The expe­ri­ence made the entre­pre­neur rethink what a leader real­ly is.


7 min read

This sto­ry appears in the
Octo­ber 2019

issue of
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Lis­ten to Marc Ran­dolph on our pod­cast, Prob­lem Solvers:

Marc Ran­dolph speaks with rare humil­i­ty, like a man with no regrets. “The deci­sion to step down as CEO and bring Reed [Hast­ings] in,” he says, “was prob­a­bly the best deci­sion I ever made at Net­flix.” Ran­dolph and Hast­ings cofound­ed the com­pa­ny in 1997, with Ran­dolph as CEO and Hast­ings as the company’s main investor and chair­man of the board. But two years lat­er, the com­pa­ny was stalled out, and they made an emo­tion­al­ly fraught change: Ran­dolph stepped aside to become pres­i­dent (and would leave the com­pa­ny four years lat­er), and Hast­ings stepped in as CEO. The com­pa­ny thrived, and Hast­ings became the man to reap most of the glo­ry. Now Ran­dolph has a new book, That Will Nev­er Work, which tells the his­to­ry of the com­pa­ny — and in this inter­view, he talks about that hum­bling moment, and what it taught him about his true call­ings.

Relat­ed: Net­flix Is Not the Prob­lem: In Defense of Strong Orga­ni­za­tion­al Cul­tures

Tell me how you came to step down as CEO.

I was work­ing in my office. It was five or six o’clock at night, and Reed came back from some meet­ings he had over in San Jose. He came into my office and closed the door, flipped open a PC, and began run­ning me through a Pow­er­Point. And at first I couldn’t quite under­stand what was hap­pen­ing. But what I real­ized even­tu­al­ly was that he was start­ing to make the case that the com­pa­ny might be stronger were he to come in as CEO. 

That’s an inter­est­ing way of doing it! Usu­al­ly, you’d sit some­one down and say, “Lis­ten, we have to have a seri­ous talk.”

Reed was build­ing a shit sand­wich. You basi­cal­ly insu­late the dif­fi­cult mes­sage in between two pleas­ant mes­sages. You lay down that first piece of bread, about all the great things someone’s done. Then you put down the shit, which is “Here’s what’s not good.” And then you close with that sec­ond piece of bread about “But of course, here’s all the pos­i­tive ben­e­fits that will come.”

At one point, I remem­ber say­ing, “Reed, I can’t believe you’re com­ing in and propos­ing that you take over.” And he says, “No, no; you have the wrong impres­sion — I’m propos­ing that we run the com­pa­ny togeth­er.” He’d come in as CEO and I’d be pres­i­dent, and we’d do things joint­ly. I think his point was that the com­pa­ny would be infi­nite­ly stronger with two peo­ple there full-time work­ing on it rather than one. 

Relat­ed: How to Over­come Stress and Attract Great Employ­ees

What did you do after­ward?

I remem­ber sit­ting in the dark for quite a long time, while the office slow­ly shut down around me. Then I remem­ber dri­ving home and sit­ting out on my back porch with my wife, hav­ing a glass of wine and talk­ing this through — and rec­og­niz­ing that, although it was incred­i­bly painful and dis­ap­point­ing, Reed was right. It would be a stronger com­pa­ny with both of us. 

How did you get through your dis­ap­point­ment so quick­ly, and come to accep­tance? That’s a lot to swal­low in one night.

I was 40 years old at the time. So I was not in my 20s, caught up in the ego of “Look at me, Mr. Big Tech CEO.” I’d had a fair amount of suc­cess in my career, and I had a rea­son­ably mature view of my real strengths and weak­ness­es. And the sec­ond thing I began to rec­og­nize is, the dream I had of myself as the CEO of a suc­cess­ful com­pa­ny now might have to be split into two dreams. I was going to have to choose which one was more impor­tant — the me-as-CEO part, or the big-suc­cess­ful-­com­pa­ny part. And I began to rec­og­nize that my oblig­a­tion wasn’t just my own any­more. I had peo­ple who were work­ing crazy hours, giv­ing up per­son­al time, away from their fam­i­lies, all try­ing to make this dream come true. 

But that’s not to say that the next morn­ing, I woke up zip-a-dee-doo-da, click­ing my heels on the way to work. This is some­thing that takes a long emo­tion­al adjust­ment.

Image Cred­it: Car­olyn Lagat­tuta

Right, because now you had to tell every­one you were step­ping aside. How did you deal with that?

I can’t answer that with­out talk­ing a lit­tle bit about cul­ture. The cul­ture at Net­flix sprung not from a Pow­er­Point, not from some man­u­fac­tured wis­dom on paper, but from how Reed and I treat­ed each oth­er — and it was with bru­tal hon­esty. As soon as one of us real­ized the oth­er was right, we’d have this ego­less fall-in and rec­og­nize, “Of course that’s the right solu­tion.” Cul­ture is not what you say; it’s what you do. That became the Net­flix cul­ture: rad­i­cal hon­esty. So the only way to present myself was to be very vul­ner­a­ble and tell the com­pa­ny what was hap­pen­ing and why I thought this was a good idea.

And it was a good idea.

So many of the tremen­dous accom­plish­ments that set Net­flix on its road to suc­cess, that moved us from being a start­up into being a real com­pa­ny, took place dur­ing that peri­od of col­lab­o­ra­tion. I mean, the tran­si­tion to tru­ly fig­ur­ing out the mod­el for DVD rental by mail — sub­scrip­tion, all-you-can-eat, the unlim­it­ed, the no due dates, no late fee, the whole per­son­al­iza­tion algo­rithm. All that hap­pened because of that col­lab­o­ra­tion.

But you left in 2003. Why do that, if the col­lab­o­ra­tion was so good?

Lit­tle by lit­tle, I began to rec­og­nize that Net­flix was no longer a start­up. We were hir­ing phe­nom­e­nal peo­ple whose skills and abil­i­ties were far beyond mine. Although I deeply loved the com­pa­ny, it was no longer some­thing I loved doing. And it began to dawn on me that what I tru­ly loved was the ear­ly stages — and I’ll be mod­est here; it’s what I’m actu­al­ly good at! Now I spend my days help­ing oth­er ear­ly-stage entre­pre­neurs turn their dreams into real­i­ties, most­ly as a CEO coach or a men­tor.

Relat­ed: The Crazy Num­bers Behind Net­flix’s 20 Years of Suc­cess

How many peo­ple achieve that — find­ing the thing they love to do, and that they’re good at, and then focus­ing on it? I sus­pect most entre­pre­neurs force them­selves into roles they’re just not right for because they want to be CEO.

Trag­i­cal­ly, I think very few. The num­ber of peo­ple who have suc­cess­ful­ly scaled a com­pa­ny from dream to post-IPO suc­cess — you could list them on the fin­gers of two hands. I put Reed in that cat­e­go­ry. Jeff Bezos. Elon Musk. For most peo­ple, though, the process of no longer being CEO is an invol­un­tary one. I’ve seen that more times than I like.

So what advice do you have for entre­pre­neurs, who may need to take a hard look at them­selves?

This starts at the begin­ning. Ask, Why are we doing the things we do? If peo­ple are doing this because they think they’re going to be rich? Not going to hap­pen. If they think they’re doing it because they’re going to be famous? Not going to hap­pen. You have to do this because fun­da­men­tal­ly, you love solv­ing prob­lems. If that’s not the part you like, you’re going to hold on to some­thing unrea­son­able. But once you’ve accept­ed why you’re doing this, iron­i­cal­ly, it does become eas­i­er to accept that Wow, I just want to be a part of this. I do not need to be run­ning it. I can look objec­tive­ly at myself and say, “What do I like, and what am I good at?” And if peo­ple are look­ing for what suc­cess is, then spend­ing your day doing the things you love — that’s suc­cess.

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