating ideas uh that you know that the sting of that stuck uh because it was a forty dollar late fee so you know and it was all my fault um of uh just not bringing it back so originally you're you're mailing dvds back and forth but the idea of streaming uh who came up with the idea that that would be better and was streaming that prevalent then or that comment or people knew what it was yeah people knew what it was and you know uh i had had the good fortune the year i came back from the peace corps so that's mid-80s now i got a job serving coffee at a company and it turned out that that company computer lab was the very first.com so there were no dot-coms at all and then there was the first one and that was this company symbolics.com and so this was a company out of mit that was like the hotbed of the internet but nobody knew the internet um and so there i was serving coffee soaking up the culture and how they thought and so when i eventually you know went on to stanford uh you know i was in the internet thing um and then had been part of that and tracking that for a decade uh when it was a decade when netscape went public and everyone else tuned into it so i mean some of that again is just incredible serendipity of you know what's the company that i got a job serving coffee in the computer lab well originally you would take programming that say disney or nbc or abc or somebody had and you would or movies and you would put it up and people would pay for it and you would pay the the people who produced it i assume some royalty when did the light bulb go off and you said no we need to have original programming well ted was intimately familiar with the history of cable television and right from the beginning he educated us on hbo's path which their first 20 years in the 80s and 90s they just had recycled programming and then with shows like sopranos and the wire they moved into original programming and what a difference it made for them so we were very aware of that history and then it was just a matter of biting time till we got big enough so today the original programming that you have is that more popular than the non-original that you're in effect renting from somebody else yeah that's right the original programming um driving uh the old guard our our newest movie uh kissing booth two an amazing movie um our series like india matchmaking or umbrella academy uh are all driving both the viewing and the membership growth so we're fundamentally an original content business that supplements with licensed content around the world why is it that on netflix you your your content is very popular but you don't do uh things like news or sports how come you haven't done those yet well those are great areas but they're well covered by other companies and we have so much more we want to do on series uh and films and we're you know breaking into animated films and series now we've done really well with unscripted reality programming uh like india matchmaking that i mentioned that love is blind tiger king so our hands are just full and again there's other companies doing other things and you know we just want to focus on entertainment and when house of cards was on netflix um did you suggest themes for it or plot lines or did you ever get involved in that or you stay away from what they're actually going to do on the on the show our book really talks about don't please the boss do what's right for netflix and because of that uh ted sarandos when he was negotiating um with house of cards with kevin spacey and david fincher he was willing to do very bold things because he was convinced it was right and so he paid a fortune and guaranteed two seasons which at that point no one had done and he only told me about it later and so his willingness to make big independent decisions it's what led to us getting house of cards and of course he could have been wrong and it could have been a disaster but it was a great series put us on the map and that's again somewhat testament to ted's personal skill but also to the culture that allowed him to make those decisions and so when you started winning um academy awards and emmy awards and other things like that was that a surprise to you that you were getting at that kind of uh recognition no i we've always wanted to work with great talent and right from the beginning um we knew that like with house of cards that the talent that was involved in that robin wright and kevin spacey you know were potential to win emmy nominations uh for that so if you if you back great talent they they will win awards and it's you know very life-changing for them for consumers um you know it doesn't matter as much they're not as visible but in the talent ecosystem it's it's very significant recently you made an announcement that stunned a number of people which was that you were uh bringing in your chief content officer ted cerados who's been with you for 20 plus years almost from the beginning and making him the co-ceo usually people who are ceos and founders don't all of a sudden give up a lot of power so why did you decide to do that and were you surprised that the reaction was a bit of a surprise you know ted and i have worked together for 20 years and we've been virtual co-ceos for the last several years um so we've been paid the same you know we don't do really do anything material without checking in with each other so this was just acknowledging and formalizing you know what has been and so externally you know it's a change and that helps on ted's stature and ability to do big deals but internally it's really no change at all from how we've been operating at the time of the announcement you said you were good for another decade so uh in october if i got it right you'll turn the big 6.0 and that'll mean by 70 you might be ready to slow down is that a fair assessment will you tell me how uh what what's your experience in that of uh 60 to 70 right i would say uh workaholics don't really pay much attention to age and so as long as your health is good i don't think you'll change that much but when you get 70 you might look around and say maybe i'll do something else but you got a long uh 10 years ahead of you i'd suspect i'm sure you'll be in great health to do it well i'm super excited about it there's uh so much that we can do in terms of bringing the world together uh sharing stories from around the world and you know there's just as the internet grows to you know every human being i think there's just an amazing opportunity ahead what would you say is the key to leadership that enabled you to be what you are today so you want to be super proud of the organization and personally humble you and your wife recently made a contribution to united negro college fund and to morehouse college and the spelman college why did you decide to do that is that not your largest uh philanthropic contribution any one uh uh gift no it's not the largest but it um it's the loudest or sort of the most public we tend to mostly be very quiet about these things but we wanted to show solidarity um for black education and black education is so critical to economic mobility uh political mobility and you know the sense of belonging and the challenge you know for us as a culture is really the legacy of slavery and it continues to be a tremendous scar across the soul of america uh and it's you know awful and it's so bad that it's hard to look at and talk about and it's so hard to look away and we really haven't come to terms with the legacy of slavery in our country so this you know modest donation again relative to the needs is really about um you know black economic gains and uh education so the story that i read was that you were originally considering a gift of maybe one tenth that size and then the last minute you increased it uh when you called the head of the united negro college fund was he surprised or what made you change your mind well i've known the head of uncf for a decade and he's taught me a lot about race in america and we've been a donor for a number of years but it was really the current time that got us to make such a substantial and frankly public donation to again bring attention to the role of the hbcus the historically black colleges and universities like morehouse and spelman and to support their work because they do uh develop um you know thousands and thousands of black leaders throughout this country and they're really positive part of our education system and because white capital tends to flow to white organizations um you know there's relative capital isolation in the same way that we have social isolation and so um you know we wanted to be part of building those bridges now the industry that i've been in the financial service industry is not replete with as much success as it would like in terms of minority hiring and the technology industry is probably somewhat that way as well is there something that you can do at netflix to enhance your minority hiring among the executives and your other employees well we we publish the data and we've made uh every quarter and we've made great progress and we've doubled our number of african-american employees over the last three years and you know that's throughout the business but in particular in the media side uh our tech side is still underrepresented you know uh as is in the field so we have a long way to go but we're you know trying to make those efforts not only again for african americans but for many underrepresented groups both in america and frankly around the world so people who are watching this will say okay i want to be like reed hastings i want to build a great company i want to be successful have a great family philanthropically active what would you say is the key to leadership that enabled you to be what you are today it's about achievement of the company as opposed to personal achievement so you want to be super proud of the organization and personally humble so um i assume you hear from your high school classmates your college classmates your stanford classmates telling you they always knew you were going to be successful and they weren't surprised and by the way they have a script for you or something like that um do you hear from a lot of people like that yeah i stay in touch with a lot of friends that way um and you know i was definitely a late bloomer um i don't think i was one of those people that was marked at an early age and you know where you read about how at age 16 they were like unbelievable um you know i was very average run-of-the-mill kid and you know i've been super fortunate with a series of events in terms of my first company doing well having that idea which then laddered into being able to do netflix so i i feel incredibly fortunate which is part of why uh my wife patty and i you know are so dedicated on philanthropy it sort of looked you know like seems to us miraculous that you know we have this money and and of course we live a very comfortable life but it's really the excitement of using that money to then uh help others so let's suppose 10 years from now when you say you might hang up your spurs at netflix you might you're not committed to it uh what might you do would you run for office do you want to be president united states you want to be a senator governor philanthropy teaching what do you think you might want to do when you turn the right boat age of 70. i want to have my own interview show um well i'm sure you could get that anytime you want one i know a good uh company you could probably uh get on netflix you

Channel: David Rubenstein

Views: 63,474

Rating: 4.88551 out of 5

Keywords: Bloomberg, video streaming, netflix, virus impact, reed hastings, netflix ceo, netflix movies, streaming services

Id: pDFKHnpqDLU

Length: 24min 6sec (1446 seconds)

Published: Tue Sep 15 2020