WHOOP Podcast - Marc Randolph, Netflix Co-Founder, on the idea that changed entertainment forever.

Episode Date: January 29, 2020

Netflix Co-Founder Marc Randolph sits down with Will Ahmed to discuss how the company he started in the late 90s grew into the entertainment giant that it is today. Randolph details how the idea for Netflix came about (3:43), some of the "stupid" ideas they almost tried instead (6:46), how investors told him it would never work (9:49), industry disruption (13:09), the importance of building a strong company culture (19:35) and not playing Little League (24:18), Amazon's attempt to buy Netflix in the early days (26:11), the company's key breakthrough (31:14), the Dot Com bust & Blockbuster's rejection of a $50-million acquisition of Netflix (32:19), why he uses WHOOP & how he boosts his recoveries (40:05), plus what he does to destress and let work go (46:02).Support the showFollow WHOOP: www.whoop.com Trial WHOOP for Free Instagram TikTok YouTube X Facebook LinkedIn Follow Will Ahmed: Instagram X LinkedIn Follow Kristen Holmes: Instagram LinkedIn Follow Emily Capodilupo: LinkedIn

We discovered that there were secrets that your body was trying to tell you that could really help you optimize performance, but no one could monitor those things. And that's when we set out to build the technology that we thought could really change the world. Welcome to the Whoop podcast. I'm your host, Will Ahmed, founder and CEO of Whoop, where we are on a mission to unlock human performance. At WOOP, our clients range from the best professional athletes in the world to Navy SEALs to fitness enthusiasts to Fortune 500 CEOs and executives. The common thread among WOOP members is a passion to improve. What does it take to optimize performance for athletes, for humans, really anyone?

On this podcast, we dig deeper, we interview experts, we interview industry leaders across sports, data, technology, physiology, athletic achievement, you name it. How can you use data to improve your body? What should you change about your life? My hope is that you'll leave these conversations with some new ideas and a greater passion for performance. With that in mind, I welcome you to the Whoop Podcast. What's up, folks? Will Ahmed here.

My guest today is Mark Randolph, the co-founder and first CEO of Netflix. Mark is the author of a new book called That Will Never Work, the birth of Netflix, and the amazing life of an idea. and that incredible idea has literally changed the way the world consumes entertainment. I found out that Mark was an avid whoop user through photos on Twitter, believe it or not. He's now an investor in Whoop, and I feel fortunate to have had him on this episode. So we discuss how Mark and Reed Hastings came up with the idea for Netflix, and some of the business models they almost tried instead of what is Netflix today.

Some of the struggles Netflix had in its early days and how the company eventually became the success it is today. His philosophy on building a positive company culture, that's something that Netflix is pretty unique for. They have a deck that's been downloaded millions of times, all about culture. And what does he do to balance his work life with his personal life? So overall, I think Mark has a fascinating story, no matter what your background is, I think you're going to be able to grab onto something in this conversation. and especially if you are an entrepreneur, a founder, an executive, someone who's wrestling with building something or creating something from scratch.

I think there's a lot of really good lessons here. I certainly took some away as an entrepreneur myself. Also, as you listen to this podcast, there's a chance you may be our one millionth listener. That's right. We're about to hit a million downloads. Thank you so much to everyone who listens to the Wooop podcast. This was something that we started. And I said, all right, we'll do 10 episodes and see how it.

it goes. We're now approaching our 60th episode and about to surpass one million listens. So without further ado, here's Mark. Mark, welcome to the WOOP podcast. Thanks, we're going to be. So we're here in New York recording this. This is the first time you and I have met in person. I was flattered to find out that you are a WOOP member and you've been wearing whoop for a long time. And I actually just devoured your book, that will never work.

So congratulations, along with building a great business in Netflix, you've also written a great book about building that business. You know, thanks, Will. It's one of those things where I can never leave well enough alone. I go, okay, write a book? What the hell? How hard could that be? Yeah, no.

So we'll touch base on that. But I thought we could just start by talking about the original idea for Netflix. How did that come to you? So these things, you know, they kind of spring on you when you're not really expecting it. In this case, I was working at a small startup that myself and two other guys had founded and about nine to ten months in, we got acquired by a much bigger software company. And the lucky break here was it was a company that had been founded and was being run by a guy named Reed Hastings. And there was two other lucky things about it. One is it turns out that

Reed and I lived in the same town. And the other lucky thing is that we'd begin commuting back and forth to work every day. So I got to know Reed in this casual way. I was working for him too, but we had a lot of time to talk. Then about, again, six, seven months later, this other company got acquired. And this time, though, the outcome was a little different. This time, Reed and I, as they say in business school, were made redundant. We're fired. There was no room for us at the new company. And I go, okay, what's next? And for me, it was pretty obvious because this company that I had sold was number five.

So I go, okay, I'll start number six. Right. And Reed, though, was not sure he wanted to begin another company. He wanted to try and change the world. He was going to go back to graduate school in education because he really thought education was a place you could have an impact. But once you're an entrepreneur, you're always an entrepreneur. nurse, we wanted to kind of keep a hand in. And so we came to an arrangement that we would come up with an idea together, that I would start it and run it and that he would be the angel investor

and the chairman of the board and we would both kind of get what we wanted. And then we just needed this idea. And so for months, Reed and I's search for ideas. And the way we did it was during our commute. So every morning he'd pick me up at my house and we'd drive over the Santa Cruz Mountains to the office in Sunnyvale, which was about 45 minutes, 50 minutes. And on the way, we would brainstorm ideas. And I did have some criteria. The internet was new. It was probably four or five years old. And e-commerce was just starting. And the whole first part of my career was in direct marketing. So this is like 96, 97? This is 96. This is 96. when we first start this and running into 97, so early 97.

And back then, Amazon was just selling books. And people were looking at this and going, wow, you can actually sell things over the Internet. And having spent so much of my career selling things through the mail, both mail order and catalogs, I immediately saw the Internet as an incredibly powerful tool for selling things. And so I go, okay, the next one is definitely going to be an e-commerce startup. And the other thing I was looking for was personalization because being a direct marketing guy, that's all about personalization, as rudimentary as it was. And so the ideas were all in that category.

So, for example, one of the famous ones was personalized shampoo. So we'd have you mail, lock your hair in, and we would analyze it in our lab. and we'd formulate a custom shampoo for your hair type, and it would be a subscription, personalized. And that got rejected. And there was baseball bats. Personalized baseball bats, custom dog food. So a lot of stupid ideas.

And then one of them was maybe we can do video, but not selling video since we figured Amazon was eventually going to come into doing that too. We were looking at rental, which was a $8 billion category at the time, and saying, we can, in some ridiculous way, do this by mail. And I had spent a lot of my life mailing things. So it didn't take a lot of analysis to figure out it was not going to work.

The VHS was too big and heavy and expensive. And so that got tossed out the window along with the shampoo and the dog food. And then there came one of those lucky breaks that timing you get timing, which is they announced the DVD in test market. And it was, you know, small and light and thin. And it was not like we said, oh, DVD, video rental by mail. It was more that feeling you get when you're like cleaning up your apartment and under the couch you find a jigsaw puzzle piece. Right.

And you go, oh, I know what this is. This is the thing that completes that puzzle that I've been working on. And we realized this was the missing piece that would make that old idea of video rental by mail work. And just to hammer that point, right, sending a VHS in the mail was much more expensive. A DVD would be much easier to store because it was much smaller. It would be much simpler to send it. So all of a sudden, it was the missing length for the rental model. Yeah, there was two big problems with VHS.

One, as you pointed out, it was big and heavy. Yeah. And so you would have had to use, I was getting quotes from Federal Express and UPS. And I'm going, they're going to charge $15 to ship this thing in both directions. And I can't rent it for enough to cover that. But the other one is by the dynamics. of the video rental business to buy a VHS cassette is $100 because it was not priced to be something that a normal person would ever buy.

That's right. It was priced for a video rental store to buy it and then rent it out a hundred times. But the DVD was the studio saying, we want to be collectible. We want to be like music. We want people to have a shelf of them. So they were pricing it at like $15. And so the fact that it was small and thin and cheap, those were the missing pieces and boom and unlock this idea it's a little crappy idea but at least in our minds we go

maybe this will work right and so you know you guys get two million dollars from reed and then you're off for the races and building this business well one point nine from reed and then i asked my mom get 25000 dollars and do you have that experience well yeah my my first two investors were my parents the third was my first boss so uh you do a great job describing the agony of asking people for money in those very early days when, you know, it does feel like there's a high probability that you could lose it. Yeah, it does require going to someone with the recognition that you're making a very, very unreasonable ask. You're saying, trust me. And this is, this is a time 22 years ago where you couldn't go in with all kinds of reams of data that you'd

accumulated from your initial tests. The only way to test this was to actually build the website and uh and launch it yeah so you are asking someone to trust you on a big thing and people hated it i mean i called the book that'll never work yeah because that was the universal reaction well you do a great job in the book romanticizing just the concept of an idea that's part of what i enjoyed a lot because for me i mean i'm naive enough or idealistic enough to still believe that ideas matter a lot. And you talk about the process in which you would go through filtering through different ideas. It's very clear that you're an idea generator as, you know, as a person in your career. How influential was that to the way you ran Netflix in those early days? Oh,

it's huge. I am an idea person. But the thing that I realized early way before even Netflix was that I am not a believer in ideas. I think ideas are ridiculous. They're almost, not almost. They're all bad. There's no such thing. I realize no such thing is a good idea anymore. That everyone who has an idea, it's beautiful in your mind. Yeah, right. You know, oh, it's just perfect little thing and you put it in a pedestal and you make it ornament it. But once you put them out in the real world, who the hell knows what's going to happen? I mean, you know, maybe you'll tell me this is incorrect, but I have almost never met a company that found its success on the thing, which was its original idea. Usually there's twists and turns.

along the ways that they never expected. And so I've realized that the key is, I don't know if it's going to work or not, I've got to try it. And so you may have to try five or ten or a hundred or five hundred ideas before you find the one what actually gives you some traction and gets going. So I'm good at ideas because I've kind of recognized

that I'm not going to just have one and have that be the company. I'm going to have to come up with hundreds. And Netflix was no example. You know, we can get to that in a bit, but I must have tried the, initial idea that everyone said would never work, did never work. We had to keep trying and trying and trying different things until a year and a half later, we finally stumbled on the idea, which actually allowed us to have a repeatable, scalable business model.

Yeah, I mean, we'll come back to that in a second. One thing that I like that you describe is, you know, kind of putting yourself out there in all these different fairs. So you went to the VHS or like the video fair. And next thing, you know, you're talking to a guy, I believe, named Mitch Lowe. Is that right? So you have this great quote in the book where you talk about Mitch Lowe was guessing using his decades of consumer knowledge to come up with an ideal lending library. I thought that was so funny because here's a guy who has to just guess what the inventory should be in those early days. There was no algorithm to tell you buy 10 Mighty Ducks 2 and, you know, two sleepless in Seattle, right?

Correct. And there was an element of hubris that. I was launching a video rental company with zero, I mean, zero experience in the video industry. I mean, I guess been into video rental stores before, but I had no idea how the business worked. And there was a moment where I kind of said to myself, maybe it would be a prudent idea to actually have someone in the company who's actually done this before. Although it does seem like it seems like that happens a lot, though, with businesses where an industry gets dramatically disrupt. by, you know, founders that actually had no previous experience in that industry. And I think it's actually quite frequent as a positive attribute in that you're not,

you don't repeat the same mistakes, but more importantly, you don't hold the same assumptions true, which may in fact not be true anymore. Right. First principle of belief system, right? Yes, exactly. And so, you know, Mitch was helpful because he was able to tell us how to get things to happen that we dreamed up. And what we realized is that there was this necessity to make a bet on what was going to be big and not big. And what we never envisioned was that we could eventually build a Mitch, which is incredibly

hard. I mean, Mitch had 10,000 hours behind a video rental counter. In terms of knowing what sold, right? Yes. And having you walk in and knowing how to play not 20 questions, but play three questions and then match you up with something you'd like. Yeah, I love that. That was a genius skill. And so. And smart of you, by the way, to go out and find that guy. I think the business wouldn't have worked in the early days without it. It certainly was hugely helpful. He became really an instrumental person. I mean, only because he, you know, this is, I don't think this is even in the book, or maybe it was briefly, but he knew everybody.

I mean, he wasn't just a video store owner, which he was. He was also the chairman of the VSDA. And so when we needed to get in and talk to a studio, he just called a studio head. And there we'd go. When we wanted to understand about how do you, there was these weird deals where you could rent titles from the studio. and through a revenue share. He helped us set that up. I mean, he was the guy who could connect us to the old guard without contaminating us.

Right. By the old guard. Now, I love that in the book, and it stood out to me because I was thinking, oh, how clever that is to if you're going to take on these Goliaths, you need to have someone who's kind of an insider to figure it out for you. And two quick things about Mitch, which is totally random, a little fact-o. So one was in the book, which is that after Netflix, Mitch did Redbox. Oh, cool.

So that's Mitch. And most recently, he did movie pass. Oh, good for him. So this is a guy. He's a good guy to have found earlier. Shout out to Mitch if he's listening. Now, one thing I also enjoyed was reading about the perfect mailer. Talk about that design process.

So we had to figure out a way, obviously no one had ever done video rental by mail before. So we had to figure out how to make this happen. And so the trick was we had to do it for the price of a first class stamp. So we had to design something which was small and light enough that it would qualify as first class mail, less than an ounce. Right. And it had to serve as a return envelope. It had to be rigid enough that it wouldn't break the DVD, but not so rigid that it wouldn't

be able to go through the automated equipment at the post office. It had to be recognizable by the post office and not go through their high-speed sorting, but go through their low speeds. I mean, it was ridiculous that criteria, which we kept realizing as we brought. We'd go down to the post office with a big tray of our newest design, and they all come back with broken desks. It's, okay, back to the drawing board. But that little mailer, this little went through easily 150 to 200 revisions,

little tweaks trying to get this thing to work. Well, it was reminding me a lot of the very early days of Whoop when we were thinking about, is it a watch, is it a sensor, does it live throughout your body, is it on your wrist, does it have, does it tell the time? you know, all these different, how do you deal with the fact that people are hairy or have different colored skin or, you know, you need the tension to be perfect. And so it just, there's something powerful about going into a super creative process that has an enormous number of constraints. Because then you as a team get locked in this box and you're trying to figure out ways to

navigate within it. And in some ways, I think it inspires even better creativity. Yes, you have this general sense of what you want to happen. But with zero guidance and specifically how it needs to happen. Yeah, exactly. And they're all conflicting. You have all kinds of different criteria it has to match. And there's a weird thing. We had a false positive that when we initially decided this DVD thing might work,

to see whether a DVD might work in first class mail, we mailed a CD to ourselves. Oh, right. I love this. And unbeknownst to us, we just dropped it in the mail slot to mail it to Reed's house in Santa Cruz to see. and it went into local mail and so it had no automation and so it got hand delivered essentially to his house

and so the next morning we went oh my God it got to his house in less than a day for the price of a stamp unbroken but if he had lived in San Jose and it had gone through the high speed sorting that next morning

rather than showing me the unbroken CD he would have poured a little pile of broken plastic shards into my hand and by the way that would be doing dog food Yeah, by the way, Netflix may not exist if that happened, right? Correct. Because that was part of what validated that you could send, you know, something the size of a CD in the mail. That was the first test and it passed, but it was in some ways a lucky break.

Well, it's fascinating. Now, Netflix today is famous for its culture. I've downloaded the PowerPoint like many other people have. Anyone listening, I encourage you to check it out. And it seems like a lot of Netflix's culture today, even as this Goliath company, still stems from some of your original beliefs around culture and really the relationship you had with Reed. In the book, you write, culture isn't what you say. It's what you do. What they really want is freedom and responsibility.

Talk a little bit about culture. It makes no difference what you want to carve into the cornerstone of your building or inspirational posters. Yes. It isn't even what you put in a culture deck. Yeah. how you behave. Anyone who has kids know that is what people realize is legitimate. Right.

Not what you say. And so culture in many cases stems from how the founders behave. And then they pass that on to their employees. And that's where this comes from. And at the beginning, Netflix culture was not that much different than any startup, which is you have, we had about 12 people, but you have enough things. you could keep a hundred people busy.

And so you can't be telling everyone, okay, Will, here's what you should do. And if you bump into this problem and do this and then check into me here. You go, I don't have time for that. Yeah, just to you. I'll see you in three weeks and here's what I expect you to have done. Yeah. And then I trust that you're going to actually figure it out.

You're going to bump into things you didn't anticipate. You're going to have problems. You're going to have delays. You'll figure it out. You'll meet me there in three weeks. And in three weeks, you all assemble and you look around the room and everyone's got their shit in order. And you go, that's awesome.

And that works great when you have seven people, okay? But then when you go to 70, what happens is someone shows up late at the assembly point. And you go, oh, this isn't good. Okay, everybody, from now on, I want us all to check in. So why we all do status reports once a week so I can find out in advance? And everyone goes, okay. And then one person, next couple weeks later, someone overspends. And you go, oh, this isn't good.

Okay, everyone get together. From now on, any expense over $500 needs to be pre-approved to make sure we don't overspend. And so pretty soon, this group of people who you had entrusted, you'd given them this responsibility to meet you at a certain point. But the freedom to solve the problems as they want, all of a sudden, you're treating them all like a bunch of seven-year-olds. Right. And what you realize is that two things. One is, when you make people do the status reports and the expense reports, they stop making independent. decisions. You slow everything down. Getting to this place, if you used to take three weeks,

takes six weeks. And they don't feel the flexibility to try something unconventional to get there. But the other thing you realize is people hate it. They don't like to go, you're trusting me with this large budget and this major responsibility, but you don't trust me whether I can make a decision about what to buy or not to buy. You know, or you don't trust me as to what kind of hotel I can stand or whether I can have the judgment to fly business class or coach class because I'm going to Japan. Totally. I mean, and so you recognize that not only does the company move so much faster and so much

better when everyone has the freedom to make decisions, but the responsibility to make good ones, but also people love working there. Yeah. And fundamentally, what A teams want is to work with other A players. And what too many companies do is you can't make judgments like that. correctly all the time. It's easy at seven. It's hard at 70. It's almost impossible at 700 and Netflix is 7,000 now. Right. So you make mistakes. You bring someone in who seemed great but doesn't have the judgment who's making mistakes, who's not being clever, being appropriate about

what they're spending. And what you have to do, what most companies don't do is you have to get that person and say, you're not the right person for this company. It is not you. You're a great guy. Let's find you someplace where you'll be appreciated. And that's sort of having a system which weeds people out quickly. And the courage to say the criteria is not did you fuck up. The criteria is you're not at the level of today can live and thrive in a freedom and responsibility culture. That's a different. Most people, you know, they drop people if they're D players. Netflix drops people if not an A player. And that's, comes up. across sometimes as being brutal, but it's the other, if you're, the analogy we use, it's in

the culture deck, which you alluded to, where people should download is Netflix considers itself a team, but it's not a little league team where everybody plays. And it's not a little league team where everyone gets a trophy. It's a professional baseball team where if you're not playing well at your position, you go down to the minors and we trade you. Because my responsibility to my shortstop is to have the very, very best second basement I can have. Right. Not going to the third basement and the shortstop and saying, he's my cousin. Cut him some slack.

They want to be champions. Yeah. And I think it's the same in, uh, in, uh, no, I think, I think it's really healthy with, what, what you've described and what Netflix has, has pioneered at whoop. We've tried to empower people as much as possible and instill a lot of the things that you're describing. Um, it's certainly been core to the way I've tried to build the business. So we're now at a 125 people.

So, you know, you start to feel all these moments where you as the founder are realizing that decisions are quickly getting made potentially at times without you and things are moving fast. And you have to get comfortable with that. You just have to keep letting it move. You know what I mean? You are at the critical point. Yeah. Because you're just about to move past the point where you aren't involved in these decisions and you have to trust people to make decisions. Totally the biggest thing.

And they're supervising down and they're hiring. people that you have no input in the hiring and you have to trust that the way you've behaved has imprinted the values that you want everyone else because that's the only way culture is the only way to steer unless you're a dictator yeah i forget who described it this way but culture is what people do when you're not there which i thought was pretty clever that's awesome i like that yeah there's a few other uh stories that i thought were really interesting You talk about a meeting with Jeff Bezos really early on in the company's evolution in which they were interested in buying Netflix. Talk about that.

Yeah. So it was interesting because this was pretty early. So don't forget, this is an idea that everyone said will never work. Yeah. And we worked for six months. We launched this website. We made these deals with the DVD manufacturers to begin getting customer flow. We managed to source every day.

We did all these things right and off we go. And the site takes off. We began doing real volume. And we're about two months in. So we're at that point where everything seems, he says, like it's going amazingly well. And that is when Jeff Bezos calls and says, I'd love to see you guys in Seattle. He's got pretty good timing. Yeah, I think it was more driven by him.

As I mentioned earlier, it was pretty obvious eventually he was going to go into selling other than just books. Yeah. And it was pretty clear of music and video is the next two categories. And so he had also just had an IPO. So we had cash. So we're going, okay. And to frame the time period, by the way, like he raised like $57 million or something. Yes.

Okay. Yeah. So, you know, that was a lot back there. Which was a lot. And this was 2000. Two thousand, uh, 1998 or 99. Okay. It's right before the bust.

Yeah. Yeah. 98, 99. And there. So it was nine, it was, yeah, summer 98, because it was just. after launch, a few months of the launch. So we knew he wanted, this was almost certainly about a make or buy for him, which is, does he build his own, or we already have all the content, we know all the

movies or the database built, we have the people, so maybe, I'm sure he was thinking, this could jumpstart me in. So up we go, Reed and I, and we end up navigating our way to this office, and it's like we're looking at each other going, where are we? It's like people are like shooting up in the doorways and the ways and the windows are broken, there's garbage in the streets. And Amazon had been held up as this pioneer of e-commerce, you know, this amazing beacon. And we're going, wow, this is a pretty weird place for the pioneer of e-commerce to have their office.

And it was in this dingy old warehouse building with the dusty windows. And we go in and people are crammed under stairwells and four people to an office. And all the desks are made out of old doors like on. on four legs, but an old door with a patch where the keyhole or the doorknob hole. And back to the point on culture, like, that shows you very quickly at a very different culture. Absolutely right. In fact, I asked Jeff, you know, what's with the doors? And he goes, it's kind of our way of imprinting on people that we spend money on things that the customer sees and not in the things that make our life easier.

There you go. And that is a very cultural thing. He's notoriously frugal that way. Yeah. So we go up And it was an amazing thing Because again, everyone said This will never work

And here is the guy Who is the pioneer of e-commerce Saying they might have something So hugely validating Right Not just anyone saying it But Jeff Bezos saying Yeah, that's pretty cool

And so we do the whole We do the whole pitch And kind of share some moments It's really cool And then at the end His CFO was walking us out Kind of goes, listen If we do anything

it's probably going to be low eight figures, you know, which we go, okay, that means barely eight figures. So it probably means it's, you know, 10 to 20. So let's say 15 million dollars. Yeah. To buy Netflix. To buy Netflix. Just to frame this. And how valuable is Netflix today? 10. No, 50, 150 billion dollars. Okay. So it just shows you, right? Like these things are I don't know, it's fascinating. A little different. Yeah. So anyway, that would have been okay because I owned a third of the company. So I go for a year's work. But the thing is, like I said, we were at this point where all the promise was ahead of us and the problems were invisible. Yeah.

We were going, we're not, Reed and I were kind of looking at each other on the flight home. We go, we're not quite ready to hand over the keys. We are ready to say, we've got to get out of selling DVDs because we were selling them too because we got to double down on rental. Yeah. So it was this incredibly, it was a commitment ceremony for, for Reed and I. And the second time you almost sold was to Blockbuster. Yeah. And in many ways, Blockbuster feels like it's almost been erased from history.

But there was a time where Blockbuster was the 800-pound gorilla. Oh, they were everything. Yeah. I mean, you know, we started our goal, my goal was to, you know, have a million-dollar run rate in the first year. Yeah. So, you know, $100,000 a month. But then you hit that and you're kind of celebrating and going a million dollars. And then you go, Blockbuster.

six billion dollars. Yeah, right. You go, oh my God, that's never going to be surmounted. But you flash forward. I mentioned before we spent a year and a half the beginning. We're talking about struggling with finding an idea. And we finally had this idea, which was the no due dates and no late fees and subscription, which is this incredibly complicated model, but it worked.

And people loved it. And it was taking off. And you have a very similar problem. which is that you have an upfront capital cost, which was someone... Yeah, building a wearable. Building a wearable. And you don't want to charge someone for the full cost of that upfront. You want to recover it with subscription.

Yeah. I mean, I don't want to give it away your whole model here, but... Right. No big secret. And we had the exact same problem is that we were giving away a first month free. Right. So shipping people discs plus the acquisition cost, but it was a subscription. And so we'd eventually recover the money.

But the irony is when you have that kind of a business, the more successful you are, the more money you burn. The more money you burn. The faster your cash runs through. And so we were in the situation where we were hemorrhaging because we were so successful. But our timing was beautiful. This was all happening in the fall of 2000. And you were probably seven or something like that. But this was the collapse of the...

I was 11. This is the dot-com bust. Right. This was going from this point. in this January of 2000 where basically if you needed money, you went out on the highway with a flag and waved it and a big truck and you pulled your driveway and you dump it out and you get a pitchfork and you shovel it in and that's how easy it was to raise money. Yeah, because you had a dot com.

Because you had a dot com. And then all of a sudden by September, now the trucks were putting their head down and driving past you as fast as they could. So we were screwed. And you do a prudent thing when you're screwed as you, as another euphemism, which is seek strategic alternatives, which means sell, which means a get out, get out. And so the obvious get out was Blockbuster. Yeah. So we flew at, we tried to get a meeting, wouldn't respond.

Then, you know, months later they call us and we fly to Dallas to pitch to sell ourselves, to Blockbuster. And they happen to as a little minor piece of caller. of the story. They happened to call. We were on a retreat at a ranch up in the mountains outside of Santa Barbara. So all I had with me was shorts and flip flops and t-shirts. So there we are in the Renaissance Tower in Dallas, this glass and steel magnificent $6 billion corporation headquarters. And I'm in the big boardroom in my shorts. Perfect. T-shirt. But anyway, we pitched to Blockbuster that they should buy us. that we should combine forces.

They'll do the stores. We'll do the online. We'll find a blended model and incredibly accretive acquisition. Which, by the way, it would have been. It would have been. In fact, it turns out that was the model that Blockbuster eventually did, which almost took us down. Oh, interesting. Yeah.

And by the way, in the book, you say that Reed offered $50 million for Netflix. Yeah, he said, they said how much. Yeah. And we were $50 million in the hole at that point. And so on the plane there, we go, oh, it's got to be at least that. Yeah, that'll at least get us whole and allow us to return investors' money and walk away with our heads held high. Dignity, yeah. And so he's at $50 million, but we may as well have said $500 billion because we got the same reaction, which was no way.

Yeah, this is fall of 2000. This is like dot com. What? Yeah. Are you crazy? And that was pretty much the reaction. But it was interesting because it was depressed. because in one hand, we kind of thought this was going to be the thing that saved us.

We'd gotten the call. It was so obviously a great deal. Yeah. And that in one fell swoop, our problems have become their problems. And we would have, we do it. And instead, this flight back was, wow. Now the only way out is through. Well, it's a great.

It's a great. The obstacle is the way moment. Yes, because thank God you got to overcome that. And now Netflix is what it is today. Yeah, it was a battle, but it really forced a discipline on us. It said we're going to have to build a business which actually makes more money than it costs us to provide the service. It's going to force us to be focused on the one thing that's important. We have to be better at Blockbuster than Blockbuster.

And now shortly thereafter, you did a big layoff to describe that. It was brutal because after we had left Blockbuster and realized the only way out is through, as I said, It means that you have to get to profitability on the money you have, and you're not going to get there at the burn rate we had, which means it's time to throw everything overboard that you don't absolutely need. And in this case, it was laying people off. And we laid off about 40% of our workforce. How many people was that? Probably 160 at the time, something like that. Wow.

I mean 200? So about 70 people or something. Yeah, big. And what was that like for you, personally? Personally. As you know, when you start a business, one thing you do is ask for money and you go to your parents and you put your hat out and you kind of go, this is unreasonable I know, but I'm really believing it. You do the same thing with people is that you're going to these people who have some cases worked for you before, other cases haven't. And you're saying, come join me on this irrational quest. We're going to do something that everyone, is saying will never work. And you get people excited to follow you. And they do. And they work like crazy. And they work weekends. And they work nights. And they miss family events all in the service of this thing. And then you finally have gotten to that place. And then you recognize these skills these people have

were unbelievably right for the first couple of years. But they're not necessarily the skills we need going forward and you have to have that discussion with someone who has given everything to you and say goodbye and it is the worst the worst feeling i mean i every single person that i laid off i had hired it's agonizing it's agonizing it's terrible i mean you know you cry they cry um it's so emotionally draining it's the worst thing it's not the thing you think of it's not even the first hundred things you think of when you start a company it's of a moment where you're You're going to have to fire a lot of people. Yeah, you think of making the decision to let someone go because they're not performing.

Totally. You always think it's going to be this rational journey. And I mean, for me, so in the earlier days of whoop, maybe we were 45 people or 50 people and we had to let about like 10 or 12 people go. And gosh, I remember that day like it was yesterday. It was the most agonizing process. And still to this day, I feel somewhat guilty about that moment that I had, you know, sort of mismanaged the amount that we were burning relative to, you know, the stage that we

were at. And as a result, we had to cut expenses by letting people go, right? But man, I'll tell you this, like, I feel so grateful that I had to go through that as a leader because it totally reframes you going forwards. And you write about this in the book, this feeling that you were operating so much more efficiently afterwards. The business was kind of humming afterwards. And I think in some ways going through that like agonizing experience together if you can kind of all hug in the process of doing it you can actually come out the other side even stronger well you know what i i was saying we talked about culture and i was saying you start out when you have 20 people and everyone is this freedom of responsibility but then as you get bigger stuff creeps in totally it had crept in

at Netflix and what happened is at the layout was a gift in a way that we got it back We got back to that point where it had to be freedom and responsibility. It had to be the radical honesty. And it felt good. And like you said, it was this gift in a way that we were humming. And that's, we kind of said, we can't lose this again. Yeah. And you become, yeah, you become a stronger organization.

Yeah. But still awful. You know, everyone, no one wants to do that. But it, you can talk about burn rate, not running out of money. And they can be abstract concepts. But when you realize what the cost is to mismanaging that, it definitely makes you careful in the future. How did you discover whoop? My son, who is now 28, shout out Logan.

Logan, yeah. Shout to Logan. Yeah, that's right. He's always been kind of a cutting edge fitness person. I don't mean like fitness and he always working out, but always trying to. to say, what can I do to be better at this? What can I do with diet? What can I do with sleep? What can I do? And somehow, he heard about this. And he showed up one day, and over a holiday, actually. So myself, my wife, and his siblings, we were all together. And we were pretty merciless.

And in fact, one of the things that we all sit conspired and said, make up a new name every time you ask him about it. So, go, what's with that whipple or the, what's the, you really were teasing them. Yeah, just teasing him about this. Because you go, that's a whip. So we go, okay, we're not ever going to get it right. We're going to get it wrong for a couple of weeks. But, of course, he begins telling me and begins showing me what it can do and what he's learning. And I'm a data geek as well.

You know, I was in direct marketing for years and years and years. And Netflix, of course, was deeply analytical. My most recent startup was a data. analytics company. So combining that with my other passion, which is really being pretty physically active, this was a natural. And so, all right, here we go. And I thought it might be like a lot of the other indulgences, which you try things. They don't quite pay out. But that was two years ago. And I don't think it's been off my wrist for more than, you know, an hour. Yeah, that's amazing. In two years. So it's pretty good. And what sort of things have you used it for?

Um, so I'm 61. For me, the danger is overtraining. Yeah. Because in my mind, of course, I'm still 30. Right. And, uh, and so for example, right. Okay. Okay. Confessional. I have a slight hamstring, uh, pull right now. Okay. Because what happens is you're, I'm going out for, it's supposed to be a certain length run at a certain intensity. And, you know, I'm feeling really good. And I go, okay, I'm going to, I'm going to push a little hard. I'm going to turn the gas on right now. Yeah. I'm going to the gas on. And. And, and, you know, and. And, you don't recognize that that's and you know that is not a good idea and so what i've really realized is that what was phenomenal at is i trust it more than i trust myself yeah to know when i can push and when i can't push and there's so many at the beginning you're not quite it's like anyone it's like trusting a coach at the beginning when it's going you're not recovered and you're going, I feel great. And you go out and you go, God, I feel like shit. And vice versa, where it goes, you are ready to roll.

And you go, I'm not, and you start and you go, yeah, I feel great. And after a while you go, this is a much better way. And then, of course, it shifts. Now, I'm giving you the whole pitch here. But then it shifts from that into now what can I do? I want that good feeling. I want to accelerate the amount of my recovery. What can I do differently?

So you're describing a phenomenon which a lot of who members experience, which is all of a sudden shifting from being. somewhat skeptical to believing in it and then once you believe in it you realize okay what can i do to have a green recovery as often as possible or as often as i want to be peaking exactly and for you what are some things that you've done that you find help your rate of recovery uh consistent sleep time is a big one yeah that's fascinating trying to get to yeah it's amazing trying to get to at the same time every night um it's really interesting seeing the correlation between alcohol consumption and yeah alcohol is a killer for whoop recovery it really really

is remarkable. And, you know, it's funny because you don't, it's, it's kind of an interesting thing. You don't see anything about that for a while because it takes you guys a while to accumulate enough data to make the prediction. Then all of a sudden, boom, goes, you know, on evenings, nice after you've had two or more drinks, you're 17% less. And you go, holy crap. That's remarkable. It's pretty dramatic. Yeah. And so it just, it's not like I'm going to stop drinking but it certainly lets me know when that if it's if there's discretionary opportunity I know what the I know what the cost is going to be a lot better than I did before another one interestingly is if I share my bed I don't sleep as well but I'm not going to

stop that I was laid the uh yeah drawn the line at that okay good and in the book you talk about hiking as being one of your favorite sort of hobbies? Yeah, I'm a climber, really. That's goes from way back. I've always been a mountaineer person. So the mountains is kind of the happy spot. And so that's happening a little bit less because I'm so much busier now than I've kind of ever been. But I still do when I get the chance to get away to climb or hike. I'll do that. And I talk to my run, it's it's always trail running. You know, when I'm biking, it's always mountain biking. So I'm kind of like a combined. these things. When you were running Netflix in its most stressful days, what were things

that you did to recalibrate or to relax? That was usually I'd get out in the middle of the day and go for a long run. Yeah. Exercise. Exercise. Almost. I mean, and that went on for years and years at Netflix. I would, we had a good shower in the office, which was pretty early now every one, not every company, but a lot of companies have that opportunity. We, we happened to have one there. So I was able to get out at lunch, go for a run, come back. Myself and Neil Hunt, who was the head of engineering back then, we used to go for long bike rides at lunch. Just to get out, de-stress, be thinking about something other than what your issues were.

So, yeah, that's always been a wait. And then, of course, when you go and wait when you're not working, really hard to not work. I mean, really important to not work when you're not working. that's a really hard thing that's a hard thing especially if it's always ticking in the back of your mind that's always going to happen but you need to have a way to kind of force it out i mean to push it far enough back that you can actually engage with the rest of your life to work is not everything and neither is fitness you have totally there's other people um and that those interactions are my opinion what kind of make life the real richness of life you know have in my case i'm married that's my best friend

And I wanted to make sure as I was starting this company and the other ones that I stayed married and stayed friends. That's a good point. And I have three kids. And I didn't want to bring three kids in the world and then see you later. Here's my paycheck. Yeah. That's not the point. So you have to make sure you have time to spend time with them and get to know them and have to get to know you and see you and see you enjoying your work and all those things.

What kind of other advice would you give to me as a young founder building a business? There's two levels of things. Certainly, I can give you business advice, but I'd be very superficial since I don't understand it in detail enough. So I'll have to give you personal advice. Are you married? I am. Yeah. So number one is you've got to stay married.

Yeah. You don't want to be the person who's on their sixth startup and their sixth wife because that's a tough road. That's a failure as a person too. Yeah. And that requires recognizing there's a carve out as opposed to here. I'm giving you all this life advice. Yeah, here we go. I met you for the first time.

Yeah, you asked. Yeah, let's do it. My wife and I have had this thing, which I did long before Netflix, where at first you're going, trying to squeeze in your relationship in the spare time. And what you quickly realize is there's never spare time. Or if there is, it's random and weird. And so we flipped it around. And this also applies to company culture being what you do, not what you say. And so many companies say, oh, we're all about family and balance.

And then they see the founder workaholic. So I did every Tuesday, without fail, 5 o'clock, date night. Nice. Without fail. So a big crisis, it's better be resolved by five. You have to talk to me on the way to the car. And the cool thing that happens is, number one, you struggle for a few months with people who want to meet with you and need to meet with you.

This feel has to happen. And then you realize, no, those people stop asking because I knew you're going to say no. But the cooler thing is, ought to be able to begin taking Tuesdays off too. And you've truly modeled that you're not just saying something that sounds good and looks good in a poster. But you're modeling, this is an important, important thing to you and to your employees and to the and your wife. I like that. And, you know, in a lot of ways, being married, so I got married. 18 months ago, and we had been dating for about six years, maybe, before we got married.

So she knew me, like, in the very early days. Lately, my wife knew me in the very early days of starting the company. But I've found being married actually very stabilizing for building a business. You know, it's like a rock that you know that you've got no matter what. And then, you know, all these other chaotic things that are happening in your life or rather in your business, you can still at least rely on knowing that you've got this partner. Yeah. And it also allows you to put things in perspective.

do. And you go, it's just a little band with a metal piece on it. This is not, you know, the end of the world. All due respect. Well, it certainly feels like it in the moment, but understood. Yeah. But it's critical, but there's other things that are important too. And I think having a relationship like that, all, you go, wow, there is more, there's more to this. And I was very similar to you. I was, my wife and I were together for five years before we got married during the period of life where I was working like a dog yeah and this dating stuff didn't happen until several years after I got married so in some ways this is a do what I say not what I did it's more than I'm I'm now quite a bit older than you so I've had a bunch of years of

seeing how it works how it plays out you know I this is not new because I've said this before but you know when Netflix is my sixth company and looker the seventh one just had a huge huge exit too yeah congratulations yeah thanks but Rosanna yeah Amazing. So what I was going to say is that of all those things, you know, the thing that I'm proudest of is not Netflix or even Looker or the other stuff. The thing I'm proudest of is I was able to do all those startups while staying married to the same person. Right. And having my kids know me and especially. And building a family like me. Yeah. That that's hard. And I'm really proud. I pulled that one off. Well, congratulations. And thank you for building the companies that you've built as well. any part of thought. So where can people find you if they're interested in learning more about Mark Randolph? Yeah, so I'm on Twitter at MB Randolph. I think Instagram is that will never work.

The best place, though, is there's a website called Mark Randolph.com, which kind of points to everything else in my life. But the best way to really mind meld with me is to read the book. That'll never work. The Birth of Netflix and The Amazing Life of an Idea. Well, it's a terrific book. I really enjoyed reading. it. And it's been a pleasure sitting down with you, Mark. Thank you so much for doing this.

Thanks. And good luck. Keep this company alive. Yeah, we're going to keep building it, man. I'm relying on it. All right, cheers. Thank you. Thank you. Thanks again to Mark for coming on the podcast. The incredible success he's had with Netflix is extremely inspiring to what we're doing here at Woop. And I hope you enjoyed this conversation as much as I did. If you're not already a Woop member, you can join our community for as low as $30 to begin. We provide you with 24-7 access to your biometric data, as well as analytics across strain, sleep, recovery, heart rate variability, and more.

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