That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea

The truth is that no business plan survives a collision with a real customer. So the trick is to take your idea and set it on a collision course with reality as soon as possible.

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What happens on a backpacking trip also turns out to be a perfect model for what happens in a startup. Startups are small, they’re often lean, and they’ve separated themselves from the dominant mode of thinking within their space. They’re made up of like-minded people who are on a journey, who share a common goal. And they often end up totally lost in the woods.

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The whole saga had provided a valuable lesson: trust your gut, but also test it. Before you do anything concrete, the data has to agree. We’d suspected that next-day delivery was important, but we’d been myopic in our analysis of our tests, so we hadn’t understood why. It took an additional test, with a truly outside-the-box execution, to understand what we’d already intuited to be true. And once we understood it, we could refine the idea and maximize its potential—which was huge. Next-day delivery was like magic. We knew it had to be part of our plans going forward. Now we just needed to figure out a way to make it work without driving the DVDs ourselves or building enormous warehouses all over the country. “I’m on it,” Tom Dillon said.

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It was time to seek strategic alternatives. Sound like jargon? That’s because it is. Silicon Valley is full of nonsense phrases just like it. For instance, when someone says that he’s leaving to spend more time with his family, what that really means is my ass got fired. When someone says this marketing copy just needs some wordsmithing, what they really mean is this sucks and needs to be completely rewritten. When someone says we decided to pivot, what they really mean is we fucked up, royally. And when a company decides to seek strategic alternatives, what they’re saying is: We’ve got to sell this sucker. And fast.

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Nolan Bushnell, the co-founder of Atari, once said something that has always resonated with me. “Everyone who has taken a shower has had an idea,” he said. “But it’s the people who get out of the shower, towel off, and do something about it that make the difference.”

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“Also, baseball’s popularity is waning with younger people,” he says, as we roll to a stop behind a sand truck. The sand is on its way to San Jose, where it will eventually be turned into concrete for roads and buildings in booming Silicon Valley. “Don’t want to be tied to a declining user base from the start.” “You’re wrong,” I say, and I tell him why. I’ve done my research, too. I know the numbers for sporting goods sales. I’ve looked into baseball bat production—how much the raw materials cost, how expensive it is to buy and operate the milling machine. And, okay, I might have a personal connection to this idea: my oldest son just finished his rookie Little League season. For every one of my points, Reed has an answer. He’s analytical, rational, and doesn’t waste time with niceties. I don’t, either. Our voices are raised, but we’re not angry. It’s an argument, but it’s a productive one. Each of us understands the other. Each of us knows that the other is going to offer stiff, uncompromising resistance. “Your attachment to this idea isn’t strictly rational,” he says, and I almost laugh. Behind his back, I’ve heard people compare Reed to Spock. I don’t think they mean it as a compliment, but they should. In Star Trek, Spock is almost always right. And Reed is, too. If he thinks something won’t work, it probably won’t.

“So, what you’re telling me is that if I mailed a naked CD inside an envelope and addressed it to anywhere else, it would have gotten scratched, cracked, or broken?” “Most likely,” he said. Lucky us, I thought. It’s called a false positive—also known as being lucky. If we’d used any other post office—or if Reed had lived in Los Gatos or Saratoga—our CD might have been destroyed. Hell, if we had mailed it to my house in Scotts Valley instead of his place in Santa Cruz, the thing wouldn’t have made it. And I wouldn’t be writing this book. Or maybe I would be, but it would be about shampoo.

Within a few days he’d put us in touch with one of the key players in what would become early Netflix’s eccentric, largely foreign-national ops team: Eric Meyer, a muppetlike Frenchman with a frenetic manner who would eventually become our chief technology officer.

All of this might seem like it happened fast. And it did—in a matter of weeks, we’d gone from a list of nebulous ideas to a semicoherent plan for moving forward. But here’s the thing about Silicon Valley in the late nineties: everything was fast. It hadn’t been slow in the eighties—not exactly. But progress had occurred on a more incremental scale. It was an engineering driven culture, so it all moved at the speed with which things could be built. At Borland International, where I worked in the eighties, the very architecture of the corporate campus—engineers on the top floor, in the window offices, and everyone else on the floors below them—enforced a sense of hierarchy: engineers were on top, and everyone else worked for them. Along with that hierarchy was a certain staidness. Change happened logically, according to plan. By the mid-nineties, things had changed. Jeff Bezos’s success at Amazon had shown us that it wasn’t just more powerful hardware or more innovative software that would lead to future progress—it was the internet itself. You could leverage it to sell things. It was the future. The internet was not predictable. Its innovations were not centralized on a corporate campus. It was a whole new world.

In the meantime, I had to find a place for Jim—and all the rest of us—to work. We needed an office. I had strong feelings about being a Santa Cruz company—of bucking the prevailing norms of Silicon Valley and not moving to a cookie-cutter office park in Sunnyvale or San Jose. Santa Cruz spoke to me. It’s a beach town, a surf town. A whiff of the sixties still clings to it. There are probably more Volkswagen vans than there are people. Its prevailing ethos, as a city, is the opposite of Silicon Valley’s “growth at all costs” model. People in Santa Cruz are typically against development. They’ve opposed widening the roads. They don’t want it to grow. Growth is God, over the Santa Cruz mountains. But in Santa Cruz, it’s vulgar. I wanted some of Santa Cruz’s laid-back ethos for my company. I didn’t want to attract just the same group of ambitious young tech workers from over the hill. I wanted freethinkers, people who were slightly outside the box. I wanted things to be different. I wanted life balance—for me and for my co-workers. I wanted Santa Cruz’s access to trails and waves and a more relaxed way of life, and I didn’t want to have to spend two hours every day commuting to Palo Alto. If I was going to start my own company, I wanted it to seamlessly integrate with my life. I wanted my kids to be able to come by the office for lunch, and I wanted to be able to drive home for dinner with them without spending hours inching along in a conga line of cars. I was looking at office space in Santa Cruz. But until we had money in hand, we were stuck with the Scotts Valley Best Western.