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1-Page Summary of That Will Never Work

Getting to a good idea takes hard work and systematic vetting.

Marc Randolph recalls the ideas he pitched to Reed Hastings as they drove to work. Most of his ideas were bad, but he did have one good idea: that they should start a company together. They had no money and would soon be out of jobs, but with some investment capital from their former employer, they could pursue this new idea.

Randolph knew the future of Netflix involved internet sales, but he didn’t know how to go about it. Hastings was studying education in college and wanted to change the world. Randolph had experience starting a new company with two other employees who moved with him from New York City, so he wanted to keep his team together. Christina Kish helped manage projects for them while Te Smith handled press releases and public relations. Together they were able to help Randolph pitch ideas for new companies that would sell through the internet instead of in stores.

Hastings wanted to create something that would encourage repeat business. He thought about selling books, but the cost of shipping was prohibitive. He also admired Jeff Bezos’ success in selling books on Amazon and considered videotapes as well, but they were expensive at the time.

In 1997, the US market for DVDs started to expand. Discs cost less than videotapes and were light enough to mail.

The author tells us how he and Hastings tested an idea to rent movies by mail. They mailed a CD in a cardboard envelope to Hastings, who received it undamaged. In mid-1997, only 125 movies were available on DVD. Building a website required six months and several engineers. The truth is that the author likes headaches; he enjoys having problems every day with which he can deal.

Randolph and Hastings agreed that their idea was worth $3 million. They created six million shares of the company, which they split in thirds. Randolph felt comfortable with this because he only risked his time; he had three young children at home to take care of.

Hastings wanted “other people’s money,” too, so they’d have skin in the game.

Netflix wanted to test the idea with potential investors. Hastings and Randolph went to Alexandre Balkanski, who made a lot of money digitizing analog content. They thought he would understand the potential for their idea. However, he wasn’t interested in it at all. He believed that once you digitize analog content, there is no need for physical media anymore.

The future, according to Balkanski, was either downloading or streaming content. However, the author notes that Balkanski underestimated how long it would take for his vision of the future to be a reality. Hollywood invested in DVDs and not online streaming. Hastings and Randolph believed that building a DVD rental business would create a customer base for their online streaming service in the future. They were right; however, Balkanski did not agree with them at first about investing in DVDs instead of focusing on streaming technology immediately.

Randolph was uncomfortable asking his friend for money. He knew he’d say yes because they were friends, so it wasn’t a good idea to ask him. Randolph’s mother gave him $1.9 million and the business started up with little furniture and tech hardware.

Randolph assembled an impeccable team and built a great culture.

Randolph and Hastings recruited a team of people to help them. They met in diners and hotel conference rooms, bringing in Kish, Smith, Meyer (as chief technology officer), Cook (for operations) and Lowe (to handle the movie rental business). Randolph also wrote that he had “a lot to do” but it was “pleasure” because they were all working on something they loved.