Don’t Wait For A Good Idea: The Netflix Origin Story

“Every single person who has an idea, who fancies themselves an entrepreneur, hears, ‘That will never work.’ It's what your wife says to you. It's what your investors say to you. It's what your employees say to you. It is the universal response to ‘I've got an idea.’”

Watched any good Netflix shows lately? Got yourself wrapped up in the latest true crime docuseries? For that, you can thank Marc Randolph – the co-founder and first CEO of Netflix, and the latest guest on my podcast.

You heard right. The guy who first put DVDs in envelopes and changed the way we watch TV is our latest guest. For one of the original innovators, he's got some pretty unique takes on business, startups, and how to test your ideas.

Marc didn't start his entrepreneurial journey when it was romantic or glorified to do so. You could say that he was ahead of his time, as were most tech startups of the 80s and 90s – and because of that, he's got some of the most valuable insights for entrepreneurs of today.

Got a few ideas brewing for your future startup? You'll want to hear what Marc has to say.

We talked iteration, MVPs, and how to test your ideas before they're 'good' rather than after. 

Grab your popcorn, and let's dive in.

Netflix: The Origin Story

Many of you are likely familiar with the way Netflix started out, so I won't dwell here for too long – but it's such a cool story that it really deserves a special mention.

In the 90s, Marc Randolph was well into his entrepreneurial journey. He'd been drawn to it since childhood. 

"Kids grew up wanting to be a fireman, or a doctor, or something like that. I was just someone who was always trying to solve problems. I'd see something that I thought needed doing, and I'd begin wondering – is there a way to do it?"

By the time his idea for Netflix rolled around, he'd already tried his hand at a few different startups, even managing to sell the successful ones.

“Netflix was startup number six," Marc told me. "I was working at a company that acquired my fifth startup, that was currently being run by Reed Hastings. When we sold that company, and I realized I was going to be out of a job, it was a fairly natural thing to say, ‘Okay, I'm gonna start another one.’ And the question, of course, was what?”

(Reed Hastings is the other co-founder of Netflix. He's an incredibly talented business person, too.)

“Once you're an entrepreneur, you're always an entrepreneur. And Reed wanted to try and keep a hand in the startup game, so we agreed that he'd be my angel investor and chair of the board. We would come up with an idea together, and then I would start it and run it. And that was the plan.”

Reed and Marc put their heads together during their daily commutes to work. Marc would pitch one of his ideas, and Reed would grill him on all the details until most of his ideas were deemed unworkable. It was this iterative, feedback-based process that eventually led Marc to pitch his Netflix idea – but at the time, he already had serious doubts.

“Video came on VHS cassette; it was big and heavy, plastic, expensive, fragile things. And so that idea quickly turned out not to work. I had a lot of mail order experience, so I knew what it costs to ship things around the country using DHL and Federal Express. And so that idea got abandoned and ended up in a pile on the side of the road.”

Iteration Brought Netflix To Life

It wasn't long before the DVD came out; tentatively at first, but making waves in the tech news space. Reed had a lightbulb moment that resurrected Marc's idea for mail-home entertainment – they would mail DVDs instead of cassettes, and if the discs didn't break, they'd only cost the price of a letter to send.

“We said, ‘The fundamental premise here is that we can mail DVDs, we can use the US Mail way cheaper.’ And then we got into this argument. Is it gonna work? Is it just gonna break? What's it going to cost? We go, ‘screw it, let's just find out.'

Right in the middle of our commute, we turned the car around and drove down to Scotts Valley to buy a DVD. Of course, there wasn't any; it was a test market. So settled for a used music CD, and popped that into a little pink gift envelope and mailed it to Reed's house in Santa Cruz.

And the very next morning, when he came to pick me up, he had an unbroken CD in a little envelope that had gotten to his house in less than 24 hours for the price of a first-class stamp.”

I love this origin story because it goes against everything we're told about the iterative process. Reed and Marc didn't sit on their hunches; they acted immediately, testing their ideas in the real world as quickly and cheaply as possible.

That'll Never Work

Being an entrepreneur means a life of being shut down. A lot of the time, it's even your loved ones who tell you an idea is stupid, and that you should give up.

“Every single person who has an idea, who fancies themselves an entrepreneur, hears ‘That will never work.’ It's what everybody says when you come rushing with great excitement into the office to tell them this new idea," Marc noted.

And it's not just the people around you who voice their doubts; it's your own mind that shuts down your ideas left, right, and center. But when have we ever been able to predict the next big-time startup? Who can honestly claim to know what will work and what won't in the business world?

I tend to side more with Marc's attitude on this:

“I've realized that nobody has any clue whether it's going to work or not," Marc explained. "In fact, there is no possible way to really know in advance whether an idea is a good idea or a bad idea without trying it. So all the things I do revolve around ‘that will never work’, because it's a reminder to me – and I hope to everybody – that it's just unknowable.”

Doesn't that take an enormous weight off your shoulders? Doesn't it free you up to try new things, without the crippling pressure of perfectionism? No one has a claim on what makes an idea 'good' or 'bad', so we shouldn't be constrained to others' expectations. 

Every Idea Is A Bad Idea

In Marc's opinion as a seasoned entrepreneur, mentor, and business extraordinaire, every idea is a bad idea. And he means it.

“Anyone who's worked in any kind of corporate setting has sat in a brainstorming meeting, where the well-meaning moderator gets up in front of the group, and goes, ‘Okay, let's get some ground rules here. Rule number one for this brainstorming session is there's no such thing as a bad idea.’ And I call bullshit on that.

I think, in fact, there are plenty of bad ideas. I'll go out on a limb and say that they're all bad ideas. There's no such thing as a good idea. Every idea is fluid. They're all not going to work. There's always something wrong.” 

I'm aware that this sounds a bit contradictory on Marc's behalf, considering the previous section – but what Marc hints at here is the need for iteration. No idea is a good idea in its untested, raw state. Ideas need to be worked, and re-worked, and fine-tuned through experimentation until they earn their 'good'.

“I have never found a successful company that became successful doing the thing they originally envisioned," Marc explained. 

"If you recognize that they're all bad ideas, what you recognize is it's futile to keep searching for this perfect idea. The skill here is not coming up with good ideas; the skill is figuring out a clever way to try something to quickly and cheaply and easily collide your idea with reality.”

From MVP to Sharpie and Paper

When he was working as a mentor in universities, Marc came into contact with a number of students who had their own startup ideas. One student wanted to create a platform where users could lend or sell their clothes to one another. 

But this girl was worried about what her next steps should be. Should she drop out of school? How would she get the necessary funding? These were the thoughts she expressed to Marc.

“I said, ‘Whoa, slow down. I want you to write on some paper, Want to borrow my clothes? Knock! And tape it right now to your dorm room door. And we're going to start this experiment now. You're going to find something out: either no one's going to knock, or you're going to learn the next phase.’”

“Her problem wasn't can I make an app? How do I get credit cards? Yes, those are things she would have to do if she was to make it a real business. But she narrowed it down to the fundamental problem: does anyone care? And I can find that out with a piece of paper and a Sharpie.”

The lesson here was important. Why worry about the finer details when you haven't even tested your idea for validity? Experiment first, refine later. An MVP doesn't have to break the bank.

“People stick with their MVPs for too long because they put so much time and effort into it, they're not willing to walk away. But if you stick something on the front of your dorm room door and that doesn't work, you throw it in the trash, and you write something different the next day. And then you wad that up and throw that in the trash and try something different the third day, and eventually, someone knocks.”

Build A Minimum Unviable Product

If you're in the entrepreneurial space, you'll know of the debate around what a minimum viable product should look like. How 'done' should it be? How much time and money should you invest? 

Well – what if you heard that building an MVP is already one step too far?

“If you're building a minimal viable product, you're building too much," Marc claimed. "The problem – whether it's an MVP, or whether it's actually raising money – is that people do these things because they think, ‘that's how this works.’ You get emotionally invested in an approach."

I so agree with that statement. Entrepreneurship can be prescriptive at times; we rely heavily on the behavior and advice of others, but forget to question whether those things are actually serving us well.

“Even a minimum viable product sometimes takes weeks, or months, or hundreds of thousands of dollars – so you're not about to say, ‘Oh, didn't work. Okay, abandon this, let's try something new.’ Which is why you've got to figure out ways to do it super cheaply, super simply, super quickly.”

In my mind, this equates to so much freedom. Imagine being able to test your entire concept with just a Sharpie and some copy paper?

“You want to build a minimum unviable product. You do not need to test all the components of your idea. Because most of the components of your idea, if you begin parsing it apart, don't need to be tested. You don't need to say, can we build an app? You don't need to worry, is someone going to trust me with their credit card? Customers accept all these things.”

Don't Wait For A Guaranteed Win

Marc Randolph's main sentiments around MVPs and idea validation remind me of a book by Michael Masterson called Ready, Fire, Aim. (Read that again – the order of words is important).

Sometimes it's better to fire right away, before you've even had a chance to steady your scope and take perfect aim. You can always adjust as you go, but if you wait for the perfect moment, you may never start shooting at all; your target will move on, nightfall will come, and you'll be left with an unloaded weapon.

Marc is incredibly passionate about this topic, and I highly recommend giving his interview a watch over on my YouTube channel. I've only scratched the surface. He’s also got a book called That Will Never Work, and a podcast by the same name. 

“I don't want people to get stuck in a rut," Marc told me. "As soon as you can, collide with reality. You're gonna find out that it's a bad idea, but that's fine – the important thing is not that it's bad. The idea is, why is it bad? Because with all the reasons you realize it's not going to work as you envisioned, it informs your intuition. You get some insight into what might work.”

As an entrepreneur, you need to have a bit of grit and determination. You also need to be okay with the fact that your first – or second, or third – idea might not work out as planned. But by taking action and learning from your mistakes, you increase the chances that your fourth, fifth, or sixth idea will be a winner.

“I've worked with so many companies since I left Netflix. I’ve had the chance to work with hundreds of early stage companies and 1000s of entrepreneurs. And over and over and over again, the things that finally work are never the first thing you try. It's always this process of starting and seeing where those collisions with real people lead you.”

I'll end with a quote from Eric Ries, author of The Lean Startup:

“Reading is good, action is better.”

And on that note, what are you doing still reading? Take action on those big, brewing ideas. I can't wait to see what you come up with.

Also published here.