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THELISTastings has the kind of background that al-
lows one not to fear failure. His maternal
great-grandfather, Alfred Lee Loomis, was
a Wall Street tycoon who anticipated the
impending stock-market crash of 1929,
then turned his attention to science, bankrolling luminar-
ies such as Albert Einstein, Enrico Fermi and Ernest Law-
rence. Hastings grew up in an affluent suburb of Boston—
his parents met while his father was at Harvard, his mother
at Wellesley—and attended private schools, then Bowdoin
College. He later obtained a master’s degree in computer
science from Stanford and spent two years in the Peace
Corps in Swaziland, teaching math to high school students.
In 1991, Hastings founded his first company, Pure
Software, which specialized in programs for measuring
software quality. Back then, he was a “geek’s geek” who
would sleep on the floor of the office after an exhaust-
ing coding session. “I’d come in in the morning and say,
‘Dude, if you’re going to sleep on the floor, in the morn-
ing go brush your teeth and look for blanket fuzz in your
beard,’ ” recalls McCord, who was with him at Pure be-
fore helping him formalize the culture at Netflix.
McCord watched the entrepreneur mature as a leader.
She remembers encountering Hastings in his office late
one evening, fixing bugs in the glow of his computer rath-
er than preparing remarks for a company meeting the fol-
lowing day. “Seriously, Reed, if you want them to follow—
lead,” McCord remembers telling him. “And I slammed
the door. The next day he did a speech... and got a stand-
ing ovation. I don’t think he knew he had it in him. He
realized it was his job to inspire them, not to do the work.”Pure Software went public in 1995, merged in 1996 with
a little-known Massachusetts company, Atria Software,
and was subsequently gobbled up by Rational Software in
a deal that PitchBook valued at around $700 million. A
tremendous success, but one that came with a strain on his
marriage. Counseling helped the once conflict-avoidant
Hastings open up—and eventually he would incorporate
the value of candor as a foundation of Netflix’s culture.
“People shy away from the truth, and the truth isn’t so
bad,” he says.
By Silicon Valley standards, Pure Software had made
a successful exit. But it left Hastings with lingering dis-
satisfaction. In the early days, it had innovated. As it
matured, like pretty much every company, it developed
policies to safeguard against mistakes, rather than tak-
ing smart risks. Pure ended up promoting people “who
were great at coloring within the lines,” Hastings says,
while the creative mavericks got frustrated and went to
work elsewhere.That was Hastings’ mindset when, according to popu-
lar legend, he had an epiphany after getting socked with
a $40 late fee on Apollo 13 at Blockbuster. “What if there
were no late fees?” he pondered, and voilà, the idea for
Netflix emerged fully formed.
“It’s a good story,” says Netflix cofounder Marc Ran-
dolph, who worked with Hastings at Pure. “And in many
ways, Netflix is about telling good stories.”
Netflix’s origin story is more complicated than the
convenient narrative. It hatched over countless brain-
storming sessions while Hastings and Randolph com-
muted together over the Santa Cruz Mountains to Pure’s
headquarters in Sunnyvale, California.
Launched in 1997, Netflix became known for red en-
velopes sent by mail, a pivot away from Blockbuster’s
brick-and-mortar rental model. Initially, it made most
of its money selling DVDs, Randolph says. That put the
young startup on an eventual collision course with Ama-
zon’s Bezos.
Instead, Netflix caught fire in 1999 with a subscription
model—customers would rent up to three movies at a time
without worrying about a specific return date or incur-
ring late fees. A better mousetrap, albeit one that carried
a huge burn—Hastings lured customers with month-long
free trials. Randolph remembers flying with Hastings to
Dallas to try to convince Blockbuster CEO John Antioco
to buy Netflix for $50 million. The head of the $6 billion
home-entertainment giant rejected the idea out of hand.
“What did we possibly have to offer that they couldn’t
do more effectively themselves?” Hastings reflects.
After the 2001 reset, Netflix’s business began to stand
on its own and grow, raising $82.5
million through its initial stock offer-
ing in 2002. It developed into a very
good business, as subscribers would
pick DVDs from Netflix’s comprehen-
sive library.
Then, in 2007, broadband brought
the opportunity for streaming. Keen
to ensure that no one did to Netflix what he had done to
Blockbuster, Hastings began plowing cash and engineer-
ing resources into what was essentially a freebie for exist-
ing DVD subscribers. It was a fateful moment. Netflix’s
old-fashioned business allowed for pretty much infinite
choice, albeit within the confines of inventory availability
and delivery lags. Streaming offered instant gratification,
but Netflix would not be able to match the breadth of con-
tent because of Hollywood’s television deals. For the first
time, Hastings had to understand people’s tastes and offer
them a compelling proposition.
“When someone sits in front of a TV to watch Net-
flix, we have a moment of truth—a couple of minutes,
maybe as little as 30 seconds, [in which] we need to
catch their attention with something interesting,” says
former chief product officer Neil Hunt, who deployed his
2,000-member team to solve this riddle—most working
independently, in keeping with the company’s culture.
Netflix also needed to find a way to charge for the on-OCTOBER 20 20“YOU DON’T GET A PERSONAL ASSISTANT.
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