One of the best things I learned to do is, you know, finding 10 minutes a day, some ritual thing where you think about all the ways that you could be wrong. So I would think, okay, literally go around, Netflix is going to crash. Assume it's crashed. What did I do that would cause it? You can get a lot of attention by saying the world's going to end tomorrow. We humans were very focused on Armageddon. Trump's done a lot of terrible things. Uh, he tweeted when I got off the board, uh, like, you know, Reed, what a criminal, blah blah blah. So 25 years of all this Netflix and that's what I got.
Please welcome Reed Hastings and Kara Swisher.
Oh, thank you so much. Um, we are taping this for On with Kara Swisher and we're going to do half of it here. This is the polite part and then the impolite part I will shame him in private. Oh, you want... Okay, I can do that.
It's the polite part when you wear the Warner Brothers Discovery...
I'm looking forward to the rest of it for sure.
How was your day? Good. Very good.
You know, Elon threatened to have a sword fight with me today on Twitter and then said I should be in prison. So, this should be easy. But...
He and Zuckerberg are great friends now. And that was going to be a cage fight. So, you know, your future is bright. Just so you know, they'll hate each other again at some point, but they used to. Uh, in any case, this will be a lot easier than that. You're not threatening me to a sword fight. Correct.
In this case, you would win. In the other case, I would totally kick Elon's ass. Um, anyhow, moving on. Let's not talk about him because he's really unpleasant.
Um, I have to say one of the first people I covered from very early on was Reed Hastings. Um, and when he started the company, almost when he started the company, and we're going to talk about that and a bunch of other things about AI and education, and apparently he's a snow bunny now. So, we'll discuss that at the very end. Um, but you stepped down as chairman of Netflix in June of this year, and you've done a lot of exit interviews about it and what happened. But in over three decades, you built a company that revolutionized the entertainment industry. Um, but you seem pretty at peace about walking away from it, um, when you did. Talk about what are the signs, we're going to start backwards. What are the signs that every founder or CEO should be looking at when it's time to pass the torch, because it's something a lot of leaders struggle with? And you look kind of young. So I mean, much more so than Chuck Grassley, say. But um, what are the signs of that for you?
Yeah. Well, see, getting off the board, uh, six months ago is a very easy thing. Um, stepping down as CEO, that's a much bigger thing. So that was three and a half years ago.
Um, so I'd always wanted to, uh, retire and do a bunch of other things. Um, you know, particularly in philanthropy. Um, and then it was finding time and developing the right leaders. Uh, and then COVID hit. Um, and then it was very intense for, uh, Greg and Ted and I during that time. Um, and then coming out of that, uh, it felt like a very natural time.
Uh, and the board was, uh, very open to it. Um, me and Greg and Ted were, and they took over three years ago.
And then the first three years they had an awesome time. Uh, then they, uh, bought Warner Brothers Discovery and I was on the board. I voted for it.
Um, and the challenge is when you're competing with a cent-billionaire who loves his son, unpredictable things can happen. Yeah. Uh, and, uh, we were quite surprised to see the bid get taken up even higher. But that's capitalism and we...
Well, I'm not so sure it's capitalism.
It's how much you can flatter the president, but go ahead. Go ahead.
You know, Ted was pretty good at that, too. So, he was good. So, you know, I'm not, um, not good enough, just speaking metaphorically. Um, and, uh, so ultimately, uh, they won and then it's been a little bit of a hard time in the last six months, which is normal after, you know, not completing a big acquisition. It's a phase they'll go through.
Yeah. And so, but a lot of CEOs don't want to, they don't leave. They don't want to leave. They don't want to exit. Is there something about you? You were just like, fine by me, I did a great job, or...
You know, it's in some ways very admirable, speaking of say Larry Ellison, of just continuing to kind of add value through work, or Warren Buffett, um, and he never wanted to have another life. He wanted to keep allocating capital until he was 100, roughly. I mean, so there are some people who choose that life and I'm not judgy at all about that. There's other people who, you know, want to have other experiences and do other things.
Um, and I think that's exciting. So, I did Netflix CEO for 25 years. Um, and every year was exciting and I was, you know, pumped about trying to work the hardest and know the most metrics and the most people and watch the most shows and, you know, the full thing. Um, but it's also been really fun afterwards to like go to the coffee shop for an hour. It's like I go for an hour for breakfast. It's crazy. Crazy. I still can't get over it, you know.
Oh god. Are you going to start calling me now? Like, I'm busy. Just so you know, I got a podcast I'm doing with Hillary Clinton now, so I'm super busy.
So, um, going further back, I want to remember this. I did meet you when you were earlier doing disc. I was just telling him I have a house here in San Francisco and my son's girlfriend found an old Netflix disc that I haven't returned yet. Um, it was one of the Fast and Furious movies and I don't intend to return it, by the way. But when we were starting, I remember it was touch and go for a lot of the time there for a long time.
Yeah, like most startups. But I interviewed you, Hulu CEO Jason Kilar and YouTube CEO and co-founder Chad Hurley at Sundance Film Festival in 2009. And I invited you there and they put us in the basement. It was astonishing and we kept going, these people are going to kill you someday, like that kind of thing. But you were talking about, and I'm going to quote you, on-demand revolution that would let people choose how and where they view content. You were obviously right, but I'm curious what you underestimated, because you were underestimated very much at that point, that nobody believed what you and Chad and Jason were saying about what was coming, and these were all relatively small companies at the time.
Yeah. I mean, we were all internet people. Um, so we had confidence in... at that point the internet was barely fast enough to do a small screen video. Um, so, uh, it wasn't that enjoyable for entertainment and wasn't connected to the TV at all. That was later in 2009, we did the Xbox deal.
So it took a lot of imagination to say the internet would get fast enough, would get to the television. Um, a number of things were non-obvious. Uh, but because I think for all three of us, for Chad and, uh, Jason and I, we'd all grown up on the internet.
Um, it was more natural. So I think when you're in a climate where things are constantly changing, you tend to be willing to bet forward, right? Um, and in most areas of the world or business, you know, like automobiles get better very slowly. And it's really only been sort of Moore's law and its associated things of networks and now AI where you get these exponential effects that are so unfamiliar that many, many people underestimate sort of where we'll be in two or three years.
Right. And what did you underestimate? I mean, at the time you were making a lot of shifts going from the discs, which was sort of a way station, to digital, which was, you caught the wave at the right time. Lots of others didn't. There were many other companies before you that had tried that. Um, what did you underestimate in that time? And talk about a decision you made then that was problematic at the time but proved right, and one that you were absolutely certain of that you were wrong.
Well, we made many radical decisions that turned out to be right and we made one radical decision that turned out to be wrong. That was splitting the DVD and the streaming business too soon. So, it's called the Qwikster, uh, incident, 2011.
That's what it's called, the Qwikster incident, 2011.
I had a Saturday Night Live parody of me as CEO and various things. Um, so it was hard, but I look back on it and say the only way to do the kinds of things we did, grow in DVD, convert to streaming, get global, produce our own content, is to be pretty radical.
And so, if you're willing to be pretty radical, you got to be willing to get some stuff wrong.
Uh, I would have loved to stick the landing and have no big decisions wrong. That wasn't the case. Um, and we did recover from that one.
What was the wrong decision there, because directionally you were correct?
Yeah, it was too early and we didn't grandfather on the pricing. Um, so it was an effective price increase for people and, uh, we should have just grandfathered everyone in the pricing and it probably would have gone better. Um, but essentially we were so obsessed with getting to streaming that we were like, kick that DVD out.
And then, um, the consumers were like, I love those silver...
That was your motto, that was your advertising.
Internally. Internally, I mean, the traumatic moment internally was kicking the DVD executives out of the standard executive meeting.
Wow. You just kicked them out. I know Netflix is a culture of a culture, but really...
Yeah, last week was not so pretty.
Do what you got to do.
Yeah. So, when you think about, uh, things that you wish you had done earlier that you missed, I'm curious. Or something that people were really pushing against you, what was the thing they pushed against you most?
Well, I say the biggest thing I missed that luckily, uh, Ted Sarandos, uh, figured out was the value of making our own content.
I know you didn't want... I remember when back to Sundance in '06 and '07 and all that time period.
Um, we dabbled in it, got crushed because we didn't have a scale distribution platform.
Um, and got out of it and I became convinced it's just a way to lose money. It's like Walmart going into music.
You're like, really, you know, can't you just stick to like distribution and your confidence?
Um, but he was convincing that we could be like HBO, where they started a long time ago on other people's content.
And then got into doing their own if they did it well. So we gave him license to swing for some home runs and then he hit Orange Is the New Black and House of Cards.
So then the die was cast. So if he had gotten those first two wrong, we probably wouldn't be in it.
Wouldn't be in the content business itself.
And, you know, the fact that he morphed, you know, he worked in, uh, VHS warehouses for Blockbuster and their suppliers, okay? And he's like a classic mailroom guy who then has incredible taste and, you know, his dynamic range is like a politician where he has the most intense conversation with the janitor to the president of European countries.
Yeah. I remember seeing him in the Polo Lounge by accident and I was like, what's he doing here? Because he was doing deals. He was doing, which was unusual. I'd never seen you there, by the way. Um, but, um...
But he looked the part. He looked the part. He's smoothing it up.
Yeah. When you think about the shift into other things like advertising or podcasts, or where did you think that was a good thing? Because if you keep, you said Walmart's making music, that's a very difficult thing to know what you're good at and then shifting to things that you're not.
Yeah. Well, we expanded into advertising about four or five years ago. Um, and in hindsight we probably should have done it earlier. Yeah. I think I was too close to the HBO model as inspiration.
And you didn't like, as I recall. Is that right?
Correct. That's again, I think I was too close to the HBO model and really Netflix should be a blend of, you know, CBS and, uh, HBO in a US context and say Televisa in a Mexican context or Globo in a Brazilian where there's a lot of ad-supported content and a very broad, uh, taste network.
And one of the things that I remember when I talked to Hollywood people, one was that I remember Jeff Bewkes called you at the Latvian army or like, I'm going to fight the Latvian army. He wasn't worried about you and this is a guy who ran a well, you know, wannabe comedian. I mean, he's a pretty good comedian actually, but and a big fan of that. Uh, so yes, he used to crack jokes at our expense, at your expense. But when you're thinking about that shift in the nature of what you are today, now a lot of people, and you will hear Hollywood people say that, is Netflix essentially ruined Hollywood, like because of your backend deals, the way you did that and changed things. How do you meet that? Because I'm always like, don't be ridiculous.
Tesla, you know, ruined, uh, Detroit, right? Because they made better cars, right?
You know, or SpaceX ruined NASA. I mean, you know, so they feel like we ruined Hollywood because we grew this network that wasn't part of their system. But what it really means is that we outcompeted them for consumers' affection.
Um, and, you know, that's always hard on the incumbent. And there's probably a useful story in the reference a moment ago to Jeff Bewkes. Uh, Jeff Bewkes, uh, MBA, entertainment guy, you couldn't want a better, uh, entertainment CEO. And in 2001, uh, AOL merged with Warner Brothers, I recall, which was in the middle of that and it was a disaster.
And Jeff Bewkes was the one Warner Brothers executive who was telling Jerry Levin, don't do this, this is terrible, don't do this. Jerry Levin did it, it was terrible for the Warner Brothers side. Um, and Jeff was the adult that held the show together, he and Dick Parsons, um, and really saved the company.
Okay. So, in that sense, he's a hero. So, guess what? If you know when you're 45, you're a hero for something, you remember that lesson.
And that lesson was the internet is bunk, right?
So, that was his thing of like, the internet is bunk. Right. And so then when it came to us, 2009, you know, down in the basement with YouTube, he really believed the internet would never do entertainment.
Because so he overlearned the thing that made him great.
He overlearned that lesson.
And that created the blind spot. And so that's why I think it's useful, because he's an extremely talented, broad, thoughtful guy. Um, but because that one lesson was so seared in his brain, uh, he was non-objective about what was going to happen.
What do you do when you do that? Because what lesson did you burn into your brain that you shouldn't have?
Well, the lesson I burned into my brain was not learning, not burning lessons into my brain. Right. So, one of the best things I learned to do is, you know, finding 10 minutes a day, some ritual thing like when you walk the dog or when you exercise, uh, where you think about all the ways that you could be wrong.
So, I would think, okay, you literally go around, Netflix is going to crash. Assume it's crashed. What did I do that would cause it?
You have to, you know, as a leader, you're like going, this is what's going to happen. This is how we're going to make it, you know? So you're always, uh...
Pushing forward and you need a leader that's got that kind of confidence and optimism and energy, but it can make you blind to some negative scenarios.
Okay. So that's why it's important, or it worked for me, I should say, to create, uh, a haven where I'd let myself be super negative to think of all the things that could cause it. If this, if that. There was an early DVD format, you know, DVD as it is, but there was a format where it was locked. Uh, what you got is bits, but they were encrypted and you couldn't play them unless you got a code from the company called DivX. And then they wanted to make it like a license. If that thing had won, we'd be dead because there'd be no by mail, right?
And so, you know, I would take those 10 minutes a day of like all the ways that DivX could succeed and what we might do to avoid that. Um, so that's an example, but I think it's important, again, the main lesson is, uh, when you're so projecting confidence and optimism of the future, it's good to keep a quiet little reservoir of darkness, um, that helps you see things.
Wow, I am so different than you. I have to say.
No, not at all. Actually, 10 minutes a day I'm like, that was fantastic. Okay.
