Mind Pump: Raw Fitness Truth - 1595: Your Ideas Suck… How to be an Entrepreneur With Netflix Co-Founder Marc Randolph

Episode Date: July 12, 2021

In this episode Sal, Adam, and Justin interview Netflix Co-Founder Marc Randolph Are you born to be an entrepreneur or is it something that can be developed? (1:52) Why would you want to be an entrepreneur? (3:35) An example of colliding your idea with reality. (6:45) The birth of Netflix. (12:04) The evolution of his relationship with Reed Hastings. (15:57) Was Netflix laughed out of the room pitching their idea to Blockbuster? (22:00) How did they generate enough revenue to stay afloat during those dark days? (30:14) Why if these companies do not have the courage to disrupt themselves, someone else will do it for them. (32:33) The importance of being comfortable with uncertainty. (36:39) How if you don’t know what you want, the opportunity of getting it is very slim. (39:30) Why you should never fall in love with your ideas. (42:42) Why there is no substitute for trial and error. (45:52) What is success if not the ability to go and spend your day with the things you love? (46:54) What characteristics does he look for in an entrepreneur? (49:26) The distinct layers of scaling a business. (51:10) His take on the two different models of streaming. (56:10) The essential ingredient of the algorithm. (59:58) The interesting dynamic of the growing podcast space. (1:01:36) What up and coming businesses excite him? (1:04:48) Related Links/Products Mentioned July Promotion: MAPS HIIT and the No BS 6-Pack Formula 50% off!  **Promo code “JULYSPECIAL” at checkout** Visit ChiliPad for an exclusive offer for Mind Pump listeners! That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea That Will Never Work Podcast Mind Pump Podcast – YouTube Mind Pump Free Resources Featured Guest/People Mentioned Marc Randolph (@thatwillneverwork)  Instagram Reed Hastings (@reedhastings)  Twitter  

If you want to pump your body and expand your mind, there's only one place to go. MIND, MIND, MIND, MIND, MIND, MIND, with your hosts. Salda Stefano, Adam Schaefer, and Justin Andrews. In this episode of Mind Pump, we interviewed Mark Randolph. He's one of the founders of Netflix, a serial, entrepreneur successful, quite successful. He wrote a book called That Will Never Work, it's also the title of his podcast. And in this episode, we talk a lot about entrepreneurship,

getting things going and started, how to motivate yourself, how to handle risks and challenges. Very enlightening episode, I know most of you will enjoy this. Now this podcast was brought to you by our sponsor, Chilly Sleep. Now Chilly Sleep makes some great devices that go on your bed,

that cool or warm your bed for improved sleep. So there's two things that they offer. One is the cube sleep system, and the other one is the uler sleep system. Both are phenomenal. I personally use the uler sleep system and I sent my side of the bed at 65 degrees, whereas my wife sends her side of the bed much warmer. We both

get great sleep. We're both very happy. By the way, it's water-cooled, no EMFs. It's a great product. Go check it out. It's documented to improve people's sleep. ChilliSleep.com.com. That's CHILI sleep.com forward slash, Mind Pump and you'll see some exclusive offers for Mind Pump listeners. Also all month long, we have two programs that are on sale, Maps Hit, which is high-intensity Invoor Training and the no BS 6-pack formula,

which is a core training program or both 50% off. You can find out more or just sign up at mapsfitinistproducts.com. Just don't forget to use the code, July Special with no space for the discount. So Mark, you really represent the avatar, I would say, of the entrepreneur, the amount of things that you've started,

risks you've taken, of course, obviously extremely successful. There's a question that I hear often that's asked about entrepreneurship, and I'd love to hear your take on it. That question is, do you think entrepreneurs are born? Is it something that we're born with or is it something that can be developed? Oh, it's absolutely something that can be developed. You can be born with it too, I suppose,

but I think the biggest to service we could do is say that if you don't already have those skills, whether or not you're going to have to go work for the man for the rest of your life. No, if everybody has the capacity to take ideas and turn them into reality, and they just need to begin working against the forces we all have. And they just need to begin working against the forces we all have to. They gotta begin working against fear. They gotta begin overcoming that concern

that they're going to fail. They need to have some comfort with uncertainty. But all those things can be learned. And learned is not even something you have to go to school for, take classes. It's purely practice. And so it's funny, almost all the stuff that I do when I'm coaching other entrepreneurs or when I'm speaking to people on the podcast is really trying to give them the confidence to take those steps. They, you know, most people, I've been a entrepreneur for a long time, but I can tell

you that most people are smarter than I am, they're better prepared than I am, they work harder than I am. It is not this superhuman skill that only a few people have. You mentioned risk taking, you mentioned confidence, you mentioned being resilient when you fail, and those all seem to be in a similar category. I know statistically from what I've read, most entrepreneurs fail, at least their first attempt, that's something like over 80%. Why would anybody wanna be an entrepreneur?

And how do you develop that skill of being okay with knowing I'm probably gonna fail? Let's talk about the why you want to be an entrepreneur first, because that probably is the first thing to get out of the way. I think, unfortunately, this whole entrepreneurship thing has been overly glorified. Certainly, when I started doing it, which was, you know, more than 30 years ago, there wasn't really this thing of being an entrepreneur. I mean, there were entrepreneurs, but no one talked about it. There weren't TV shows, there weren't movies, there weren't books.

It was not something you did to be rich or famous. And I think the people who say I want to be an entrepreneur for those reasons are going to be disappointed, because very much like someone who says, I want to be an entrepreneur for those reasons are going to be disappointed because very much like someone who says, I want to be an actor because I want to be rich and famous. Well, I have hate to disappoint you. The odds are extremely long that that's going to be the case. And the same thing with entrepreneurship.

So the reason you should do it is because it's a tremendous thing where you're actually working to solve problems all day. You're solving puzzles. You're trying to do something that has not been done before. You get to come to work every day and do something different. And that is one of the most thrilling things I can imagine doing. It's not for everybody. Some people like more predictability.

They like to know I'm going to be doing the same thing every day, every day I come into work and I take the stings out of this box and I stamp them a few times and staple and put them in this box. Well, that's fantastic. There's tons of jobs like that. But doing something on your own, doing something where you have to figure it out, there's a certain thrill to that, which really speaks to me. And I think it's what really drives entrepreneurs forward. And it answers the second question, which

is, how do you overcome the disappointments that are part and parcel of being an entrepreneur? And it's purely that you're driven to find out what's next. And listen, most of the things you try aren't going to work. That's absolutely true. But it's fine, because even the things that don't work, you've learned something. You always get this little glimmer of insight into the thing you're going to try next. And the best analogy I can give for

is it's kind of like solving a crossword puzzle, where listen, you know it can be solved. It wouldn't be in the mean the paper had no solution, but you really can't quite see your way to how it's to dissolve. But you know, you put it down and you come back a few hours later, you come back a day later or a week later and all of a sudden something sparks and you see that word that fits and then boom, you've made more progress. And entrepreneurship is exactly like that. Let's talk a little bit about that, Mark, because you've shared some stories that have blown my mind

as far as I wish I would have found you long before I failed, you know, 10 other times before this. Yeah, you mean both. Because one of the things that stifle people so much when thinking about taking the leap into entrepreneurship is thinking that they have to have this massive risk. They got to go out and develop this app, or they got to take money on and do those things. And you share some stories on how to help people figure out if they even have a good idea or not before they go out and risk all this money or risk all this effort.

Can you share some of those? Yeah, certainly. And what we're really talking about is that the best way to learn entrepreneurship going back to the very first question is to practice, is to do it. And the way you do that is by not starting off huge. Everyone thinks, I mean, I've heard every single possible

excuse, all 10,641 of them, about why I can't do this. And it's surprising how many of them are, because how do I raise, I can't raise money. I can't find a technical co-founder to build this thing for me. I can't quit my job. I can't drop out of school. Blah blah blah blah blah. And the answer is you don't need to do any of those things.

And the real skill in entrepreneurship these days is not how good your idea is. I don't care about your idea. The real skill is can you be clever enough to figure out a quick, cheap and easy way to try it. And I will give you an example. And this is a woman that I worked with quite a number of years ago. She was a university. She was still in college. And she sat down and was like got this great idea, Mark. What I want to do is peer to peer clothing sharing. In my closet, I have all these great blouses and dresses that I never wear.

And I know my friends have other stuff that I'd like to wear. Wouldn't it be great if there was a way this app that allowed us to match up to all the different clothing everyone has, we could all share it? And then her question to me was, how do I raise the money to start this company? How do I find a technical co-founder? Can this wait until I graduate from college and I can do it full time? And it was like, whoa, whoa, slow down.

I go, let's figure out some way right now to begin making some steps toward figuring out whether this idea isn't a good. I said, okay, do you have a piece of paper? She goes, yeah, of course, I get a piece of paper on my college student. And I go, okay, do you have a sharpie, a magic marker? And she goes, yeah, I've got one of those two. And I go, great, I want you to write this down.

Write down, do you want to borrow my clothes? Knock. And I want you to tape that sign to your dorm room door. And we're going to find out right now, the first things about that idea. We're going to find out maybe no one knocks. Well, you've learned something that way. Well, let's say you're lucky.

Now someone does knock and wants to borrow some clothes. Now you're going to start learning something else. You're going to find out about fish and about taste. Now let's say you were even luckier, and all of a sudden, people began to find in clothes they like, and they enjoyed this borrowing. Well, you're going to find out the next step. You're going to see, how does it feel when your paper blouse

comes back with a stain on it, where it's torn, or you have to send everything out for dry cleaning? And you're going to learn all of these things now, and you're gonna learn them with nothing more than a piece of paper and a sharpie. Now, this is not repeatable or scalable. If for some lucky fluke, you're really successful at this, you're gonna go crazy.

You are gonna be spending all your time in Unicom, you can call me up and go, Mark, I'm going out of my mind. I'm keeping track of everything on three by five cards. I have to call everyone. I'm going to keep track of this all. I've got to figure out a better way to do this. And I go, and that's the point where if you want to raise money, you can. That's the point if you're trying to attract someone to help you from a technical perspective, you can because you've proven that your idea is a good one. And you've demonstrated so much about how it works and that when that investor says to you, well, how do you know this works? Rather than saying, imagine if you will. You can say, here's the

evidence I've collected over six months doing this out of my dorm room. Here's what my acquisition cost is. Here's my lifetime value. Here's my churn. And that is what it takes to raise the money. But you don't get to that point until you take those first steps of colliding the idea with reality. And just like I demonstrated, you know, this woman did it with a piece of paper and a sharpie.

But I can usually figure out some way to collide the idea with reality for almost any idea. I mean, Miss and maybe if you've invented some new CAT scan device, I'm not going to be able to help you. But so much of the stuff, for example, that I do on my podcast and that one ever work is not just dispense with power on like, collide to right do with reality and everyone goes, oh, good. I then say, let's walk through with real people how to do that. How do you think about it? What's the thought process that goes about trying to figure out these quick simple and easy ways to collide with reality. Now you obviously are teaching this, so you've applied it to your own business.

So tell us how you did that with Netflix. Well, certainly it happened a thousand times at Netflix, but it happened from the very beginning. You know, when we, before Netflix was even Netflix, when it was just read Hastings and I in a car commuting back and forth to work every day, trying to figure out an idea for this new business that I was going to start. We were constantly colliding ideas with the reality. And for example, during those car rides I would pitch ideas to read.

And this for example, and these were not movie ideas. This is not like I'm a movie buff. One of the ideas I pitched them was personalized shampoo that you'd cut off a lock of your hair. You would mail it in, and our team of ace hair scientists or something like that would formulate a custom blend just for you. And then, Reed would sit there, he'd be driving, and looking at the window, and be quiet. And maybe a minute would go by, and maybe two minutes. And I would just sit there waiting patiently, because I knew it was coming, because all of a sudden,

then he'd turn and go, OK, that'll never work. And he hears why. And then he'd launch into this long, perfectly crafted business school like dissertation on all the flaws, all the weaknesses, all the potential in the idea. And listen, I'm no baby here. So I'm prepared and I'm way dragged to get to go, no, you are wrong. Here's exactly why it might work. And we debate these things for the duration of the car ride and you know the shampoo idea.

Okay, no good. Maybe the next day I'd pitch them another one. Another real one I pitched in was custom dog food. We formulate a blend just for your pet, for its breed, its age, its activity level, whatever. Nope. And then I pitched in video rental by mail, $8 billion category, people hate blockbuster. Can we do this as an online store and mail people their movies? And one of the things that read basically through back at me is, goes, hey, video is on

those VHS cassettes. They're big and they're heavy and expensive, so that got rejected. So the breakthrough came one day when Reed picked me up and told me about this new technology he heard about called the DVD. And he was saying maybe this would unlock that DVD, video rental by mail business you had a little while ago. And now here is the collie, the idea with reality. So we batted it around in the car for a few minutes, and then immediately said, okay, here's what we do.

What we didn't do was go to work and start crafting a business plan. What we didn't do was begin working on a pitch deck. We turned the car around and made commute and said, let's figure out if this idea actually has any merit. And went down to town to try and buy a DVD. And of course, couldn't find one because they were in test market. And instead settled in buying a music CD

and put it in a little gift envelope like you mail a greeting card in and mailed it to a Reads House and the very next morning when he dropped pick me up at work he had a little envelope in his hand with an unbroken CD that had gotten to his house and 24 hours for less than the for the price of a postage stamp and that was probably the point we said, this just might work. And again, we validated that idea for a $3 use music CD in a 29 cent postage stamp.

Unbelievable. Tell me how you and I've heard that story. Tell me how you and Reed actually initially got together and built a relationship. And how did you guys figure out that you would make this this great team? Well, you know Netflix was my sixth startup, right? So I'd been doing this for a while and in fact the way I met Reid is that he purchased startup number five that I was doing with two other two other people and We were a tiny company. We were probably nine or 10 employees. We were still in beta. And all of a sudden, we were plucked from obscurity. And the other eight of them ended up in the basement, forming a little business unit to sell the product and re-pulled me up and put me in as the VP of

marketing in his company, which he had started and was running. But by then was a big company, multi-thousand employee, international software company. All of a sudden there was this whip lash of going from this little cerebral startup to boom all over the world. Anyway, luckily, that didn't last long. About six months later, lightning struck again. And our reads company was now going to be acquired. But this time, they didn't need read and they didn't need me. But during the period after we acquired my company, we turned out that Read and I lived in the same town. And we began to carpool to work together so we had six months of

Getting to know each other six months of working together And it had this friendship and one of the things we immediately noticed is we had shared so many common beliefs I'm gonna say culturally Probably the most dramatic thing was that Reed was as blunt as I was, and I don't mean blunt in a rude way. Just neither of us believed there was really more room for not coming right out and saying something if you believed it. Even if it might hurt someone's feelings, even if you never would go, that's

an interesting idea, if you didn't think it was an interesting idea. You just go, read, that is the stupidest thing I've ever heard. But that's just so refreshing. And immediately it showed that we had this connection that way. But the other interesting thing is that I'm a marketing guy. I mean, most of my life, I've been in these roles, which are a very customer-facing. And it's because if I have to look at one of these fundamental skills I have, is that I have a fairly strong sense of empathy, meaning as a marketing person, that's critical, because you need to be able to guess or understand or judge how someone's going to respond to the things you do, to the offers you make,

the prices that you put out there, the way you put a product together, how you describe it, how you price it, et cetera. So I'm very much this touchy-feely guy. Read is a mathematician. It's a software engineer. He's very analytical. And so we're very in and Yang. And it turns out that whenever we would have these conversations, they were so fantastic, because we found that we came at problems and came at ideas from

totally different directions. And that the solutions we'd come to through that process were ones that neither of us could have gotten to on our own. Now did you both recognize that right away because I can imagine that you probably had a lot of arguments. You probably had a lot of conflict coming from different areas, both being very confident in your ideas, also both being very blunt. Was it something that you recognized right away?

Like, okay, we're arguing a lot, but this is good. We're learning a lot. Oh, no. We read and I love to argue. We love the fact that we could push and that person wouldn't take it personally. You could be, I mean, we used to argue like cats and dogs, but it was fun. And once you get past the point, you know the other person thinks it's fun. That's such an amazing way to get to the heart of a problem.

And it took other people some getting used to, because, you you know we'd be in a meeting with 10 people So those people around the conference table and read or I or and we're getting into it and to us for going This is awesome. We're we're making progress and all of a sudden you stop be quiet And we look around that everyone's there like Like with their jaws open going. You know why, why are mom and dad fighting? It turned out that it was such a positive thing. And, you know, I don't all remember, one of the very first days that I started

at these company, after we acquired our company, he was working on a keynote speech he had to do. And I love that because that's such an art, is how you craft a message and how you deliver it, and how you create empathy with the audience, and all these. And so Riko's helped me a little bit. I mean, we begin working through this and not long in there, and he goes, wow, you're really good at this, aren't you? He didn't quite expect that it would be possible for someone to do something like that differently or better than he did it. But at the same time, would very, very quickly be wrestling with a problem, and he would be two or three intuitive leaps over me and get to some insight faster. So I think there's a lot of mutual respect there.

You know, there's a very popular story that people repeat that exemplifies how quickly the market changes or sometimes people will bring up the story about missed opportunities or even about arrogance. And it's a story about Netflix presenting their idea to Blockbuster and the story says that they're laughed out of the room. Is that a true story? That really happened?

Oh, that absolutely happened. I'm never going to forget that moment. Walk us through that. Yeah, tell us what was that all about? What led up to that? And then what was it like talking about? Make you feel, of course. Yeah, exactly.

So I'm sorry, I have to give a little bit of foreshadowing, a little bit of background for what was putting us in that room to begin with because that's kind of key to how it made us feel when it went the direction it did. Which is that, you know, my book is called That One Number Work. My podcast is called That One Number Work. The call about is That One Number Work. I mean, that one number work is a big part of my life because that is what everybody told me when I pitched the idea of Netflix. I mean, that's what the investor said, that's what employee, potential employee said, it is what my wife said. And that will never work is this key thing. And, you know, when we finally did launch Netflix, this is back in April

in 1998. Well, what a surprise, it didn't work. It was a terrible idea. We could not get anybody to rent from us. And we spent a year and a half iterating of trying every possible thing we could think of to try and iterate our way to some model that would let video rental by mail work. And amazingly enough, we finally figured something out. And it was this crazy unintuitive model where we would let customers keep their disks. Because listen, as you you guys probably know, you know, Netflix at the beginning did not have streaming. If you wanted a movie, you got it on a DVD and we mailed it to. And the model we came up with was why bother having them have to send it back? Let them keep the disc as long as they want.

And after they've watched it, they'll mail it back to us and we'll give them a new one. And not only we not charge them each time, they can do that as often as they want with charge them of flat monthly fee, a subscription. We rolled that together and tested it. It was amazingly successful and it took off. But the problem with subscriptions is that the model for them, on one hand is phenomenal because when you get a customer, they pay you every single month for hopefully years.

The downside is you pay all your acquisition cost upfront, which means that the more successful you are, the faster you go through cash. And that was what was happening to us. It took off. So in one hand, we were huge as successful. On the other hand, money was flying out the door, hand over fist, and that was not a problem in the spring of 2000, because that was the peak of the .com irrational exuberance, and money was easy to come by. It was not quite so easy once the bubble burst, and then there was no more funding to be had.

So here's that's the setup for why we were basically about to go out of business. And unfortunately, we are going bankrupt being successful. And when you get faced with that sort of circumstance, you, as they say in Silicon Valley, you seek strategic alternatives, which is code word for, we have to sell this. Yeah, it's code word for oh shit.

Exactly right. So you had to do something fast. And our strategic alternative was blockbuster. And the problem was blockbuster was huge. I mean, they were $6 billion company. You know, they had 60,000 employees and 9,000, some other stores. And we were this tiny company with $5 million in revenue and $50 million in the losses. So we

tried to get the meeting, nothing. Couldn't get them to return the calls, would not return our emails, the go between weren't any use. And we are on the verge of giving up when about two months later in the fall of 2000 we get the call that we would love to chat with you. Can you be in Dallas tomorrow? And unfortunately we got that call we were at a corporate retreat at a ranch in the foothills outside of Santa Barbara. And all I had with me was shorts and t-shirts and flip-flops and no possible way to get from there to Dallas.

So we did the thing that a company whose 50 million in the hole would normally do, which is charter a corporate jet. That's the other Silicon Valley term, which is that's just for Silicon Valley term, which is, that's a surrounding area, flying to Dallas, and there you're right. And all of a sudden, we're there on the 27th floor of the Renaissance Tower in Dallas in this cavernous, huge conference room. And the blockbuster guys are there, and they're $6,000 suits. And I'm there in shorts and a t-shirt and reads there

and on a Hawaiian shirt. And we pitch. And it was a great, it was a great, obvious business idea. I mean, we knew it would work because we were terrified that they would think of it first. And it was simply that we would combine the forces. They'd run the stores. We'd run the online business.

But more importantly, we'd build this blended model where you could do either. And our testing had shown that would crush both sides. And they were nodding and saying this is interesting. And until they asked the big question, which is how much, and we had practiced this on the plane, of course, but read Lean Forward, you know, got his courage up and sit with his big boy face, you know, $50 million. And And it didn't quite go like we expected. Maybe they didn't laugh out loud, but it was pretty clear that they found this entire idea ridiculous.

That a company with $5 million in revenue, losing money, $50 million in the whole, would possibly think they're worth $50 million. And so the meeting did go downhill pretty quickly after that. But on the plane on the way home, it was let it all begin to really sink in how desperate the situation was. Because when we had gotten that meeting, we thought we

were saved. That this was the, you know, as the, as the movies, this is the Deus Exmocchi in a moment, where the hand of God reaches down or the, you're trapped in the dead end canyon and there's enemy all around and the cowboys cavalry comes to the rescue. But this time blockbuster was not going to save us. In fact, even worse, they were going to compete with us. No one was going to lend us money. And we thought there was no way out. And I remember thinking that, unfortunately, we're going to have to rely on ourselves here.

And that, you know, my dad used to sometimes say, sometimes, Mark, you know, the only way out is through. And we turned and we faced and we didn't we had to do. And it took us, you know, a long time, it took us eight years, I think. And now the, that company, which has the nine, had 9,000 stores, it's down to one. And the company, they could have bought for $50 million. It's now worth about $220 billion. So, there is a bunch of lessons in there. Yeah, there is. What were some of the things you did to get out of that? I mean, you guys are running in the hole and you were desperate, you need money, but then you persevered through

eight years. What were some of the things that you guys accomplished to start generating revenue to keep it afloat if you didn't take money on? So you ever see those movies where, you know, they're, let's see what happens. It's usually a boat, there's a storm, and they go, we're not going to make it. And everyone begins throwing shit overboard. And they're chopping down stuff and they're tearing things out. We've got a light in this boat. That's what this was like.

It was basically saying, we're not gonna have it, we're not gonna get any more cash. We're not gonna get anyone to help us. And so basically said, we've gotta do what we gotta do. So we abandoned huge numbers of initiatives we had in place and said we're going to focus in a single thing. We had a big layoff. We've laid off about 40% of the company. Basically refocused in on the things which had more short-term return. Did all the basically prudent things you would do when you realized that you had to survive

on your own resources? And besides the fact that we survived, it was a hugely formative moment because we had suffered from a lot of the things that every growing company suffers from, which is you begin to accrete all kinds of projects, which all sound great, but they tend to defocus you from what the most important project is. And culturally, we had fallen prey to bringing on more people than we needed to accepting that it was okay to have people who may not have been star players. to accepting that it was okay to have people who may not have been star players. And once we got down to 60% of our previous things

but didn't really diminish too much what we had to work on, as opposed to being really oppressive and difficult, it was fun. It was back to being everyone was empowered again. And I think at that point, we sort of said we never want to lose this feeling, and we shaped a lot of how Netflix grew from that point on. Now, obviously, you guys persevered. That was like a pivotal moment for you.

My question is though, at what point, a company that faces that reality. That's a real reality check that they have to now digest and re-evaluate their company, their idea, their original idea and all that. At what point does the company then decide, okay, this isn't gonna work. Let's just figure something else out now and completely change directions.

They should be doing that all the time. That's the discipline I think is, you should constantly be asking yourself, are we doing the most important thing right now? It does sometimes take a shock to the system, but I don't think it's something you only do when things turn against you. I mentioned that a lot of discipline for Netflix came out of that, but that focus is such a key entrepreneurial element. Netflix, for example, would do things like saying, well, I'll give you a couple quick examples. So these are, you predate the blockbuster

moment. At the very beginning, when I said that we launched this company and it didn't work, well, there was one element that worked really well, which is we were also selling DVDs. So we had this crazy scenario where we couldn't get anyone to rent, but everybody was buying DVDs from us because it's an afterthought we decided to sell DVDs. And the reason that was a bad thing is because eventually that was going to go away because selling DVDs we didn't believe was sustainable. It was a commodities business. The margins were, the margins were going to be a little bit by little.

And what it was also doing was making it more difficult to get the rental part right because doing both things were confusing, it was hard doing our analytics cleanly, our checkout process was strange, inventory management was a problem. And so we said, well, we've got to pick one of these two things to focus on them and do you focus on the selling DVDs, which is paying 98% of the salaries to that point, or do you focus everything on rental, which if we can get it right, could be a huge business, but is showing no promise. And walked away in a single day from all the sales, walked away in a single day from 98% of our revenue, and focused on everything we had to do on rental. And Netflix did that again, almost 10 years later, when the same scenario where all of a sudden

they had a streaming business and a disk business and recognized that doing both the same time was complicated and made the decision at that point that we're going to essentially walk away from the disk business. They didn't do it literally, but say any time there is ever a decision to make, it's being optimized for the streaming business. Even if that decision hurts the disk business, even though at the time the disk business is bigger. And I think that's what sinks companies is they clearly see what the future is.

I mean, these are not stupid people. They can see what customers are going to want. They can see the world changing, but low and behold, 90% of their revenue or 90% of their margin or 90% of their employees are all busy on their legacy business. And they don't want to do anything that could impact their legacy business. And as a result, they don't pay attention to what the future is. And they just leave that for someone else to do. And it's a wonderful, it's a terrible thing if you're a big company. It's a wonderful thing if you're a startup, because what it allows, as in the Netflix case, a handful of people with no experience in the video industry to take down a six billion dollar

category leading company um you know if if these companies don't have the courage to disrupt themselves well there's plenty of people who will step in there and do it for them. Great way to go. Now mark you know hindsight when you're telling these stories it sounds so obvious it sounds so like oh yeah that was the but I mean making that decision to cut 90 plus percent of your profits in pursuit of something that you think is going to be. Tell me about that mental space. It's got to be terrifying for somebody who just built something and you're looking at

your business and going, we're about to cut our revenue or our profits by 90 percent that's guaranteed. We see this to do something else like what kind of mental space do you have to put yourself in? What does it, what are those conversations look like with yourself? There is a decision making, I was going to use word matrix, which just sounds so BS, but there's a decision making process. And I talked by kids all the time about it, which is that's a circular process. We are constantly looking for a right answer.

And you go, let's do this one because this has A and B, oh, but it's missing C. All right, let's try this one. This has B and C. It was missing A. Oh, let's try this one. And you go around that around the circle and none of them work. And at some point, the light bulb goes off and you go, point, the light bulb goes off and you go, oh, there is no good answer. And if some case is most people don't do anything then. But if once you're comfortable, there is no right answer. It makes it very, very easy to put, go ahead on a bad solution with complete confidence because you know, well, there's nothing better. So even though this flaws, they all have flaws. I'm going to do this one. And this is the same thing. You can clearly see that even though selling DVDs, for example, is 98% of your revenue, you can also clearly see that

it's just a matter of time back then that Amazon is going to begin selling DVDs too. And then Walmart is going to sell DVDs and Kmart and I don't know, Pet Smart. Everyone is going to sell DVDs and the margins are going to go to zero. You can see that coming. It's years off. But you go, it's a dead end business. And yes, it's really going to hurt. But the advantages I get is focus is I'm committed. And all the smart people who are trying not just to work on

the sales business, but more importantly, are trying to manage the complexity of doing two things at once are all of a sudden working on the thing, which is truly the future. So I'm not saying it's easy. I think one of the biggest character traits required for entrepreneurships is courage. And that's courage. It's saying, I don't know what's going to happen. I know if I go this way, I know what's going to happen. I'm going to be successful over three or four years and then little by little, I'm going to manage the thing into the ground. This is uncertain, but if I can get it right, it could be huge. And I'm drawn, I'm drawn to that. Mark, how do you, how do you stay present? Like you, when you're scaling something,

especially to the size that you've scaled companies to, it's really easy to get caught in the business and constantly thinking about the future and pivots and all the things that we're talking about right now. And to use your analogy, how do you sometimes sit at the top of the mountain and enjoy the current view and what you just climbed? Well, if you don't know it, talk it this way, but if you don't know what you want, the odds of you getting it are pretty slim. And I'm pretty fortunate and then I figured out reasonably early in my life, like in my late 20s, maybe when I turned 30, what I wanted. And it was not necessarily

business success. It was balance. That's what I said, this is what I want to construct my life around. And not because I'm some guru who has these brilliant insights because I messed it up terribly in my 20s and got completely out of balance. I worked all the time, almost lost my relationship with my now wife. And kind of said, this is not what I want.

So the reason I do have this incredibly fortunate life right now, where I have had, yes, business success. But I also have a wife and a family who I feel very connected to and I feel fortunate for that. And I get out and do all kinds of crazy outdoor stuff, which is my real passion in life. But that only happened not because I was lucky. It's because from the very, very beginning,

I said, I'm going to work really hard at trying to make that happen. And that is almost harder than doing the business thing. Because unfortunately, I happened to pick fairly incompatible balance points for my life. On one hand, I said, I'm going to work at a startup, which is almost seven by 24 unpredictable crises, something different every day. At the same time, I said, oh, the thing that makes me passionate about my personal life is outdoors things that sometimes

require. I mean, if I want to go paddle, you know, the no attack river, which is a northern Alaska, it just takes freaking two and a half days just to get there. And then 10 days to pass, you can't fit that in between a morning conference call on a two o'clock meeting. You've got to build a system that allows you to be absent and not have things fall apart. And the same thing, you know, with my family, I vowed I was not going to be one of those guys who was on their sixth company, but also on their sixth life.

And if you, if I realized that if I said that my wife gets what's left over after I'm finished for the day at work, that was not going to be a very satisfying relationship for her or for us. Anyway, so you get the idea. All this stuff happens because you have to want it and put in place the steps to do it, and that doesn't come without really, really making it objective in your life. Was there ever a moment in your career mark where you got hit so hard by a challenge or maybe something didn't work, where you almost didn't recover?

Because you sound so resilient, so positive, but I know we're talking to the black belt who's done this now for a while, right? Was there ever a moment where something happened and you said, I don't know if I could do this again? Probably not. I mean, that's not, that's, that sounds so glib, but it's, it's that I don't, have I been disappointed in things? Absolutely. Have I been incredibly upset that something I was working so hard on didn't happen? Or that I lost some opportunity through no fault of my own. I mean, yes, it's really difficult.

So I'm not like this. I'm all, you know, obliviously happy all the time. Of course not, but the thing is the way I've always, the thing that has drawn me to being an entrepreneur since the very beginning, again, was not the end point. I was not drawn to it because I want to be some captain of industry. I was drawn to it because I loved that problem solving piece. I loved coming to work and sitting around the table with really smart people, solving really hard

problems. And when something doesn't work, it's fine. As I said earlier, the beginning of our conversation, you almost always glean some little insight that says, oh, I can go this direction. And that totally energizes you. It just takes one little glimmer to get you back up and go, oh, I can't wait to come in tomorrow and now begin pursuing that route. So no, I'm one more little tip here, which is that what makes that possible is not falling in love with ideas, which is this huge flaw for people who are aspiring entrepreneurs is they get this idea and they fall in love with it. But the idea is always terrible, all ideas are bad.

And so if you've hung your self-esteem and your happiness and your sense of achievement on will this idea work? Yeah, you're gonna be crushed But instead of falling in love with the idea the trick is to fall in love with the problem Because the problem will never let you down The idea you'll try that first idea you'll hang that sign on your dorm room door. Nobody will knock Okay, but how am I going to make this work? You'll try that first idea, you'll hang that sign on your dorm room door, nobody will knock. Okay. But how am I going to make this work? Because the problem of I wanting to borrow clothes, it's still there. And the more you learn about it, the more interesting it gets.

And you can weather, and then all these little ideas you have about a solve the problem that don't work, big deal. You're still focused on that same big problem. Yeah, I say love your ideas. Just don't marry them. That's what I say to people. Do you have books that you've read that were very pivotal? Like a book that you read and maybe changed the way

that you led or that the way you ran a company? Were there moments like that or books you read? No. I'm not a big believer in this skill set is something you get by reading a book. I'm not saying I haven't read a shitload of business books and get things out of them, but 99% of what I believe I've learned, I've learned by trial and error, I've learned by doing it, I've learned by trying things. There's no substitute for that. It's like trying to learn, trying to learn golf. I mean, sure, you can watch videos and you can read books about how the

grip should be in the stance. But you're never going to learn how to play golf in a book. You've got to go out and hit balls. And I think entrepreneurship is no different than that. You definitely sound like someone who gets excited by challenge, who likes being in a situation where you can change directions and pivot. At what point does it get boring when your company is a well-oiled machine? At what point does you go from start-up to now everything's working well?

And then you get bored, do you think to yourself, all right, I want to go do something else now. Oh, I get bored, I get definitely get bored. I mean, it's more profound than that, but listen. I'm an optimist. I'll put it in a positive sense, which is that I figured out something hugely critical pretty early in my life. And I figured out what I'm good at, and I figured

out what I like doing. And the answer to both of those things is startups. I love that. And here's a modesty piece. I'm pretty good at it. And give an example, Netflix, not long after we had our IPO, we had financial resources. All of a sudden we had stability. We had a repeatable scalable model to some degree. We were able to hire incredibly talented people with amazing expertise. And there I am. And I'm feeling this real conflict

because in one hand Netflix is my baby. I love that company. It is of me. But at the same time, I'm recognizing that I don't really love the things I'm doing. And perhaps even more importantly, I don't, I'm not very good at it. And if that's the case, what am I doing there? What is success, if not the ability to go and spend your day doing the things you love and that you're good at? And for me, that was early stage companies. So yeah, I began getting bored. I began going, I don't like this really anymore.

And we'll all be whole. I left. I mean, I didn't quit. I spoke a year to carefully extricate myself so as not to damage anything on the way out. But I'm now incredibly fortunate because I do get to spend my day working on early stage companies. I still get to come in and sit around the table with really smart people and solve really interesting problems. And read Hastings, the current co-founder, still CEO, happy as a clam.

He loves what he's doing, and he's incredibly good at it. So we both are getting what we want. Mark, I'm gonna create just a hypothetical situation here and I'd love your input. So let's say you were trying to field a bunch of applicants trying to pick out who would be a really good entrepreneur. Forget the ideas, it could be anything, but you're just trying to look for characteristics,

you're trying to look at behaviors and you're trying to pick the best ones. What are you looking for? What are you looking for in? Somebody that you think would have a really good chance of succeeding as an entrepreneur? Probably at the in the scenario you're describing I would be looking for their predisposition to action I'm trying to find someone who thinks less and does more. You would love us. Yeah.

That's how I know. We build the parachute on the way down. Yeah, exactly. I don't care, like you said, about your ideas. Tell me about your side projects. What are you doing after school, or if you're at work? What are you doing on the side, on the weekends? And hopefully, I don't even need to prompt.

The person's coming in and says, I'm currently working, so and so and so and so, but I'm really excited because I had this idea. And so I began doing this thing on the side, on the weekend, after work, and I was doing it with a patent paper, I'm looking for someone who is so compelled to collide their idea with reality

that they just figured out a way to do it. I think that is the most important gem, genetic marker for the people who are successful. They're constantly saying, how can I validate things? And they're not making excuses about why they can't. Now, Mark, do you think there's things that stand out to you that like at levels of scaling, like when you see somebody starting something up

from zero, common things that you see as far as challenges at the six figure mark, at the seven figure mark, at the eight figure mark, do you, are there common themes that you see that people get stuck at those at those points? Well, certainly the management challenge is a huge one because your scale of control, that's the right word, changes pretty dramatically. So certainly when you're a 10 person company, not only do you know everybody, you hired everybody, you have constant feedback onto what they're working on.

And you don't even really need to have formalized communications about it because you overhear things. That works really well at 10. All of a sudden you were at 100, and wow, you probably don't know everybody. You probably didn't hire everybody. Information flows differently. Decision making is different. You get to a thousand people. Now those problems are multiplied again. At the same time, you're

creating disciplines that you didn't have to before. When you had 10 people, you don't need a human resources function. At a thousand people, you certainly do. So that puts a huge strain on your ability as a leader as this scale of control changes. And quite frankly, it's one of the things that I'm not very good at. I'm much better at a small scale enterprise than a huge one. The other one that happens is the financial considerations change because the expectations of various funding rounds. I'm talking about venture funded, venture back startups. That changes. The expectations of what the angel investors expect is one thing. What you expect, the B, Cs, and Ds expect are totally different things, and they have very,

very different requirements and expectations. So yes, it's a, there's very, very distinct layers you have to go through. And I'll be quite honest, you know, we've mentioned, I was speaking for myself when I said, I know now that I'm not good at it when they're big, but very, very, very few people are, that the skills get required to start a company, to navigate your way to the repeatable scalable business model, and then have the skills to guide the company as it gets larger and more successful. You know, I can count two hands, the number of people who are able to do that. And there's a reckoning where you as a founder have to look yourself in the eye and that's but I'll put it in the mirror. Look yourself in the mirror, I guess how they do that.

Look yourself in the mirror and ask yourself am I the right person for this next stage of the company? Am I holding on to something that I'm not capable of doing? And that kills a lot of companies too when that founder makes an incorrect decision. This is a conversation that we have behind the scenes all the time. You have four founders. We've been doing this for almost six and a half, seven years now. We've had a lot of success. We've built two other companies underneath it. And we've created an incredible balance for ourselves.

In fact, after you, we take off to our Tahoe cabin for four days where we get to just kind of enjoy the view at the top of the mountain that we've climbed recently and talk about all the things that we're enjoying. But we also have these visions of building something even more grand. I feel like we're challenged here on, are we gonna stay at this place

where everybody's living financially very comfortable? We have great balance. We love what we're doing, but then I feel sometimes we're torn between wanting to go even bigger. Do you have advice for people like us that are in this position trying to figure out, do we wanna stay here or do we wanna maybe scale ourselves

out of the business and bring on experts to take it to the next level? Oh, that's such a personal question. That's really hard for there to be a simple one size fits all solution. But I would just back up and ask yourself what you're looking for. It sounds to me like you guys have got it nailed. I mean, you've got really interesting business. You have the time to get away and spend time doing the other things that are important

in life. What else is there? But that's just me. And the answer is maybe there is a possible way for you to extrocate yourself from the business so that someone else can take the next level while you still have time to spend time up in your cabin and Tahoe. I got another question for you. I love your opinion on it. We love the ever-evolving entertainment, streaming entertainment business. Obviously with Netflix being one of the pioneers, and now you've got streaming Disney, and HBO, and Amazon, and all these other competitors. And there's two models that seem to be competing. We always go back and forth as to which one we think is better.

So I'd love your opinion. On one hand, you have the, they drop all the episodes at once Netflix model. Like, look, come out with a series, all 12 episodes, and then you binge watch them all. On the other hand, you have like HBO that releases one, you know, episode at a time. You got to wait for Monday at whatever time for the next one to come out. What's your opinion? Which one do you think is better and why?

Oh, I think that releasing them, I haven't asked, but I can't believe that anyone who's choosing that we release them one week at a time is doing it purposefully. And of course they're looking at purposefully, but what our better way to say it is not being forced to do it. Because what consumers want is the flexibility of being able to watch as much as they want when they want it. And creative talent wants customers to have the flexibility

to watch them when they want them. Because when you're forced into this, I'll come back to why people are forced that way. But when you're forced to release them one at a time, and people are watching them a week apart, it absolutely messes with the narrative structure of the content. You have to have something at the beginning to remind people where

they were when you left off a week ago. You kind of need something as a cliffhanger at the end to compel them to come back in a week. The story arc can really only be one episode long because it's got to wrap up neatly before you go off and do something else for a week. So it really impacts the storytelling, whereas streaming frees all that up. Okay, so why are people forced into this one at a time? Well, there's two main reasons. The first one is they don't have enough content to do otherwise. Whereas you need this constant flow of new things, and if you're a new streaming service, and you're still trying to get up to speed, it is really hard to have sufficient volume to begin releasing

13 episodes of something one after another. I mean, you know, 13 at a time, and doing that for a different show the next week and a different show the next week. It's Really really expensive. It takes a long time to build that pipeline. I mean it takes years You have to find the talent you have to approve the shows you have to get the develop the concepts You've got a shoot you have to do post-production There's a long long window So if you are new to the streaming business you don't have that And so what you do is you begin releasing what you have slowly. The other reason is you're in two businesses simultaneously, like HBO. So HBO has a broad, a cable network where it doesn't have the luxury of streaming the shows.

So it has, it would be kind of be weird if you could now go to HBO Plus and stream a full season of something, but yet you have to then wait and watch it one week at a time on cable HBO. So they go, we gotta keep things consistent. I think I haven't gotten that from the horse's mouth at HBO, but pretty obvious, I think that's one of the reasons that's driving them to be on. We released them

one at a time scenario. Wow, that's such a great, great, we speculated. We were wrong. So we were told we were. No, that's, that's okay. So one more question for you. So I've never run into this. I'm old enough to remember when I turned on the TV and I had to choose from 10 channels, then it turned into 50 and then maybe a hundred and that was about it and you would scroll through, find the one you want. Now there's so many choices that sometimes I find myself searching for a movie for 45 minutes

because it's hard for me to decide because how important do you think it is for algorithms and new tech to be invented or created to where they're going to be able to predict what you want to watch, show you what you need to watch because I find myself now stuck searching, almost with that indecision state or whatever. I don't know what I want to watch, there's so much to watch. Oh, I think it is an essential ingredient. It's one of the reasons quite frankly why Netflix has such a big lead on everybody else

is that we've been working on those mechanisms for 23 years. We've been focused on how do you help people discover great stories and our knowledge of that space and our technology for that space has been getting better and better and better and better. And you're right, it's crucial. You can't have someone turn on the TV and say there's 10,000 things you're overwhelmed. You have to have some mechanism to narrow it down. And narrow it down in a way that people can choose things and go, wow, I actually did like that. And I think what will happen, it might take a while.

We'll get to the point where the recommendations become very, very, very good and that you almost don't even need to choose that almost anything you watch you're going to like. But that's still off in the future. But I think it's a critical thing to aim for. So, Fricelia, I have to ask this question. We're in the podcasting space. You've recently got into the podcasting space. Is there any particular insights that you've acquired through going through this or do you see in terms of the future of podcasting being this new medium? It's really interesting, isn't it? We're doing this, we have video associated with it, but I think what is the interesting dynamic is the immersive feeling

of an all audio experience that you have these voices in your head. And it's more intimate than it is on sitting and watching something on a screen. I think to a large degree, that's what's driving the popularity of podcasting. And it's what's driving the popularity of clubhouse and why all the social media platforms are all adopting a audio platform. And I think we're still kind of learning the best ways to use it.

But I've certainly really enjoyed my recent foray into podcasting. And I'm taking a different approach than you guys are. I'm really recognizing that people like yourselves do this so much better, interviewing people who are more well-known. And I'm just basically speaking to people who are nobody and trying to let other people listen in

on me mentoring somebody. But either way, you know, I think it's a pretty cool, cool space. I'm happy to be doing it. Yeah, my favorite part of podcasting is it's long form. It's brought back this kind of long form conversation, especially complex ideas in the past. You were so limited by the space. I have to communicate this complicated thing in three minutes, but now I can do it for two hours. And I think we thought for a long time, nobody had that attention span,

but I think we're finding that people do want to hear the whole conversation, which to me that's exciting. And it scratches that problem solving itch, which I'm sure that you've experienced as well, being able to help these people in these conversations. Oh, it's no question. And it's kind of the antidote to the shortening attention span that's been driven by Twitter and Instagram.

I mean, how do you deliver a complicated concept in a limited number of characters or in a visual little quote panel? And then you end up with platitudes. And I think people are recognizing that feels good. It's like junk food. But fundamentally, I'm not really nourished by it. And what this sort of show does, what I'm trying to do is say, all right, I will do my little Instagram quote panel

that says, stop thinking and start doing. And you can frame that and put it in your, I don't know, office. But let's have the longer discussion about how, how do you actually put that into action? Yeah. I think they both are going to exist for it. I think they both are necessary, right? I think you need something that grabs people's attention quick, but I think there's people that are going to be seeking out that long form,

like medium-like podcasting, for sure. Now, you have had the opportunity to talk to probably thousands of entrepreneurs, and you're doing it now on your podcast on a regular basis. Anything I heard you talk about Clubhouse, which is kind of newer business. Anything that excites you, or you think is really interesting that you've heard recently in the say the last six months to a year that are maybe up and coming business that you think is really neat. I'm going to say, yes, of course, but not in the way you expect. Not like I go, oh my God, blockchain or AI. No, because I don't really care. I'm not driven by the technology. I don't, I mean, I do a fair amount of angel investing, and I certainly mentor a lot of people. And I don't start from a premise of I'm looking for someone in robotics.

I'm so much more motivated by who the person is, by who the founder is, by what problem they've chosen to solve, and I let that drag me into new categories. And that's how I've been introduced to things. You know, it wasn't like I was into robotics, but I'm mentoring a female CEO who has a robotics startup. But the thing that drew me to it was the CEO and the opportunity to work with her. And the fact that it was robotics was secondary. Another person is doing an AI startup.

The same thing I was drawn to working with him. And another company that I recently invested in started out doing a sort of a version of a social network, but through four or five pivots is now in blockchain. So you never know. Well, Mark, this has been awesome. Great conversation. You're great to talk to. I think a lot of the information you provide is super insightful and valuable to people. So we appreciate your time for coming on our show. Oh, it's been certainly my pleasure. And thanks a good luck with your business

and with your lifestyle choices. Yeah, thank you very much. Thank you, Mark. Cheers, buh-bye. Thank you for listening to Mind Pump. If your goal is to build and shape your body, dramatically improve your health and energy, and maximize your overall performance, check out our discounted RGB Superbundle at MindPump

Media dot com. The RGB Superbundle includes maps and a ballad, maps for performance and maps aesthetic. Nine months of phased, expert exercise programming designed by Sal Adam and Justin to systematically transform the way your body looks, feels and performs. With detailed workout blueprints in over 200 videos, the RGB Superbundle is like having Sal Adam and Justin as your own personal trainer's butt at a fraction of the price. The RGB Superbundle has a full 30-day money-back guarantee, and you can get it now plus other valuable free resources at MindPumpMedia.com.

If you enjoy this show, please share the love by leaving us a five-star rating and review on iTunes and by introducing MindPump to your friends and family. We thank you for your support, and until next time, this is MindPump. Thank you for your support and until next time, this is Mindbomb.