What’s in Reed Hastings’s New Book? A Blueprint for How He Conquered Hollywood

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Reed Hastings is releasing a memoir titled ‘No Rules Rules.’ 

Photographer: Kwaku Alston/Netflix

About three years ago, Reed Hastings set out to answer a question that had bedeviled Hollywood for the past decade: How did a small DVD-by-mail company build the most popular TV service in the world?

Hastings, the co-founder and chief executive officer of Netflix Inc., was never fond of revisiting his past. “There’s not a nostalgic bone in his body,” says Patty McCord, a former employee and longtime friend. But after outmaneuvering media barons, tech conglomerates and startups to build a global entertainment colossus, Hastings agreed to write a book.

He didn’t want to write a gushy memoir, what Hastings calls “CEO pontification books,” in which corporate bigwigs chronicle their rise to the top of the business world, offering their life as a model for aspiring entrepreneurs. They’ve all left him dissatisfied. “Every time I read one, I wonder, ‘What’s the reality? What’s it really like?’” he says, speaking from his home in Santa Cruz, California. Take “The Ride of a Lifetime,” Bob Iger’s reflection on his time at Walt Disney Co., now Netflix’s chief competitor. The book offered great insights about Iger’s early days at ABC, but, in Hastings’s view, everything was a little too tidy. “He covered all the acquisitions that went well and none of the disastrous ones.”

Inspired by books such as “The HP Way” and “Beyond Entrepreneurship,” Hastings chose to write about what he says is the real key to Netflix’s success: its culture. That topic will strike some as hopelessly dull. Who wants to read a tome about travel and expense policies? But the Netflix culture is already an object of fascination for Silicon Valley and Hollywood — ever since Hastings released a 127-page PowerPoint presentation on the topic in 2009. That slide deck has since been viewed more than 20 million times and hailed by Facebook Inc. Chief Operating Officer Sheryl Sandberg as perhaps the most important document ever to come out of Silicon Valley.

Hastings, 59, is hoping his new book will have a similar impact. “No Rules Rules,” co-written with Erin Meyer, expands upon the PowerPoint presentation, outlining a 10-step plan to replicate the Netflix culture of “freedom and responsibility.” “The goal is to give back and influence young organizations about a set of principles we think are valuable,” Hastings says.

Though Hastings didn’t set out to write about himself, “No Rules Rules” serves many of the same functions as a memoir, reflecting what he has learned in his 30-year journey from young, ambitious entrepreneur to one of the world’s richest people. It also offers a glimpse inside the mind of a man who is affectionately called a robot by his employees. Hastings is brilliant and focused, an engineer who predicted the future of Hollywood 20 years ago and has seldom erred in executing his vision. But he is also unsentimental and less outgoing than your typical entertainment mogul. 

“Erin dragged many very personal stories out of me,” he says, while describing his personal journey as only “marginally interesting” and unlikely to change anyone’s life. “A good book about culture may change some other organization in a positive way.”

When Hastings first released the culture slideshow, McCord was convinced it would damage the company. The presentation encouraged employees to openly criticize one another for the sake of transparency, and it recommended that managers get rid of workers whose performance was “merely adequate.” She was in charge of recruiting and human resources at the time and recalls thinking, “Oh God. You’ll scare away all our candidates.”

Ultimately, however, it filtered out the candidates who were wrong for the company. “It made discussion and hiring very different,” McCord says. “It wasn’t just talking about whether or not you were qualified but whether or not you liked to be independent. Do you deliver when you say you will?”

The approach boiled down to a simple idea: Hire the very best people and get out of their way. Netflix employees are paid far more than they would earn at almost any other company, receiving unlimited vacation, generous parental leave and no official limit on expenses. The company’s decentralized decision-making lets people take big swings without approval from above. Hastings is fond of talking about how few decisions he makes, suggesting that his job is little more than cutting ribbons and kissing babies.

But former employees have complained about the downside. While Netflix’s practices may filter out some underperformers, the approach can feel impersonal and leaves the ever-present specter of losing your job.

Netflix CEO Reed Hastings for TOPLIVE

Hastings never planned to run Netflix. He made a series of investments, of which Netflix was just one.

Photographer: Kimberly White/Bloomberg

“It does hurt when people say it was terrible at Netflix,” says Hastings, but he’s confident that most employees enjoy the workplace. “The percentage of people leaving is at its lowest it’s ever been.” (Some of that, he acknowledges, is due to high compensation and some is due to the pandemic.)

Netflix’s high-performance culture was forged during a round of layoffs in 2001, just after the dot-com bubble popped. The company needed to raise money to prop up its unprofitable business and had to fire a third of its staff to stay solvent. The layoffs, though painful, had no effect on the company’s performance. If anything, the company was better off. Hastings and McCord soon realized that Netflix could do more with less.

A Boston native, Hastings traveled across the country in 1985 to study computer science at Stanford University, the sun in Silicon Valley’s solar system. After graduating, he worked at a couple of technology firms before coming up with the idea for Purify, which identified errors in computer programs. Hastings built a prototype of the product by himself before approaching other people to help — one of whom was Raymond Peck, then dating Hastings’s co-worker.

The early years of that startup were fun, Peck says. Hastings would host hot-tub parties and beer bashes for the small group of employees. But even then Hastings showed an ambition that amazed his colleagues. Hastings’s view for the business “was almost evangelical — the fervor he had for doing great and amazing things,” Peck says.

Hastings would often ask McCord to rate him as a boss. She had joined the company after stints at Borland Software and Sun Microsystems, where management threw chairs across the room, McCord says. On the jerk meter, you barely flicker, she would tell him.

Most of Hastings’s fellow CEOs were more interested in taking their staff on private jets, but he just wanted to write code. “It was a very geeky software company,” says McCord. “Reed wrote the first program — he was the geek of the geeks.”

Pure Software — as it was then known — was successful enough that it started buying other companies, and that’s when things got complicated. New employees didn’t assimilate, creating a company with many fiefdoms and cultures. Hastings began to compromise in hiring, bringing on “B people” instead of “A people.” Pure shuffled through five heads of sales in five years.

Hastings tried to compensate by micromanaging. Everywhere he went, he’d ask people what they were doing and try to offer assistance. McCord would give tours of the offices to prospective hires and point out Hastings’s cubicle. “You like it when he’s in his cubicle because it means he’s not in yours,” McCord would say. (Hastings has no office at Netflix; he just floats around from room to room.)

Not long after Pure went public in 1995, it acquired a company called Atria that was similarly sized and generated a lot of money. But the software was flawed, and the company’s leaders blamed the customers instead of fixing it, Peck recalls. Not long after that, Hastings sold the company — then called Pure Atria — to Rational Software and walked out the door.

“We had built something amazing, and then because of market forces and his inability to continue that culture, that got destroyed,” Peck says.

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