“If people tell you ‘it’ll never work’ — that’s when you’re on to something.” Netflix co-founder Marc Randolph takes the path less travelled
Back when Blockbuster still reigned supreme, Marc Randolph decided to see what would happen if he sent a DVD through the post. "It'll never work!" they told him...
Words: Joseph Bullmore
Marc Randolph wants us to think more about the little guy. “I think there’s this whole over-glorification of the big money side of business, which is a disservice because the vast majority of companies are not huge tech ventures, they’re not VC funded. They’re people using their savings, because their objective isn’t to build these huge companies to make themselves and their investors rich — they want to have a job they enjoy, they want to provide an income for a handful of employees, and they’re perfectly happy with that,” he says. “I really believe there’s honour in that and that we’ve made this fetish of fund-raising and the idea of becoming this big, rich entrepreneur.”
Randolph knows of what he speaks. He’s the host of a podcast that goes by the name ‘That Will Never Work’, in which he advises people just getting started with their business as to where to go next. He’s the author of a book with the same title. At the same time, he’s a big, rich serial entrepreneur — a business mentor and angel himself, one of whose latest investments was in the data sciences company Looker, which sold to Google for $2.6bn. Oh, and he was the co-founder and founding CEO of something called Netflix.
Marc Randolph and his son on the way to the Netflix IPO, 2002
Randolph, who lives in California and spends as much of his time as possible climbing mountains, kayaking through rapids, cycling through forests — just about anything, in fact, instead of sitting in front of a screen, and the irony of this is certainly not lost on him — didn’t start out big. He launched the US edition of a computer magazine and helped establish a PC mail order business. He worked on a few Silicon Valley start-ups, helping to found an automated software tester. It got acquired by a company called Pure Atria. Randolph hit it off with the founder, a guy called Reed Hastings.
When Pure Atria was acquired, the pair started riffing on ideas for a new project. Personalised shampoo for dogs was one of them. Anything was on the table, contrary to the naysayers who would keep telling him ‘it will never work’. And not least because, he stresses, on paper most business ideas sound a bit dumb. And because, of those that get off the ground, most end up being something very different anyway.
"We’ve made this fetish of fund-raising..."
“Developing new ideas is the most fun part of entrepreneurship,” laughs Randolph, who seems genuinely excited about this process. “It might start out of frustration — ‘why isn’t there an easier way to do this?’ You start with things you know well. [But it’s fun because] you can suspend concerns about how expensive it could be, or who you’d be competing with. You just don’t care.”
And then came yet another, fateful late fee for a video that hadn’t been returned to Blockbuster on time (and, for younger readers, this was back in 1997, when you rented movies on physical tape, from a real place called a shop). That’s when the lightbulb came on: what if you could return the tape by post? And then another lightbulb: never mind tape, what about these newfangled things called DVDs? What if they were posted out to you, as part of a subscription service? There and then, Randolph and Hastings bought a DVD and posted the disc to themselves. It survived.
Early Netflix DVD mail orders, 2002
Well, that last part is authentic, at least. Truth be told, such epiphanies are, Randolph says, very rare in business — and were rare in the much messier creation of Netflix, too. They just suit the media’s desire for a snappy, relatable prècis. Newton didn’t come to gravity by watching an apple fall, either.
“[Inevitably you have to] come up with an easier, shorter story [about how a business came to be] instead — but one that leaves you feeling some kind of emotional truth about the product. It’s eBay and needing to get rid of your girlfriend’s Pez dispensers; or Uber and not being able to get a cab when it’s raining on New Year’s Eve. It resonates,” he says. “Even if it’s not strictly true, it’s emotionally true. A guy has a late fee on a movie. The true story takes 350 pages of a book. But a few words can communicate what that company is all about.”
Randolph knows a few things about telling a story, not least because his uncle was Edward Bernays, considered to be the founding father of modern public relations. Indeed, Randolph’s middle name is ‘Bernays’. He’s not one to dismiss marketing as smoke and mirrors, privileging the importance of product over image. An early experience taught him why.
“Early on in my career I had a software product, a spreadsheet, and we got the great news that it won Product of the Year in this prestigious computer magazine. No, not the one I founded — there wasn’t any inside job,” he laughs. “We were all very excited. And we looked to see who else had won over past years — and nearly all of those companies weren’t here anymore. It was a reminder that you can have the best product in the world but if people don’t know about it, or think about it in the right way, understanding why it’s important, then it’s useless.”
Yet, refreshingly, seeing as so many business people of his stature like to give the impression that they know everything, Randolph makes a point of stressing that part of successful entrepreneurialism is to know your strengths and weaknesses. He readily concedes that his strength is in business creation rather than business building. He says that’s he’s good at finding expertise and putting teams together. He’s good at what he calls triage: when there are a hundred things on fire, and the resources to put two out, he knows which two. He can name a company, as he did Netflix, despite his misgivings that anything ending in an X hints at the pornographic. He can find what business types call product/market fit.
Randolph and Reed Hastings on the day Netflix IPO’d on the Nasdaq, 2002
But, he says, it’s a whole other skill set to take that and start introducing those tiny, constant incremental improvements on efficiencies and margins that scale a business up over time. It’s why Randolph didn’t stay with Netflix all the way to becoming today’s entertainment behemoth. He probably wouldn’t have liked it anyway. He’s more likely to complain when he can get a wifi signal.
“I think almost all the business skills I use as an entrepreneur I developed in the mountains — because from age 14 I spent a disproportionate part of my youth with a backpack on,” says Randolph, who was an active member of the US’ National Outdoor Leadership School — something akin to the UK’s Duke of Edinburgh Awards Scheme — and is now the chairman of the organisation’s board.
“There is, of course, a style of backpacking where you get on a trail and just follow it. But [with NOLS] I did bushwhacking, where there is no trail, where you have to use your map and your senses and whatever you can to figure out the best way to travel,” he adds. “They’d would assign you as leader for the day, say where you had to be by when, and you’d screw it up royally — you’d be imperious as a leader, or you’d call for a break and then just sit there for two hours, all these crazy mistakes, but with an adult nearby to debrief you and help you understand why you didn’t do well. But you internalise those skills and they’re the same skills you use really when starting a company.”
"The thing is that nobody knows if an idea will work or not..."
These are, the laments, the kinds of skills that young teenagers today rarely get the chance to develop — they’re all too busy watching their screens. Perhaps, he suggests, too many of them just want to take the well-trodden trails towards what Randolph says are the worst possible benchmarks of success: fame and/or money. It’s a debate he used to have with his banker brother at recruitment fairs.
“Yeah, he’d say you should be an investment banker, move to the city and make $100,000 a year as an intern. And I’d say ‘come to San Francisco, live six to an apartment and eat ramen’ — so he was definitely much better armed in that arms race,” Randolph chuckles. “But what I was fighting against was the tendency for people to take the safe path. And your career as a banker is pretty predictable. Listen, if you really want to do that, for god’s sake be it. But if you silence the thing that might fulfil you, being an entrepreneur, in order to be that banker, then my job is to show you that you can take that risk. The odds of being hugely successful economically in business are low, too. But that’s not the point.”
The point is the creation. It’s the ride. It’s the independence. It’s the learning. And, he says, you never stop learning as an entrepreneur: repeated experimentation, and a readiness to junk what doesn’t work and try something else, is the nature of the beast.
“The thing is that nobody knows if an idea will work or not. I’ve gone from finding that line — ‘that will never work’ — depressing when I was younger and now finding it inspiring, because it suggests I’m doing something that hasn’t been done before,” says Randolph. “The fact is that every big successful venture you can think of started out as something someone else thought wouldn’t work. But someone had enough confidence to try something and push by someone else’s cynicism.
“But I also have to be careful not to be one of those guys saying ‘that will never work’, because that response is based on an assumption I’m making that was appropriate ten or five years ago but which isn’t relevant now. And some other entrepreneur will come along and say ‘Marc doesn’t understand how the world really works right now.’ And they’re probably right.”
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