This is a comprehensive summary of “No Rules Rules” by Reed Hastings and Erin Meyer. The book explores netflix and the culture of reinvention.

what’s in it for me? get an inside look at netflix’s revolutionary company culture.#

Introduction

reed hastings and erin meyer.

no rules rules.

netflix and the culture of reinvention.

narrated by rosalind tordesillas and thomas florio.

with its 183 million subscribers worldwide, netflix has become a touchstone of modern culture.

having started off 20 years ago as a dvd-by-mail service, it streams oscar-winning movies.

movies like roma and the irishman that the company itself produces.

but netflix isn't successful because of streaming.

it's successful because the company was founded on a culture that allows it to nimbly pivot wherever it needs to go.

indeed, millions have studied netflix's 127-slide culture deck, hailed by facebook coo sheryl sandberg as perhaps the single most important document to have come out of silicon valley.

in these chapters, we take a deep dive into the netflix culture, understanding its key components and how you can apply them to make your company more efficient.

netflix has been successful because of its unique company culture.#

it was the year 2000.

reed hastings, co-founder of netflix, was in dallas, texas.

he was shaking in his boots as he waited to meet with the ceo of blockbuster, a giant company worth $6 billion, which boasted 9,000 stores all over the world.

it was 1,000 times the size of netflix, hastings's scrappy young startup.

hastings and his partner made a pitch to the ceo, buy netflix for $50 million and let them run blockbuster's website as an online video rental service.

the ceo flatly refused.

this proved to be a mistake.

ten years later, blockbuster filed for bankruptcy because it couldn't keep up with netflix, which by then had 167 million worldwide subscribers and was producing its own award-winning films and tv shows.

how was netflix able to nimbly pivot, succeeding where the behemoth blockbuster failed?

that's easy.

the key message here is, netflix has been successful because of its unique company culture.

the netflix culture values people, prioritizes innovation, and has few control mechanisms.

with this as a foundation, netflix has built immense value, growing 300 times faster than the nasdaq's stock index over 17 years.

what's more, a 2018 survey rated it the top place to work in silicon valley.

perhaps most impressively, it's responded nimbly to four seismic industry shifts.

netflix started out as a dvd-by-mail subscription service, then transitioned to streaming.

from there, netflix began licensing original content produced by other studios.

and finally, it began producing its own in-house movies and tv shows.

hastings believes that all this stems from the fact that at netflix, his employees enjoy more freedom than any other company he knows of.

that freedom inspires them to make better decisions.

it also makes it easier to hold them accountable.

but you can't just set your employees free and expect your business to automatically do as well as netflix.

true freedom comes from careful planning.

three things are necessary to unlock the potential of radical employee freedom and the responsibility that comes with it.

first, high talent density.

next, high levels of candor between employees and managers.

and finally, the courage to remove controls which waste everyone's time and company money.

in these chapters, you'll learn more about each of these three mechanisms.

on the way, you'll also hear netflix's startup fairy tale story and how one plucky company became one of the most recognized words in the world.

high talent density encourages employees to perform at their very best.#

chapter 2 of 6 hastings's first eureka moment sprang from one of his lowest points as a ceo.

netflix launched in 1998 and was doing pretty well.

after three years, it had 400,000 subscribers.

but while hastings had learned some lessons from his previous company about running a startup, he freely admits that netflix wasn't a great place to work.

then, in 2001, the first internet bubble burst.

hundreds of silicon valley startups failed and had to liquidate.

netflix was impacted too.

the company's venture capital funding was cut off.

as a result, hastings had to lay off a third of the workforce.

it was a wrenching moment for the company, and hastings wasn't sure if netflix would recover.

but he never predicted what happened next.

here's the key message.

high talent density encourages employees to perform at their very best.

weirdly, netflix's performance improved a lot after the layoffs.

people had new bursts of creativity and zeal for their work.

they were not only getting everything done with fewer people, they were doing better work.

these layoffs taught hastings a critical lesson about employee motivation and leadership responsibility.

he and his team realized that an increase in talent density was behind the dramatic improvement.

a company with really dense talent is one everyone wants to work for because high performers thrive in an environment with other high performers.

it holds people to a higher standard, and it's more fun.

when everyone is excellent, performance spirals upward.

this is borne out in a study of contagious behavior conducted at the university of new south wales in australia.

groups of students that had been infiltrated with one actor behaving badly performed worse than other teams by 30 to 40 percent.

but what's the secret to attracting and retaining rock star talent?

it's actually no secret at all.

pay rock star salaries.

given that some people radically outperform others, it makes more financial sense to hire one amazing person and pay them a huge amount, rather than a couple of decent people and pay them a normal salary.

according to bill gates, the best software engineers add 100 times the value of a normal one.

so talent density is the first part of the equation.

but even an amazing team or stunning colleagues in netflix parlance needs mechanisms for communicating for maximum efficiency.

in the next chapter, we'll find out what they are.

radical candor helps netflix employees improve, even if it can be difficult to hear.#

chapter 3 of 6 when co-author and insead professor erin meyer began consulting for netflix, she was in for a nasty shock.

her very first job with netflix was to deliver a keynote conference address to 400 managers from around the world.

halfway through, she divided the attendees into discussion groups.

as she observed, one woman beckoned her over and told her in front of everyone that the way meyer was fielding answers from the international audience was undermining her message about cultural diversity.

meyer had been choosing people who raised their hands to answer her questions, which had an unintended result.

only americans got a chance to answer.

she hadn't taken into account that hand-raising might not be as common in other countries.

the key message here is radical candor helps netflix employees improve, even if it can be difficult to hear.

meyer realized that the feedback was dead on and luckily managed to adjust the rest of her presentation.

instead of waiting for hands to be raised, she directly asked for people from specific countries to contribute to the discussion.

it was a stressful moment, but meyer's presentation was better for having received the constructive feedback.

at netflix, radical candor is a vital part of the company's culture.

for example, it's perfectly common for people to directly contradict their bosses in meetings if they disagree.

casually dropping by someone's desk to say you thought they came off as defensive in an email is not only normalized, it's expected.

in fact, at netflix, if you don't speak up when you disagree, it's as if you are purposely being disloyal to the company.

you could help the business be better, but you're choosing not to.

plenty of organizations have annual performance reviews, where managers give feedback individually to their direct reports.

at netflix, employees are encouraged to give feedback at all times, not just once a year.

but more than that, employees are encouraged to give feedback to their bosses even more than the other way around.

that's because the higher you are in an organization, the more likely you are to make a mistake that seriously impacts the company.

but there are rules to candor.

you can't just impulsively say anything just to get frustration off your chest.

to be effective, you have to follow four rules.

first, give feedback with the aim of helping.

second, your feedback should be actionable.

third, when receiving feedback, you should appreciate the effort and bravery of your colleagues speaking up.

and finally, you should think carefully about whether or not to accept it.

in meijer's case, she has accepted all the feedback she's been given, and her work has markedly improved.

later, we learn how to ramp up this culture of candor even more.

getting rid of useless policies made netflix employees more accountable.#

chapter 4 of 6 when employees feel comfortable speaking up when things don't make sense, amazing things happen.

for example, in 2003, an employee pointed out that the company wasn't tracking how many hours or days people worked, so why should it track how many days they took off?

good point, thought hastings.

so he abolished the official vacation policy.

since then, netflix guidance regarding vacations has been, take some.

after the no vacation policy was implemented, hastings started noticing that people were taking a little more responsibility for things around the office, like throwing out the milk in the refrigerator when it went off.

that's when he and his team coined the term freedom and responsibility.

one thing leads to another.

freedom is a path toward accountability.

if removing controls could be this successful, hastings thought, why not keep going?

the key message here is, getting rid of useless policies made netflix employees more accountable.

you can't just remove controls though and expect everyone to fall into perfect formation.

when you offer radical freedom, leaders have to set context from the very start, as well as model good behavior.

when hastings first removed the vacation policy, he had two fears.

first, he worried that everyone would burn out, trying to take less time off than their colleagues in order to impress the boss.

to set a culture of holiday taking, hastings himself started taking elaborate vacations and showing everyone lots of photos.

his second fear was that come summer, he would be faced with an empty office while his entire team was sunning themselves in the south of france.

to prevent this nightmare scenario, he asked managers to set guidelines for their teams.

accountants, for example, aren't allowed to take time off in january when the annual books are due.

fresh from the vacation policy success, hastings was eager to remove even more controls.

next, he did away with the approval system for expenses and travel.

at his previous company, hastings had once spent an entire afternoon rewriting policy based on a mundane travel issue.

it led to the resignation of one of his top people, who couldn't believe senior management spent their time on something like that.

at netflix, he didn't want anyone, much less senior management, wasting time on these types of things.

ultimately, hastings learned the reason why giving employees more freedom promotes accountability.

it signals that you trust them.

maintaining a talent-dense team requires a lot of intense effort.#

chapter 5 of 6 the end of 2018 was pretty great for netflix.

the netflix-produced film roma had been released and hailed as a masterpiece by the new york times.

bird box had also been released, and within a week, over 45 million households with netflix accounts had watched it.

the best first week ever for a netflix original.

when hastings called up ted sarandos, netflix's chief content officer, to congratulate him, sarandos said, we've all picked well.

hastings picked sarandos, who then picked the best people, who then picked those excellent films to produce.

as we learned earlier, this is what talent density is all about.

but to keep up the talent density, you have to do something extremely unpleasant.

fire people who are merely adequate.

the key message here is, maintaining a talent-dense team requires a lot of intense effort.

a lot of companies talk about how their employees are a family.

for hastings, netflix's talent-dense team isn't a family.

jobs aren't something you should have for life, through thick and thin, regardless of your performance.

a job is something you do for a magical period of time when you're the best person for the job.

and the job is the best position for you.

instead of a family, netflix employees think of themselves as a professional sports team aiming for the championship.

every player is the best performer possible in that position.

but job loss not only impacts someone's career, but also their personal finances and morale.

isn't it cruel to take firing someone so lightly?

well, sort of.

that's why netflix offers generous severance packages.

an individual contributor gets four months' pay, and a vp gets nine months.

it's enough money to keep them and their families taken care of while they move on to a new project.

but doesn't the internal competitiveness become impossible to bear?

is it like the hunger games in the office?

well, no.

netflix manages to achieve both high talent density and strong collaboration.

because there's no fixed number of slots, employees aren't fighting each other for one position.

rather, the more excellence there is, the more netflix can grow.

and with a continuous feedback system, employees always know where there's room for improvement.

if employees take feedback on board and can action their colleagues' suggestions, they improve constantly and perform at the cutting edge of their abilities.

at talent-dense organizations, dispersed decision-making is most efficient.#

adam del deo, the netflix employee in charge of original documentary programming, was at the sundance film festival in 2017 when he saw something so great, it made him feel sick.

the sports documentary icarus was one of the greatest films he'd ever seen, and he wanted to buy it for netflix.

he felt sick because he would have to pay an incredible, unprecedented amount of money to obtain the film.

as much as $4 million.

would his boss, chief content officer ted sarandos, ever sign off on such a thing?

but when del deo asked his boss, sarandos didn't say yes or no.

instead, he set broad context and encouraged del deo to make the decision himself.

you're the doc guy, not me, sarandos said.

we pay you to make those decisions.

but ask yourself if it's the one.

is this going to be a massive hit?

the key message here is, at talent-dense organizations, dispersed decision-making is most efficient.

at most companies, the boss is there to either approve or shut down employees' ideas.

that's leadership with control.

and this is a great way to limit innovation and slow down growth.

at netflix, managers lead with context, letting employees use their own judgment to make the choice they feel is best for the company.

with employees making their own decisions, senior leadership is freed up for other things.

this type of leadership can be counterintuitive.

if your employee does something you think is stupid, it can be hard not to jump in and offer a correction.

but if you focus instead on understanding why the employee thought this decision was best for the company, you can improve your communication and alignment, making for a more efficient company.

no micromanagement necessary.

this only works, of course, if you've already built a talent-dense team which you trust to make creative, smart decisions.

in case you were wondering, adam del deo truly believed icarus was going to be a smash.

he paid a record-breaking $4.6 million to get it.

his impulse was right.

icarus was important enough to be cited as evidence in a decision by the international olympic committee.

in march 2018, it won the oscar for best documentary.

after six nominations in the category, netflix had finally won the big prize.

on the way to the oscars after party, del deo ran into sarandos.

do you remember that conversation we had at sundance?

he asked.

sarandos grinned back and replied, yep, it was the one.

final summary#

Conclusion

the key message in these chapters is that, by maximizing talent density, creating a culture of candor, and leading by context rather than control, netflix has become one of the fairy tale startup stories of the 21st century.

this fosters an environment of freedom and responsibility among employees, which empowers them to make the most creative decisions and perform at the very peak of their capabilities.

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