I had started on a bit of a reading tear even before having to shelter in place. (Something I do most of the time anyway!)
My favorite genre of late has been about startups that became large companies. It’s probably useful for those of us who run small businesses to recall that most giant companies were also once just a person or two in the proverbial garage. (Apple, Microsoft, Google, Amazon, and on and on.)
Some common themes appear, including the maniacal, tyrannical, perfectionist who formed them. (Jobs, Gates, Brin & Page, and Bezos for the companies I just mentioned.) One almost has to wonder if to be successful, one has to be an unmitigated jerk!
Then I stumbled upon a book entitled, “That Will Never Work” by a man I had never heard of—Marc Randolph. The subtitle of the book is, “The Birth of Netflix and the Amazing Life of an Idea.”
It turns out that Marc Randolph founded Netflix, which came as news to me since I had long understood Reed Hastings to be the founder; he remains CEO to this day. It also turns out that both of them are darn nice guys…not jerks or tyrants at all.
But every story has plenty of twists and it turns out that Randolph worked for Hastings at another company, and the idea of a video rental store (renting VHS formats at the time) was born during one of their daily carpools from their neighborhood to the office. Randolph is quick to point out that Hastings (who had money and a track record with other companies) had shot down dozens of his daily ideas before pausing when the concept of renting tapes was thrown out there.
Randolph’s wife, on the other hand, was far less curious when she immediately told her husband, “That will never work!”
And for lots of reasons, it probably shouldn’t have, first, because it turned out that VHS tapes were far too bulky (and therefore expensive) to ship by mail and expect a customer to ship back.
Why didn’t they just sell the tapes? Because even then a fledgling company called Amazon would have put them out of business overnight had it also decided to sell tapes. But Randolph and Hastings assumed that Amazon would not want to deal with the returns of a rental business, and that their competition was really the gigantic rental store, Blockbusters.
Netflix went forward based on a few other guiding principles. First, they had learned of something called a DVD. There were only a few hundred different DVD titles in the world, and almost no Americans had a DVD player, but because of the low shipping costs and easy returns, they knew this would be their only chance.
They networked with the nerds that owned DVD players, purchased copies of “every DVD in the world” and began their rental business which was an instant success. In fact, on the day they went live, their server crashed within an hour. This was before tech companies could just rent space from Microsoft or Amazon; they actually had to provide their own!
In fact, on the day they went live, their server crashed within an hour.
So off Amazon employees went to the local computer store to buy a dozen more PCs that they linked together to handle the load. Those lasted about two hours before crashing again and sending the old pickup truck back to the store to buy a dozen more.
One thing I’ve always wondered is how Netflix was able to make the transition to streaming digital content given all of the competition they faced, most notably HBO. The reason is that Hastings saw that business model coming from Day One, years before it actually arrived. He was tech savvy and always knew that’s where things would end up. Instead of those little paper envelopes containing DVDs being a sign of backward thinking, they were a sign of forward thinking. They were, in a sense, a placeholder.
In the end, like so many founders, Netflix quickly outgrew the skill set of Marc Randolph and Reed Hastings took the reins. But Randolph does a very good job in this book of reminding history who actually had the original idea, even as he gives Hastings his full due for building the multi-billion-dollar company we know today.
Turns out, Randolph’s idea did really work.