Valuetainment - Episode 358： How Netflix Destroyed Blockbuster Video - Patty McCord

00:00:00.000 30 seconds. One time for the underdog. Ignition sequence start. Let me see you put them up. Reach the sky, touch the stars up above. Cause it's one time for the underdog. One time for the underdog.

00:00:16.840 I'm Patrick Biddy, host of I Tim. And today's guest I'm interviewing is Patty McCord, the former chief talent officer of Netflix for 14 years, where they helped the company go from zero to $150 billion. We're going to talk to her today.

00:00:31.060 Patty, what I hear is the fact that you're at a different event. You're speaking at that event. You took a quick flight to come. You got to get back to the event.

00:00:37.460 I did.

00:00:37.880 Is that really what's going on right now?

00:00:38.920 Yeah, yeah, yeah. And my flight was an hour late because we had a flat tire.

00:00:42.780 Planes with flat tires nowadays.

00:00:44.200 You know, guys are kind of rolling it up.

00:00:46.360 Literally.

00:00:46.900 Yeah, literally.

00:00:47.860 Well, I'm glad whoever changed the flat tire is here.

00:00:50.460 They probably called the AAA. I don't know if planes called AAA.

00:00:53.740 What a lovely introduction. Thank you.

00:00:55.020 Yeah, I was really fascinated by your story and what you built. Literally, when I started going through, I'm like, and maybe part of it was because I'm going through right now with hiring an HR person and we're going through that culture.

00:01:04.920 But the timing was so perfect where I'm like, people need to know about the kind of culture you guys built.

00:01:09.700 And so, one is, before we go through the story of, you know, what's happened, what's taken place with the business on how Netflix became the success story that it is, maybe let's go back at the infancy stages of the business while you guys were first going through it.

00:01:25.460 You know, beginning stages while you're working with Reed Hastings.

00:01:28.340 You know, did you guys really know what you had?

00:01:31.660 Was it like, yes, we're going to one day do it?

00:01:33.920 Was it vision?

00:01:34.620 And what was it?

00:01:35.420 No, no, no, no, no, no.

00:01:39.040 Okay, let me tell you the pre-story because it's a good story.

00:01:41.820 Reed and I worked together at another company, which was a software tools company.

00:01:45.340 Reed was an engineer.

00:01:46.360 He wrote the original product.

00:01:48.640 We grew through merger and acquisition.

00:01:50.700 In the five years we were together, we went public and acquired four other companies.

00:01:54.380 Every company that we acquired was twice as, when we got together, we were twice as big.

00:01:58.780 So we were 100 people, 200, 400, 800, 1,600, and then we got acquired by our largest competitor.

00:02:05.640 And honestly, it was my first big HR job.

00:02:09.920 I started out as a recruiter, and Reed hired me because it was the only skill he thought was actually necessary in HR. 0.83

00:02:17.560 He was like, all that other stuff is bullshit, but you're a recruiter, so I'll hire you. 0.80

00:02:21.500 He flat out said that to you. 0.99

00:02:22.520 He flat out said that to me.

00:02:23.660 After he hired me, probably wouldn't have taken the job if he hadn't.

00:02:26.760 So we sold the company, and Reed made a bunch of money, and he invested in a bunch of startups, and one of them was Netflix.

00:02:34.160 And for those of you who are in the U.S., anybody use DVD by mail?

00:02:39.380 Okay, so the first product was, so he calls me up in the middle of the night, and I knew about the idea because he had told me about it.

00:02:46.900 He says, are you sleeping?

00:02:48.160 And I said, yeah, geek, I'm normal.

00:02:49.840 It's 2 in the morning.

00:02:50.620 And he said, I'm going to go run Netflix, and I said, sounds like a great career move.

00:02:57.000 You go for it, big guy.

00:02:58.880 And he said, well, I want you to come, too.

00:03:01.600 And I'm like, you know, I need to go back to sleep because, first of all, who's going to use this product?

00:03:10.220 There's only, I only knew four people that had DVD players.

00:03:13.260 They cost $1,500, right?

00:03:15.680 But, and so I'm like, who's going to use this product?

00:03:18.340 Is this 94?

00:03:19.040 Is this 96?

00:03:20.000 Seven.

00:03:20.520 97.

00:03:20.880 97, okay.

00:03:21.700 I said, you know, I'm consulting.

00:03:23.660 My kids know my name.

00:03:24.720 I'm having a pretty good time.

00:03:27.040 Don't ask me to do a startup with you.

00:03:29.040 I know what you're talking about.

00:03:30.280 Go call a stranger and say, startup would be fun. 1.00

00:03:33.340 And third of all, this is the dumbest idea I've ever heard. 0.98

00:03:37.580 And he said, I'll make it compelling. 0.99

00:03:41.260 I'll make it so that you can't say no.

00:03:42.860 And I said, there isn't a possible thing you could say to me.

00:03:45.920 And he said, what if we build a company that was really successful and we loved working there

00:03:52.040 and we just built the kind of company we wanted to work in?

00:03:56.500 Okay, now I'm awake.

00:03:58.800 And I said, well, how would you know?

00:04:02.800 Right?

00:04:03.060 Good question.

00:04:03.340 If we did that, how would you know?

00:04:04.700 And he said, oh, I'd want to walk in the door and solve these problems with these people every day. 0.98

00:04:09.240 I'm like, damn, that's good. 0.97

00:04:10.700 And he said, how about you? 0.98

00:04:11.560 How would you know?

00:04:12.100 And I said, wouldn't it be great if we were a great place to be from?

00:04:16.540 Like if having Netflix on your resume meant something.

00:04:19.840 Because I was in, I didn't, I'm a recruiter, right?

00:04:21.860 Like, you were at Apple?

00:04:23.320 Wow.

00:04:24.040 You know, so I didn't know at that time how profound my statement was.

00:04:31.000 Because when you build a company that is a great place to be from,

00:04:34.580 and you say that you want it full of people who, when they leave, which most people do,

00:04:41.080 that they walk away saying, God, that was, I did something that was unbelievable with people that I really loved working with.

00:04:50.100 I accomplished something that people use, right?

00:04:52.520 And so, you know, I had to, that was compelling.

00:04:56.320 But the beginning was, you know, we were blockbuster online, we had due dates and late fees, we couldn't get any content, nobody would sell us anything, we bought DVDs at Walmart.

00:05:05.760 I mean, I would go to Walmart with my shopping cart and fill it full of DVDs.

00:05:11.660 Really, it was, it was bad, bad, bad.

00:05:13.920 Now, let me ask you, at that time, Patty, who was Reed at that time?

00:05:17.340 Like, meaning, what kind of reputation did he have with you of working with him?

00:05:21.220 Well, the, we had sold the company that we were in together for quite a bit of money.

00:05:26.540 And so, we made the investors a lot of money.

00:05:29.560 So, he was pretty golden in terms of rainmaking.

00:05:32.060 But in terms of the man I knew, you know, when I met him, he was, I would have to lecture him in the morning and say, look, if you're going to sleep under your desk, please get the fuzz out of the beard in the morning, because it looks tacky, right?

00:05:47.240 He was a, he was a geeky engineer.

00:05:49.520 And his transformation to a great leader was when he realized, I caught him one night, this is at the first company, I caught him one night, I walked in, it's like seven o'clock at night, he's at his computer, you know, in the glow of his,

00:06:02.060 the computer, and I said, oh, are you working on the slides for the company meeting tomorrow?

00:06:05.680 He's like, yeah, that's what I'm working on.

00:06:07.620 I walked behind him and I said, you're bug fixing.

00:06:11.240 You found a bug in the software and you're working on it.

00:06:13.040 He's like, well, somebody's got to do it.

00:06:14.540 I'm like, yeah, somebody's got, like, how about these people that we hired to do it?

00:06:18.800 You have a big speech tomorrow. 0.98

00:06:20.880 Reed, if you want to follow, then God damn it, lead. 0.99

00:06:24.340 Wow. 0.99

00:06:24.820 And I stomped out.

00:06:26.100 Was this prior, this is not Netflix.

00:06:27.420 This is not Netflix.

00:06:28.100 At that time, is he known in the market?

00:06:29.380 Like, does he have a name like he is Reed?

00:06:31.340 Like, do they look at him as?

00:06:32.680 No.

00:06:33.260 No.

00:06:33.900 No.

00:06:34.300 He's just another Silicon Valley.

00:06:36.740 I mean, he's successful.

00:06:37.720 He made a bunch of money and so that makes you famous, right?

00:06:40.600 Having a successful IPO is important.

00:06:42.960 Sure.

00:06:43.120 But he's not famous like he is now.

00:06:45.640 And so at Netflix, like, what was different was we both made a commitment to each other

00:06:52.720 that we would try to create the best possible place we could.

00:06:59.000 And we didn't mean people were happy, right?

00:07:01.700 Because I'm not very touchy-feely.

00:07:03.600 You can read it in my book.

00:07:05.340 No.

00:07:05.560 Nobody's ever called me touchy or feely.

00:07:07.720 But people hugged you when they left, though.

00:07:09.380 People cried when they saw you a couple years later after work.

00:07:12.040 You know, I used to do, when I first started speaking, I would do a lot of talking about

00:07:15.880 how your employees aren't your family and you shouldn't use the word family.

00:07:19.440 And then when people meet me, they say, they read my book and they meet me and they say,

00:07:23.260 you know, I hope you're not offended, but you're pretty nice.

00:07:26.360 Like, I kind of didn't expect you to be nice and I didn't expect you to be warm.

00:07:31.220 And, you know, I'm the queen of the good goodbye.

00:07:35.660 And I think you can say goodbye to people with affection and grace and dignity.

00:07:40.740 And I'm really, really good at it.

00:07:42.960 And so what I now say is my lifelong friends are from work, right?

00:07:49.500 I mean, I would trust my children's lives with the people I worked with at Netflix, but it wasn't.

00:07:54.520 But it's not a family and it wasn't always fun.

00:07:57.660 That's why, you know, like I've been crazy when I left Netflix.

00:08:01.020 I was sort of at the beginning of this whole San Francisco startup scene.

00:08:04.800 And I would go into all, every single office was really cool and every single office had plants and every single office was open and every single office had a bartender, right?

00:08:16.880 And I'm like, really?

00:08:18.000 You raised, you know, you raised this much money in your second round and you're spending it by putting a bartender on payroll?

00:08:25.140 And they're like, you know, we're worried we might have some issues of sexual harassment.

00:08:28.240 And I'm like, you think?

00:08:30.240 I mean, you've got a bar at work.

00:08:33.400 And I would talk to people and they would say, you know, it's our job in HR to make people happy.

00:08:37.600 And I would give them this assignment and I'll give you this assignment.

00:08:41.800 Find two, three people in your organization that are amazing.

00:08:46.520 You know who they are, right?

00:08:47.800 The people that really accomplish amazing stuff.

00:08:49.880 And ask them to tell you a story about, tell me about the thing that you're most proud of, right?

00:08:56.320 Something that you accomplished that you really thought made a difference.

00:08:59.880 And every single story will be about something hard, right?

00:09:04.520 And so my fundamental belief is what makes us happy at work.

00:09:08.560 That's so powerful.

00:09:09.460 Is accomplishing things.

00:09:11.460 It's always when you go, man, we didn't think we could do that.

00:09:14.240 We sure didn't think we could do it by that deadline, but we did it, right?

00:09:17.600 And the stories are also always about team efforts, right?

00:09:23.720 It's always a we, right? 0.97

00:09:25.500 And if the person's an I person, you probably don't want to hire them anyway because all of your companies, all of the things that you're doing, it's a team effort.

00:09:33.980 So that's what I just fundamentally believe.

00:09:37.360 And so I fundamentally believe that.

00:09:39.280 And then it took me until Netflix.

00:09:41.300 So that was a long way in my career.

00:09:43.380 I'm an old lady to realize that you could actually build a company with adults.

00:09:51.340 And I don't mean old, you know, because all of you know really mature 20-year-olds and we all know really immature 40-year-olds, right?

00:10:01.060 And so we started sort of screening for adult behavior.

00:10:05.980 And so if you hire people who are adults and they're smart and they care and they can and you expect a lot from them, it goes pretty right.

00:10:16.480 So let's start with that.

00:10:17.660 Because there's a few things I'd like to accomplish with the sit-down we have together.

00:10:22.180 One is recruiting.

00:10:24.180 Two is when it's time to go.

00:10:26.140 Three is repositioning and putting people in better places.

00:10:28.900 But the most important one to start off with is, I mean, for Cheryl to say what she said about what you guys came up with, we've got 15 million hits.

00:10:38.220 That's pretty wild right there.

00:10:39.580 Okay, here's the back story of the Netflix culture deck.

00:10:41.560 Tell us.

00:10:42.180 So when Reed and I went to Netflix, the thing that we vowed to each other that would be different was we would actively control the culture as much as we could.

00:10:50.360 We would be deliberate about it.

00:10:51.840 We wouldn't let it happen.

00:10:53.100 And so what we would do in order to do that is we'd write it down.

00:10:55.700 So at the time, Reed was a guy who thought in PowerPoint.

00:10:59.540 He does outlines, right?

00:11:01.300 So PowerPoint's good for him.

00:11:02.900 And so he said, let's have an off-site and we're going to talk about values.

00:11:06.880 And I said, let's not.

00:11:08.040 We've got a business to figure out.

00:11:09.640 And it's usually just an esoteric waste of time.

00:11:12.080 You know, Enron said integrity and they carved it in marble and they didn't mean it.

00:11:16.420 So I don't want to do that.

00:11:17.600 Like, tell me what to put on a T-shirt.

00:11:18.940 We'll buy some T-shirts.

00:11:19.780 I don't care.

00:11:20.560 And I said, but you know what I will do?

00:11:22.440 I will write down behaviors.

00:11:23.880 Let's write down, like, if we say integrity, we need to say, this is what it looks like.

00:11:29.460 This is what you act like when you have integrity.

00:11:31.780 And this is what it looks like when you don't.

00:11:33.680 And if you don't, you don't work here anymore.

00:11:35.640 It's going to be that straightforward.

00:11:37.720 So we did that.

00:11:39.280 And if you, those of you who have ever seen the Netflix Culture Deck, that's the first part of it.

00:11:43.060 We rewrote that section seven times.

00:11:45.600 Because we would, what we'd do is we'd get back with all the leaders of our team and we'd say, okay, let's go through this.

00:11:53.180 Name a person that's doing this.

00:11:54.520 Name a person that's doing this.

00:11:56.180 And if we couldn't, we would say, is that a value that really matters?

00:11:59.680 Is that a behavior that we care?

00:12:01.460 Is that, are we true to ourselves?

00:12:03.180 Okay, that's chapter one.

00:12:04.640 Okay.

00:12:06.480 In the year 2000, we were going to go public.

00:12:10.600 We were pitching our IPO on Sand Hill Road.

00:12:13.040 We were drinking champagne and eating caviar.

00:12:15.260 And we were going to have $100 stock in private jets.

00:12:19.080 Because Pets.com did.

00:12:21.400 And Webvan did.

00:12:23.120 And so it was our turn, I mean, after all.

00:12:25.420 And we were going to be a portal.

00:12:26.840 We were going to be, sell ads and movie stars.

00:12:30.660 And we were going to be everything entertainment.

00:12:33.520 And the bubble burst.

00:12:36.820 And the bankers pulled the IPO and we didn't make it.

00:12:39.920 Is this the time where you lost the 30-year employees?

00:12:41.940 Yeah.

00:12:42.460 So this is when we, I laid off 30% of the workforce.

00:12:47.760 So it was, we ran out of money.

00:12:50.160 And so we had one chance to make it.

00:12:52.360 We were either going to, the business was going to be, it was subscription business, right?

00:12:55.780 So we had to build a base.

00:12:56.840 And every, the marketing dollar that we spent acquiring a new customer was a dollar that was lost.

00:13:02.260 Because it didn't come back in the subscription for many months, actually.

00:13:06.840 So I said goodbye to anybody whose job it was to tell somebody else what to do.

00:13:12.160 All of middle management.

00:13:13.600 Anybody who wasn't technically competent to work on DVD by mail only.

00:13:17.720 Anybody who was a baby or a whiner. 1.00

00:13:22.780 Because I just couldn't, I couldn't tell the guy who complained about the color of his t-shirt that we literally didn't have any money left for t-shirts.

00:13:31.920 So we did that.

00:13:33.300 It was, it was very difficult for us.

00:13:35.820 But that Christmas, so now it's 2001.

00:13:39.180 DVD players dropped to $99.

00:13:41.540 If you're in the U.S., you had one under your Christmas tree.

00:13:44.140 And in that DVD player box was a coupon that said, try Netflix for free.

00:13:48.980 And our business went, whoosh.

00:13:51.020 How'd you get that contract?

00:13:52.840 You know, we, I, I went into Best Buy one night before Christmas and opened up boxes and stuffed in envelopes.

00:13:59.440 Because we got to deal with Best Buy that they would let us do it in certain DVD player boxes.

00:14:04.340 Oh, so you, so wait a minute.

00:14:05.460 Let me get this straight.

00:14:06.060 You guys put that in there?

00:14:07.640 Yeah.

00:14:08.600 Yeah, yeah, yeah, yeah.

00:14:11.460 We're scrappy, baby.

00:14:12.660 We're scrappy.

00:14:13.320 I mean, we're all over the, it's scrappy stuff.

00:14:16.100 You know, and we, because we couldn't, we couldn't put them in in China.

00:14:18.900 We couldn't afford the plane ticket to China.

00:14:21.540 It's really expensive.

00:14:22.640 That's great.

00:14:23.080 It's great.

00:14:23.820 So, business takes off and.

00:14:27.860 By the way, I'm still thinking about it.

00:14:29.200 That's insane.

00:14:30.840 Did you guys really hear what you. 0.75

00:14:32.120 Don't you guys do insane stuff like that? 0.91

00:14:33.280 That's insane. 0.61

00:14:34.320 That's great.

00:14:35.180 Love it.

00:14:36.180 Yeah.

00:14:37.800 Okay.

00:14:38.540 But, but yeah, we, we knew when we were doing well because we didn't have a bartender.

00:14:43.000 It's when I went over with my shopping cart and got beer that wasn't in cans to celebrate

00:14:48.480 something.

00:14:49.020 Okay.

00:14:49.640 So, business is going crazy.

00:14:52.180 We're working harder than we've ever worked.

00:14:55.400 Reed and I are driving to work one day and I'm like, I've never worked this hard in my

00:14:58.820 life.

00:14:59.100 He goes, me too.

00:14:59.780 I'm like, I've never had this much fun in my life.

00:15:02.140 And he goes, me too.

00:15:04.280 What is it?

00:15:05.980 Let's figure it out.

00:15:07.300 Right?

00:15:07.540 And so, we realize everybody is so focused.

00:15:12.800 And everybody, and, and here's how we would win.

00:15:16.260 Right?

00:15:16.580 This is the only hope we had was to make our product so much better that you'd get addicted

00:15:23.280 to it that you wouldn't ever want to give it up.

00:15:25.300 Right?

00:15:25.560 And so, the only metric that mattered was our customer.

00:15:30.360 And we knew that they liked it because they stayed because it was a subscription service.

00:15:34.820 Right?

00:15:35.180 And so, we had to constantly, constantly improve, improve, improve, improve.

00:15:40.360 And inside of the company, we started changing the way we communicated with each other where

00:15:46.540 if anybody would opine about something or have an idea or disagree with something, it

00:15:53.880 kind of, whatever the sentence was, it had to end with, because it affects the customer.

00:16:00.120 Right? 0.99

00:16:00.580 If you're being a jerk and my team doesn't want to work with you, then that's really problematic 0.98

00:16:04.660 because we're wasting a bunch of time and we got to get, make this feature for our 0.99

00:16:09.060 customers as soon as we can.

00:16:10.560 Right?

00:16:10.800 Because it's really a thing that they'll really want.

00:16:13.040 But, so it was like comma for the customer.

00:16:15.280 Okay.

00:16:15.740 So, that's when we wrote the chapter in the culture deck called High Performance.

00:16:19.660 And that's when we described what we thought were high performing people.

00:16:23.400 Adults, smart, good judgment, make the right call, would be able to go out and talk to other

00:16:30.080 people on the team to be able to be good team players.

00:16:32.540 Then, when I, and it probably took me four years to create the systems to actually have

00:16:42.500 high performance people.

00:16:44.640 Say, to create systems?

00:16:46.280 Yeah.

00:16:46.680 To have high performance people?

00:16:47.060 I had to have a really great recruiting team and I had to have, and I, and if I, if the

00:16:53.000 business changed, if I hired you to build something and two years in you had built it and you were

00:16:57.760 done and now I needed you to maintain it and you don't want to maintain it, you're a builder,

00:17:02.500 I'm not going to put you on a performance improvement plan, you're performing, right?

00:17:09.680 Over time, I would realize that I could just say, I think you're done.

00:17:14.860 So, what do you want to do here?

00:17:16.180 Because we only had one product.

00:17:18.340 I couldn't send them somewhere else in the company, right?

00:17:21.120 And so, I had to, instead of doing a 90-day written performance improvement plans, now this

00:17:27.620 took me years, that's why I'm telling you, it took me years.

00:17:29.600 Eventually, I could say, I don't think this is going to work out.

00:17:33.680 Here's three months' pay.

00:17:35.720 You want to work on your next great job, right?

00:17:38.760 So, I'm going to segue into a lesson I want to teach you about this.

00:17:41.880 But, so then we wrote high performance.

00:17:43.800 So, the Netflix culture deck took 10 years to write because it took 10 years to figure it out.

00:17:52.540 So, another day we're driving, Reed and I carpooled a lot.

00:17:55.140 But, he says, I met this woman last night who created this really cool company. 0.51

00:18:00.340 They put PowerPoint decks on the internet.

00:18:03.220 I said, that is such a great idea.

00:18:05.480 I wonder what people are going to put out there.

00:18:07.020 And he said, oh, I put the deck out.

00:18:09.860 It was an internal onboarding document.

00:18:11.980 We didn't write that to be a viral treatise on how to run your company.

00:18:15.860 We wrote it so that when you joined Netflix, we could say, oh, by the way, we should tell

00:18:19.460 you how it works around here.

00:18:21.220 And I freaked out.

00:18:23.040 Okay, so, anybody seen the Netflix culture deck, that PowerPoint presentation?

00:18:27.180 It's ugly as sin.

00:18:28.780 I said, oh, God, Reed, it's the graphics.

00:18:31.660 I mean, some arrows and the yin and yang.

00:18:33.840 Oh. 0.58

00:18:34.460 You know, and people kind of loved it because it was so dorky.

00:18:36.860 He said, you never told me it was dorky.

00:18:38.540 I'm like, yeah, I didn't want to hurt your feelings.

00:18:40.620 And then I said, you're going to scare all our candidates.

00:18:43.700 Because in the culture deck, it says adequate performance gets a generous severance package.

00:18:49.760 And he said, only the ones we don't want.

00:18:52.780 But what it did for us was it made our interviewing process really rich because we didn't just talk

00:19:00.760 about were you qualified for the job.

00:19:04.300 We talked about how do you like to work?

00:19:07.020 What kind of team player are you?

00:19:09.260 What's important to you?

00:19:10.900 Where are you at in your career, right?

00:19:13.260 Is it title that you're chasing right now?

00:19:15.600 Because we don't have any.

00:19:17.840 I mean, I call people senior software engineers.

00:19:20.800 They're like, you have one title for software engineers?

00:19:22.900 What's the salary range?

00:19:23.920 I'm like, oh, like 70,000 to 700,000.

00:19:28.540 How do you know you're senior?

00:19:29.900 I'm like, oh, you know.

00:19:31.680 You know, right?

00:19:33.180 Senior, you know, right?

00:19:35.020 Okay, so that's how the culture deck was written.

00:19:38.000 That's how it was not.

00:19:39.200 We didn't release it.

00:19:40.720 That's how it went viral.

00:19:42.560 We had no clue that people would pick it up like they did.

00:19:46.220 Crazy.

00:19:47.020 The reason why I wrote my book was that when I left Netflix, every CEO in the world would

00:19:51.700 throw the culture deck down and say, I want to do this, and I would say, by the way, newsflash,

00:19:55.940 it took 10 years to write, and so I wrote my book, and my book is like the Hitchhiker's Guide

00:20:00.920 to the Netflix culture deck.

00:20:02.820 So there's a methodology I want to teach you, all of you, that will encompass when to hire,

00:20:08.380 when to fire, who to hire, that I think is really helpful, and it's this.

00:20:14.280 Imagine your team six months from now, and I think six months is a really good amount

00:20:19.960 of time because our businesses move so fast now.

00:20:22.800 I have a hard time with companies that still do five-year planning.

00:20:25.720 I'm like, you know that you're just making up the other three years, right?

00:20:28.500 We all know that, right?

00:20:30.300 So let's say in six months you have a team that is amazing, not better, amazing, like

00:20:36.360 your competitors, the other people around you are like, oh my God, these people, I can't

00:20:42.600 believe what they're accomplishing.

00:20:44.160 And I want you to write down what's going to be occurring then that's not occurring now.

00:20:51.560 You can give me all your numerals if you're a metrics person.

00:20:55.080 Is it more customers?

00:20:56.800 Is it better retention?

00:20:58.340 Is it a better quality software?

00:21:00.780 Is it better customer experience?

00:21:02.980 Whatever that is, right?

00:21:04.720 And give me all those numbers, but then walk around your company and make a movie of it.

00:21:09.680 I can't help it.

00:21:10.340 I'm from Netflix, right?

00:21:11.520 And you make a movie of it like, if it was optimal, would there be more meetings or would

00:21:17.900 there be less meetings?

00:21:19.520 Would there be people who stand up and go, it sounds like what they're doing, it's marketing

00:21:23.120 is crazy.

00:21:24.160 I'm going to go ask them why instead of going, the people in marketing are crazy, you know, 0.88

00:21:29.980 right?

00:21:30.620 What's occurring then that's not occurring now?

00:21:33.420 Because I want you to think about those behaviors.

00:21:36.580 And for smaller companies, very often the problems that you reach when you actually are

00:21:44.040 going to be successful are no longer problems of difficulty, they're problems of scale or

00:21:49.320 complexity, right?

00:21:51.100 So in six months, you might need somebody who really knows how to take this rocket ship

00:21:55.780 and really make it successful.

00:21:57.920 And everybody you have on your team's been there since the beginning, but they don't know

00:22:01.800 anything about 100 times.

00:22:03.640 Okay.

00:22:04.100 So we got that.

00:22:05.040 You got that written down.

00:22:05.920 Now drop down a level and go, huh, what would people need to know how to do in order to

00:22:11.100 accomplish that in six months?

00:22:14.500 Very important that we put time wrappers on this.

00:22:16.900 Because otherwise, as leaders of companies, especially small companies, we get caught in

00:22:21.900 the trap of someday, right?

00:22:26.060 And we tell people, you know, yeah, you could be CFO someday.

00:22:30.200 Rock on.

00:22:31.040 You do it.

00:22:31.480 You can do that, right?

00:22:32.160 You say that?

00:22:32.680 No, but no, people do in other companies, right?

00:22:34.800 No, no, you guys didn't say that someday.

00:22:35.980 And then that person goes, you told me I could be CFO.

00:22:38.200 And I say, yeah, but you're an accounts payable clerk, right?

00:22:41.000 You know that you can't be CFO now.

00:22:42.780 Why not?

00:22:44.500 So wait a minute.

00:22:45.180 Let me get this straight.

00:22:45.820 So you're saying you guys didn't say someday.

00:22:47.480 We didn't say.

00:22:48.160 No.

00:22:48.540 That's why I'm saying for you when I'm teaching you this.

00:22:50.820 Let me ask the questions.

00:22:51.860 Let me ask the question because I want to go specific.

00:22:53.800 So I say I can't be a CFO.

00:22:56.820 I ask you a question.

00:22:58.100 Hey, one day I'd like to be a CFO.

00:22:59.580 Yep.

00:22:59.960 And I'm accounts payable.

00:23:00.920 Yep.

00:23:01.300 What do you tell me?

00:23:02.680 I say, have you thought about a reasonable and rational time frame to accomplish that,

00:23:07.660 right?

00:23:07.960 And you say, well, there's a CFO opening here and I'd like to be qualified for it.

00:23:12.880 And I say, you're not because here's what the qualifications for a CFO would be in a public

00:23:18.400 company.

00:23:19.480 So there's, you know, you don't know anything about tax.

00:23:22.000 You don't know anything about audit.

00:23:23.620 You don't know.

00:23:24.080 So these are all things that you will learn in your career.

00:23:26.560 Let's just be realistic about the time frame.

00:23:28.480 Okay.

00:23:28.660 So back to my methodology.

00:23:29.960 Okay.

00:23:30.180 Now I'm six months out.

00:23:31.800 What do you need to know how to do?

00:23:33.140 Then you drop down and say, what kind of skills and experience would it take for somebody

00:23:36.060 to know how to do that in order to accomplish that in six months?

00:23:39.160 And then and only then who's on your team now, right?

00:23:44.560 And if you start with who's on your team now and you extrapolate out,

00:23:48.860 you'll, you'll do more, you'll get better, but you might not get as good as you could

00:23:53.520 if you didn't articulate the end game.

00:23:56.280 So when you have that articulation, this is what it's going to look like.

00:23:59.840 These are the problems.

00:24:00.560 Now you can go, wow, this is a problem that nobody on the team knows how to solve.

00:24:05.040 That's who you hire, right? 0.99

00:24:07.740 And so now you haven't written a job description because job descriptions are dumb. 0.97

00:24:13.200 I mean, I'm in recruiting. 0.86

00:24:14.900 Here's what job description is.

00:24:16.380 It's either a description of somebody who left that you wish hadn't,

00:24:20.220 a fantasy person that doesn't exist, or whatever it takes to get it approved.

00:24:25.720 None of those are who you hire.

00:24:27.460 You want to hire somebody who can solve this problem that you have in a fairly short amount

00:24:33.080 of time.

00:24:34.040 And so now when you're recruiting, you're not only recruiting for somebody who's qualified,

00:24:38.760 but you're recruiting for somebody who goes, oh man, I'd love to do that.

00:24:43.560 The other thing is it leaves you open to a lot of different ways of solving the problem.

00:24:48.600 Because otherwise, what people tend to do is say, I want to hire somebody with these qualifications

00:24:53.740 and I want them to be really smart and quick on their feet and intelligent, charismatic,

00:25:02.700 like someone like me, maybe me 10 years ago.

00:25:07.320 And that's who you hire.

00:25:08.620 And like hires, like hires, like hires, like hires, like.

00:25:10.360 And then you wonder why you don't have any diversity and any diversity of thought,

00:25:14.560 and you don't have anybody who knows how to solve a problem that nobody on the team already

00:25:17.940 knows how to solve.

00:25:18.680 Okay.

00:25:19.200 So that's how you figure out who to hire.

00:25:20.860 In the same way, sometimes when you do those problems, you realize, oh, oh, the team I

00:25:30.460 have is not the team to do that.

00:25:33.060 So here's my Netflix story.

00:25:35.240 We've grown 30%.

00:25:36.300 This is after things are going good, right?

00:25:38.500 This is probably around 2010, right?

00:25:42.180 At this point, you've been there 13 years.

00:25:44.440 Yeah, I've been there a long time.

00:25:45.540 Our team is really tight.

00:25:46.660 We're rocking it, man.

00:25:47.760 And it reads on the cover of Fortune, CEO of the year, stock has grown, you know, the

00:25:52.800 business has grown 30%, quarter over quarter, three quarters in a row.

00:25:56.040 I mean, it's, we're awesome, right?

00:25:58.040 So we do a session at our executive staff, and I said, what if this kept up?

00:26:06.940 Like, because Reed always wants to do disaster planning.

00:26:09.240 I'm like, why don't, just for once, like, what if it kept up?

00:26:12.840 So the CFO goes to the whiteboard, and he does top-line revenue, 30%, and so he starts

00:26:16.800 doing that happy dance that CFO, I mean, can you imagine, for those of you who are the finance

00:26:21.680 people, you'd be like, oh, yeah.

00:26:24.720 So Ted, our head of content, at the time, we would say to ourselves, someday we'll be

00:26:32.320 as big as HBO, someday.

00:26:35.920 And Ted looks at the number, and he goes, it's next year, right?

00:26:41.220 And we just looked at each other, like, stunned, and Neil, who is our head of products, said,

00:26:47.020 I think that's a third of the U.S. internet bandwidth.

00:26:51.760 I think we could be streaming a third of the U.S. internet bandwidth.

00:26:55.040 And we all just kind of looked at each other, like, what?

00:27:00.060 So he and I get together, and I'm like, do we have anybody that knows how to do that?

00:27:04.800 He goes, no.

00:27:06.640 I'm like, can we do that in our data center?

00:27:09.400 Oh, no, no, no, it must be in the cloud.

00:27:11.900 So we sit down with our IT team, and these guys are amazing.

00:27:15.820 They're amazing.

00:27:17.060 And we lay out the problem, and they're like, no worries.

00:27:20.100 You go exec something, and we'll build a cloud.

00:27:23.280 And I said, you know what?

00:27:24.640 If there's any people in the room, anybody on earth that could do that, it's probably

00:27:28.940 you guys.

00:27:30.360 Not in nine months.

00:27:32.160 We could stand up the servers, right?

00:27:35.240 We could lease the physical space and buy the equipment and do it.

00:27:39.400 And so one of the people in the room said, I've been here for seven years.

00:27:42.620 We wouldn't be here if it wasn't for me.

00:27:44.740 Are you telling me I might not be on this team?

00:27:47.280 And I said, yeah, I think that's what I'm telling you.

00:27:50.980 But we got nine months to figure it out.

00:27:53.060 And, you know, even though people didn't like that answer, it was true.

00:28:00.700 And I've worked with engineers forever, and engineers think the world is good or bad, right

00:28:06.240 or wrong, black or white, zero or one, right?

00:28:08.620 So it was like, I'm not sure I like that answer, but I can't deny the truth of it.

00:28:15.140 And so what the aha of that lesson is, it's your job if you're running an organization to

00:28:23.900 field the team that can win.

00:28:25.620 And you never want to let the talent or lack of talent in your organization come between

00:28:33.360 you and what success looks like.

00:28:35.640 That's pretty wild what you just said.

00:28:37.440 Can you say that one more time?

00:28:39.040 If you're in charge of running an organization, it's your job to field a team.

00:28:43.260 It's your job to create amazing teams that do incredible work on time with quality that

00:28:48.980 serve the customer, period.

00:28:50.760 And the finish, it's never to allow the talent to come in between you.

00:28:56.360 And what, your opportunity.

00:28:58.040 That's unbelievable right there.

00:28:59.340 So has your personality always been like this?

00:29:02.840 Yeah.

00:29:03.220 You are.

00:29:03.720 And let me ask you.

00:29:04.480 I'm a Texan.

00:29:05.020 Is Reed like you as well?

00:29:08.240 Yeah.

00:29:08.940 He is.

00:29:09.580 He's a geek, right?

00:29:10.980 No, no, I'm not talking about the geek part.

00:29:12.360 Here's what I'm talking about.

00:29:13.180 The geek part matters because the geek part says, you know, when I start speaking HR speak,

00:29:17.220 when I first met him for about six months, he'd be like, did you just say anything?

00:29:21.700 That noise that you made, did that, like, can you tell me in English?

00:29:25.200 How did you guys meet in the first place?

00:29:26.320 How did you guys, what did you guys meet?

00:29:27.760 Oh, this is a funny story.

00:29:28.940 So I was working at a company called Borland.

00:29:32.800 It was a software company.

00:29:35.180 And I was working with one of, the company was kind of falling apart because Microsoft

00:29:38.960 was killing it.

00:29:40.200 And one of the VPs that I worked with was deciding, he was a Harvard MBA, whether to go

00:29:44.540 back to Harvard and teach or go to a startup.

00:29:47.520 And so I helped career counsel him.

00:29:49.140 And he went to this startup.

00:29:50.780 And I called him up about some stock or something one time.

00:29:53.820 I'm like, hey, how'd your new HR guy work out? 1.00

00:29:55.800 And he said, oh, man, he was an idiot. 1.00

00:29:57.720 We fired him. 1.00

00:29:58.280 It's just been bad.

00:29:59.040 He tells me the story.

00:29:59.660 I'm like, oh, great.

00:30:00.400 Well, you can hire me.

00:30:01.160 And he said, you told me if I hired anybody from Borland, you'd break both my legs.

00:30:07.820 And I said, yeah, I didn't mean me.

00:30:10.740 So he said, I can't do it.

00:30:12.240 I told the CEO I wouldn't recruit anybody out of there.

00:30:14.340 The CEO's name is Reed Hastings.

00:30:15.900 Good luck.

00:30:17.080 So if those of you who are old enough, back in the day, you could dial star 69.

00:30:21.560 And it would call back.

00:30:22.620 And Reed's sister answered the phone.

00:30:24.580 And I said, hi, I'm Patty McCord.

00:30:26.260 I'm friends with Rob Dickerson.

00:30:27.360 Can I please speak with Reed Hastings?

00:30:29.560 And she put me through and he answered the phone.

00:30:32.300 That's literally how it happened.

00:30:33.440 That's literally how it happened.

00:30:34.040 And what did the conversation sound like?

00:30:35.400 Oh, we got in this huge argument because, now remember, back in those days, I could still speak HR.

00:30:40.960 Do you have a difficult side to your personality?

00:30:42.780 Like, I can sense there's a part of you that's difficult.

00:30:45.320 Oh, yeah.

00:30:45.860 Okay.

00:30:46.260 So he asked me in the interview, tell me about your HR philosophy.

00:30:50.760 Reed, I believe in empowering employees to reach their potential so that they can align themselves with the organizational structure and their own desires and careers to accomplish.

00:31:07.140 Well, you know, I go into full-on HR speak, right?

00:31:10.300 Burning platforms.

00:31:12.040 And he looks at me and he goes, you people.

00:31:17.000 Like, why do I have to have somebody like you in my business?

00:31:21.180 You don't speak English.

00:31:23.020 Honestly, that's how I felt.

00:31:24.120 So I'm trying to see how.

00:31:25.260 Yeah.

00:31:25.960 And so then I'm like, well, you don't know me.

00:31:28.600 Yeah.

00:31:28.820 And he goes, well, how am I supposed to know you when you're blah, blah, blah.

00:31:32.340 So I'm like, oh, yeah, well, I know how to do some things that are pretty darn important around here, right?

00:31:36.740 And he's like, oh, yeah, like what?

00:31:37.840 I'm like, well, I'm a hell of a recruiter and I'm really good with engineers.

00:31:40.760 He's like, oh, yeah, well, that might matter.

00:31:43.020 So I go home.

00:31:44.540 I go home.

00:31:45.120 My now ex-husband says, how'd it go?

00:31:47.340 I said, well, I kind of got in a fight with CEO.

00:31:51.660 And he's like, you're the breadwinner of this family.

00:31:54.240 You've got to grow up and act like a real HR person.

00:31:56.760 You're never going to get another job.

00:31:59.560 That's how you got started, the relationship.

00:32:01.400 That's how the relationship got started.

00:32:02.140 So what makes an ideal relationship with the CEO and the HR?

00:32:08.640 So what makes it effective?

00:32:10.860 Like, is it very open?

00:32:12.460 Is it constant daily communication? 1.00

00:32:14.000 First of all, even if you hire a traditional HR person, you've got to get them to unlearn that crazy language that they talk because it's really stupid. 0.93

00:32:22.840 And I'm doing a lot for you in that vein. 0.79

00:32:24.940 I talk to a lot of HR people, and sometimes I don't want to, but, you know, I say the door is closed.

00:32:29.620 It's just us.

00:32:30.240 I'm one of you.

00:32:31.120 You've got to stop using a language that nobody knows but us. 0.99

00:32:34.380 The language you must speak is the language of the business.

00:32:37.420 So don't put anybody in the role who doesn't deeply understand your business.

00:32:41.880 They should be able to read a P&L, and they should be able to derive from that business plan exactly what the team structure should look like.

00:32:48.880 That's their added value.

00:32:50.080 HR people, HR has three components as far as I'm concerned.

00:32:53.660 One of them is staffing.

00:32:55.080 Staffing is really, really critical, and staffing is your job.

00:32:59.000 It's not HR's job.

00:33:00.460 If you have a great partnership with your recruiting or your staffing team, then you'll find the right talent.

00:33:05.320 But finding the right talent for your team is a job that you do all the time.

00:33:10.680 Did I say all the time?

00:33:11.800 All the time.

00:33:13.800 Your job, meaning CEO your job.

00:33:16.200 Absolutely.

00:33:16.900 Okay, it is your job.

00:33:17.940 It's your job to be scouting for talent constantly, and it's your job to do that because you set the example for everybody else in your organization that it's their job to build great teams, 0.99

00:33:29.740 and they can't build great teams if they rely on a bunch of people in HR that they think are stupid. 0.99

00:33:35.020 Okay, question for you. 0.99

00:33:35.960 Give me some examples of how you saw Reed constantly looking for talent.

00:33:39.460 I was interviewing somebody one time, and I said, I know her.

00:33:46.520 And he goes, yeah, she's the head of HR at Yahoo. 0.91

00:33:49.940 And I'm like, why are you interviewing the head of HR at Yahoo?

00:33:52.440 I'm here.

00:33:52.840 He's like, you can get hit by a bus.

00:33:56.960 That's a good point.

00:33:58.240 And he's like, I just, you know, want to see what other people are doing, see if there's anything we should try.

00:34:01.940 What year of your career was this?

00:34:04.380 Oh, at this point, I was pretty confident, you know, because Reed had asked me to come to Netflix, so.

00:34:10.360 No, no, meaning this one, when this was taking place.

00:34:12.360 In the year of my career, 20-something probably.

00:34:14.280 No, no, no, not in your, what year of Netflix was it?

00:34:17.280 Was it, was it like.

00:34:18.440 Early.

00:34:18.840 Fifth year, fourth year.

00:34:19.920 No, I thought fifth, fifth, sixth year, something like that.

00:34:21.440 Oh, okay, got it.

00:34:21.740 I mean, you still ended up.

00:34:22.380 Anyway, so.

00:34:23.800 The only person, the only person I'm asking this question, you said your job CEO, you said scouting, you're always scouting.

00:34:28.280 What were some ways that Reed was scouting for talent?

00:34:31.120 Just wherever in a meeting like this, to meet, you know, it's, and very often my experience as a recruiter in all these years,

00:34:40.860 when I coach people about looking for work, I say, it's not what you know or who you know, it's who knows what you know.

00:34:49.740 So every person that you meet is a conduit to somebody else.

00:34:53.580 So, for example, in my team, I'm like, we give good interview.

00:34:58.080 I'm telling you, we want every single person that walks in here to walk out and go, God, I hope they hire me, even if we hate them.

00:35:06.200 Because we want them to do, you know, to be at their kid's soccer match and say to the dad next to them, what do you do?

00:35:13.540 Oh, you know what, I was just interviewing at Netflix and I wasn't the right person, but it sounds like you might be.

00:35:20.520 Should I tell them about you, right?

00:35:22.000 So that's, my recruiting, my early, I'm a very good technical recruiter.

00:35:27.200 So in Silicon Valley, and this probably happens wherever you are, the engineers had this habit of, like, there was the ethnic restaurant du jour.

00:35:37.920 We're all eating Thai food or, you know, it's all about Korean barbecue.

00:35:42.280 And there are always these little hole-in-the-wall restaurants next to a nail salon in a strip mall.

00:35:47.440 And I find out where those restaurants were.

00:35:49.540 And so in those restaurants, they have, like, a fish bowl.

00:35:52.020 You put your business card in, you get a free lunch.

00:35:53.760 So I'd walk in and I'd take the fish bowl, this would be four cell phones, right, and the Internet.

00:35:59.440 And I'd go to a table in the back corner, I'd dump them out, and I'd just start writing down names, go back and call them.

00:36:05.940 I love that.

00:36:07.840 So God gave you LinkedIn.

00:36:10.240 Yeah.

00:36:10.680 So, right, God gave you social networking.

00:36:12.700 Okay, so that's staffing.

00:36:14.300 The next component of HR is the administrative and compliance component.

00:36:19.040 That's payroll and benefits and all the legal labor law stuff.

00:36:23.040 That stuff is really, really important.

00:36:25.240 You want people in those roles who really, really love accuracy.

00:36:29.500 You want them to wake up in the middle of the night and go, I spelled her name wrong.

00:36:34.320 You want them to know all the rules.

00:36:35.920 You don't want them to make any.

00:36:37.580 Their answer to can we is always no.

00:36:41.280 Right?

00:36:41.700 So, but that's okay.

00:36:42.500 You need somebody to know what those things are.

00:36:44.720 So I put that in Netflix eventually in finance or in legal.

00:36:49.720 The dilemma of putting that is those guys sometimes don't have the best customer service, so it's an internal thing.

00:36:55.180 Then the third component is the component about organizational structure and design, leadership coaching, being honest.

00:37:02.520 I call it being a mirror to your organization.

00:37:07.020 So you have to know the business, and you have to know what your values are, and you have to be able to say truthfully to anybody in the organization,

00:37:18.480 I think we could do better.

00:37:21.440 Right?

00:37:21.880 And you have to be able to honestly, for me, I mean, I practice it a lot. 1.00

00:37:26.480 So I could say to somebody, bring them in the room and close the door and go, you know, you're kind of an asshole. 1.00

00:37:32.080 And I'm not going to tolerate it. 1.00

00:37:34.320 I know Reed's in love with you, and I know you're brilliant.

00:37:36.300 And I know you also want to be a VP when you grow up.

00:37:38.360 So here's the deal.

00:37:39.860 VPs run teams.

00:37:40.880 VPs who run effective teams run effective teams because people want to work for them and do great work.

00:37:46.780 And nobody wants to work with you.

00:37:48.940 They don't like you.

00:37:50.360 They don't like to be in meetings with you.

00:37:52.100 They get bummed when they're put on your team.

00:37:54.260 You've got to change that, dude, because that's what's going to make success for you. 0.99

00:37:58.060 And I'll help you because I'd really like you to not be an asshole and be a brilliant guy that can contribute to our company. 0.98

00:38:03.400 He's still there. 0.99

00:38:04.600 What's next?

00:38:05.820 I'll help you.

00:38:06.440 What does that mean?

00:38:06.980 What's next?

00:38:08.200 For me? 1.00

00:38:08.780 No, you said, I'll help you if you want to be a VP one day, but you can't be one being an asshole. 1.00

00:38:13.460 Yeah. 1.00

00:38:13.640 So when you say, I'll help you, what is that help?

00:38:15.160 That help was for me to see his team in a meeting, walk in the room and sit down.

00:38:23.860 He's like, Patty, what are you doing here?

00:38:25.440 I'm like, in the neighborhood.

00:38:28.100 Just thought.

00:38:29.000 And then I would say, Todd, excuse me, but you're doing it right now.

00:38:35.600 Because he didn't know.

00:38:36.680 He's like, yeah, I've gotten that feedback before.

00:38:38.400 I'm like, but you didn't do anything about it.

00:38:40.620 So most people who have.

00:38:43.260 Did Reed do that as well or no?

00:38:45.480 He didn't do it as well as me.

00:38:45.860 Or was that your role?

00:38:47.300 No, no.

00:38:47.700 Meaning.

00:38:47.980 Yes, he absolutely did.

00:38:48.460 Was that assigned to you or he did it as well?

00:38:50.480 Yeah.

00:38:50.540 So Reed and I worked together for 25 years.

00:38:53.580 So, you know, this is a long, long time.

00:38:56.460 And we could, but we worked really hard on he and I modeling the kind of relationship we wanted other people to have.

00:39:05.620 So we would, so we used to go in the early days.

00:39:09.800 We took the company to the Sundance Film Festival.

00:39:12.960 That was our annual event.

00:39:14.880 And every year, Reed and I would have a bottle of wine together.

00:39:19.600 Got progressively better, by the way.

00:39:22.100 That bottle of wine.

00:39:23.180 And the bottle of wine together that we would have would be the discussion, which would say, what's on our plates for next year and am I still the right person?

00:39:33.440 What's on our plate next year and are you still the right person?

00:39:36.360 And is he still the right person?

00:39:37.280 Or is he still the right person?

00:39:38.100 Both of us.

00:39:38.440 Like, what do you think our strengths and weaknesses are going to be next year?

00:39:42.440 So, for example, when we had the DVD by mail business, I said, you know, Reed, I think we're going to have, we could have like 5,000 employees.

00:39:51.440 And I think 4,000 of them are going to work in warehouses and drive cars, you know, drive trucks and put DVDs into envelopes.

00:39:59.300 I think we're going to have a lot of blue collar direct labor work for us. 1.00

00:40:02.360 And he's like, yeah, I could see that.

00:40:03.800 I'm like, I don't know what minimum wage is.

00:40:06.160 I mean, I'm so far away from this kind of workforce.

00:40:10.340 I just, I'm not your gal to do this.

00:40:13.580 Like, I don't, do we have, do they have to be bonded?

00:40:15.940 I mean, you know, what are the rules around this kind of worker? 0.98

00:40:19.860 And he goes, yeah, you'd probably suck at that. 0.97

00:40:22.400 And I said, yeah, I probably would. 0.99

00:40:23.820 And he goes, but then if we got somebody for whom that was their expertise, they probably would suck at relating to engineers.

00:40:30.740 And that's really critical to our business at the time.

00:40:32.980 I'm like, yeah, it's true.

00:40:34.020 And he goes, well, let's do a six-month plan.

00:40:36.380 You go see if you can find somebody to do that, to work for you, who can teach us both about how we manage that kind of workforce.

00:40:42.420 I'm like, okay, deal, right?

00:40:44.020 And then I would say to him, by the way, you know, you keep, you sort of by default keep flowing into this role where we can't keep an executive.

00:40:53.420 And honestly, we need to find somebody who really owns this and not you anymore, right?

00:40:58.100 Because that's going to hurt us, right?

00:41:00.000 Tell me what you mean by you can't keep executives.

00:41:02.140 It was a situation.

00:41:03.120 I forget what the role was.

00:41:04.600 But it was like if there wasn't anybody in marketing, then he'd run it.

00:41:07.880 Or data science, right?

00:41:09.200 The data science guy wasn't there.

00:41:10.980 So they would report to him.

00:41:12.420 I'm like, you know, really not helpful for you to run a function.

00:41:15.920 Because we kind of would like you to go CEO something.

00:41:18.920 What does CEO mean to you?

00:41:20.520 So what is the CEO's job?

00:41:21.700 A good CEO, what does your CEO mean?

00:41:23.140 A good CEO has a couple of great characteristics.

00:41:25.980 One of them is you're very smart.

00:41:30.100 Good CEOs have good rapid-fire ability to process information.

00:41:38.040 I used to call it, it's old school now.

00:41:40.420 I used to say, you know, you want a really big hard drive.

00:41:42.440 You want to be able to have a lot of, recall a lot of information and keep it there.

00:41:47.560 The second thing is you have to be able to see the future in ways that other people can't.

00:41:54.160 And the third thing is you have to be brave.

00:41:56.380 You have to be the first one off the cliff.

00:41:59.140 Right?

00:41:59.500 Nobody's going to jump unless you do.

00:42:01.580 And you can't spin it.

00:42:04.640 You've got to believe it.

00:42:06.040 You know, here's a read example.

00:42:09.160 We have reached a million customers.

00:42:12.440 I mean, what a milestone.

00:42:14.740 He's up at the company meeting.

00:42:16.280 He's showing the bar graph of a million customers.

00:42:18.280 And afterwards, he's like, this is the best day ever.

00:42:22.020 And I said, yeah, I want to make a rug of it and just lay on it.

00:42:25.820 Like, and he goes, he goes, yes.

00:42:28.440 Five million.

00:42:30.600 Like, wait a minute.

00:42:32.060 Five million.

00:42:32.400 We just reached a million.

00:42:33.440 We've been working on that goal for four years.

00:42:35.420 And he's like, yeah, that's so yesterday.

00:42:37.940 Five, that's a good number.

00:42:40.200 Like, instantly.

00:42:41.760 I'm like, can we have a party?

00:42:43.080 He goes, I guess if you want.

00:42:44.620 But, I mean, you know, one was easy.

00:42:46.640 Now it's five.

00:42:47.360 One more startup story.

00:42:55.100 Engineer, quality engineer says to me, Patty, you and me don't understand.

00:43:00.400 Management doesn't understand.

00:43:01.580 It's not like it used to be.

00:43:02.740 We used to all know each other.

00:43:04.100 And we knew what everybody was doing.

00:43:05.660 And we were all really good friends.

00:43:07.140 And it's not like that anymore.

00:43:08.140 There's too many people.

00:43:08.980 And we don't get it.

00:43:10.180 You know?

00:43:10.500 And management doesn't understand.

00:43:11.820 I'm like, Rob, I'm a VP.

00:43:13.660 I report to the CEO, I'm going to call me management.

00:43:16.640 And we've had this conversation seven times.

00:43:18.760 So, part A of the sentence is untrue.

00:43:21.420 Management knows.

00:43:22.520 I've talked to Reed about it.

00:43:23.680 Okay.

00:43:24.260 Second part, do you know what we want to be when we grow up?

00:43:29.040 No.

00:43:30.120 Like, we want to be a global corporation.

00:43:33.880 And he just kind of melts down.

00:43:37.200 No.

00:43:37.820 And I'm like, that's okay.

00:43:38.680 You don't have to be here.

00:43:40.180 You're a 50-person startup guy.

00:43:42.020 Now, by the way, 50-person startups, there's three endings to a startups.

00:43:46.580 Bigger, smaller, eaten.

00:43:48.760 Smaller's death.

00:43:50.260 So, I call that the smoke of nostalgia.

00:43:53.920 Beware in your company if you smell the smoke of nostalgia.

00:43:58.280 Because you don't get to go backwards.

00:44:01.280 You don't get to keep it the way it is.

00:44:03.560 It's an ever-evolving thing.

00:44:05.720 Your business, if it's successful, will change.

00:44:09.160 So, what you want is a team of people who, when things change, don't fret, but go, yes.

00:44:20.040 Yes.

00:44:21.280 Two questions for you.

00:44:22.480 Yeah.

00:44:22.620 One, in the book you talked about, one of your employees came up to you, said, I need 50 employees at $50,000.

00:44:29.340 We're growing so fast.

00:44:30.220 I need you to help me get this.

00:44:31.740 And then you said, why 50 at 50?

00:44:33.960 Why not 25 at 75?

00:44:36.220 25 at 100.

00:44:38.660 Why do we need 50 at 50? 0.89

00:44:40.320 So, at what point do you know if we need 50 at 50 or 25 at 100?

00:44:45.300 How do you process that?

00:44:46.400 You go through my methodology and decide what the problem is you're trying to solve.

00:44:50.880 And so, let's say you're trying to solve a problem of scale and you need somebody who has a lot of experience doing it.

00:44:58.120 I think that a story I found later, I don't know if it's in the book, was when I went to a CEO who had just gotten another round of funding.

00:45:04.120 And he said, yeah, I really want to talk to you because we're going to scale from 150 to 300 people.

00:45:08.100 I said, magic of 300 is that you think if you hire twice as many people, you'll get twice as much work done?

00:45:14.220 He's like, yeah.

00:45:14.920 I'm like, yeah, that's not going to happen.

00:45:16.660 You know, this is this completely chaotic.

00:45:19.360 And so, I said, are those guys in the corner taping up boxes to ship your product?

00:45:25.340 He goes, yeah.

00:45:26.420 I'm like, it's San Francisco.

00:45:28.940 You're paying San Francisco rents for people to tape boxes?

00:45:32.680 What are you paying them?

00:45:34.120 Well, we don't pay them that much.

00:45:35.500 I'm like, well, you don't pay them enough to live here.

00:45:37.240 That's for sure.

00:45:38.080 And guess what?

00:45:40.160 Figuring out how to efficiently tape boxes, that problem's been solved.

00:45:45.660 So, you don't need another 10 guys in the corner with tape guns.

00:45:49.500 You need nobody with a cardboard box here.

00:45:52.880 In San Francisco.

00:45:53.580 In San Francisco, right?

00:45:54.940 So, that you could outsource, right?

00:45:58.200 So, that is something absolutely you could outsource.

00:46:00.080 Are you still literally building the product here?

00:46:02.580 Are those guys have soldering irons?

00:46:03.960 So, I'm like, okay.

00:46:05.140 And then how many people do you have in customer service?

00:46:07.340 Well, yeah, we're going to need lots more customer service people.

00:46:09.700 I'm like, because it doesn't work that well, right?

00:46:12.300 He goes, yeah.

00:46:12.880 I'm like, or a couple of really expensive, really great engineers to help you solve the problem

00:46:19.920 before it gets to the customer, right?

00:46:22.280 And so, what we did was we walked through, first of all, walked through what are the priorities

00:46:27.260 of the business?

00:46:28.480 What was the time frames of those priorities?

00:46:30.980 And then that same kind of thing, which is in which areas with the highest priority do

00:46:35.940 we have the weakest teams?

00:46:37.580 And that's where you spend your money, right?

00:46:39.900 Then you get the absolutely best people.

00:46:41.340 Well, conversely, I worked with another startup that had hired an HR person.

00:46:45.960 They were doing compensation.

00:46:47.040 She was going over her compensation plan with me.

00:46:49.280 And she said, yes, we've decided to pay in the 65th percentile.

00:46:53.760 And I said, huh, why?

00:46:57.080 She goes, well, that seems like the right thing to do.

00:46:59.400 And I said, okay, but that's fine.

00:47:01.940 That fits in the budget and all that kind of stuff.

00:47:03.980 And that maps with your headcount.

00:47:05.300 And I said, but you can't no longer say we only hire A players.

00:47:09.880 You can't say that anymore.

00:47:10.980 Because A players don't work for 65th percentile.

00:47:13.740 And I said, can I be an employee?

00:47:16.600 What does 65th percentile mean?

00:47:18.480 And who gets the other 35%?

00:47:21.680 She goes, well, that's not what it means.

00:47:22.940 I'm like, I know what it means.

00:47:24.920 And you know it.

00:47:25.580 But nobody else in the world knows what it means.

00:47:27.480 And did you use survey data to come up with this?

00:47:30.040 Yes, I did.

00:47:30.840 And I said, how hard was it to match people who ship razor blades online to the survey?

00:47:41.540 If you're going to have a compensation system that makes sense to you, A, it should make sense to you.

00:47:47.880 And B, you should be really transparent about it.

00:47:50.080 Here's how we figure out your pay.

00:47:51.800 And my experience is there are oftentimes.

00:47:55.360 So the story I told you earlier about cloud computing.

00:47:58.140 We extracted a really talented team out of Yahoo in between CEOs to do our cloud computing.

00:48:05.980 In between you guys going through CEOs or in between?

00:48:08.220 No, Yahoo was going through CEOs.

00:48:09.560 Oh, yeah.

00:48:09.740 You know, like every two years, it's like, God, get into Yahoo and start recruiting because the last one quit.

00:48:14.560 So did you guys exploit that opportunity?

00:48:16.400 Absolutely.

00:48:16.760 So let me ask you, the part about pure competition, was the idea like we got to, you know, extract best talent from this company, put these guys out of business?

00:48:27.160 Was it a pure like?

00:48:28.840 No, it wasn't competitive.

00:48:30.580 But what you said absolutely sounded very competitive.

00:48:33.760 I feel that all is fair in love and war in recruiting. 0.75

00:48:36.540 That's the point.

00:48:38.580 That's the point.

00:48:39.080 I really do.

00:48:40.020 Fair enough.

00:48:40.260 Because, and I mean it both ways.

00:48:43.280 If you tell me you want to be a CFO and you're actually pretty close and I might need a CFO in a couple of years and I'm busy working with you on it and you're a talented guy and I like you and I don't want you to leave.

00:48:54.320 Sure.

00:48:54.560 But somebody reaches out to you and says, I got a CFO position in my company right now I think you'd be amazing at.

00:49:03.220 Well, I want you to take it.

00:49:04.860 Right?

00:49:05.140 If I can't get it.

00:49:05.740 Have you had that conversation multiple times?

00:49:07.200 Absolutely.

00:49:08.420 Absolutely.

00:49:09.340 I've had more.

00:49:11.560 Reed's like, hey, you were talking to so-and-so.

00:49:14.260 What were you talking to him about?

00:49:15.440 I'm like, that it's time for him to go.

00:49:17.180 He's like, you are telling our employees to leave?

00:49:20.520 I'm like, he's not happy and not into the work anymore.

00:49:23.860 And he's got all these other opportunities and every day he walks in feeling like he passed another one by.

00:49:30.440 Here's the Google story that's in my book.

00:49:33.440 We had this guy that he was a university hire at Cisco.

00:49:38.220 He had been at Cisco for like a year.

00:49:40.100 And then we brought him over to work with our most talented, most senior engineer working on the personalization algorithms, the AI in our business.

00:49:48.880 And so he was sort of his protege for about five years.

00:49:52.300 And the personalization algorithms at Netflix are deep, deep core software, deep core talent in part of our business.

00:50:03.580 So he's been there about five years, and his boss calls me up and says, John got an offer from Google at twice his salary. 0.98

00:50:10.400 I'm like, bullshit. 0.99

00:50:12.680 Well, tell him not let the door hit him in the butt on the way. 1.00

00:50:15.460 He's not worth twice his. 0.99

00:50:17.220 Google can't pay anybody.

00:50:18.880 Google's got more money.

00:50:21.360 Google doesn't rule the world.

00:50:22.680 You're saying that.

00:50:23.200 I'm saying that.

00:50:24.500 My reptilian HR brain kicks in, and I'm like, no, no, he doesn't.

00:50:29.240 Well, just tell him to go to Google.

00:50:30.740 And they're like, he can't go to Google.

00:50:32.140 He's critical to us.

00:50:33.240 See, that's what happens when we make one person the center of our product.

00:50:38.220 And it shouldn't be like that.

00:50:39.380 We should be more desperate.

00:50:40.340 No.

00:50:41.780 So then the VP gets in.

00:50:43.380 Then Reed gets in.

00:50:44.140 We're emailing back and forth all weekend.

00:50:46.060 Sunday morning, I wake up.

00:50:47.040 And I'm like, oh, my God.

00:50:50.500 Of course they want him.

00:50:52.820 Who else knows what he knows?

00:50:54.540 I mean, I'm thinking, we can't hire anybody because there's nobody that knows.

00:50:59.860 So I send an email out.

00:51:01.680 I say I was wrong.

00:51:04.140 I just looked at the salaries of everybody on that team.

00:51:07.220 We can double it, and it's nothing to the P&L.

00:51:09.460 I can go.

00:51:10.020 I'll do it as soon as I get into work.

00:51:12.020 And everybody's like, wait a minute.

00:51:14.760 You can't say yes.

00:51:17.040 You're supposed to say no.

00:51:20.100 Who's everybody?

00:51:21.020 Reed?

00:51:21.580 Yeah.

00:51:22.160 They're trying to convince you to give them twice.

00:51:24.960 But what we did was we started to have the real conversation we needed to have, which was, oh, my God, my dream came true.

00:51:33.600 Now, having worked here makes you more valuable.

00:51:39.540 And I started thinking about.

00:51:41.460 So this is where my.

00:51:42.860 I'm hanging around with inventors all the time.

00:51:44.960 Right.

00:51:45.280 So now I'm thinking, wait a minute.

00:51:47.840 Oh, my God.

00:51:49.840 All these companies that worry about retention when their compensation system is so restrictive that it makes people.

00:51:57.800 And John came in.

00:51:58.740 He goes, I heard you've been talking about my offer at Google.

00:52:01.060 I'm like, yeah.

00:52:02.080 And he says, I can't say no.

00:52:05.500 I got a family.

00:52:07.640 I mean, it's not nobody.

00:52:09.120 It's Google.

00:52:09.900 I mean, it's a pretty cool opportunity.

00:52:11.780 So, you know, I want to stay.

00:52:14.180 But it's twice my salary.

00:52:16.140 And, you know, he's like, I might be worth it.

00:52:20.080 And he was.

00:52:22.760 He told you I might be worth it?

00:52:24.520 Yeah.

00:52:24.980 And I, over time, what I realized was for the, for people that you want to stay that are really critical to the business, you can't keep them.

00:52:35.440 That's, you can't change their dose.

00:52:36.880 You don't retain people.

00:52:37.860 It doesn't work.

00:52:38.780 But you can take money off the table as an issue.

00:52:43.060 Right.

00:52:43.320 And I used to tell people, this also got me in trouble with all my fellow HR people who already did this.

00:52:49.060 I said to everybody, look, I know you're being recruited all the time.

00:52:51.940 I know the headhunters call you.

00:52:53.120 I know that we're very popular right now.

00:52:55.040 But I'm trying to figure out what real market data is for you guys.

00:52:58.480 And it's hard because it's shifting.

00:53:00.320 So, when the headhunter calls, please, before you say no thanks, be sure you say how much and come tell me.

00:53:08.280 So I would know what other people were offering them.

00:53:11.720 And then I just went through the company quarterly and looked at particularly teams that we'd done a lot of hiring on and said, well, so everybody we hired makes more money than the people we have.

00:53:22.920 Is it there, we just hired a bunch of better people, which can be, right?

00:53:26.600 You hired more senior people and you pay them more.

00:53:28.640 Or is it that the people that you want to stay on the team could leave and get jobs at a better salary, right?

00:53:36.000 So that's just, you know, when you start to think about it, everything.

00:53:40.920 So my bigger message to you is the way you think about your product, the way you think about your customer, the way you think about innovation, you can apply all of that to managing people.

00:53:52.460 Last question before we wish you the best.

00:53:58.280 How did it feel when you were going through the process of maybe you're competing, maybe you're not, but, you know, the company you're going up against at the beginning stage of a blockbuster and then they went out of business.

00:54:10.240 What was that like for you when that took place?

00:54:13.020 Like, what conversation did you and Reid have when that happened?

00:54:15.940 A pre-one, we used to listen to the blockbuster earnings call.

00:54:20.700 Everybody in the company would go into a conference room and Liz said to the blockbuster earnings call on the Polycom.

00:54:25.720 You remember those?

00:54:26.420 That's that in the middle of your, and we'd all sit around the table like, listen.

00:54:29.940 And one of the analysts asked John Antioca, the CEO of blockbuster, what do you think of Netflix? 1.00

00:54:35.600 And he said, stop asking me about that stupid little company. 1.00

00:54:40.020 I love that. 1.00

00:54:40.720 They are a gnat, they are no one, no one will ever use this stuff.

00:54:46.100 It's too hard, it's too complicated.

00:54:46.960 He did not say that.

00:54:47.800 He did, right.

00:54:48.460 People love the video stores, we're the largest video retail renter in the globe.

00:54:54.080 Wow.

00:54:54.620 And I'm looking at my CMO who's sitting across from me and behind her on the whiteboard is our customer growth, right?

00:55:01.620 And like I told you, it's like, and we went, oh my God, he doesn't know, right?

00:55:09.940 Reed had tried, Reed had gone to sell us the year before.

00:55:14.040 Hey, you want to buy our service?

00:55:15.160 He's like, no, I don't forget what it was, you know, $40 million or something like that. 0.99

00:55:20.680 So then we get to the company meeting and people are like, kill them! 0.99

00:55:28.080 Take them down! 1.00

00:55:29.240 Take them down! 1.00

00:55:29.540 We can do it, we can do it, we can do it!

00:55:30.880 And we're like, yeah, so here's our strategy.

00:55:34.300 Everybody's like, give us a strategy!

00:55:36.320 We're taking Blockbuster down!

00:55:37.960 And we're like, lay low.

00:55:41.300 Give it up, Patti McCord. 1.00

00:55:43.580 Thank you, guys.

00:55:45.560 I got a gift for you.

00:55:46.820 You have a gift for me?

00:55:48.220 Amazing.

00:55:49.000 I got a gift for you, though.

00:55:49.900 Let me get the gift.

00:55:50.820 Okay.

00:55:51.220 All right, come on.

00:55:53.300 Uh-oh, what's he got?

00:55:54.440 I figured it just made sense to get you an old Blockbuster bag.

00:55:59.540 Whoa! 0.71

00:56:00.100 And I got you some special limited edition DVD.

00:56:04.760 One week rental.

00:56:06.480 One week rental.

00:56:07.120 One week rental for her.

00:56:09.520 Okay?

00:56:10.460 And then I also know you love sailing.

00:56:14.440 I figured you're going to appreciate this.

00:56:15.760 Oh, how lovely.

00:56:16.240 Now you're going to have to send that to me.

00:56:17.360 No, of course we're going to ship it.

00:56:18.400 I'm not going to take this with you.

00:56:19.440 Where did you get these?

00:56:21.660 Well, you know, we had to call a few people, but we got it for you.

00:56:24.800 That's amazing.

00:56:25.460 So you can go frame it and do whatever you want to do with it.

00:56:27.140 Thank you.

00:56:27.280 Yeah.

00:56:27.820 Make noise for Patti McCord.

00:56:29.400 Bye-bye, guys.

00:56:30.300 Thank you so much.

00:56:31.080 You're amazing.

00:56:31.780 Thanks, everybody, for listening.

00:56:33.040 And by the way, if you haven't already subscribed to Valuetainment on iTunes, please do so.

00:56:37.580 Give us a five-star.

00:56:39.060 Write a review if you haven't already.

00:56:40.420 And if you have any questions for me that you may have, you can always find me on Snapchat,

00:56:44.620 Instagram, Facebook, or YouTube.

00:56:46.600 Just search my name, Patrick David.

00:56:48.120 And I actually do respond back when you snap me or send me a message on Instagram.

00:56:53.480 With that being said, have a great day today.

00:56:55.220 Take care, everybody.

00:56:55.940 Bye-bye.

Valuetainment - August 21, 2019

Episode 358： How Netflix Destroyed Blockbuster Video - Patty McCord

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