I did no due diligence. David how does it feel to get up in the morning and know that 330 million americans want to know the state of your health that day . David a few weeks ago, Reed Hastings surprised the corporate world when he said even though he was the ceo and founder of netflix, he would give up that position and become the coceo. I have been the coceo for a publicly traded company for a while. It can work and it did work for me but it is challenging to be the sole ceo and be the coceo. When you talk to Reed Hastings, you realize he does not have a big ego. He is willing to listen to other people. I think it will work and i think it is working. The company now, which went public in 2002, the market cap is up 86,000 . Stock is up 41,000 since then. Did you ever think it would become that big, that successful . Reed no, because then i would never have sold a share. You never know on that. Honestly, there has been a lot of luck along the way, too. Blockbuster could have wiped us out many times. When viacom spun off blockbuster in 2004, they saddled them with 1 billion of debt as their goodbye gift. The covenant on that debt severely limited blockbuster when they attacked us. That was one. Another one is blockbuster had us on the ropes, and then carl icahn got elected to the board of directors to the board of blockbuster and he fired the ceo over some silly bonus issue and they completely changed strategies. All these things have been incredibly lucky strokes. So you need both and luck, which im am sure you have experienced, too. David i have had a lot of luck. Let me ask you, for those who may not be familiar with the new book youre coming out with, called no rules rules, in that book, you describe that you at , at wanted to go to blockbuster one point, and sell them the company for a modest amount today, 50 million. Reed totally. In the early days, we were like, blockbuster is going to wreck us as soon as we get big. We were almost right about that. We went to see them. They were very polite, but they were not interested. David had they bought the company, where do you think blockbuster would be today and where you think netflix would be today . Reed it is always hard to tell. I think we could have made a blockbuster a modern brand. David you have a culture that you describe in your book that is very unique that. I will go through a couple things that i found stunning. For example you have a system , where people can take whatever vacation they want to take. There is no limit. People can take any time off, no limit. Where did you get that idea from . Reed in the industrial economy like factories, we measured people by how many hours they did on the job. 9 00 to 5 00, 8 00 to 6 00. What ever that is and we really want people to focus on ideas, on generating important work. We do not measure them during the day. We do not clock our people in. If we are not going to tell whether someone is working 5 00 to 9 00 or 9 00 to 5 00, which ana two to one difference hour why are we tracking whether , they do 50 weeks or 48 weeks a year of work . Unlimited vacation is sort of like saying, dress how you want. People still do not come to work naked. There are cultural assumptions about appropriate clothing for work. We do not need to specify that. The same way with vacation, people understand getting work done and they get to live more flexibly. David you also say you do not to please, at your company, your boss. You can go ahead and do what you think is best and if your boss does not agree, that is ok. Is it easy to run a company that way . Reed again, we are focused on inspiration over supervision. The traditional paradigm is that Good Management is close management, sets objective, manages tightly. All of that is appropriate in safety critical environments. Airlines producing vaccines, etc. , but in a creative business, you do not care so much about what goes wrong. You care about enough of the right things get done. We really focus on inspiring our people and having it be very open and collaborative and from that, you get amazing Technical Innovation and you get amazing content innovation. David you point out in the book that if people do a reasonably good job, they still might lose their job if they have not done a spectacular job and they get a good severance, but not a continued job. Can you explain that theory . Reed in the traditional industrial paradigm, you have to do something wrong to let go. You can think of a job as a property right until you lose it by abusing your position. But if you think about professional sports, if that team is going to win a championship, it has to have a mix of the right players that work well together that are the absolute best in the world. We try to model ourselves like a professional sports team. So, highly paid but you have to , earn your position every year. It is about performance. That is not right for everybody. Some people care mostly about job security. Other people care mostly about excellent colleagues and playing great team ball to achieve achieving something important for the consumers. We are attracting that group of people who care about team excellence. David i have no doubt your book will be a bestseller because it is a very interesting book. I could not understand whether you are saying your culture is one that if other companies adopted, they would do better or , you are explaining what is so unique about your company and why you are so successful, so which is it . Or is it both . Reed i think, a certain type of company, a company in Creative Industry where there is a lot of change will do better by optimizing for flexibility than efficiency. Other Companies Like an airline or factory want to optimize either for safety or for manufacturing yield, so again, highly consistent results. That is not for this netflix culture, but again, for a company that wants to invent and create new things this offers a , lot of fresh ideas for people to rethink the traditional industrial paradigm. David recently, you made an announcement that stunned a number of people which is that you were bringing in your chief content officer who has been with you for 20 plus years and making him the coceo. Reed externally, it is a change stature helps on teds and ability to do big deals. David let us go back a little bit to your background. You grew up in the boston area, is that right . Reed boston and d. C. Yeah. David you went to college at bowdoin. After you graduated, what did you do . Reed i went into the u. S. Peace corps and i was a High School Math teacher in a rural part of southern africa. David after that you decided , you would go to Business School at stanford. What led you to go to Business School at stanford . Reed i went into computer science. I tried to take a Business Class but they rejected me. , in any case, being at stanford in the mid 1980s was an incredible experience because you learned so much entrepreneurial work from all your colleagues. Everyone is bubbling with ideas. That is still happening today 40 years later. David so when you graduated , from stanford, you decided to get into the computer industry and you were a programmer for a while. Is that right . Reed yeah, i was a programmer at a couple different companies, and then i was fortunate and had an idea of something i really wanted to do. That was in 1990. I took a year off and consulted on the side parttime and wrote a program that ultimately turned into a company, which was a reasonable success. Morgan stanley took us public in 1995. It doubled every year. Ultimately, that is a company process, thatmuch it got too rigid. It was a great learning lesson. David when you left that company, after taking it public in managing it with somebody else you had the idea of , starting what is now netflix. Reed the timing was shortly thereafter. A colleague of mine, Mark Randolph and i, were brainstorming on different ideas, and like many people at that point, i had had this terrific idea. Thinking there has to be a better way. It was when this friend told me about dvds, i thought, you could mail those cheaply. You could potentially build a business that was not in amazons direct interest because of the return loop that you dvds. Return these it was ecommerce, but a smaller market than what amazon is going after. David the story is you took out some dvds, i guess, from blockbuster. You found out you had kept them too long, you did not like paying a late fee, and that prompted you to think of Something Like this . Is that fair or apocryphal . Reed no, that is accurate. It says every time something goes wrong, the idea did not pop into my head then. It was later when i was debating ideas that the sting of that stuck because it was a 40 late fee and it was all my fault. Just not bringing it back. David originally you are , mailing dvds back and forth. But the idea of streaming, who came up with the idea that would be better, and was streaming that prevalent or people knew what it was . Reed yeah people knew what it , was. I had the good fortune the year i came back from the peace corps, so mid1980s, i got a job serving coffee at a company, and it turned out that company, a computer lab, was the dot com. First there were no dot coms at all, than the first one, symbolics. Com. This was a company out of m. I. T. That was like the hotbed of the internet but nobody knew the , internet. There i was serving coffee, soaking up the culture and how they thought. So when i eventually went on to stanford, you know i was in , the internet thing, and had been part of that and tracking that for a decade. It was a decade when netscape went public, and everyone else tuned into it. So, some of that, again is , incredible serendipity of, what is the company i got a job serving coffee in the computer lab. David originally you would take , programming like what disney or nbc had and you would put it up and people would pay for it and you would pay the people who produced it, i assume, some royalty. When did the light go off and you said no, we need to have original programming . Reed ted was intimately familiar with the history of cable television, and right from the beginning, he educated us on hbos path. Their first 20 years in the 1980s and 1990s they had recycled programming. With shows like the sopranos and the wire, they moved into original programming and what a difference it made for them. We were very aware of that history and then it was just a biding time until we got big enough. David today, the original programming you have, is that more popular than the nonoriginal you are renting from somebody else . Reed that is right. The original programming driving the old guard, our newest 2 too, ansing booth amazing movie. Our series like india matchmaking or Umbrella Academy are all driving both the viewing and the membership growth. We are fundamentally an original content business that supplements with licensed content around the world. David why is it that on netflix your content is popular but you but you do not do things like , news or sports . How come you have not done those yet . Reed those are great areas, but they are well covered by other companies. We have so much more we want to do on series and films and we are breaking into animated films and series now. We have done well with unscripted reality programming like india matchmaking and love is blind, tiger king. Our hands are full. Again there are other companies , doing other things. We just want to focus on entertainment. David when house of cards was on netflix, did you suggest themes for it or plot lines, or did you ever get involved in that or did you stay away from what they are actually going to do on the show . Reed our book talks about, do not please the boss, do what is right for netflix. Because of that, ted sarandos, when he was negotiating with house of cards with kevin spacey and david fincher, he was willing to do bold things because he was convinced he was it was right. We paid a fortune and guaranteed two seasons, which at that point no one had done, and he only told me about it later. His willingness to make big independent decisions is what led to us getting house of cards. Of course, he could have been wrong and it could have been a disaster but it was a great , series and put us on the map. That is somewhat a testament to teds personal skills but also , to the culture that allowed him to make those decisions. David when you started Winning Academy awards and emmy awards, other things like that was that , a surprise to you that you were getting that recognition . Reed no, we always wanted to work with great talent and right from the beginning, we knew that , like with house of cards, the talent that was involved in that, robin wright kevin spacey, there was a potential to win emmy nominations for that. If you back great talent, they will win awards and it is lifechanging for them. For consumers, it does not matter as much. They are not as visible. But in the talent ecosystem, it is significant. David recently you made an announcement that stunned a number of people which was that you were bringing in your chief content officer, ted sarandos who has been with you for 20 , plus years and making him the coceo. Usually people who are ceos and founders do not give up a lot of power. Why did you do that, and were you surprised that the reaction was a surprise . Reed ted and i have worked for together for 20 years and we have been virtual coceos for the last several years. We have been paid the same. We do not really do anything material without checking in. With each other. This was just acknowledging and formalizing what has been. Externally, it is a change and that helps on teds stature and ability to do big deals, but internally, it is no change at all from how we have been operating. David at the time of the announcement, you said you were good for another decade. So, in october if i have got it right you will turn the big 60. By 70 you might be ready to slow down. Is that a Fair Assessment . Reed you tell me. What is your experience of 60 to 70 . David i would say workaholics dont Pay Attention to age and so as long as your health is good, i do not think you will change that much but when you , get 70, might look around and say i would do something else, but you have a long 10 years ahead of you i suspect. Im sure you will be in great health to do it. Reed i am super excited about it. There is a lot we can do in terms of bringing the world together, sharing stories from around the world. As the internet grows to every human being, i think there is an just amazing opportunity ahead. David what would you say is the key to leadership that enabled you to be what you are today . Reed you want to be super proud of the organization and personally humble. David i assume you are coming to us from your bedroom. Reed it is actually my sons old bedroom. We are locked down in covid. We are working out of the home. David how have you found that to be . You are a Technology Company so people would presume you are good at adapting did it turn out , to be harder than you thought . Reed the hardest thing has been producing our films and series , you know because that is very onset in that physical realm. We are working on that. I would say it is a hallmark of culture of the adaptive. No one waits for me to tell them what to do. When you build a culture as we have, everybody pitches in and figures out what they need to do. An example would be our animation group. I cannot take the credit, but they moved hundreds of workstations out of the office into the home over a weekend and have been able to continue to produce great animated films and series from the house in a way that was remarkable and not centrally directed. David many ceos that i have say, offcamera they , are not going to be hiring back everybody they once had. They realized they can get by with fewer people and they do not need as much of a space because people are happy to work from home. Will that be true in your case . Reed the virus has been so tragic for people, the economy and unemployment, certainly hotels and other businesses like that are down. Unfortunately as an internet , business, we are up, so we fortunately as an internet , business, we are up, so we have continued to hire through this crisis. We are adding new buildings. We are incredibly fortunate. David you and your wife recently made a contribution to Morehouse College and spelman college. Why did you decide to do that . Is that your largest philanthropic contribution . Reed no, it is not the largest, but is the loudest. We tend to be quiet about these things, but we wanted to show solidarity for black education and black education is so critical to economic mobility, political mobility, and the sense of belonging. The challenge, you know for us , as a culture is really the , legacy of slavery. It continues to be a tremendous scar across the soul of america and, you know it is awful and it , is so bad that it is hard to look at and talk about and it is so hard to look away. We have not come to terms with the legacy of slavery in our country. Againis modest donation, relative to the black economic need is about black economic gains and education. David the story i read was you were considering a gift of 1 10 that size and at the last minute you increased it. When you called the head of the United Negro College fund, what changed your mind . Reed i have known the head for a decade and he has taught me a lot about race in america. We have been a donor for a number of years. But it was really the current time that got us to make such a substantial, and frankly, public donation. To again, bring attention to the role of the hbcus, historical black colleges and universities like morehouse and spelman and , to support their work because they do develop thousands and thousands of black leaders throughout this country. The really positive part of our education system. Because white capital tends to flow to white organizations, there is relative capital isolation in the same way we have social isolation. And so, we wanted to be part of building those bridges. David the industry i have been in, the Financial Service industry, has not been replete with as much success as it would like in terms of minority hiring. The Technology Industry is probably somewhat that way as well. Is there something you can do at netflix to enhance your minority hiring . Reed we published the data and we have made great progress and we have doubled our number of africanamerican employees over the last three years. You know that is throughout the , business, but in particular on the media side. Our tech side is still underrepresented. As is the field, so we had a long way to go, but we are trying to make those efforts not only for africanamericans but to many underrepresented groups both in in america and around the world. David people who are watching this will say i want to be like , Reed Hastings. I want to build a great company, be successful, have a great family, philanthropic leak, be active. What would you say is the key to leadership that enabled you to be the one you are today . Reed it is about achievement of the company as opposed to personal achievement. You want to be super proud of the organization and personally humble. David i assume you hear from your high school classmates, your college classmates, your stanford classmates telling you they always know you were going to be successful and by the way, they have a script for you and Something Like that. Do you hear from a lot of people like that . Reed yeah i stay in touch with , a lot of friends that way. I was definitely a late bloomer. I do not think i was one of those people that was marked at an early age. You know, when you read about at age 16 how unbelievable they were. I was very average, runofthemill kid. I have been super fortunate with a series of events in terms of my First Company doing well, having that idea that laddered into being able to do netflix. I feel incredibly fortunate, which is why my wife, patty, and i are so dedicated on philanthropy. It seems to us miraculous that we have this money and we live a very comfortable life, but it is really the excitement of using that money to help others. David let us suppose 10 years from now when you say you might netflix,our spurs at you might, you are not committed yet, what might you do . Would you run for office . You want to be president of the United States . 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