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Maps hit and the NoBS six pack formula, both 50% off. You can find out more or just sign up at mapsfitnessproducts.com. Just use the code July special no space for that discount. Enjoy this podcast. Mark, you really represent the avatar, I would say, of the entrepreneur. The amount of things that you've started, risks you've taken. Of course, obviously extremely successful. There's a question that I hear often that's asked about entrepreneurship and I'd love to hear your take on it. The question is, do you think entrepreneurs are born? Is it something that we're born with? Or is it something that can be developed? Oh, it's absolutely something that can be developed. You can be born with it too, I suppose. But I think the biggest service we could do is say that if you don't already have those skills, whether then tough for you, you're going to have to go work for the man for the rest of your life. Everybody has the capacity to take ideas and turn them into reality. And they just need to begin working against the forces we all have to. They've got to begin working against fear. They've got to begin overcoming that concern that they're going to fail. They need to have some comfort with uncertainty. But all those things can be learned. And learned is not even something you have to go to school for, take classes. It's purely practice. And so it's funny, almost all the stuff that I do when I'm coaching other entrepreneurs or when I'm speaking to people on the podcast is really trying to give them the confidence to take those steps. I've been an entrepreneur for a long time, but I can tell you that most people are smarter than I am. They're better prepared than I am. They work harder than I am. It is not this superhuman skill that only a few people have. You mentioned risk taking. You mentioned confidence. You mentioned being resilient when you fail. And those all seem to be in a similar category. I know statistically from what I've read, most entrepreneurs fail at least their first attempt. That's something like over 80%. Why would anybody want to be an entrepreneur? And how do you develop that skill of being okay with knowing I'm probably going to fail? Let's talk about the why you want to be an entrepreneur first, because that probably is the first thing to get out of the way. I think, unfortunately, this whole entrepreneurship thing has been overly glorified. Certainly when I started doing it, which was more than 30 years ago, there wasn't really this thing of being an entrepreneur. I mean, there were entrepreneurs, but no one talked about it. There weren't TV shows. There weren't movies. There weren't books. It was not something you did to be rich or famous. And I think the people who say, I want to be an entrepreneur for those reasons are going to be disappointed. Because very much like someone who says, I want to be an actor because I want to be rich and famous. Well, I hate to disappoint you. The odds are extremely long that that's going to be the case. And the same thing with entrepreneurship. So the reason you should do it is because it's a tremendous thing where you're actually working to solve problems all day. You're solving puzzles. You're trying to do something that has not been done before. You get to come to work every day and do something different. And that is one of the most thrilling things I can imagine doing. It's not for everybody. Some people like more predictability. They like to know, I'm going to be doing the same thing every day. Every day I come into work and I take the stings out of this box and I stamp them a few times and staple them and put them in this box. Well, that's fantastic. There's tons of jobs like that. But doing something on your own, doing something where you have to figure it out, there's a certain thrill to that, which really speaks to me. And I think it's what really drives entrepreneurs forward. And it answers the second question, which is how do you overcome the disappointments that are part and parcel of being an entrepreneur? And it's purely that you're driven to find out what's next. And listen, most of the things you try aren't going to work. That's absolutely true. But it's fine, because even the things that don't work, you've learned something. You always get this little glimmer of insight into the thing you're going to try next. And the best analogy I can give for it is it's kind of like solving a crossword puzzle where, listen, you know it can be solved. It wouldn't be in the paper if it had no solution. But you really can't quite see your way to how it's to be solved. But you put it down and you come back a few hours later, or you come back a day later or a week later, and all of a sudden something sparks and you see that word that fits, and then boom, you've made more progress. And entrepreneurship is exactly like that. Let's talk a little bit about that, Mark, you've shared some stories that have blown my mind as far. I wish I would have found you long before I failed 10 other times before this. Yeah, you and me both. Because one of the things that stifle people so much when thinking about taking the leap into entrepreneurship is thinking that they have to have this massive risk. They got to go out and develop this app, or they got to take money on and do those things. And you share some stories on how to help people figure out if they even have a good idea or not before they go out and risk all this money or risk all this effort. Can you share some of those? Yeah, certainly. And what we're really talking about is that the best way to learn entrepreneurship, going back to the very first question, is to practice, is to do it. And the way you do that is by not starting off huge. You know, everyone thinks, I mean, I've heard every single possible excuse, all 10,641 of them, about why I can't do this. And it's surprising how many of them are, because how do I raise... I can't raise money. I can't find a technical co-founder to build this thing for me. I can't quit my job. I can't drop out of school, blah, blah, blah, blah, blah. And the answer is you don't need to do any of those things. And the real skill in entrepreneurship these days is not how good your idea is. I don't care about your idea. The real skill is can you be clever enough to figure out a quick, cheap, and easy way to try it. And I will give you an example. And this is a woman that I worked with quite a number of years ago. She's a university. She was still in college. And she sat down and goes, let's get this great idea, Mark. What I want to do is peer-to-peer clothing sharing. I, in my closet, I have all these great blouses and dresses that I never wear. And I know my friends have other stuff that I'd like to wear. Wouldn't it be great if there was a way, this app that allowed us to match up to all the different clothing everyone has, we could all share it. And then her question to me was, how do I raise the money to start this company? How do I find a technical co-founder? Can this wait until I graduate from college and I can do it full-time? And I was like, whoa, whoa, slow down. I go, let's figure out some way right now to begin making some steps toward figuring out whether this idea is any good. I said, okay, do you have a piece of paper? She goes, yeah, of course. I get a piece of paper. I'm a college student. And I go, okay, do you have a Sharpie, a magic marker? And she goes, yeah, I've got one of those, too. And I go, great. I want you to write this down. Write down, do you want to borrow my clothes? Knock. And I want you to tape that sign to your dorm room door. And we're going to find out right now the first things about that idea. We're going to find out maybe no one knocks. Well, you've learned something that way. Well, let's say you're lucky. Now someone does knock and wants to borrow some clothes. Now you're going to start learning something else. You're going to find out about fish and about taste. Now let's say you're even luckier. And all of a sudden people begin to find clothes they like and they enjoy this borrowing. Well, you're going to find out the next step. You're going to see how does it feel when your favorite blouse comes back with a stain on it, where it's torn, or you have to send everything out for dry cleaning. And you're going to learn all of these things now. And you're going to learn them with nothing more than a piece of paper and a sharpie. Now, this is not repeatable or scalable. If for some lucky fluke, you're really successful at this, you're going to go crazy. You are going to be spending all your time going to call me up and go Mark. I'm going out of my mind. I'm keeping track of everything on three by five cards. I have to call everyone. I'm kind of keep track of this all. I've got to figure out a better way to do this. And I go, and that's the point where if you want to raise money, you can. That's the point if you're trying to attract someone to help you from a technical perspective, you can, because you've proven that your idea is a good one. And you've demonstrated so much about how it works and that when that investor says to you, well, how do you know this works? Rather than saying imagine if you will, you can say, here's the evidence I've collected over six months doing this out of my dorm room. Here's what my acquisition cost is. Here's my lifetime value. Here's my churn. And that is what it takes to raise the money. But you don't get to that point until you take those first steps of colliding the idea with reality. And just like I demonstrated, you know, this woman did it with a piece of paper and a Sharpie. But I can usually figure out some way to collide the idea with reality for almost any idea. I mean, this may be if you've invented some new CAT scan device, I'm not going to be able to help you. But so much the stuff, for example, that I do on my podcast, and that won't ever work, is not just dispense with pablum, like, collide your idea with reality. And everyone goes, oh, good. I then say, let's walk through with real people how to do that. How do you think about it? What's the thought process that goes about trying to figure out these quick, simple, and easy ways to collide with reality? Now, you obviously are teaching this, so you've applied it to your own business. So tell us how you did that with Netflix. Well, certainly it happened a thousand times at Netflix, but it happened from the very beginning. You know, before Netflix was even Netflix, when it was just Reed Hastings and I in a car commuting back and forth to work every day, trying to figure out an idea for this new business that I was going to start, we were constantly colliding ideas with reality. And for example, during those car rides, I would pitch ideas to Reed. And this, for example, and these were not movie ideas. This is not like I'm a movie buff. One of the ideas I pitched him was personalized shampoo that you'd cut off a lock of your hair. You would mail it in and our team of base hair scientists or something like that would formulate a custom blend just for you. And then Reed would sit there. He'd be driving and looking at the window and be quiet. And maybe a minute would go by and maybe two minutes. And I would just sit there waiting patiently because I knew it was coming because all of a sudden that he'd turn and go, okay, that'll never work. And here's why. And then he'd launch into this long, perfectly crafted business school like dissertation on all the flaws, all the weaknesses, all the potential in the idea. But listen, I'm no baby here. So I'm prepared and I'd wade right beginning to go, no, you are wrong. Here's exactly why it might work. And we'd debate these things for the duration of the car ride. And the shampoo idea, okay, no good. Maybe the next day I'd pitch him another one. Another real one I pitched him was custom dog food. We formulate a blend just for your pet, for its breed, its age, its activity level, whatever. Nope. And then I pitched him video rental by mail. $8 billion category. People hate blockbuster. Can we do this as an online store and mail people their movies? And one of the things that Reed basically threw back at me is goes, hey, video is on those VHS cassettes. They're big and they're heavy and expensive. So that got rejected. So the breakthrough came one day when Reed picked me up and told me about this new technology he heard about called the DVD. And he was saying maybe this would unlock that DVD, video rental by mail business you had a little while ago. And now here is the collide, the idea with reality. So we batted it around in the car for a few minutes. And then immediately said, okay, here's what we do. What we didn't do was go to work and start crafting a business plan. What we didn't do was begin working on a pitch deck. We turned the car around in mid commute and said, let's figure out if this idea actually has any merit and went down to town to try and buy a DVD. And of course couldn't find one because they were in test market and instead settled in buying a music CD and put it in a little gift envelope like you'd mail a greeting card in and mailed it to Reed's house. And the very next morning when he dropped pick me up at work, he had a little envelope in his hand with an unbroken CD that had gotten to his house in 24 hours for less than the, for the price of a postage stamp. And that was probably the point we said this just might work. And again, we validated that idea for a $3 used music CD and a 29 cent postage stamp. Unbelievable. Tell me how you, and I've heard that story. Tell me how you and Reed actually initially got together and built the relationship. And how did you guys figure out that you would make this great team? Well, you know, Netflix was my sixth startup. So I'd been doing this for a while. And in fact, the way I met Reed is that he purchased startup number five that I was doing with two other, two other people. And we were a tiny company. We were probably nine or 10 employees. We were still in beta. And all of a sudden we were plucked from obscurity. And the other eight of them ended up in the basement forming a little business unit to sell the product. Reed pulled me up and put me in as the VP of marketing in his company, which he had started and was running. But by then was a big company, you know, multi-thousand employee international software company. And all of a sudden there was this whiplash of going from this little cerebral startup to boom all over the world. Anyway, luckily that didn't last long. About six months later, you know, the lightning struck again. And our Reed's company was now going to be acquired. But this time they didn't need Reed and they didn't need me. But during the period after we acquired my company, we turned out that Reed and I lived in the same town. And we began to carpool to work together. So we had six months of getting to know each other, six months of working together. And had this friendship. And one of the things we immediately noticed is we had shared so many common beliefs. I'm going to say culturally. Probably the most dramatic thing was that Reed was as blunt as I was. And I don't mean blunt in a rude way. Just neither of us believed there was really much room for not coming right out and saying something if you believed it. Even if you thought it might hurt someone's feelings. Even if you never would go, that's an interesting idea. If you didn't think it was an interesting idea, you just go, Reed, that is the stupidest thing I've ever heard. But that's just so refreshing. And immediately it showed that we had this connection that way. But the other interesting thing is that I'm a marketing guy. I mean, I've, most of my life I've been in these roles which are very customer facing. And it's because if I have to look at one of these fundamental skills I have is that I have a fairly strong sense of empathy, meaning as a marketing person that's critical because you need to be able to guess or understand or judge how someone's going to respond to the things you do, to the offers you make, the prices that you put out there, the way you put a product together, how you describe it, how you price it, et cetera. So I'm very much this touchy-feely kind of guy. Reed is a mathematician. He's a software engineer. He's very analytical. And so we're very yin and yang. And it turns out that whenever we would have these conversations, they were so fantastic because we found that we came at problems and came at ideas from totally different directions and that the solutions we'd come to through that process were ones that neither of us could have gotten to on our own. Now, did you both recognize that right away? Because I can imagine that you probably had a lot of arguments. You probably had a lot of conflict coming from different areas, both being very confident in your ideas, also both being very blunt. Was it something that you recognized right away? Like, okay, we're arguing a lot, but this is good. We're learning a lot. Oh, no. Reed and I love to argue. We love the fact that we could push and that that person wouldn't take it personally. That you could be, I mean, we used to argue like cats and dogs, but it was fun. And once you get past the point, you know the other person thinks it's fun. That's such an amazing way to get to the heart of a problem. And it took other people some getting used to because, you know, we'd be in a meeting with 10 people. So there's people around the conference table and Reed and I are, and we're getting into it. And to us for going, this is awesome. We're making progress. And all of a sudden you stop and be quiet. And we look around and everyone's there like, they're jaws open going, you know, why are mom and dad fighting? It turned out that it was such a positive thing. And, you know, I'll remember one of the very first days that I started at Reed's company after we acquired our company, he was working on a keynote speech he had to do. And I've, I love that because, you know, that's such an art is how you craft a message and how you deliver it and how you create empathy with the audience and all these things. And so Reed goes, could you help me a little bit? And we begin working through this and not long in there he goes, wow, you're really good at this, aren't you? He didn't quite expect that it would be possible for someone to do something like that differently or better than he did it. But I at the same time would very, very quickly be wrestling with a problem and he would be two or three intuitive leaps over me and get to some insight faster. So, you know, I think there's a lot of mutual respect there. You know, there's a very popular story that people repeat that exemplifies how quickly the market changes or sometimes people will bring up the story about missed opportunities or even about arrogance. And it's a story about Netflix presenting their idea to Blockbuster and the story says that they're laughed out of the room. Is that a true story? Did that really happen? Oh, that absolutely happened. I'm never going to forget that moment. Walk us through that. Yeah, tell us that. What was that all about? What led up to that? And then what was it like talking? How did it make you feel afterwards? Yeah, exactly. So I'm sorry, I have to give a little bit of foreshadowing, a little bit of background for what was putting us in that room to begin with, because that's kind of key to how it made us feel when it went the direction it did, which is that, you know, my book is called That Will Never Work. My podcast is called That Will Never Work. Clubhouse is That Will Never Work. I mean, that will never work is a big part of my life because that is what everybody told me when I pitched the idea of Netflix. I mean, that's what the investor said. That's what potential employees said. It is what my wife said. And that will never work is this key thing. And, you know, when we finally did launch Netflix, this is back in April of 1998. Well, what a surprise, it didn't work. It was a terrible idea. We could not get anybody to rent from us. And we spent a year and a half iterating of trying every possible thing we could think of to try and iterate our way to some model that would let video rental by mail work. And amazingly enough, we finally figured something out. And it was this crazy, unintuitive model where we would let customers keep their disks. Because listen, as you guys probably know, you know, Netflix at the beginning did not have streaming. If you wanted a movie, you got it on a DVD and we mailed it to you. And the model we came up with was why bother having them have to send it back. Let them keep the disk as long as they want. And after they've watched it, they'll mail it back to us and we'll give them a new one. And not only do we not charge them each time, they can do that as often as they want. We'll charge them a flat monthly fee, a subscription. And we rolled that together and tested it. It was amazingly successful and it took off. But the problem with subscriptions is that the model for them, on one hand, is phenomenal because once you get a customer, they pay you every single month for hopefully years. The downside is you pay all your acquisition costs up front, which means that the more successful you are, the faster you go through cash. And that was what was happening to us. It took off. So on one hand, we were hugely successful. On the other hand, money was flying out the door hand over fist. And that was not a problem in the spring of 2000 because that was the peak of the dot-com irrational exuberance. And money was easy to come by. It was not quite so easy once the bubble burst and then there was no more funding to be had. So that's the setup for why we were basically about to go out of business. And unfortunately, we were going bankrupt being successful. And when you get faced with that sort of circumstance, you, as they say in Silicon Valley, you seek strategic alternatives, which is codeword for we have to shell this. Oh, shit. Oh, shit. It's codeword for oh, shit. Yeah, exactly right. So you got to do something fast. And our strategic alternative was Blockbuster. And the problem was Blockbuster was huge. I mean, they were a $6 billion company. They had 60,000 employees and 9,000 somewhat stores. And we were this tiny company with $5 million in revenue and $50 million in the losses. So when we tried to get the meeting, nothing. Couldn't get them to return the calls. We'd not return our emails. The go-betweens weren't any use. And we were on the verge of giving up when about two months later in the fall of 2000, we get the call that we would love to chat with you. Can you be in Dallas tomorrow? And unfortunately, we got that call. We were at a corporate retreat at a ranch in the foothills outside of Santa Barbara. And, you know, all I had with me was shorts and t-shirts and flip flops and no possible way to get from there to Dallas. So we did the thing that a company who's $50 million in the hole would normally do, which is charter a corporate jet. That's the other Silicon Valley term, which is that's a surrounding air, flying to Dallas. And there you're right. And all of a sudden we're there on the 27th floor of the Renaissance Tower in Dallas in this cavernous, huge conference room. And the Blockbuster guys are there and they're $6,000 suits. And I'm there in shorts and a t-shirt and reads there and on a Hawaiian shirt. And we pitch. And it was a great, it was a great obvious business idea. I mean, we knew it would work because we were terrified that they would think of it first. And it was simply that we would combine the forces. They would run the stores. We'd run the online business. But more importantly, we'd build this blended model where you could do either. And our testing had shown that would crush both sides. And they were nodding and saying, this is interesting. And until they asked the big question, which is how much and Reed, we had practiced this on the plane, of course, Reed leaned forward, you know, got his courage up and sit with his big boy face, you know, $50 million. And, you know, it didn't quite go like we expected. Maybe they didn't laugh out loud, but it was pretty clear that they found this entire idea ridiculous that a company with $5 million in revenue, losing money, $50 million in the hole, would possibly think they were worth $50 million. And so the meeting did go downhill pretty quickly after that. But on the plane, on the way home, it was, it was when it all began to really sink in how desperate the situation was. Because when we had gotten that meeting, we thought we were saved. That this was the, you know, as the movies, this was the Deus Ex Machina moment where the hand of God reaches down or the, you're trapped in the dead end canyon and there's enemy all around and the cowboys, cavalry comes to the rescue. But this time Blockbuster was not going to save us. In fact, even worse, they were going to compete with us. No one was going to lend us money. And we thought there was no way out. And I remember thinking that unfortunately, we're going to have to rely on ourselves here. And that, you know, my dad used to sometimes say, sometimes Mark, you know, the only way out is through. And we turned and we faced and we did what we had to do. And it took us, you know, a long time, it took us eight years, I think. And now that company, which has the nine, had 9,000 stores, it's down to one. And the company they could have bought for $50 million, it's now worth about $220 billion. So there's a bunch of lessons in there. Yeah, there is. What were some of the things you did to get out of that? I mean, you guys are running in the hole and you were desperate, you need money, but then you persevere through eight years. What were some of the things that you guys accomplished to start generating revenue to keep it afloat if you didn't take money on? So you ever see those movies where, you know, they're, let's see what happens. It's usually in a boat, there's a storm. And they go, we're not going to make it. And everyone begins throwing shit overboard, you know, and they're chopping down stuff and they're tearing things out. We've got to lighten this boat. That's what this was like. It was basically saying, we're not going to have it. We're not going to get any more cash. We're not going to get anyone to help us. And so basically said, we've got to do what we got to do. So we abandoned huge numbers of initiatives we had in place. And said, we're going to focus on a single thing. We had a big layoff. We've laid off about 40% of the company. Basically refocused in on the things which had more short-term return. Did all the basically prudent things you would do when you realized that you had to survive on your own resources. And, you know, besides the fact that we survived, it was a hugely formative moment because we had suffered from a lot of the things that every growing company suffers from, which is you begin to accrete all kinds of projects, which all sound great, but they tend to defocus you from what the most important project is. And culturally, we had fallen prey to bringing on more people than we needed to accepting that it was okay to have people who may not have been star players and once we shed people, once we got down to 60% of our previous things, but didn't really diminish too much what we had to work on, as opposed to being really oppressive and difficult. It was fun. It was back to being everyone was empowered again. And I think at that point, we sort of said we never want to lose this feeling. And we shaped a lot of how Netflix grew from that point on. Now, obviously, you guys persevered. That was like a pivotal moment for you. My question is, though, like at what point, like a company that faces that reality, like that's a real reality check that they have to now digest and reevaluate their company, their idea, their original idea and all that, at what point does the company then decide, okay, this isn't going to work. Let's just figure something else out now and completely change directions. They should be doing that all the time. That's the discipline I think is, you should constantly be asking yourself, are we doing the most important thing right now? It does sometimes take a shock to the system, but I don't think it's something you only do when things turn against you. I mean, I mentioned that a lot of discipline for Netflix came out of that, that focus is such a key entrepreneurial element. Netflix, for example, would do things like saying, well, I'll give you a couple of quick examples. So these are even predate the blockbuster moment. At the very beginning, when I said that we launched this company and it didn't work, well, there was one element that worked really well, which is we were also selling DVDs. So we had this crazy scenario where we couldn't get anyone to rent, but everybody was buying DVDs from us because as an afterthought, we decided to sell DVDs. And the reason that was a bad thing is because eventually that was going to go away because selling DVDs, we didn't believe was sustainable. It was a commodities business. The margins would get eroded little by little. And what it was also doing was making it more difficult to get the rental part right because doing both things were confusing. It was hard doing our analytics cleanly. Our checkout process was strange. Inventory management was a problem. And so we said, well, we've got to pick one of these two things to focus on them. And do you focus on the selling DVDs, which is paying 98% of the salaries to that point, or do you focus everything on rental, which if we can get it right could be a huge business but is showing no promise. And walked away in a single day from all the sales, walked away in a single day from 98% of our revenue and focused on everything we had to do on rental. And Netflix did that again almost 10 years later when the same scenario where all of a sudden they had a streaming business and a disc business and recognized that doing both at the same time was complicated and made the decision at that point that we're going to essentially walk away from the disc business. They didn't do it literally, but said any time there's ever a decision to make, it's being optimized for the streaming business, even if that decision hurts the disc business, even though at the time the disc business is bigger. And I think that's what syncs companies is they clearly see what the future is. I mean, these are not stupid people. They can see what customers are going to want. They can see the world changing, but lo and behold, 90% of their revenue or 90% of their margin or 90% of their employees are all busy on their legacy business. And they don't want to do anything that could impact their legacy business. And as a result, they don't pay attention to what the future is and they just leave that for someone else to do. And it's a wonderful, it's a terrible thing if you're a big company. It's a wonderful thing if you're a startup, because what it allows, as in the Netflix case, a handful of people with no experience in the video industry to take down a $6 billion category leading company. If these companies don't have the courage to disrupt themselves, well, there's plenty of people who will step in there and do it for them. Now, Mark, hindsight, when you're telling these stories, it sounds so obvious. But I mean, making that decision to cut 90% of your profits in pursuit of something that you think is going to be... Tell me about that mental space. It's got to be terrifying for somebody who just built something and you're looking at your business and going, we're about to cut our revenue or our profits by 90% that's guaranteed. We see this to do something else. What kind of mental space do you have to put yourself in? What do those conversations look like with yourself? There's a decision-making... I was going to use the word matrix, which just sounds so BS, but there's a decision-making process. And I talk to my kids all the time about it, which is that's a circular process. We are constantly looking for a right answer. And you go, let's do this one, because this has A and B. Oh, but it's missing C. All right, let's try this one. Well, this has B and C, but it's missing A. Oh, let's try this one. And you go around and around the circle and none of them work. And at some point, the light bulb goes off and you go, oh, there is no good answer. And if some cases, most people don't do anything then. But if once you're comfortable, there is no right answer, it makes it very, very easy to go ahead on a bad solution with complete confidence because, you know, well, there's nothing better. So even though there's flaws, they all have flaws. I'm going to do this one. And this is the same thing. You can clearly see that even though selling DVDs, for example, is 98% of your revenue, you can also clearly see that it's just a matter of time back then that Amazon is going to begin selling DVDs too. And then Walmart's going to sell DVDs and Kmart and I don't know, Petsmart, everyone's going to sell DVDs and the margins are going to go to zero. You can see that coming. It's years off. But then you go, it's a dead end business. And yes, it's really going to hurt. But the advantages I get as focus is I'm committed and all the smart people who are trying, not just to work on the sales business, but more importantly are trying to manage the complexity of doing two things at once are all of a sudden working on the thing, which is truly the future. So I'm not saying it's easy. I think one of the biggest character traits required for entrepreneurship is courage. And that's courage. It's saying, I don't know what's going to happen. I know if I go this way, I know what's going to happen. I'm going to be successful over three or four years and then little by little, I'm going to manage the thing into the ground. This is uncertain, but if I can get it right, it could be huge. And I'm drawn, I'm drawn to that. Mark, how do you, how do you stay present? Like you, when you're scaling something, especially to the size that you've scaled companies to, it's really easy to get caught in the business and constantly thinking about the future and pivots and all the things that we're talking about right now. And to use your analogy, how do you sometimes sit at the top of the mountain and enjoy the current view and what you just climbed? Well, if you don't know, I'll put it this way, but if you don't know what you want, the odds of you getting it are pretty slim. And I'm pretty fortunate and then I figured out reasonably early in my life, like in my late 20s, maybe when I turned 30, what I wanted. And it was not necessarily business success. It was balance, that that's what I said. This is what I want to construct my life around. And not because I'm some guru who has these brilliant insights, because I messed it up terribly in my 20s and got completely out of balance. I worked all the time, almost lost my relationship, my now wife and kind of said, this is not what I want. So the reason I do have this incredibly fortunate life right now where I have had, yes, business success, but I also have a wife and a family who I feel very connected to and I feel fortunate for that. And I get out and do all kinds of crazy outdoor stuff, which is my real passion in life. But that only happened not because I was lucky. It's because from the very, very beginning I said, I'm going to work really hard at trying to make that happen. And that is almost harder than doing the business thing. Because unfortunately, I happen to pick fairly incompatible balance points for my life. I mean, on one hand, I said, I'm going to work at a startup, which is almost seven by 24, unpredictable crises, something different every day. And at the same time, I said, oh, the thing that makes me passionate about my personal life is outdoors things that sometimes require, I mean, you can't, I want to go paddle the No Attack River, which is in northern Alaska. It just takes frigging two and a half days just to get there. And then 10 days to paddle, you can't fit that in between a morning conference call and a two o'clock meeting. You've got to build a system that allows you to be absent and not have things fall apart. And the same thing with my family. I vowed I was not going to be one of those guys who was on their sixth company, but also on their sixth life. If I realized if I said that my wife gets what's left over after I'm finished for the day at work, that was not going to be a very satisfying relationship for her or for us. Anyway, so you get the idea. All this stuff happens because you have to want it and put in place the steps to do it. And that doesn't come without really, really making an objective in your life. Was there ever a moment in your career mark where you got hit so hard by a challenge or maybe something didn't work, where you almost didn't recover? Because you sound so resilient, so positive, but I know we're talking to the black belt who's done this now for a while, right? Was there ever a moment where something happened and you said, I don't know if I could do this again? Probably not. I mean, that sounds so glib, but it's that I don't... Have I been disappointed in things? Absolutely. Have I been incredibly upset that something I was working so hard on didn't happen or that I lost some opportunity through no fault of my own? Yes, it's really difficult, so I'm not like this. I'm always obliviously happy all the time. Of course not. But the thing is the way I've always... The thing that has drawn me to being an entrepreneur since the very beginning again was not the end point. I was not drawn to it because I want to be some captain of industry. I was drawn to it because I loved that problem-solving piece. I loved coming to work and sitting around the table with really smart people solving really hard problems. And when something doesn't work, it's fine. As I said earlier at the beginning of our conversation, you almost always glean some little insight that says, oh, I can go this direction. And that totally energizes you. It just takes one little glimmer to get you back up and go, oh, I can't wait to come in tomorrow and now begin pursuing that route. So no. One more little tip here, which is that what makes that possible is not falling in love with ideas, which is this huge flaw for people who are aspiring entrepreneurs is they get this idea and they fall in love with it. But the idea is always terrible. All ideas are bad. And so if you've hung your self-esteem and your happiness and your sense of achievement and will this idea work? Yeah, you're going to be crushed. But instead of falling in love with the idea, the trick is to fall in love with the problem because the problem will never let you down. The idea, you'll try that first idea. You'll hang that sign on your dorm room door. Nobody will knock. Okay. But then how am I going to make this work? Because the problem of wanting to borrow clothes, it's still there. And the more you learn about it, the more interesting it gets. And then all these little ideas you have about how to solve the problem that don't work, big deal. You're still focused on that same big problem. Yeah, I say love your ideas. Just don't marry them. That's what I say to people. Do you have books that you've read that were very pivotal, like a book that you read and maybe changed the way that you led were there moments like that or books you read? No, I'm not a big believer in this skill set is something you get by reading a book. I'm not saying I haven't read a shitload of business books and get things out of them, but 99% of what I believe I've learned, I've learned by trial and error. I've learned by doing it. I've learned by trying things. There's no substitute for that. It's like trying to learn golf. I mean, sure, you can watch videos and you can read books about how the grip should be in the stance but you're never going to learn how to play golf in a book. You've got to go out and hit balls. And I think entrepreneurship is no different than that. You definitely sound like someone who gets excited by challenge, who likes being in a situation where you can change directions and pivot. At what point does it get boring when your company is a well-oiled machine? At what point does you go from start-up to now everything's working well and then do you get bored? Do you think to yourself like, all right, I want to go do something else now? Oh, I get bored. I definitely get bored. I mean, it's more profound than that. But listen, I'm an optimist. I'll put it in a positive sense, which is that I figured out something hugely critical pretty early in my life and I figured out what I'm good at and I figured out what I like doing and the answer to both of those things is start-ups. I love that. And here's a modesty piece. I'm pretty good at it. And give an example, Netflix, not long after we had our IPO, we had financial resources. All of a sudden we had stability. We had a repeatable, scalable model to some degree. We were able to hire incredibly talented people with amazing expertise. And there I am. And I'm feeling this real conflict because on one hand Netflix is my baby. I love that company. It is of me. But at the same time, I'm recognizing that I don't really love the things I'm doing. And perhaps even more importantly, I'm not very good at it. And if that's the case, what am I doing there? What is success if not the ability to go and spend your day doing the things you love and that you're good at? And for me, that was early stage companies. So, yeah, I began getting bored. I began going, I don't like this really anymore. And, well, lo and behold, I left. I mean, I didn't quit. I took a year to kind of carefully extricate myself so as not to damage anything on the way out. But I'm now incredibly fortunate because I do get to spend my day working on early stage companies. I still get to come in and sit around the table with really smart people and solve really interesting problems and read Hastings, the current co-founder and still CEO, happy as a clam. He loves what he's doing and he's incredibly good at it. So, we both are getting what we want. Mark, I'm going to create just a hypothetical situation here and I'd love your input. So, let's say you were trying to field a bunch of applicants trying to pick out who would be a really good entrepreneur. Forget the ideas, they could be anything. You're just trying to look for characteristics. You're trying to look at behaviors and you're trying to pick the best ones. What are you looking for? What are you looking for in somebody who's a really good chance of succeeding as an entrepreneur? Probably, in the scenario you're describing, I would be looking for their predisposition to action. I'm trying to find someone who thinks less and does more. You would love us. We build the parachute on the way down. Yeah, exactly. And, you know, I don't care, like you said, about your ideas. Tell me about your side projects. What are you doing after school or if you're at work? What are you doing on the side, on the weekends? Hopefully, I don't even need to prompt the person's coming in and says, I'm currently working so and so and so, but I'm really excited because I had this idea. So I began doing this thing on the side, on the weekend, after work and I was doing it with a patent paper. I'm looking for someone who is so compelled to collide their idea with reality that they just figured out a way to do it. I think that is the most important genetic marker for the people who are successful. They're constantly saying, how can I validate things? And they're not making excuses about why they can't. Now, Mark, do you think there's things that stand out to you starting something up from zero? Common things that you see as far as challenges at the six-figure mark, at the seven-figure mark, at the eight-figure mark, are there common themes that you see that people get stuck at those points? Well, certainly the management challenge is a huge one because your scale, the scale of control, not the right word, changes pretty dramatically. So certainly when you're a person company, not only do you know everybody, you hired everybody. You have constant feedback on what they're working on. And you don't even really need to have formalized communications about it because you overhear things. That works really well at 10. All of a sudden you're at 100 and, wow, you probably don't know everybody. You probably didn't hire everybody. Information flows differently. Decision making is different. You get to 1,000 people, now those problems are multiplied again. At the same time, you're creating disciplines that you didn't have to before. When you had 10 people, you don't need a human resources function. At 1,000 people, you certainly do. So that puts a huge strain on your ability as a leader as this scale of control changes. And quite frankly, it's one of the things that I'm very good at. I'm much better at a small-scale enterprise than a huge one. The other one that happens is the financial considerations change because the expectations of various funding rounds. I'm talking about venture-funded, venture-backed startups. That changes. The expectations of what the angel investors expect is one thing. The B, Cs and Ds and they have very, very different requirements and expectations. So yes, there's very, very distinct layers you have to go through. I'll be quite honest. I was speaking for myself when I said I know now that I'm not good at it when they're big. But very, very, very few people are. That the skills get required at a company to navigate your way to the repeatable scalable business model and then have the skills to guide the company as it gets larger and more successful. I can count two hands, the number of people who are able to do that. And there's a reckoning where you as a founder have to look yourselves in the eye and look yourself in the mirror. I guess how they do that. Look yourself in the mirror and ask yourself, am I the right person for this next stage of the company? Am I holding on to something that I'm not capable of doing? And that kills a lot of companies too when that founder makes an incorrect decision. This is a conversation that we have behind the scenes all the time. You have four founders. We've been doing this for almost seven years now. We've had a lot of success. We've built two other companies underneath it and we've created an incredible balance for ourselves. In fact, we after you, we take off to our Tahoe cabin for four days where we get to just kind of enjoy the view at the top of the mountain that we've climbed recently and talk about all the things that we're enjoying. But we also have these visions of building something even more grand. I feel like we're challenged here to be going to stay at this place where everybody's living financially very comfortable. We have great balance. We love what we're doing. But then I feel sometimes we're torn between wanting to go even bigger. Do you have advice for people like us that are in this position trying to figure out do we want to stay here or do we want to maybe scale ourselves out of the business and bring on experts to take it to the next level? Oh, that's such a personal question. That's really hard for there to be a simple one size fits all solution. But I would just back up and ask yourself what you're looking for. It sounds to me like you guys have got it nailed. I mean you've got really interesting business. You have the time to get away and spend time doing the other things that are important in life. What else is there? That's just me. And the answer is maybe there is a possible way for you to execute yourself from the business so that someone else can take to the next level while you still have time to spend time up in your cabin in Tahoe. I got another question for you. I love your opinion on it. We love the ever-evolving entertainment, streaming entertainment business. Obviously with Netflix being one of the pioneers and now you've got streaming Disney show and Amazon and all these other competitors and there's two models that seem to be competing. We always go back and forth as to which one we think is better. So I'd love your opinion. On one hand you have the they drop all the episodes at once Netflix model like it'll come out with a series all 12 episodes and then you binge watch them all. On the other hand you have like HBO that releases one you know episode at a time you got to wait for Monday at whatever time for the next one to come out. What's your opinion? Which one do you think is better for you? I think releasing them I haven't asked but I can't believe that anyone who's choosing we release them one week at a time is doing it purposefully and of course they're doing it purposefully but what are a better way to say it is not being forced to do it because what consumers want is the flexibility of being able to watch as much as they want when they want it and creative talent wants customers to have the flexibility to watch them when they want them because when you're forced into this I'll come back to why people are forced that way but when you're forced to release them one at a time and people are watching them a week apart it absolutely messes with the narrative structure of the content you have to have something at the beginning to remind people where they were when you left off a week ago you kind of need something as a cliffhanger at the end to compel them to come back in a week the story arc can really only be one episode long because it's got to wrap up neatly before you go off and do something else for a week so it's really impacts the storytelling whereas streaming frees all that up okay so why are people forced into this one at a time well there's two main reasons the first one is they don't have enough content to do otherwise whereas you need this constant flow of new things and if you're a new streaming service and you're still trying to get up to speed it is really hard to have sufficient volume to begin releasing 13 episodes of something one after another 13 at a time or a different show the next week and a different show the next week it's really really expensive it takes a long time to build that pipeline I mean it takes years you have to find the talent you have to approve the shows you have to develop the concepts you have to do post production there's a long long window so if you are new to the streaming business you don't have that and so what you do is you begin releasing what you have slowly is you're in two businesses simultaneously like HBO so HBO has a cable network where it doesn't have the luxury of streaming the shows so it has, it can be weird if you could now go to HBO plus and stream a full season of something but yet you have to then wait and watch it one week at a time on cable HBO so they go we got to keep things consistent I think I haven't gotten that from the horse's mouth at HBO but pretty obvious I think that's one of the reasons it's driving them to be on and we release them one at a time scenario wow that's such a great great we speculated we were wrong we were totally wrong okay so one more question for you so I've never run into this I'm old enough to remember when I turned on the TV and I had to choose from 10 channels then it turned into 50 and then maybe 100 and that was about it and you would scroll through find the one you want now there's so many choices that sometimes I find myself searching for a movie for 45 minutes because it's hard for me to decide how important do you think it is for algorithms and new tech to be invented or created to where they're going to be able to predict what you want to watch show you what you need to watch because I find myself now stuck searching almost with that decision you know state or whatever I don't know what I want to watch there's so much to watch oh I think it is an essential ingredient it's one of the reasons quite frankly why Netflix has such a big lead on everybody else is that we've been working on those mechanisms for 23 years we've been focused on how do you help people discover great stories and our knowledge of that space and our technology for that space has been getting better and better and better and you're right it's crucial you can't have someone turn on the TV and say there's 10,000 things you're overwhelmed you have to have some mechanism to narrow it down and narrow it down in a way that people can choose things and go wow I actually did like that and I think what will happen it may take a while we'll get to the point where the recommendations become very very very good and that you almost don't even need to choose that almost anything you watch you're going to like but that's still often the future but I think it's a critical thing to aim for selfishly I have to ask this question we're in the podcasting space you've recently got into the podcasting space is there any particular insights that you've acquired through going through this or do you what do you see in terms of the future of podcasting being this new medium it's really interesting isn't it that we're doing this we have video associated with it but that I think what is the interesting dynamic is the immersive feeling of an all audio experience that you have these voices in your head and it's more intimate than it is on sitting and watching something on a screen I think to a large degree that's what's driving the popularity of podcasting and is what's driving the popularity of clubhouse and while social media platforms are all adopting an audio platform and I think we're still kind of learning the best ways to use it but I've certainly really enjoyed my recent foray into podcasting and I'm taking a different approach than you guys are you know I'm really recognizing people like yourselves do this so much better interviewing people who are more well known and I'm just basically speaking to people who are nobody and trying to let other people listen in on me mentoring somebody but either way you know I think it's a pretty cool cool space I'm happy to be doing it yeah my favorite part of podcasting is it's long form it's brought back this kind of long form conversation especially complex ideas in the past you were so limited by you know the space I have to communicate this complicated thing in three minutes but now I can do it for two hours and I think we thought for a long time nobody had that attention span but I think we're finding that people do want to hear the whole conversation which to me that's exciting and it scratches you know that problem solving itch which I'm sure that you've experienced as well being able to help these people in these conversations oh it's no question and it's kind of the antidote to the shortening attention span that's been driven by Twitter and Instagram I mean how do you deliver a complicated concept in a limited number of characters or in a visual little quote panel and then you end up with platitudes and I think people are recognizing that feels good it's like junk food but fundamentally I'm not really nourished by it and what this sort of show does what I'm trying to do is say alright I will do my little time quote panel that says stop thinking and start doing and you can frame that and put it in your I don't know office but let's have the longer discussion about how do you actually put that into action I think they both are going to exist for I think they both are necessary right I think you need something that grabs people's attention quick but I think there's people that are going to be seeking out that long form like medium like podcasting for sure I've had the opportunity to talk to probably thousands of entrepreneurs and you're doing it now in your podcast on a regular basis anything like I heard you talk about clubhouse which is kind of newer a newer business anything that excites you or you think is really interesting that you've heard recently in the in let's say the last six months to a year that are maybe up upcoming business that you think is really neat I'm going to say you know yes of course but not in the way you expect not like I go oh my god blockchain or hi no because I don't really care I'm not driven by the technology I don't I mean I do a fair amount of angel investing and I certainly mentor a lot of people and I don't start from a premise of I'm looking for someone in robotics I'm so much more motivated by who the person is by who the founder is by what problem they've chosen to solve and I let that drag me into new categories and that's how I've been introduced to things you know it wasn't like I was into robotics but I'm mentoring a female CEO who's has a robotics startup but the thing that drew me to it was the CEO and the opportunity to work with her and the fact that it was robotics was secondary another person is doing an AI startup the same thing I was joined to working with him and another one was another company that I've recently invested in started out doing a sort of a version of a social network but through four or five pivots is now in blockchain so you never know well mark this has been awesome great conversation you're great to talk to I think a lot of the information you provide is super insightful and valuable to people so we appreciate your time for coming on our show oh it's been certainly my pleasure and thanks and good luck with your business and with your lifestyle choices thank you very much mark I didn't know it was called a growth mindset at the time but that's exactly what I adopted this belief that you can become anyone you choose to become with tenacity and determination and I decided that I was going to be a healthy person with healthy habits that was literally the phrase that was my bedrock and so when I would ask myself when I had you know faced with decisions or choices I would ask