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Hard work doesn't matter as much as people think. In fact, I think the idea that hard work leads to success is a myth, and let me give you two examples to explain what I mean.
I work with a lot of younger people, and as was discussed earlier before we began the session, younger people are in different places in their lives than older people, especially when it comes to their careers and how they think about them. Earlier in my life I used to do triathlons, the races that combine swimming, biking, and running. Back when I did them, they didn't start quite the same way anymore. It would be a mass water start, with four or five hundred people, and when the gun sounds, all 500 of them plow into the water simultaneously. It's not a phased start, and as you can imagine, it's a show. You're getting kicked, your goggles are being knocked off, and you're being held underwater. You quickly realize that if you want to survive that mass dash, you have to sprint for those first 400 or 600 yards to get yourself far enough toward the front of the pack that you have open water. In my opinion, work life is a lot like that when you're younger, when you don't really know what you're doing and you have to go down a lot of false ends. You're not just being productive, you'd better work your ass off. You'd better sprint, and you'd better work three times harder than everybody else in the company. So it's essential. But ideally, you get yourself far enough ahead that you recognize you can't keep going at that pace for the entire triathlon, and you need to get some breathing room, so that now you can back off.
So yes, at certain points in your career you need hard work, and at certain points in the trajectory of your business you need hard work. If you're fundraising, you can't say, "Oh, we're closing around, I'm taking two weeks of vacation." If you're doing M&A, you can't say, "I'm only going to work a couple of hours." You're going to have to grind it out. But that's not the answer.
Here's one more story, which is part two of why I say hard work is a myth. During one part of my career I lived in Europe, doing international marketing for a big software company. We had an office in Paris, and I lived in Paris, but I was meeting every week with the marketing people in our other branches. Probably four days out of five, I was flying. I'd fly to Copenhagen one day, then down to Milan, then maybe to London, then maybe to Madrid, all in one week. So I spent a lot of time at the airport, and because I'm sometimes not that organized, I'd be late. You would find me sprinting down the concourse in my blazer and my wool coat, desperately trying to make the plane. What I found out was that probably 49% of the time I'd pull up to the gate and the plane was delayed, and I'd have to wander onto the plane with no problem at all. I could have made it on crutches. Instead, I'd sit there marinating in my sweat for another hour before the plane took off. The other 49% of the time, I'd come sprinting down the concourse and see the plane halfway out on the runway about to take off. What I realized is that it didn't make a difference whether you ran for the plane or not. You were either going to make it or you weren't. The running didn't change the outcome. I vowed then and there that I'd never run for a plane again, and I never have.
I'm telling you that story because it's a metaphor. So many entrepreneurs spend all this time running for planes. They're up all night polishing their deck, reviewing other people's work to make sure the spelling is correct, double-checking every detail. They're working so hard. But I know from experience that it's like running for the plane: most of the time, it doesn't make a difference. You don't lose the deal that morning because you didn't check the fonts. You lost that deal four weeks ago when you didn't have some fundamentals right, or you just weren't the right company to begin with. No matter how hard you worked, you weren't going to change the outcome. That recognition is the key to having some balance in your life as an entrepreneur: if you're smart about the things you choose to focus on, you make 99% of the difference, and all that extra work doesn't really change the outcome.
In that analogy of running for the plane, the key thing is to be better prepared further upstream. If we stick to the analogy, you'd have made a better decision to leave the house at a better time. Yes, absolutely. If you want to make the plane, you leave earlier. Listen, you're going to scroll down the concourse anyway. You don't need to run. If the plane leaves on time, running isn't going to make a difference, and if the plane's late, running didn't make a difference either. Either way, you made it or you didn't. The number of times that running was the deciding factor in whether you made it is basically infinitesimal, so what's the point of running? That's what I fundamentally believe: if I can be really smart about which problems I choose to focus on, I'll make the difference. I don't need to get everything right, because most things don't make a difference. Some things do, and some of the small things that made a difference to your business seem to have been discovered through a process of experimentation and failure.
When I look back through your story, you were trying to get Netflix to product-market fit. You referenced it a second ago, this idea of no late fees, which seemed to be quite pivotal, an idea you had to remove the late fees. I find this interesting because there are entrepreneurs who build their idea, bang their heads against the wall, and it doesn't work. Then I hear so often, whether it's from Brian Chesky at Airbnb or from Daniel at Spotify, that there was one change that was quite pivotal to their business at some point. So my question becomes: how do I know? Can you explain to me why this no-late-fees thing, and any of these other small changes that changed the game, and what was the system that led you to them?
We're really talking about finding product-market fit. If I have to give a definition, product-market fit is when you recognize you finally have something customers actually want. You recognize it because all of a sudden the momentum of your business dramatically shifts. Things go into high gear. Acquiring customers becomes so much easier. Customers stick around. It's an instantaneous "Oh my God, we found it." Up until that point, it's a constant struggle of trying one thing after another, incrementing your way closer and closer.
When I mentioned earlier that there wasn't a lot of business model innovation at Netflix at the beginning, the model was this: you ordered a disc, we mailed it to you, and we charged you a due date. If you missed the due date, we had late fees. The reality is the idea was ridiculous. It didn't work. Nobody would rent from us, and if you did rent from us once, you didn't rent from us again. We had a realization that we had to begin figuring things out, and that began a year-and-a-half-long process of trying to find some way to get people to rent DVDs by mail from us. We tried almost everything you could think of, hundreds of things. I talk about this a lot, but I had no shortage of ideas. I had lots of things I wanted to try. If there was a problem I had, it was that I was a bit of a perfectionist back then. All the tests I wanted to run, I wanted them to be perfect. So we would lovingly argue over every word of copy, we would do custom photography, we would check every link, and we'd stress-test the site. It might take us three weeks or a month to prepare for a single test. We'd test this new idea, and it wouldn't work. It wouldn't do anything, and we'd look at each other and say, "We just wasted a month." So, okay, faster. Then we'd do a test in two weeks, and it would still fail. Okay, faster again, and we'd do it in a week, and then faster still. We eventually got to the point where we could run a test every day, or multiple tests every day.
It turns out that once you go that fast, things get very, very sloppy. We'd have the wrong image, or the watermark would be on it, or the pages we had greeked would still be Greek. We'd have bad links and crash the site. But that was such an incredibly big insight for us, because it turned out that it didn't make a difference. If it was a bad idea, even spending a month crafting the perfect test wasn't going to make it a good idea. But if it had even an inkling of being a good idea, no matter how bad the test was, customers would immediately perk up. They'd raise their hands. They'd fight to do it. They'd call us. They'd reboot the site. It was an incredibly loud signal that there was something there. It goes back to what we said before: it's not about having a good idea. It's about building a whole process, a culture, and a system to try lots of bad ideas. We got really, really good at trying lots of bad ideas, one after another, hundreds of them, each one informing us a little about what to try next. Eventually we got to the point where we had two big ideas left. One of them was this: by that point Netflix was pretty big. We probably had several hundred thousand DVDs in our warehouse. I remember one day Reed and I were in the warehouse looking at all these DVDs, thinking, "It's such a shame that all these DVDs are here in the warehouse, not doing anyone any good. I wonder if there's a way to store them at our customers' houses, let them keep them, and when they're done, they mail them back, and we'll just replace them. Rather than having them pay each time they replace one, let's just have a monthly fee, a subscription, and they can rent as often as they want. There are no due dates and no late fees." It was a ridiculous idea, but when we tested it, it was that mythical product-market fit. It worked. People loved it. They couldn't get enough of it. They told their friends, and they did not cancel their subscriptions.