There’s a scene early in Marc Randolph’s new book, That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea, that takes place at Lulu Carpenters at the top of Pacific Avenue in Santa Cruz. Randolph has been pitching his future partner, Reed Hastings, on a slew of business ideas. This has been happening for months while the two men commute over Highway 17—they work at a company Hastings has recently sold, a few months after he acquired Randolph‘s company. Following each enthusiastic pitch (“Customized sporting goods. Personalized surfboards. Dog food individually formulated for your dog … shampoo by mail”), the laser-focused and logic-driven Hastings responds with some version of the words that give this book its title.

But this time is different.

Sitting on Lulu’s patio, Randolph is looking at the Santa Cruz post office. Admiring its old-fashioned elegance, and the stream of people parading in and out, he thinks back to two successful direct-mail startups  that had made him “the junk-mail king.”

“Look,” I said, eyeing the delicate leaf etched in foam on the surface of my cappuccino. I was thirty minutes into the “DVDs by mail” pitch …. “Let’s just try it. Mail a CD to your place. If it breaks, it breaks, and we know that this idea could never work. If it gets there, you got something to listen to on Tuesday night.

Reed’s eyes bored into me. It was eight o’clock on a Monday morning, and not only had he probably already been awake since four, he’d also already had a double shot of espresso. Now he was halfway down a cup of regular coffee. He’d already reminded me several times that neither of us had ever actually seen a DVD.

Me? I was excited as a bird. I’d been up early as well, surfing at the Lane as the sun came up. But even hours later, sipping coffee on dry land, I could see this latest idea ahead of me, just starting to differentiate itself from the horizon, rising in the distance as an indistinct swell. It was still too early to see if it was going to be rideable or not—but regardless, it was best to maneuver into position anyway.

Hastings is less than enthusiastic, but Randolph is typically on fire. The two walk down to Logos Bookstore and buy a CD; DVDs were a brand-new technology, still rare, and Randolph was in a hurry to create the company that would take advantage of what he was sure would be their ubiquity. They walk next door to Paper Vision, buy a card, slip the disc in and walk back up Pacific to the post office. Drop the envelope in the Local Mail slot… and the rest is, as they say, history.

That Will Never Work is chock-full of scenes like this, in which Randolph suffuses the story with the local color that makes Santa Cruz such a cool place. The book most certainly will be a delight for anyone involved in the Santa Cruz tech scene. It will also deliver the goods to anyone interested in Netflix and the Silicon Valley scene that gave birth to it. And it will surely engross budding entrepreneurs—that is clearly one of Randolph‘s target audiences: he’s spent much of the past decade or so serving as a mentor to early-stage startups and delivering Ted-type talks around the globe.

This book is not, however, a business or leadership manual or guide—although anyone who is or has been on the team running a business will learn a lot from it. This book is rather a rollercoaster-ride of a story, with a bunch of compelling characters (Netflix’s founding team and partners), suspense, and, obviously, an enormous victory.

Best of all, That Will Never Work is a boldly revealing memoir, written by a man who was forced to look closely at himself while confronting the enormous challenge of turning his idea into what would become one of the most successful businesses of all time.

Radical Honesty

Some of you know about Netflix’s legendary “culture deck“—125 slides, dating back to the company’s early days, which explicitly lay out its values. One of those values is “direct communication,” which within the company is often called “radical honesty.“

One scene from Randolph‘s book displays two examples of this.

In the fall of 1998, a year and a half after the meeting at Lulu’s and just a few months after the company launched, Hastings confronted Randolph in his office. “‘Marc,’ Reed started slowly, ‘I’ve been thinking a lot about the future. And I’m worried … I’m worried about you. About your judgment.’

For the next five minutes, Reed laid out a meticulous argument for why the company was in trouble, if I were to continue leading it alone. He put forth a clear-eyed assessment of my first year in charge, my accomplishments and my failures. It was like watching a computer play chess, ruthlessly and quickly. His analysis was both detailed and general—it veered from individual hires I’d made to errors in accounting to corporate communications. It all went by in a blur, but one thing he said really stuck out.

“You don’t appear tough and candid enough to hold strong people’s respect,” he said. “On the good side, no one good has quit, and your people like you.”

I had to smile at that. Forget radical honesty. This was brutal honesty. Ruthless honesty.

“Gee, thanks,” I said. “Put that one on my tombstone: He may have run his business into the ground, but no one good quit, and his people liked him.”

It is common in for a memoirist to tell a story of a low point, a big mistake, or a tragedy. Telling the story of how his friend and partner demoted him, how Reed Hastings essentially took over Netflix as CEO, leaving Randolph as president, and then significantly diluted his shares, Marc Randolph is honest in a fashion I don’t think I’ve seen in a business memoir. If you have ever worked in an office, it’ll make the hair stand up on the back of your neck.

As it happens, practicing radical honesty seems to make a person strong. Randolph describes how he decided to accept the new terms, and go on to co-lead Netfix as president with Hastings as CEO for three more years.

And in retrospect, of course, Reed was right. Netflix might have survived with me continuing on as sole CEO. But you don’t write a book about a company that survives. There is no doubt in my mind that without him assuming more of a leadership role, Netflix would not have become the company it is today. Paradoxically, if I hadn’t relinquished the title of CEO to Reed in 1999, I wouldn’t be writing this book.

 Leaving Santa Cruz

If there’s anything that Randolph regrets, it seems to be Netflix’ decision to abandon its original Scotts Valley home and move to the Valley.

I was deeply invested in Netflix being a “Santa Cruz company.” I’d been on the Silicon Valley startup roller coaster, and I wanted us to be different, set apart. I wanted something of Santa Cruz’s laid-back ethos to seep into our office culture. Santa Cruz felt like a respite from the boom-and-bust cycle in San Jose.

I wanted to keep a mountain range between my company and the prying eyes of the VCs keeping it afloat.

However, he was forced to recognize that most of the key players on his team resided over the hill, and that the Santa Cruz location was convenient only for him and a handful of others. And so he reluctantly agreed to the move, insisting that the company relocate to Los Gatos and not deeper into the Valley or up the Peninsula.

Almost 20 years later, at Looker (Randolph’s title is “ABC”—anything but code), where he serves on the board of directors, he and his old friend Lloyd Tabb made a vow to keep their new company in Santa Cruz. And that seems to be working out.

Don’t miss our next event! Meet Marc Randolph on October 2, 2019 at The Impossible…Possible