79FORBES.COMTH
E(^) L
IS
T
OCTOBER 20 20
average peers. It extended this generous compensation
to creative executives working in Hollywood, from the
well-connected (Matt Thunell, whose ties with the tal-
ent community enabled him to read an early draft of the
sci-fi series Stranger Things over lunch in Hollywood) to
the visionaries (Shonda Rhimes, Joel and Ethan Coen,
Martin Scorsese). Those large checks singlehandedly
turned streaming from a backwater to an auteur’s para-
dise, with early hits like House of Cards and Orange Is the
New Black. The eyeballs followed.
“In the beginning we were able to attract rebellious
folks, the folks that were stifled by the studio environ-
ment or hadn’t gone far enough in the system to be ru-
ined,” McCord says. “We just wrote big checks. ‘I know it
seems crazy. I know you don’t get a personal assistant.
You don’t get a parking spot. How about we give you this
big shitpile of money?’ ”
Those piles are delivered cleanly. The company’s pay
packages come fully as salary, with as much or as little
compensation as you wish in stock options; Netflix doesn’t
believe in bonuses, which Hastings thinks can reward the
wrong things. “It’s the specifics of trying to hold someone
accountable that trips you up,” he says, adding, “we do
evaluate people, but we don’t micromanage the goals.”
A corollary, though: These stars, all paid like stars,
must continue to perform like stars. No part of the com-
pany tolerates resting on one’s laurels. “Adequate perfor-
mance gets a generous severance package,” Hastings and
McCord wrote in a 129-page SlideShare presentation on
Netflix’s culture that was widely shared a decade ago and
remains on the company’s website.
“We describe it as like getting cut from an Olympic
team. And it’s super-disappointing. You’ve trained your
whole life for it, and you get cut, and
it’s heartbreaking,” Hastings says. “But
there’s no shame in it at all. You have
the guts to try.”
Extending the sports analogy, this
team of elite players, in trusting one an-
other’s exceptional skills, will then com-
municate openly to collectively up their
game. It’s akin in some ways to Ray
Dalio’s much-promoted “Principles” of
brutal transparency at Bridgewater As-
sociates, the world’s largest hedge fund.
And it’s not for everyone. One former
executive describes the work environ-
ment as a “culture of fear” in which
“everybody is chipping away at each
other at every moment—because you’re
rewarded.” The annual review process,
called “360,” culminates in dinners at
which small groups gather to provide
constructive feedback.
“Each one gives feedback about that person, live, in
front of everybody else,” says the former executive, who
requested anonymity. “You go around the table. It lasts
for hours. People cry. Then you have to say ‘Thank you,
because it’s making me a better person.’ ”
To Hastings, these 360 reviews are a necessary com-
ponent because of another element of the Netflix Way:
a huge amount of autonomy. Like the coach who wins
championships by empowering stars to execute the game
plan rather than trying to control each play, Hastings en-
courages the freedom to act in the company’s best interest.
Again, this can be disconcerting. Ted Sarandos, Hast-
ings’ co-CEO, talks about a coffee break with Hastings in
the pre-streaming days, when he was the chief content
officer and deciding whether to order 60 copies of a new
alien movie or 600. Sarandos casually asked Hastings
how many he should order, and Hastings responded,
“Oh, I don’t think that’s going to be popular. Just a few.”
Within a month, the movie was in high demand, and
Netflix was out of stock. Hastings asked Sarandos why
he hadn’t ordered more DVDs. “Because you told me not
to!” Sarandos protested. Hastings cut the conversation
off immediately, declaring: “You’re not allowed to let me
drive us off the cliff!”
“And to me, that was an immediate lesson,” Sarandos
now says. “With all that decision-making power comes re-
sponsibility.... Reed models that over and over again, and
he lets you own the win and he makes you own the loss.”
“Normally companies organize around efficiency and
error reduction, but that leads to rigidity,” Hastings says.
“We’re a creative company. It’s better to organize around
flexibility and tolerate chaos.”
A Show of a Different Stripe
The Netflix mega-hit Tiger King stars Joe Exotic,
a self-described “gay cowboy” big-cat breeder.
The seven-part documentary captivated millions
homebound by the pandemic.