Reading Notes — That Will NEVER Work

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This is a book about the story of the birth of a billion dollar company — Netflix.

As someone who has always been fascinated to start-up/entrepreneur’s stories, this book naturally caught my eyes at the first sight. Netflix is a great company not only because it has nearly 200 million subscribers and worth almost 200 billion (stats at 2020 Q1), but how it had transformed the entertainment industry. It redefines the way we consume entertainment, introduces the concept of ‘binge watching’, and is a popular euphemism for getting laid (in the author’s own word). Following are some of my favorite milestones in Netflix’s history.

Like many others, Netflix started from a demand. Marc was tired of paying late fee to Blockbuster. At least that’s the simplified version for the sake of easy understand. Marc was determined to build something significant. Before the idea of ‘sending tapes to people’s house to save their trouble of renting and returning them from stores’, Marc had come up with countless startup ideas, which were all in vain with the discussion with Reed in their every morning ride to work. Eventually, they decided to test out the ‘sending tapes’ ideas.

The biggest problem in the beginning was posting. Tapes were too big and too expensive to wrap and mail. The book lists all kinds way they tried just to minimise the wrapping cost and the mailing fee. The attempts were rocky. Meanwhile, it was the time when DVD was just about to be introduced. DVD is a new form of the storing and playing videos. It’s small, it’s light, it’s easy to mail. However, no one knew weather it will be the next mainstream. Plus the DVD players were pricey and very few people had them. Netflix opted to give it a shot nonetheless as soon as learning that providing their service with traditional tapes was really a no-go. Once deciding change the whole business to shipping DVDs, the following problem is obvious: how to reach those who have DVD players? Their solution was brilliant. Netflix partnered with main DVD players manufacturers like Sony or Toshiba, agreeing that Netflix will provide three rental DVDs for free for every DVD players they sell. From there, the business started rolling.

Subscription. Loads of online services use membership and subscription to provide their service nowadays. Yet it was an innovative and industry-shattering business model that no one had tried in 90s. Netflix introduced it and has changed the rule of the game ever since. Here’s how they did. Marc spotted an issue in one of his visits to their warehouse: there are way too many unused DVD on the shelves.

“Why are we storing so many DVD’s?”

“What if we let our customers store the DVD’s in their on shelves?”

“What if we waive the late fee?”

Following they came up with three solutions they’d like to experiment:

  1. The Home Rental Library. Users can now rent four DVDs at a time, keep them as long as they want, and they can rent another when returning one.
  2. Serialised Delivery. Users write down a list of DVDs they want, once watched DVD was in the mailbox, Netflix automatically send the next DVD on the list to users.
  3. Subscription. Users pay a monthly fee to enjoy the service.

The initial thought was to test the above three methods separately, to see which worked and which didn’t. And learned from the process, like what they’d been doing since founding the company. But if each test takes 2 weeks to test and analyse to know the result, it would be too long. As bold as Netflix was, they tested them all at once. They gradually become the business model we see today.

In 2000, Marc and Reed went to Blockbuster for acquisition due to the lack of cash. By then Blockbuster was still the hugest player in the market. It took ages for them to be willing to meet Marc and Reed. 50 million dollar was proposed by Reed, and they were laughed out of court. After Blockbuster refused to buy them, Netflix had no choice but to tighten their belt. They carried out their first massive layoff. Only the best of the best stay. The team became smaller, more efficient, and more concentrate on their goal than ever. The rest is the history, Netflix rose from the ashes, Blockbuster filed for bankruptcy in 2010. The paragraph of one of Marc’s early hires’ leaving stunned me.

“Hey,” he shouted back, a smile on this face. “Crush Blockbuster, okay?”

And with that he was gone.

We all know that Netflix gives its employee the most flexibility with unlimited annual leave. Everyone can take as much holiday as they want as long as they get their jobs done. Marc spent some paragraph explaining the culture too. Long story short, they cautiously hired employee, and only hired the best. Once those the best hires get on board, the company trusts them. As long as the jobs were done well and timely, no one had to know when you went to see a doctor or how you scheduled your holidays or where were you working from. They just didn’t matter. Netflix values employees’ self discipline, and believes they can finish the works.

Marc stepped down as CEO after making Netflix public in 2002. The reason gives me a lot of food for thought. In different stages of the growth of a company, the company needs different type of employees as well as leaders. Marc sees himself as a builder, a problem solver. He thrives when the company stumbles, and enjoys rebuilding it. Netflix was way beyond that point at 2002. I can’t imagine how difficult it was to leave the company he built from scratch. If it were you, can you do it?

This is a book narrating the ups and downs of Netflix from the very beginning. What makes the book standout is that Marc doesn’t just talk about how he founded Netflix, but he’s life philosophy. How he dealt with each contradiction with other co-founder and the team, how they struggled and make it through to the dawn, how he managed the company and played his part in a family well at the same time, how he identified and acknowledged his own capability and bravely left his own company, how he passed on his wisdom to help the next generation. All of these and beyond are truly inspirational. “That will never work” is definitely worthier to binge watch than any series on Netflix.

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