No Rules, Rules!

Whatever works, works, and all else smart succinct sayings that convey the message oh so blissfully well, come straight to the forefront. It’s a world where we must adapt to what works, to what brings out the best in us, to what makes for the best in us. It’s a move on kind of world, for there is so much to see, even more to experience and much much more to savour. And for that it is imperative that we get out of our screens and experience the big bad (or good) world first hand. While Netflix largely encourages it’s fold to get out there and experience the world it thrives on it’s customers to stay home and chill, experiencing the world through a screen. And the drive to develop algorithms that will ensure us (their customers) to stay at home and chill, has had the founders get out and thrill, only to come back refreshed and inspired or lets just say armed, to keep us at home and chilled even more, and hence the loop continues.

This book is a memo of the culture at Netflix and more outdrawn version of the card deck or wait, just a poetic resemblance of these lines from Antoine de Saint Exupery’s The Little Prince.

If you want to build a ship,

don’t drum up the people

to gather wood, divide the

work, and give orders.

Instead, teach them to yearn

for the vast and endless sea.

What a wonderful way to lead, to not micro-manage, to create a context rather than control, to thrive on honest win-win feedback, to be open to feedback, to let in only the highly effective/talented people in the first circle, to avoid framework, rigidity, rules, to keep keep people over process on all accounts and in short to live and let live but all within a highly aligned context.

Here’s my review of Reed Hastings latest book No Rules, Rules. A book that is so refreshingly different. When I read about Reed Hastings and heard podcasts interviewing him I was so intrigued by the fact that the man has no hobbies, not even one, a confessed workaholic, I was his days were filled with fatigue making decisions. But I was even more intrigued by the fact that the CEO of Netflix, spends his days making no decision whatsoever. (In Hastings own words, a CEO who is busy is not really doing his job) Now that’s quite a feat considering the mammoth company operates in over 190 countries, who’s stock price jumped from about 7 dollars in 2010 to 504 dollars in 2020. Now that is stellar performance, from a leader who does not believe in control, believes in sunshining, advocated candor, asks for feedback and apologises publicly. The whole idea is insane. Insanely good that is. He believes in no orchestra, instead campaigning for jazz, and anyone who has heard jazz will agree that the spontaneity of the craft is particularly beguiling. It is where the company shines along with the individual unlike a traditional orchestra where the individual morphs into the larger picture, completely.

There a lot of takeaways from the book, some small scale that can be applied in our day-to-day lives, some bigger ones that companies can aspire for, some even personal ones that we can apply in our inter-personal encounters, Reed himself uses a couple in his relationship with his wife, which according to him saved his life. He terms it the culture of candor. In an age where one is told what the company thinks one needs to know he champions honesty in individuals and transparency in organisations. Now if you thought that is incredible he drives the point of feedback with the 4A’s. Feedback is not useful if all it wants to be is fluff, to undermine a person or to embaress, or even to insult. (though being insulted is apparently the fastest way to enlightenment according to the Buddhist monk Akong Tulku Rinpoche) The 4 A’s ask the feedback to aim to assist, be actionable and in effect by the receiver to be appreciated and then to be accepted or rejected as most deemed fit. In two lines he recounts the basic workings of the billion dollar company 1) Build a culture that values people over process, emphasised innovation over efficiency, candour over secrecy and has very few controls and 2) One that focusses on achieving top performance with talent density and leading employees with context and not control.

Amy Edmonson in “The Fearless Organisation” claims that the safer the atmosphere, the more innovation one will have in a company. Another study claims that employees who take holidays are happier, enjoy their jobs more and are more productive.

Represented by an equation it goes like this:

increasingly efficient = decreasingly creative

Following processes does not allow one to think freshly or shift fast, and for an innovation driven company what matters is not so much efficiency but more certainly creativity.

Netflix also follows a no vacation, no expense policy, the entire rule book of the company is summed up in trite three sentences that go as “There is no policy. Use your best judgement. Act in Netflix’s best interest”. Whether the action involves not pleasing your boss, not asking for permissions, signing million-dollar acquisition contracts or even flying half-way across the globe on a first-class ticket just so that you’d be fresh as a daisy for the meeting next morning and will be able to cinch an atrocious deal.

But all this is possible only by having a workforce of high talent density, meaning every member of the workforce is so well-equipped, motivated and is ambitious enough to believe in a win-win situation for all. And to keep the best individual the company believes in offering a rockstar pay. That rockstar pay is what they believe attracts the best talent, and paying as per the market rates, keeps them. Like the adage goes, throw peanuts and you will attract monkeys. And if the Rockstar does not perform, due to any reason like not aiming high enough, or not taking the risk, in short not making bold and strong moves then well the company lets them go with a generous severance package, sometimes covering four month’s pay or at other times covering 9 months pay. The benefit in hiring a stellar talent is that they usually are self-motivated and do not work for the paycheck, they are creative. Though it may mean a leaner workforce, considering one cant pay to retain a lot of Rockstar payees, it accounts for lesser people to manage and that has some serious advantages. Managing people well is hard and it takes a lot of effort but managing mediocre-performing employees is not just harder but its even more time-consuming. So much so even bonuses and incentives are done away with, coz creative work requires one’s mind to feel a certain level of freedom, contingent pay works for routine tasks but actually decreases performance for creative work. Verbatim from the book, “If part of what you focus on is whether or not your performance will get you that big check, you are not in that open cognitive space where the best ideas and most innovative possibilities reside. You do worse.” If you can prove that the market pays more for your talents then Netflix will pay that top-of-the-market-salary. And when the market rates for your skill-sets drop, then Netflix will drop your salaries too. The CEO is no exception to the rule. If someone better could lead the company, Hastings is sure to let them.

Apart from hiring the best, Netflix makes sure that they are honest, or rather more honest than the true blue scout. Candour is something that is taken very seriously, not just in providing feedback but here’s a company that asks people to learn to read the profit and loss statements, releases quarterly reports to the company ahead of time with a simple disclaimer stating, do not share or you might go to jail. Even when a time or two several employees managed to insider trade or make use of the no expense policy they were treated as a one off case and dealt with promptly rather than being treated as a wake-up call and changing the system. Like Hastings say, Trust is the one value that they would like to hold to, a value that is only festered by honesty, for how can you trust someone when you feel they are hiding things from you? The letting go of secrets and speaking transparently means no cabins, no lockable desks, all hands meeting and certainly no confidential reports, thereby fostering a sense of ownership like none other. This sense of candour is further pumped up by whispering wins and shouting mistakes, thereby sunshining them, learning from them and moving on. There is no shame in admitting to a mistake and no greater merit than learning from a mistake, and if you have a boss who can take it in his stride, appreciate the learning then building upon it is just a fabulous beginning. Again verbatim from the book, “Self-disclosure builds trust. Seeking help boosts learning. Admitting mistakes fosters forgiveness and Broadcasting failures encourages people to act courageously”. When a commandment like “Don’t seek to please your boss” floats around the office then the level of honesty within individuals and their act of courage is amped up a really great deal.

But in order for employees to have the courage to take huge decisions on their own, the company suggests a couple of measures, from farming for dissent or socialising the idea, to testing out an idea, from making the bets as an informed captain to celebrating success and sunshining failures, there are ways to work in alignment with the system even if the ways are your own. Don’t say anything that you wouldn’t say to someone’s face cuts out gossip multifold, packs up office politics and also makes sure there is actionable feedback, not just fluff. The dispersed decision-making model means you pick the very best people, who pick the very best people who then pick the best decisions, the goal is to create moments of joy, to be a team rather than a family, because a team works for the best interests of the company and no person will be tolerated just because a family means unconditional love, a team on the other hands works for the win, in alignment to the goals of the team. As Netflix spreads over to 190 countries, the culture of different countries definitely affects the very American way the company works, and in less direct workplaces like that of Japan, Hastings recommends to follow the netflix culture but to adapt, adjust the style and talk, talk, talk it out to be heard and more so understood, for after all everything is relative.

As an analogy Erin Meyer, the co-author writes about the culture of Netflix resembling the “l’Etoile” or the “Star” road around the Arc de Triomphe, with no traffic rules in place, the traffic works brilliantly, with creativity, speed and agility in resolving itself though it connects 12 roads into the star! Netflix too sheds all the rules and regulations, embracing a culture that allows it to be innovative at an unprecedented speed. Thats all the stock market needs to appreciate the stock at an unprecedented speed. For the average user it maybe Netflix and Chill but for the not-so-average investor, it’s Netflix and Thrill!