- Startup Archive
- Posts
- Reed Hastings on the biggest mistake he made at the company he built before Netflix
Reed Hastings on the biggest mistake he made at the company he built before Netflix
Before Netflix, Reed Hastings founded Pure Software in 1991. Six years later he sold the company for $750 million. While most people would consider this a home run, Reed saw it as a missed opportunity and a company that never reached its potential. Reed reflects:
“When I analyzed what happened, one of the major things was a decline in talent density. With declining talent density, you need a bunch of rules to protect against the mistakes, and that only further drives out the high-caliber people. It was through that experience that I realized: I tried to run software like a manufacturing plant — reducing error and putting in process — but that doesn’t get high productivity or high talent. Instead, we should manage software much more artisanally with inspiration rather than management.”
He continues:
“Typically we humans value being nice and we value loyalty. Yet, in the workplace, that’s at tension because being nice is in contrast with our intention of being honest. I generally like people who are nice; yet, in the work place, I want you to be honest with each other so that we’re more productive. We have to find a way to give each other permission to not be conventionally nice and instead be focused on the team’s success, which is being very direct.”
The same is true of loyalty, Reed argues:
“Loyalty is something in your family. You would never fire your brother if you were tight on money — you would share, and that’s what we admire. Yet in a company, we lay people off. So this whole idea that a company is a family is unintentional and derives from all the structures of society being family. All companies used to be family companies. Then corporations have grown more recently. All countries used to be family countries and kingdoms. Basically family was the deep organizing unit. So it’s natural that that spills into how we think about an organization.”
Reed contrasts this with professional sports teams:
“[The professional sports team] is an admired model. It’s really focused on achievement. And everyone understands that you change players as you need to try to win the championship.”
He concludes:
“It’s changing the language that you use. Don’t use words like ‘We’re a family’ . . . Instead it’s ‘We’re a professional sports team and we all have to fight every year to keep our position.’ If we can upgrade we must to win the championship, which is producing a great company.”