And brought to you today by your television provider. Peter Reed Hastings and erin meyer are the coauthors of this book, no rules rules. Mr. Hastings is also the ceo of netflix. What is netflix and what do you do . Reed netflix is the worlds leading entertainment service. We produced Television Series and movies. Weve been around 20 years and have about 200 million families around the world who are members. Peter is there a connection to the 1998 companies where you had 900 movie titles and 30 employees . Rita theres a little connection to that. We started about 22 years ago, mainly dvds in the united states, competing with blockbuster. That was a full decade, really, we were competing with video stores dressed in the u. S. Thats 2007 when we started streaming, roughly the same time youtube did. Peter erin meyer, how did you get involved in this project . Erin i study cultural differences in the workplace. I am a professor. On the internet way at the beginning it said things like adequate performance gets a generous severance. And that genuinely shocked me. In Business School, we were talking about Psychological Safety to promote innovation. So here i had a company that was not focusing on Psychological Safety, but instead focusing on getting rid of people who didnt perform adequately. There were also things like they had no vacation policy, travel policy, things that got me think about how a culture like that could work in an organization. Thats when i saw there was Something Interesting the world can learn from this company. Peter well, your book, the culture map is what connected you two, correct . Reid correct. I was fortunate enough to be recommended the culture map by a friend. Its an exploration of Different National cultures in a corporate situation, the french and the mexicans and americans. And it spoke to many of the challenges we have at netflix. So, i looked erin up and asked her to be a speaker in this internal conference at netflix. And i realized she would be perfect as an astute observer of culture to write the book. And the point of having a coauthor is, like many people, ive read a lot of ceo pontification books. And every time i read them i wonder what its really like in the middle the company. And i thought ok, we get erin in, shes got her own good reputation and is a Business School professor. Ill give her open access to interview throughout the world and let her write honestly about the reality. And some of the readability comes from the tension of me doing the theory and erin talking about the reality of employees experiencing it. Peter and erin meyer, you were really aghast when Reed Hastings sent out an unfinished draft of a chapter to employees . Erin [laughter] im sure reeds happy to hear about that again. One of the leadership tenants was the importance of being transparent with your employees. That level of transparency is way beyond what you find at many companies. And that is spearheaded by reed. So one of the experiences i had was i worked at length in this chapter, but it was nowhere near finished. I sent it to reed to work on. A couple of weeks later, one of the employees said, when i was reading the chapter that you wrote and i was like, what . And he said, oh yeah, reed sent that to the managers at netflix. I was like, all of the managers . And what i found out was that when they talk about transparency, he means helping everybody, even when its not finished. Peter youre quoted in the book as saying you love the netflix culture for its honesty but loathed it for its content. Erin yeah, that was my first reaction before i started doing the interviews and understanding netflix. I think thats one of the reasons reed was interested. It provided a tension and his belief as to why that kind of Corporate Culture would lead to success. And i already mentioned feeling shocked about the adequate performance, gets a generous severance. There is another part which was about candor. And what it says is dont Say Something about somebody you wouldnt say to their face. And of course, most of us spend a lot of time at work talking about people. So i just couldnt imagine how that could actually play out in a work environment. And then i got to netflix and started to see it in action and the advantages going with it. Peter and what are some of those advantages . Erin well, i guess ill give a personal example. One of the first things i did with reed and his team was give a presentation at a leadership conference. I was giving this keynote, right . All the Vice President s and directors were there. I thought it was going well. I was a little nervous because i was working with new content. But they seemed engaged. I started walking around. And one of the women, who is having a discussion with one of their employers, was talking with great hand gestures. And when she saw me, she beckoned me over. And she said to me in front of her group, right, she says erin, the way youre presenting this information is really undermining your point. Because when you ask questions, its only the americans who raise their hands and therefore were not getting diversity. She said i dont think we can take this to heart given the poor delivery youre giving. I was like, oh my gosh, somebodys giving me feedback right in front of the keynote. Then i took about three minutes to think about how to reorganize the discussion. But i actually think of that candor that saved the presentation. Thats what we see with this kind of candor and netflix. Sometimes it hurts. Sometimes it feels kind of inappropriate. But it almost always helps improve performance. Peter Reed Hastings, what caught me about that part of the book was why were you holding a conference in cuba . Reed [laughter] because were expanding globally. It was a symbol of we want to entertain people everywhere, including cuba. Peter and do you have a presence in cuba . Reed unfortunately, in the last four years, the hopes of opening up the internet in cuba has diminished. So, were on our way to a great presence there, which we have a strong presence in brazil, mexico, many other latin countries, but not cuba. Peter in your book, no rules rules, talent density is referred to in your book. Reed youd rather have 10 amazing people who work well together than 20 not so good who dont work well together. If you can combine people who are very talented and have good team skills, in many cases, a small number can be very effective. Thats talent entity. Peter erin meyer, first of all, when you hear the words, Corporate Culture, what do you think of . Erin well, my first book was about National Cultural differences. Id never been interested in Corporate Culture until i came across this company. The Corporate Culture is a list of aspirational dreams as to what we like this company to be like. So, we believe in integrity, or we believe in respect. And it just seemed like we didnt really have a life in the company. What i saw with netflix, reed, he was helping employees to make decisions by looking at these tensions, tensions between talent density and feeling secure at work. And its only really when he helps people deal with tensions the Corporate Culture would come alive in the organization. And thats what i thought with netflix. One of the first times ever i see a company that what they say is their culture is really in the company. Peter now, could this culture be taken to a ford or a gm and be implemented there . Reed thats a great point. We had 200 years of factories providing Enormous Economic help to our cultures. Its a very topdown system. You have a senior boss and all of the workers who are supposed to never make a mistake and assemble a perfect car or a perfect pharmaceutical or hopefully a perfect airplane. And so the manufacturing paradigm is very strong because its very valuable. And that topdown culture is wellsuited to a factory. Then youve got another type of work, Creative Work. It used to be very small. And now its grown to be a substantial part of the economy. And were over influenced by the factory paradigm. And really, with Creative Work, you want to increase variation, not decrease it like in a factory. With Creative Work, you want to expand it and learn and try new things. Think of it as fertile is the goal in our culture, and sterile is the goal in a factory. You want repeatable stuff. You may have to go to the edge of chaos to get the best ideas. So again, as the Creative Sector has arisen, we havent figured out what are the right paradigms for Creative Work . And the netflix culture is one example of that, where its really incredible employee freedom, where theres no rules. And thats a hard way to manage because youre managing on the edge of chaos. You have all these complicated systems about culture and chaos thats all helpful. But think of it as a set of paradigms wellsuited to Creative Work. And our culture is not suitable for safety critical work or manufacturing work. And its the beginning of new paradigms for Creative Work. Peter so, writing a book, thats using a rather old medium to put your ideas down in, isnt it . Reed we first put these ideas down online, slide share, and there have been over 20 million views. But we really wanted to do a book length treatment, where we took the time to edit, write out the stories, reedit, sort of a highly polished, well thought through version of the story. And those who have read the culture memo will see a fuller explanation of why it works. Peter erin meyer, after your indepth study of netflix, where are your criticisms still . Erin well, before i move there, let me build on what reed was saying, whether theres a place for this kind of culture in a ford or more traditional manufacturing company. What really struck me as i was, as i was doing this research on netflix, is any area of any company thats seeking to be more innovative or flexible or trying to figure out how to reinvent themselves more quickly can benefit from these principles that reed is using at netflix. You might be working i was working this morning with michelin, a manufacturing environment. But certainly there are areas of that company that are focused mainly on innovation. Certainly, any organization, any team leader and ceo, anyone who wants more innovation can learn from creating this sort of fertile environment reed was talking about. You asked about criticisms. Of course, one of the things about doing something kind of edgy like this is that there are always these difficulties that go with it. One of the big things that comes up is that of course if were focused on talent density, some people are worried about whether theyre going to lose their job. And then theres a lot of thinking about that at netflix about how to reduce that kind of sort of worry while taking advantage of this talent density. Peter you have a story in the book, comparing npr being a family to netflix being a team. Erin thats right. I think reed is better to talk about that, but whereas most Companies Think about their organizations, think of them as families. Like, we have longterm security. We put up with one another even when we have bad behavior. An olympic team is more what reed is going for at netflix. That might be changing based on whos best at that time. Peter mr. Hastings . Reed i totally agree with what erin said. When we say were a family, that makes people cynical. They intuitively know a family will stick together. A family we admire, a good family will stick together no matter what. And thats just not the way corporations work. Peter in your book, no rules rules, you write, employees arent allowed to let me drive this company off a cliff. Peter it comes with a quote from my coceo. He was choosing how many dvds to buy for certain films. He said, i dont think thats going to be a very popular film. He ordered less than he would have. We ran out and customers were unhappy. When i said, why did you order so few . You said it wasnt going to be very popular. And thats when i said, ted, you have to do what you think is right to help the customers and the company. You cant be trying to please your boss, me. You cant let me drive the bus off the cliff. You have to fight for the benefit of the company. And in general, we say dont seek to please your boss. Seek to please the customers and to grow the company. So we want people to actively think independently, not just to implement your bosses wishes. Now, you should never hide anything from the bosses. Certainly, you should tell them. But the idea is to get people thinking about how to best please the customers and grow the company. And if they do, you get the tremendous results weve had over the past 20 years. Peter mr. Hastings, youre the founder of the company, largest stockholder, the ceo. You say you dont have an office. But at the same time, there are some inherent qualities that are going to make people do what you want. Reed sure. I lead by direction and example. And i talk about whats important, like customers, how they want to relax after a hard days work and just laugh sometimes. Other times, they really want to be pushed in terms of the content they watch. And so ill try to bring the Customer Experience home. Ill talk about culture. And its not that i dont want some things. Its that we want everyone else to also want things. And in those conflicts or disagreements, a lot of good things come out of that. Peter so, erin meyer, is it tough for a ceo to, in a sense, let go of that control . Erin i think its an interesting process reed has implemented. Reed has strong opinions. On the other hand, he has strongly made it clear throughout the company that he wants people to be clear with him when they disagree with him and where they have candid feedback for him. They have this whole thing, farming for dissent. Which is all about you are disloyal to the company if you feel disagreement for what the organization is doing or boss is doing and dont express that disagreement. So you were asking reed earlier about whether people really dared to give him feedback given his level of power. I would say its really remarkable how frequently people do get back, partly because he celebrates it whenever it happens. Peter mr. Hastings, how do you define your job today, and how much time do you get to just think . Reed i get a lot of time to think nights and weekends. In the traditional work hours, i tend to be in meetings and talking with people, and trying to understand what theyre working on, talking through various situations in certain countries, how were evolving, if the content mix is right. I want to know whats going on all throughout the company. But then i dont reach in and say, lets cast this person instead of this person. If i detect, in general casting, lets say too many men, its probably more limited to one area. And i would try to abstract that a little bit and go to the principles of it, which is there is a broad range of storytellers and we should have a broad range of storytelling and kind of get to the underlying lesson rather than fix the tactic. So, im always trying to be a teacher, essentially, abstract what i see. But to do that, i need to be highly involved and know whats going on throughout the company. So, thats the recipe, essentially. Im always trying to build organizational muscle rather than fix particular problems. Peter question for both of you, is the geographical area of Silicon Valley important, indispensable to what you do . Reed its one of many indispensable areas. And certainly the culture and i come out of the Silicon Valley culture. But at this point, its a fraction, well less than half of our employees are Silicon Valley. So, its super important to what we do. About two thirds of our spending is on content. We have a majority of employees in hollywood. So were really an entertainment company. Of course, all modern companies are tech powered. Disney is coming out on the others. They have super entertainment. They have pixar and animation, now they have disney plus. I think all the Entertainment Companies are getting tech infused. Peter erin meyer . Erin yeah, i think ill add to that. When i started working with netflix, they were just getting ready for this enormous international expansion, which was quite interesting for me since i studied cultural differences. In 2016, were moving all over the world. So, one of the things we write about in the book that i was very interested in researching was how this provocative and surprising Corporate Culture that was leading to this enormous innovation and flexibility could be implemented in countries around the world, like in japan and singapore and brazil. So, we really talk in the book about how to take your Corporate Culture, which may be very useful to you at your headquarters, and we figure out how to make that work, even when its in direct contrast with some of the National Cultures that you may be moving into. So i think thats a really interesting part of the netflix story. Peter Reed Hastings, sheryl sandberg, bill gates come up in the book. Whats the level of collaboration or friendship among ceos in Silicon Valley . Reed its quite variable, im sure. So, those particular three people that you mentioned i have had longstanding relationships with. But i would say Silicon Valley is a very competitive place. And, you know, most and netflix doesnt compete with them. We compete with other Entertainment Companies like disney and hbo. Not those tech leaders you mentioned. So its friendly because its not competitive, whereas with the Entertainment Companies it can be a more challenging relationship. Peter well, we cant finish this without talking about my favorite person in the book, and thats patty mccord. Erin meyer, did you have a chance to talk to patty mccord . Erin i talked to patty a lot. [laughter] shes a great storyteller and has an incredible memory. Often, were switching from one story. She always had a story to provide to me. Shes an important character in the book. Peter who is she, mr. Hastings . Reed patty mccord was our founding head of hr. Was with us over a decade, and really pioneered a lot of these ideas, gave us permission and pushed us that we can be great for employees without rules if we focus on giving them a fertile environment that stretches them. And that became the way we oriented everything. Peter and one of those no rules is vacation time. Reed you know, its a funny thing. We dont count how many hours someone works in a day. We dont know if someone is working eight hours, 10, 12 hours a day. Yet in the old days, we used to count vacation, whether someone is working 46 weeks a year, 48 weeks a year, 50 weeks a year. And we realized, why do we care between 46, 48, 50, if were not even measuring 8, 10, 12 in a day . Its this industrial hangover im talking about from this factory mindset. Lets just let everybody take what they want, and its worked out great. I try to set a great example by taking a lot of vacation. So thats been very positive. Its not that we beat blockbuster because we have unlimited vacation and they dont. But its a powerful symbol of Employee Trust with almost no risk. As patty mccord used to say, we dont have a clothing policy either, but no one has come to work naked lately. So, the lesson is societal norms work fine for many things, such as its good to Wear Clothing in the office, and vacations are a good part of your life, but works important, too. Peter Reed Hastings, when you, in the evenings and on the weekends, have time to think, what do you think youve achieved in the last 22 years . Reed well, i never think about that. Im always thinking about what we have to achieve a and how hard it is. And the key is relentless dissatisfaction. I count my success to date as a good start. And what we want to do is build a company that entertains the world, connects people. People learn so much from entertainment of other peoples lives, other countries, other cultures, other racial groups, other genders, all kinds of things that you really learn through entertainment and exposure. And when you think about how big the internet is around the world, over 6 billion active mobile phones, we have a tremendous opportunity to continue to grow, and were just getting started. Peter our big threat in the long run is not making a mistake, but lack of innovation. No rules rules is the name of the book. Erin meyer and Reed Hastings are the coauthors. [captions Copyright National cable satellite corp. 2020] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] youre watching cspan, your unfiltered view of government, created by americas Television Companies as a Public Service and brought to you today by your television provider. 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