NETFLIX Co-Founder, Marc Randolph | The NETFLIX Startup Story and How You Too Can Learn to Pursue Your Dreams

Audio Transcription

Speaker 1:
Ladies and gentlemen on today’s show, I interview the co-founder of Netflix, Marc Randolph. Yeah. You have all the time you want. You co-founded Netflix so you’ve got all the time you want here.

Marc Randolph:
Yeah. I want that (beep) mega point.

Speaker 1:
On today’s show. He shares with us the challenges of starting a successful company.

Marc Randolph:
That is the situation that every early stage entrepreneur is always facing. You have no idea what’s going to happen and so it’s this ability to relax a little bit and recognize that you don’t know what’s going to happen and so you have to put yourself into a position to be prepared for almost anything. To put yourself in a position where I can do this for a long time.

Speaker 1:
He shares with you the importance of never taking no for an answer when working in the game of business.

Marc Randolph:
That has been a profound lesson. That is something that I carried with me my whole life. That is something that I teach my kids, that I teach other entrepreneurs I work with. That in the business context that no doesn’t mean no.

Speaker 1:
He shares with us the process he went through to see if the market actually wanted Netflix to exist.

Marc Randolph:
We wanted to see whether we could actually mail this to people, but we couldn’t find a DVD. So we went and bought a music CD and mailed it to somebody. But ultimately the thing we needed to figure out was would anybody do it? And there was no way to know that other than doing it.

Speaker 1:
He shares with us how he started from the bottom and now he’s here.

Marc Randolph:
And you’re picking up a pattern here is that the first half of my career I was a junk mail guy.

Speaker 1:
He shares with us about the sneaky self-promotion they used to grow Netflix.

Marc Randolph:
And he would infiltrate the user groups, the Usenet groups, these early social networks of the web. And he had find the ones that were dealing, there were the video files who are into new geeky technologies like laser discs. And he’d talk up things pretending he was just one of the gang. Like, “Hey I just heard about this company launching that rents DVDs by mail. Anyone heard about it? It’s called netflix.com.”

Speaker 1:
And I attempt to have the co-founder of Netflix diagnose my rash.

Speaker 3:
Get ready to enter the Thrivetime Show.

Speaker 3:
(singing)

Speaker 1:
Yes, yes, yes and yes. Thrive nation, on today’s show we have an incredible guest. He just happens to be the founder of a little company by the name of Netflix, Marc Randolph. Welcome onto the Thrivetime Show. How are you sir?

Marc Randolph:
Okay, well I hate fun, so it’s going to be miserable this next hour. I can tell.

Speaker 1:
I got to ask you, I got to ask you my friend. What does it feel like to be the guy that co-founded Netflix? I’m sure people know you as the guy who co-founded Netflix. What does it feel like? Does it feel really awesome? Kind of awesome? On a scale of one to 10, how awesome does it feel?

Marc Randolph:
Oh no, it’s pretty awesome. It’s not just the founding Netflix part. I think in general, I’m kind of the luckiest guy you’re going to meet. I mean, I’ve got a lot of stuff that’s kind of gone right. I’ve been incredibly lucky in my life. And the Netflix thing is just amazing to me because when you start a company you have no clue that it’s ever going to be anything like a Netflix.

Speaker 1:
Well, Marc, I have a rule here at the Thrive Time Show whenever we interview the co-founder of Netflix, we always give you one free mega point. That’s the sound of a mega point kind of loud there. That’s one free mega point. So there you go, sir. Your one mega point. It’s better than a coin.

Marc Randolph:
Yeah, I’ll save them up. I want to have as many mega points as I can get. I assume that’s the objective here.

Speaker 1:
No, they’re really, really a valuable in the afterlife. You just have to talk to the guy upstairs. So now you when you started Netflix people don’t realize or don’t probably even remember that you were originally competing with folks like Blockbuster and but I want to go back to the very, very beginning and I just kind of work our way through. You’ve had a lot of success now, but how did you originally start? I mean you were born on April 29th, 1958. What was your life like growing up or where did you grow up?

Marc Randolph:
So I grew up in New York. Not in the city, but not in the country. I grew up in Westchester County, which is kind of neither nor suburban town, nothing to do. And I was fortunate and that I kind of grew up in a risk-taking family where when I would go off and do something crazy, I would not be reprimanded, but I’d be greeted with enthusiasm and curiosity. I mean, just to give you an example, one time I decided I wanted to learn how to rappel. Where you send down a rope down a cliff. So I got a book and read up on it and then found a big tree in my yard and went to a 20 foot tall limb and was rappelling off this limb. And I remember when I nervously told my parents what I was doing expecting that I’d be grounded or something. It was the opposite, it’s, “Oh, that sounds incredible. Show us.”

Marc Randolph:
And I would lead them out to the tree. And it was like that for almost anything. When I decided I want to earn money and I had a crazy idea about selling something door to door, “Give it a shot.” And so I kind of grew up, used to risk taking and comfortable with risk taking and for some reason was just attracted to doing things that were not clearly laid out for me.

Speaker 1:
You’re a wild man. Did your friends call you Marc wild man Randolph?

Marc Randolph:
No. No. My wildness is restrained. I guess when they see me in crazy idea mode, maybe their eyes get wide, but yeah, you wouldn’t quite notice that I’m quite as the same way if you met me on the street.

Speaker 1:
At the age of 23 I understand that you landed your first job at Cherry Lane Music company in New York and you were put in charge of this company’s small mail order operation. How did you land this job?

Marc Randolph:
Yeah, it was a strange one. I I heard a friend of mine told me there was this person looking for someone to be his assistant and I go, “Whatever, this sounds fun.” But what this job was, was actually an amazing job. I guess now it has a fancy title. It’s called chief of staff. But basically what it means is you follow the CEO of the company around with a clipboard and anytime he tells someone, “Can you get me those numbers by Wednesday?” You write down, “Make sure he gets him the numbers by Wednesday.” And then you follow up to make sure he gets him the numbers by Wednesday. And what you do is you sit in this person’s office on their couch, like you’re a guest in the Johnny Carson Show and you listen.

Speaker 4:
And now ladies and gentlemen, here’s Johnny.

Marc Randolph:
His phone calls, his meetings. And doing this, you see what a CEO does all day, how he treats people, how he treats different vendors, people who owe him money. With suppliers, with employees. And so that was a great learning experience. But one of the things I noticed at the company was that they had this nascent mail order division and the person who was running it left and I decided I wanted that job. And of course he said, “Fine.” He slotted me right in. And I got to set the expectations here that mail order department basically meant… This is a company that published songbooks.

Speaker 1:
Oh wow.

Marc Randolph:
Like the Beatles for autoharp or Led Zeppelin for tuba, the sheet music. And in the back of every songbook was a little blurb that said, “For a list of more great Cherry Lane song books, send a self-addressed stamped envelope to P.O Box so-and-so.” And so my job in the mail order department was to taking these self-addressed stamped envelopes. Xeroxing the copy of the list of more great Cherry Lane songbooks and mail it back to them. And then if an order came in, I’d go to the warehouse, grab the book and ship it out. And for some crazy reason I found that job fascinating and I experimented and I tried. Maybe I’ll do color list of great song books and pictures. Let’s do a catalog. And it got more and more and more involved. And I taught myself the mail order business.

Speaker 1:
The mail order business. A lot of people don’t maybe have context for this time in American history because this was, what year was this?

Marc Randolph:
Wow. This would’ve been 1981 to 1984.

Speaker 1:
Okay. Now I have a question for you. This is old school jam time now. Old school jams. 1981 here we have the Police. Every Little Thing She Does is Magic. You’ve got Jessie’s Girl, Rick Springfield. You’ve got Journey. I mean you’ve got some hot, hot music. You’ve got Phil Collins, In the Air Tonight. The Drum Solo. What was your favorite jam from that era?

Marc Randolph:
Oh my gosh. I’ve got to say. Oh wow. That’s a tough one.

Speaker 1:
Take me back. I want to know what was your jam. You have all the time you want, you co-founded Netflix. So you’ve got all the time you want here.

Marc Randolph:
I want that (beep) mega point. [crosstalk 00:10:08] I’ll tell you what, [inaudible 00:10:10] something later and it’ll pop into my mind and I’ll let you know.

Speaker 1:
Oh gosh. [crosstalk 00:10:14].

Marc Randolph:
Listen, I got to tell you a weird story about this. So while I was at Cherry Lane, we decided to start a magazine, a sheet music magazine called Guitar for the Practicing Musician. And there was lots of people to do editorial, lots of people to do the art, but no one did the circulation, the subscriptions. And they basically said, “Okay Randolph, you do this.” And so all of a sudden I got to figure out magazine circulation. But that’s not the story. The story is that one of the editors, there was two editors, both music guys to the core. And as you can probably imagine, the editor of a music magazine is sent albums to review. So these guys got every single album released. All.

Speaker 1:
Oh, that’s got to be a sweet job. That’s probably why it’s hard for you to name a specific song. I mean you had albums everywhere.

Marc Randolph:
So I did. These two guys did and one of them was a total music guy and he kept them all and his house was just wall to wall bookshelves with thousands of albums. The other guy was, “I could care less.” And he would sell them and he would sell them to me for a dollar an album. And so I had the most incredible collection of 1981 music.

Speaker 1:
Oh sweet.

Marc Randolph:
It was like a snapshot in time. So anyway, that’s my crazy story, which I’ve never told people on a podcast or a [inaudible 00:11:42] so there you go.

Speaker 1:
I’m going to see if you can, I’m going to go off the reservation here and to see if we can have a little bit of a therapy for Marc Randolph, this is true story. The company that I started at in my dorm room in college was a company called DJ Connection. I sold it, I’m no longer involved in it, but it grew to be the nation’s largest wedding entertainment company. So I would get all those records a 1978 Sugarhill Gang. I got the Michael Jackson Thriller. I got all the CDs back in the day.

Speaker 1:
And I had, no exaggeration, probably 20,000 albums, maybe 20,000 I mean CDs or vinyls or whatever. And we had a flood that flooded my house, like an epic flood, like Noah. It was crazy. I thought about I’ll try to build the arc and I lost all of it. And I’m sure you’ve had a moment. I remember waking up the middle of the night and I’m going, “Sounds like we’re in the ocean.” And so I walked downstairs in the basement. I mean at this point it’s up to waist level and everything’s floating around. Craziness.

Speaker 1:
What’s maybe a really bad moment in your life and how did you get over it? I’m curious about how, because I think adversity is a big part of being an entrepreneur. And if I could go down to the bottom for a moment, I’d love to hear you share a story where it just didn’t work out that awesome and how you recovered from it.

Marc Randolph:
Oh, okay. Here’s a good one. And listen, since we’re still talking about the early years of Marc Randolph, I won’t tell about our Netflix layoff or we can later because that was a pretty traumatic moment for me. I’m going to go back actually before this Cherry Lane thing when I was in college. And I was a senior and I was applying for jobs and for some ridiculous reason decided I wanted to work in advertising. But of course not as a writer or a creative, I wanted to be an account guy and those are impossible jobs to get for an undergrad, especially an undergrad with a liberal arts degree like I had. But there was an agency which had a few slots available and I decided to apply. But I think a thousand people applied and I made the first cut and I had, so it was 400 of us and they had everyone down to kind of a career day thing at the agency and they interviewed people and they made a second cut.

Marc Randolph:
Now we were down to about 50 and these 50 people spent the whole day at the agency and they cut it down to four and we spent one more day and I go, “Oh, this is going to be awesome.” And at the end of the day they brought me in and said, “I’m sorry, but you’re not going to get the job.” And it was a profound disappointment because I had had my heart set in this. I of course knew I was going to get it. And I went back to college, totally crestfallen.

Marc Randolph:
Well, don’t take away my mega point though, because about didn’t take long. And I kind of began thinking, “Wait a minute, what did those other guys have that I didn’t have? What was I missing?” And I go, “I’m going to ask.” And I wrote a letter to every single person I’d interviewed with, not just that last day, but the previous other two days as well. And I said, “What could I do differently? What could I learn? What experience would help me if I came back next year and applied for this job again?” And they called and they said, “Why don’t you come on back in?” And I went back down to New York City and they brought me up to the building and they offered me the job.

Speaker 1:
Sweet.

Marc Randolph:
And here’s the kicker. It turns out that of the four of us who were the finalists, they hadn’t offered any of us the job because this was an account job at the interface between the client and the creative. This was a, you got to turn a no into a yes type of job and they wanted to see which of us wouldn’t take no for an answer.

Speaker 1:
And that was you.

Marc Randolph:
That was me.

Speaker 1:
That is awesome.

Marc Randolph:
And that has been a profound lesson. That is something that I’ve carried with me my whole life. That is something that I teach my kids, that I teach other entrepreneurs I work with that in the business context that no doesn’t mean no.

Speaker 1:
You know what I want to do here, Marc, is I’m going to ask you a question. I’m not going to take no for an answer. I’ve been inspired. Here we go. You started the US version of a MacUser magazine, I believe in 1984.

Marc Randolph:
Yes. Correct.

Speaker 1:
How did you go from Cherry Lane to MacUser or why did you go from it?

Marc Randolph:
Well, that was the Guitar Magazine that I had all this circulation experience that I had taken a magazine, a specialty magazine and launched it and made it successful. And I learned how to do circulation and I eventually I got blocked. Listen, I’ll be honest with you, I got fired from Cherry Lane because I was a pain in the ass. I was always pushing, I was always trying things. I was always getting frustrated. I couldn’t get everyone as excited about this malware division I brought this circulation. And so I met this entrepreneur who was going to start a Macintosh magazine and he invited me to join the team as a circulation director and that was MacUser and that was a wild ride. And that was a wonderful life experience too because that entrepreneur was a guy named Peter Godfrey who is a serial entrepreneur.

Marc Randolph:
And watching him make decisions was a tremendously formative thing for me. Seeing how a real entrepreneur thinks, what they do, what they don’t do, how they parse the problem, what questions I ask. And we sold MacUser magazine to Ziff Davis about a year later. And this time he said, “Marc, get us into the mail letter business. Let’s start a computer mail order business.” And that was Marc Warehouse. And that one I led that effort. And that was also a crazy wild ride. And you’re picking up a pattern here is that the first half of my career I was a junk mail guy.

Speaker 1:
How old were you when you finally left the junk mail order industry?

Marc Randolph:
30.

Speaker 1:
30.

Marc Randolph:
But when I transitioned, I left MacUser, I moved to California to turn around a mail order company there, which we did. We sold it to a company back East and now I was in Carmel, California there I was not quite ready to go back to the ice and snow. And began casting around for a job in California and found a big software company called Borland International and managed to talk them into hiring someone to do direct marketing for them, which was not done at all in the computer business. And I ran direct response marketing for them for about five years after that and really kind of introduced direct selling to the software business.

Marc Randolph:
And that was the transition because while I was still using my direct marketing skills, I was also learning the software business, learning the technology world. And about five years into my tenure they moved me over to run a division of the company as a general manager. And that was the turning point. Now I had P&L, I had programmers working for me, I had marketing people, sales people. So that was the point where the Marc Randolph’s transition from being a junk mail king to being a Silicon Valley entrepreneur kind of finally took root.

Speaker 1:
I would classify. I’ve been doing a lot of Google search and a lot of reading about you, I’d also classify you as a beautiful man. I don’t know if that helps you at all, but I would just, I would say Marc Randolph, beautiful man and Silicon Valley. I think you need to put the beautiful man part first and then that’s-

Marc Randolph:
Just you’re clear, I assume you’re speaking about my character rather than my appearance because the beautiful man doesn’t necessarily apply to how I look.

Speaker 1:
You look here, listen here my friend. People are going to pick up a copy of your new book, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea. And just to look at you, they’re going to get there and say, “You know what, I don’t even know this book’s about. I’m not even sure That Will Never Work is something I’m going to read but I’m going to get this. I’m going to try to flip through there and find a picture of this guy. I don’t see him on the cover, but he’s somewhere in there.” We have a picture of you inside the bookstore.

Marc Randolph:
Yes, we do. You’ll find me right there smiling at you from the inside of the book jacket. And yeah-

Speaker 1:
It’s worth the pleasure.

Marc Randolph:
… I must say I look pretty good in that photo, I’ll give you that.

Speaker 1:
Oh yeah, no Photoshop done folks. So he’s only eating kale. He’s drinking kombucha, very healthy stretch and every day. Now you then you started Netflix and you teamed up with Reed Hastings to do so. How did you meet Reed, initially?

Marc Randolph:
Me and two friends started a small software company. It was pretty geeky. It was doing quality assurance software. But it was small. There was probably a dozen of us all together my self, my two co-founders and then nine other employees. And we did that for about six months. And then this wonderful thing happened. Our little company got acquired by a much bigger software company, which happened to have been founded and was being run by Reed Hastings.

Marc Randolph:
And we all went to work for this big new company. And 11 of them went to this warren of offices in the basement to be a little business unit for their product. But me, retook and made VP of marketing for his big international company. So I went from being this nice cerebral, heady job, marketing a product for a small 12 person startup and boom, international man of mystery, employees and problems and time zones. But the good news is the bonus is that Reed and I lived in the same town, Santa Cruz, California. And so we began commuting to work together. And so I worked for him. We lived in the same town, we carpooled together and over the next six months actually became reasonably good friends. And that was important because six months later, and this would have been winter of 1996. Reed’s big company was acquired by an even bigger company.

Marc Randolph:
But this time we weren’t moved into a cubbyhole of a warren of offices. This time Reed and I were both being made redundant, fired. And we were commiserating in our commutes back and forth. And the circumstances of this were different. These were two public companies merging. And as you know, those can’t happen without government approvals and it takes four to six months. So there’s this weird limbo where they need you to come to work. They keep paying you, you have your office but you have nothing to do. And I said, “I’m going to use this time just start my own company, my next company.” Number six. And Reed, he didn’t want to start another company, but he wanted to keep a hand in this startup world. He was going to go to back to school, get a higher degree in education, become an educational philanthropist.

Marc Randolph:
But he decided that he’d be my angel investor, that I would start and run the company and that all we had to do was come up with an idea. And that was the Genesis for a series of three or four months’ worth of Reed and I carpooling back and forth to work every day, brainstorming ideas for what this next new venture was going to be.

Speaker 1:
Now, I want to go, I don’t want to steal all the thunder from the book. I don’t want to steal all because what I want what I want to do, folks out there, folks you know I’m a shameless sales person. You know that’s my character. So if you’re listening right now, you know what I’m going to do. I’m going to ask our incredible guests, Marc, just enough questions about the book to make you go, “Come on. Just tell us everything.” I’m just going to do just enough. That way you want to go pick up the new book, That Will Never Work. So let me ask you, when your friend Reed picked you up to work, what time of the morning would he pick you up? And in what vehicle would you guys be driving in?

Marc Randolph:
So the hours in Silicon Valley are pretty long. So I think our commute time was seven o’clock in the morning, maybe 7:30. And both of us drove pretty nondescript cars. Reed drove a gold Avalon, if you can picture that. I had three kids, so I drove an old Volvo.

Speaker 1:
Oh yeah.

Marc Randolph:
With car seats in the back. And Reid’s car was immaculate. My car full of half empty packages of diapers and Coke cans and things, fast food wrappers. They say cars sometimes reflect the personality. And that was pretty true.

Speaker 1:
When Reed would pick you up at this time. Was he wealthy at this point? Would you classify him as wealthy at this point?

Marc Randolph:
Yes.

Marc Randolph:
(singing)

Marc Randolph:
Pure Atria, his company had gone public. And then so that was certainly a nice outcome for him. And then when he sold Pure Atria to Rational, that also was pretty nice. So yeah, he was in a pretty comfortable spot, comfortable enough that he was prepared to be the primary angel investor.

Speaker 1:
Got it.

Marc Randolph:
Or for whatever crazy idea we could dream of.

Speaker 1:
So how much money did it cost to start Netflix and where did you start Netflix?

Marc Randolph:
So we spent months carpooling back and forth throwing around these ridiculous ideas. And one of them stuck with us, which was maybe we should try doing video rental by mail. And even crazier, we decided that we would do it with this brand-new technology called the DVD, which at the time we come up with the idea wasn’t even out of test market yet. And so we tested a bunch of things. For example, we wanted to see whether we could actually mail this to people, but we couldn’t find a DVD. So we went and bought a music CD and mailed it to somebody. But ultimately the thing we needed to figure out was would anybody do it? And there was no way to know that other than doing it.

Speaker 1:
Marc, I thought it was weird, bro. When I got those things in the mail, I thought, “Who in the crap is mailing this? What am I supposed to do with this? Have these people lost their minds.” And it was maybe one out of maybe 100 people I knew maybe one out of 50 people I knew. It seemed like they would go, “Oh yeah, that’s cool. I use it.” I’m going, “You do?”

Marc Randolph:
The reason the name of the book is That Will Never Work because you are not the only person who goes, “What, video rental by mail? There’s a Blockbuster in every corner. Why would I wait two or three days for something I can run down to the corner to get?”

Speaker 1:
Mind blowing. Mind blowing.

Marc Randolph:
It is mind blowing.

Speaker 1:
How did you get your first 10 customers, your first 10? Was it through the mailers?

Marc Randolph:
Yeah, it was a crazy thing. Listen, Reed, wrote a check for $2 million. Well actually 1.9 and then my mom and two other people put in the extra. But we had $2 million to start. And if you think about what it was like in 1997, you couldn’t just go up and get into Amazon web services and grab a website. You had to build everything yourself. So it took $1 million. Took us six months just to launch a simple website. And when we launched we had about 900 DVDs, that was the entire catalog there were. And at the time, you couldn’t go out and buy a mailing list of DVD owners. Just weren’t any. And so what we did is we had someone who did something we call black ops and he would infiltrate the user groups, the Usenet groups, these early social networks of the web.

Marc Randolph:
And he’d find the ones that were dealing with, there were the video files who are into new geeky technologies like laser discs. And he’d talk up things pretending he was just one of the gang. It’s like, “Hey I just heard about this company launching that rents DVDs by mail. Anyone heard about it? It’s called netflix.com.” And doing that, he spread the word. And so when we finally launched in April 14th, 1998, almost a few days from now, it’ll 22 years ago. We actually had this flood of people who were curious. Now by flood I mean about 100.

Speaker 1:
Wow.

Marc Randolph:
This was not 160 million subscribers. This was getting 100 people to actually come to the website in a single day. So it was pretty exciting.

Speaker 1:
I love the honesty about this. I love this. This is your story about how you got those early adopters is very similar to the Reddit story. They are very similar to Reddit. For people out there that are struggling to get their first 10 customers, what advice would you have for them?

Marc Randolph:
Oh, don’t set aspirations beyond your means. You need to figure out how to get one. So get one and then learn from how you got the first. Now get two more the same way and learn from what you learned from that. It’s an incremental process. Even a company that becomes as large as world changing as Netflix started out with nothing. We were in an old bank building with filthy carpets and we sat on beach chairs because we couldn’t afford furniture. I spent months in the wilds of the New Jersey office parks trying to convince DVD manufacturers to put a coupon in the box. Nothing was easy. It was persistence, persistence, persistence and confidence, confidence, confidence. But that is the situation that every early stage entrepreneur is always facing. You have no idea what’s going to happen.

Marc Randolph:
And so it’s this ability to relax a little bit and recognize that you don’t know what’s going to happen. And so you have to put yourself into a position to be prepared for almost anything. To put yourself in a position where I can do this for a long time and that doesn’t necessarily mean business advice. It doesn’t mean necessarily lay off as people that your business can survive for an indefinite period of time. It means taking care of yourself so that you weren’t burning yourself out because this may not maybe a crisis that you need to be able to manage for more than a month.

Marc Randolph:
You may have to be able to manage it for a year. And that means maintaining your relationships, maintaining your balance, maintaining your sleep, eating well. I mean all these simple things which we tend to forget when we get into these high stress situations. And this one, I remember back in 2000 when Netflix was finally cruising it, we were gaining a customer’s hand over, it was so easy to raise money because the dotcom was ish and then boom, in a matter of weeks the bottom falls out and where money was easy, now money’s impossible to get. And wow, was that an eyeopener?

Marc Randolph:
Was that a crisis? All of a sudden for a company which is spending money it doesn’t have and it can’t get any more. That’s awful. You have to relax and realize that things are not going to happen dramatically quickly. I do a lot of outdoor things. I do a lot of climbing, I do a lot of skiing on a mountain biking, kayaking, wilderness things.

Speaker 1:
And a lot of outdoor modeling.

Marc Randolph:
And there’s this thing that when you have a crisis, when someone’s injured, they say, “Stop, take a breath.” The person is better suited, if you take a minute to evaluate the situation, then if you rush in and I feel that’s the best possible advice for what’s happening now.

Speaker 1:
I want to go back to right before the dotcom fell apart. Right before the dotcom implosion. How long did it take you to get Netflix to a place where you were gaining traction? How long did that take you from startup to gaining traction?

Marc Randolph:
Two and a half years. It was brutal. As I mentioned the book’s called, That Will Never Work because that’s what everyone told me. Well damn it, they were right. It didn’t work as we initially envisioned it. I mean, at first when we launched this thing, it was all a cart service. It was like due days, there was late fees. It was like going to a video store but by mail. And so we couldn’t get people to rent from us once.

Marc Randolph:
And if we did, we couldn’t get them to rent again. And it took us easily a year and a half, almost two years of testing and struggle and trial and error to finally evolve to a business model that actually worked. Where we actually could provide a service that someone would pay us for and they’d pay us more than that it costs us to deliver it. And we’d stay and they’d tell their friends, but that wasn’t apparent at the beginning. That took a long, long, long time and eventually it looked nothing like we started with. It was no due dates and no late fees. It was subscription. It was this crazy model which miraculously worked.

Speaker 1:
By the way, that was a crazy deal. I remember I saw that. That’s what got me to try it out. It’s like, “No late fees, how is this company even going to survive? I might as well try.” I mean, did that no late fees policy bite you in the butt ever? Or is that or was that the key to really opening up the market for you?

Marc Randolph:
It was the key to opening up the marketplace. But it did bite us in the butt later for a different reason. But initially that was the key because the reason that everyone said that’ll never work because there’s a Blockbuster in every corner is because they said, “Why am I going to wait two days for a movie when there’s a Blockbuster in the corner?” But once we had no due dates and no late fees, we’d ship you your three DVDs and you’d put them on top of your television set. And you could leave them there for a week, a month, a year where you didn’t care. But what it meant was now when you wanted a movie, it was instantaneous. You’d walk over and grab it from your TV. We were now faster than Blockbuster. And that turned it around.

Marc Randolph:
And then when we added in the subscriptions again, my junk mail king being brought to the fore again, my circulation experience. That combination of the two was fantastic. And that was the point where we kind of stopped being a startup because we had finally figured out the repeatable, scalable business model. But the reason that it did us later was that because it was confusing as you said, because, What? No due dates, no late fees.” We gave people their first month free and in a subscription business, that’s fine. You pay 30 or $40 up front to acquire the customer and then you make it back $2 a month over four or five years. It’s a great model, but what it means is that if you’re wildly successful, if orders are flooding in, “You’re going, this is fantastic.”

Marc Randolph:
But, “Oh my gosh, every new customers cost me $40 and the next month I only get $2 from them.” So you can go broke being successful and then the dotcom bubble explodes.

Speaker 1:
When was that? When did the dotcom bubble explode approximately? I’m not looking for a specific date.

Marc Randolph:
Summer of 2000.

Speaker 1:
And now we’ve got the dotcom explosion. And then you also have this fight against Blockbuster. It’s like a Chuck Norris movie where Chuck is fighting against 18 ninjas and somehow he dodges bullets and he’s got the whole… Talk to me, how are you able to be the Chuck Norris of this? How were you able to do this?

Marc Randolph:
No this is Chuck Norris rolling over onto his back and exposing his throat after whimpering abjectly for a while. We were of course struggling against Blockbuster, but we were still nothing to them. Listen in the summer of 2000 I think we were on track to do $5 million in revenue, but we were in the hole for about $50 million by that point. And Blockbuster was a $6 billion company and they had 60,000 employees and 9,000 stores. So we were insignificant. So what happened is after the dotcom bubble collapsed and we had all this expensive, all these new customers going broke, being successful, we go, we can’t sustain this. And then, “Aha, we’ll sell ourselves to Blockbuster.” And that was the plan.

Speaker 1:
That was the move.

Marc Randolph:
Of course, we were nothing to them. We were a net. And so we couldn’t get them to return our calls no less have a meeting. And it took about a month or so us trying everywhere we could to get a message to them. They finally agreed to meet us at their headquarters in Dallas one morning.

Speaker 1:
Did you meet Wayne Huizenga?

Marc Randolph:
I did not. He had sold by then and it was now John Antioco who was running it. But so he was out of the picture. I did not meet him, but it was quite a meeting. I mean, because we were pumped. We go, “This is our out. Our problems are going to go away or at least they’re going to be someone else’s problem.”

Speaker 1:
You’re fired up. Yeah.

Marc Randolph:
Yeah. And so we make the pitch, we go, “All right, we’ll run the online part of the business, which we know. You’ll run the stores which you know, we’ll find all those synergies which people are always talking about.” And voila, everyone’s happy. And it was going great, getting the nods, good questions, and then came the big question, “How much are we going to pay for you?” And we had talked about this on the plane and we decided, well, we’re $50 million in the hole, “So, $50 million.” And there’s this long pause. And then I’m not sure, but I think they were all struggling not to laugh at us at the hubris that this little company, $50 million in debt in the middle of the dotcom crisis would have the balls to ask for, pardon me, could ask for that much money.

Marc Randolph:
And it went downhill pretty quickly after that. But it was a key moment for us and for me because flying there, I had seen this as the out as the deus ex machina. The hand from God that would come down and instantly solve our problems.

Speaker 1:
Oh yeah. You were fired up.

Marc Randolph:
But on the way home I was going, “Oh no, now there’s no way out. There’s no easy fix. There’s no magic bullet. There’s no way around. The only way we’re going to do this is head on.” As my dad used to say, sometimes the only way out is through and not only through, but through Blockbuster. And wow, there is nothing that focuses your mind so much as realizing you’re going to have to take down a $6 billion corporation in order to survive.

Speaker 1:
I don’t want to devalue the value of a mega point because if you printout too much currency, you devalue it. But that right there, from any anybody who can beat Blockbuster with a $50 million in the hole business going against a multiple billion-dollar business, you surrogate your sir, get your second mega point.

Marc Randolph:
Oh, thank you. I treasure this moment.

Speaker 1:
Well, I guarantee you’re not going to be on another show that’s going to give you another mega point. I can say tell you that.

Marc Randolph:
They are hard to come by. I’ve realized that already.

Speaker 1:
Now my understanding is you also sat down with Jeff Bezos. Is that hoo-ha, is that hearsay? Did you actually sit down with Jeff Bezos about acquiring Netflix or no?

Marc Randolph:
No, that is true. That’s quite a bit earlier in our checkered past because that actually took place in the summer of 1998. Probably less than three months after launching. And that was a really interesting meeting because I hate to keep hammering this, but everyone said that will never work. And then all of a sudden we get the call from Jeff Bezos, the pioneer of eCommerce. And back then, I mean Amazon was only selling books, so it was still just a bookstore, but still he had managed to pull off an IPO. So this was the guy and if he saw something in this, well then maybe we were on the right track. And it was pretty clear he had made it clear that he wasn’t just going to be the bookstore, he was going to be the everything store. And we were pretty sure the next category was going to be music and movies.

Marc Randolph:
And so it was pretty obvious he wanted to have us up to Seattle to talk about a possible acquisition. And it was kind of amazing because Reed and I flew up to Seattle and we’re following the directions to get to the headquarters and we’re wandering through this really sketchy neighborhood and there’s people shooting up in the doorways and there’s broken glass and litter. And there it is, this old warehousy building, which is Amazon. And inside it’s just as bad. I mean, desks are crammed in the corners and under stairs and there’s four people to an office and all the desks are made out of old doors on wooden posts like the kind where you’d have the keyhole filled in with a little round piece of wood.

Speaker 1:
Oh wow.

Marc Randolph:
But anyway, we sit down with Jeff Bezos and it was really fantastic because he was already in this real business. I mean he had real volume and you could see as we were talking that he was getting so jazzed up talking about the early days of Amazon. We were sharing these stories about what our names were prior to launch because you always have a beta name. To pay people before you come up with your real name, you need somebody to be on the check, something to take the lease under. And at Netflix, our beta name was kibble, like the dog food. And at Amazon the beta name was Cadabra, which Jeff thought evoked magic, but his lawyer said, “No, it sounds like cadaver.” So that one got nixed. And so I think Amazon was a better improvement, but it was really fun.

Marc Randolph:
And what was happening is eventually his CFO walked us out and said, if something happens, it’s probably going to be in the low eight figures rather which we go, okay, that means very low figures. I mean, it’s probably, it’s going to be a 15 million, $16 million offer. And at the time for someone who owned a third of the company and had been working on it for less than a year, that would have been a great outcome. But Reed and I felt we were just getting started. We’d spent six months building a website, figuring out how to ship DVDs. I’d made these deals with the DVD manufacturers. We were right on the verge of something we believed, and it was too soon to sell. So in many ways, this trip up to Seattle was less a sale, but it was more of a commitment ceremony. And we said, “We’re not ready to hand someone else the keys.”

Speaker 1:
In this journey I mean, you’ve met so many great people throughout your career. And Jim Rowan, the bestselling author says, you’re the average of the five people you spend the most time with. Tim Ferriss has a similar quote. Proverbs says a similar concept of he who surrounds himself with the wise does well essentially and the person who surrounds himself by fools, doesn’t do well. So I just want to know, what are some really big friendships that you’ve made along this journey? Who’s kind of your top five that you spend the most time with or some great people you’ve got a chance to meet along the way that maybe you talk about in the book, maybe you don’t, but I think our listeners would be curious.

Marc Randolph:
Yeah, it’s an interesting, I’ve been incredibly lucky and I’ve had a chance to work with three unbelievably good entrepreneurs. And what’s been valuable about that? First of all, I was lucky that I happen to end up in the same room with these three people at various points in my career. But people often want to, now it’s become this glorified thing to be an entrepreneur and they think it’s all doing pitch decks and parties and being on Shark Tank or being rich or famous or something like that. And they take courses in it and you can’t learn it that way. You’ll learn it by watching someone doing it and even better you learn it by doing it yourself. And it was so great having these years with these people so I could see how they made decisions. And frankly, those are the things that have stuck with me for my whole career.

Marc Randolph:
One was a guy named Peter Godfrey who was the person who pushed me into starting Marc Warehouse and who was there giving me advice or criticizing me, helping me and seeing him run his companies at the same time. Another person was Philippe Khan who was the founder of Borland, the big software company where I did the direct marketing work. And of course the third person’s Reed Hastings. What an unbelievable privilege to have a chance to work alongside of him for seven years. But now I collect people and I have a lot of people that I know think the way I do that I can bounce ideas off of that think differently than I do. And that’s one of the things that’s a huge asset for someone who’s my age who can fall back on this big network of people that I can run my thoughts past.

Speaker 1:
You during the peak of this Netflix craziness you mentioned… I say the, craziness, did the crazy growth of Netflix during this whole Netflix Epic growth during the struggle during that, you mentioned that during a crisis you have to be mindful of your sleeve. You got to make sure you’re sustainable, you got to make sure you’re in it for the long haul. So what did your schedule look like while building Netflix? I mean, what time did you wake up every day and how did you start the first four hours of every day?

Marc Randolph:
I’m going to answer it somewhat obliquely, which is my style as you probably picked up here, is that I’ve always been about balance, I mean forever, in college about balance. But especially once I became an entrepreneur, I vowed really early on that I was not going to be one of these guys who’s on his sixth startup, but also on his sixth wife. And so I’ve always carved the timeout for the things that I felt were really important in my life. And just give you an example at Netflix and even before Netflix, every Tuesday, without fail, I mean without fail, at 5:00 PM I would leave the office and I’d meet my wife, we had had a sitter and we’d have a date night. And for years we did this. And at first it’s tricky, but you got to be firm. Big crisis. Great. We’re going to wrap it up by five. “Oh Marc, I have to talk to you.” “Okay. On the way to the car.” But a really interesting happens of course, is that if you do this consistently, eventually they stop asking. They realize you’re serious.

Marc Randolph:
But the better is culture is what you do, not what you say. And people realize this balance thing is for real. But I’ve always been like that. So what it means sometimes when you’re in the thick of it starting a company is that you get up early and you work a couple of hours before the family gets up. But then you shut the damn lid and be there while your kids are up and getting ready for school. At Netflix, I would come home and I’d be home from six to 8:30 so I could have dinner help put my kids to bed and then I’d go back to the office at 8:30 and work until midnight and you can’t do that forever.

Marc Randolph:
But the things that are important, my opinion, have to carve out those blocks of time because they won’t magically appear. You can’t say, “I’m going to get out and get surfing if some time happens to appear.” You’ve got to go, “I’m going to block out three hours on Thursday afternoon and get the hell out of here.”

Speaker 1:
Every time we interview-

Marc Randolph:
Because otherwise, it’ll never happen.

Speaker 1:
Every time we interview, great guys like you, we hear of the importance of time blocking. It is just so, so important. And I want to respect your time so we’re moving into the lightning round because I know you’ve blocked out about an hour here. We’re going into the lightning round, lightning round.

Marc Randolph:
Perfect.

Speaker 1:
Netflix, you grew it, you navigated the company through the Initial Public Offering. Most people would think that once you’ve been through hell and back to take something public, you might want to stick around for a while and enjoy the afterglow. You decided that you wanted to leave Netflix, I believe in 2002. What prompted the move?

Marc Randolph:
I’m fortunate that I figured out what I love doing and I figured out what I’m good at. And it’s the same thing, both, which is that I love early stage companies and it’s love that problem solving that’s sitting on the table with super smart people solving interesting problems. And so yes, Netflix was successful, we had money, we could hire amazing people and I still love the company, but I realized that the things that I love doing were not happening as frequently there. And that success is really about doing what you want. And what I wanted to do was do early stage stuff. And so in great terms, gradually and safely, I did leave the company and now I’m back to doing the thing that I love, which is working with early stage entrepreneurs and helping them hopefully have some of the same success I’ve had.

Speaker 1:
I know the listeners can pick up a copy of your book, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea, but is there a specific website you want the listeners to go to if they want to learn more about you and all the things you’re up to these days?

Marc Randolph:
Sure. The best place to find the holding ground is my website, which is marcrandolph.com. That’s Marc expelled with a C and Randolph spelled with a P-H. But there you can find links to all of my usual, my writing, my video stuff places I’m going to be and also links to the social media where I do pontificate more frequently.

Speaker 1:
This question, it’s not meant to paint you into a corner question. It’s just I wanted to ask you this. When you finally, because you worked so hard, you delayed gratification and I know you didn’t do it for the money. But once you recognized that in the great checklist of life, that money would no longer be a problem, at least for the short-term or mid-term or whatever. Once you had finally made some money, how did that feel?

Marc Randolph:
It’s nice, I guess. I grew up in a fairly affluent community and one of the best things about that is pretty early in your life, you separate happiness from money. You recognize they are not the same thing. One does not lead to the other. I knew a lot of super rich people who were super miserable. So I treat them always as two separate axis. And so is it better to be rich than poor? Certainly, you don’t need to worry about your kids’ education or being able to afford to go to a doctor. But is it going to make you happy? No. That you’d have to look other places.

Speaker 1:
Final two questions for you. What’s maybe a few daily habits or a daily habit that you believe has allowed you to achieve super success by most people’s standards?

Marc Randolph:
I’m very focused. I start every day saying, “What do I want to accomplish today? I start every week by saying what do I want to accomplish this week?” Every quarter I do the same thing. You don’t accomplish the things you don’t make priorities and make goals. And I stick to that and that includes though taking a lot of time off. It’s not like I’m constantly working. I just don’t wander through life. I’m fairly directed even when I direct myself to say, “You’re going to spend three days now not thinking about anything except enjoying yourself.” That’s a big one for me. And I’m pretty balanced. I mean, I really do get out and run or bike or surf or climb pretty much every day.

Speaker 1:
Now, chief, this is the tough question. This is the one where you might want to boom.

Marc Randolph:
I’m ready.

Speaker 1:
This is what you’re thinking right now. Going back to the music, we’re going back, remember I’m a former DJ, I’m a former disc jockey and I have to know, give me a few of your favorite artists or maybe a favorite song. Just give me kind of the soundtrack of all things Marc Randolph.

Marc Randolph:
So I’ll usually hit up Alexa to play some Steely Dan for me and just let her a pick and choose from that catalog. I just find that really fascinating. My musical tastes were largely driven by the ’80s as you picked up. So I do still love that music. Luckily though, my kids have brought me into kicking and screaming and now I’m really kind of a hip-hop guy too, which is-

Speaker 1:
No way.

Marc Randolph:
… A little embarrassing to admit.

Speaker 1:
Do you have any hip hop artists or any hip hop songs that’s kind of your jam right now? Or maybe one of your jams?

Marc Randolph:
No, I’m retro.

Speaker 1:
Retro.

Marc Randolph:
I’m Biggie.

Speaker 1:
Oh wow.

Marc Randolph:
I’m behind the times by about 10 years. But it’s okay. I’m okay.

Speaker 1:
You are impressive folks, Google search just for a blasty blast. Google search, Marc Randolph, M-A-R-C Randolph, and I’m sure it’s eye-candy folks. It’s eye-candy. Google search the guy. And then by the way, folks seriously this book, That Will Never Work. Man, does that speak to the heart of entrepreneurs? So folks, if you’re out there today and you’re saying, “I’m quarantined.” Listen, this is my high pressure sales pitch. Marc’s not going to do this. I’m going to do it. One, you say, “Well, I don’t have the time to read a book.” Well, right now folks, that’s not a great excuse. That’s not really the move. You’re quarantined. And you know you want to educate the mind. Two, folks that when you read a book, what you feed your mind changes the way you operate. It changes your actions. It’s so important and third, there are great stories in this book. Marc, would you agree there are great stories in the book?

Marc Randolph:
I do. I was just really trying to paint a picture of what it really feels like to start a company. It’s not glorifying it. It’s not painting me, hopefully I’m not painting me as being a hero or a genius. It is what it really is like. The really fun parts, but the really disappointing parts. Keeping your family together while you’re going through these things. But fundamentally there are some good stories in there.

Speaker 1:
Marc, thank you so much for joining us today on the Thrivetime Show. I really do appreciate it. And on behalf of our half a million listeners, we hope that we have done you justice with our questions.

Marc Randolph:
This has been great. Really fun. And listen, I’m going to hold on to those mega points very carefully because I know that they’re like Bitcoin. They’re going to appreciate.

Speaker 1:
Yeah, no, it’s really, and it’s hard to explain to your family and friends. You go, “I got an audio mega point.” They’re like, “Can I see it?” “Nope. You can’t see it. But it is important.” It’s hard to explain it to people too.

Marc Randolph:
I’m going to trade my cow for an extra one or maybe some magic beans.

Speaker 1:
Nice. Marc Randolph. Thank you so much my friend.

Marc Randolph:
My pleasure. Thanks again.

Speaker 1:
Hey Marc, we’re off air. I got two quick questions for you. Ad now without any further ado, three, two, one, boom. Boom, boom, boom.

TD Jakes:
Why does this still keep happening to me? I don’t know whose prayer I’m breaking into, but I’m breaking into somebody’s prayer. Say, “Lord, why do I keep going through the same things over and over again?” And the Lord sent me here to tell you, the problem is with your default, until you change your default, you will always go back to being who you were before because you would have never changed your mind. You change your friends, you change your address, you change your phone number, you change the songs you sing. You change everything else, but you didn’t change your mind. There’s nothing as powerful as a changed mind.

TD Jakes:
(singing)

TD Jakes:
And the Lord sent me here to tell you, the problem is with your default. Until you change your default, you will always go back to being who you were before because you have never changed your mind. You change your friends, you change your address, you change your phone number. You change the songs you sing, you changed everything else, but you didn’t change your mind. There is nothing as powerful as a changed mind.

Speaker 1:
Hear the rest of TD Jakes incredible life changing and mind-altering sermon. Nothing as powerful as a changed mind today by looking up TD Jakes on YouTube and typing in, nothing as powerful as a changed mind.

TD Jakes:
[inaudible 01:02:08].

Speaker 1:
That is a biblical miracle rap.