Business 3 min read

The Most Important Lesson From Marc Randolph’s Netflix Origin Story

Netflix co-founder shares his advice to aspiring entrepreneurs in his new book, That Will Never Work. Here’s the one lesson that stood out to me.
“You’ll learn more in one hour of doing something than in a lifetime of thinking about it.” —Marc Randolph

In the summer of 1997, Marc Randolph bought a used Patsy Cline Greatest Hits CD, dropped it into an envelope from a greeting card, sealed it, and sent it off to Reed Hastings. He was testing to see whether it was possible to send DVDs by post. The CD arrived safely in the envelope, and Randolph set off to create a company that would later be known as Netflix.

Marc Randolph tells the story of Netflix in That Will Never Work, from the early days of coming up with the idea of renting DVDs by mail, to growing the company to its stock market launch in 2002.

At the end of the book, Randolph shares what is perhaps the most important lesson from his journey:

“The most powerful step that anyone can take to turn their dreams into reality is a simple one: you just need to start. The only real way to find out if your idea is a good one is to do it. You’ll learn more in one hour of doing something than in a lifetime of thinking about it.”

Netflix didn’t start out as a video streaming service—the technology just wasn’t ready in 1998. The company started as a DVD rental service by mail. As Randolph and his team began to implement the idea, they had to solve many challenges they hadn’t yet considered, such as figuring out stronger packaging for the DVDs so they wouldn’t be damaged in transit and a system to store and sort their growing collection. More important: Netflix didn’t hit upon its successful business model until over a year after launch.

The original idea was to rent individual DVDs. This proved unpopular. The company also started off selling DVDs, and this was where the vast majority of their initial revenue came from. Since their goal was to build a rental company, not a DVD store, Randolph and his team had to figure out a way to vastly improve the rental experience.

They came up with not just one, but three clever ideas: 1) rent 4 DVDs at a time, 2) send a new DVD from the customer’s wishlist as soon as they receive one back and 3) a flat monthly subscription fee. By pivoting away from individual DVD rental to a subscription model, which eliminated the headache of late fees and provided customers with several DVDs at once, Netflix turned an unpopular, unprofitable business into a massive success.

Randolph couldn’t have known this beforehand. He had to start somewhere—he had to begin moving in order to discover what worked and what didn’t, and then adapt and improve as he went. Even the name of the company wasn’t originally “Netflix”—it was “NetFlix.com.” Similarly, Twitter only changed its name from “twttr” six months after launch, and Facebook changed its name from “TheFacebook” about a year after launch.

Thinking through action

In The Craftsman, Richard Sennett describes how craftsmanship provides us with “an anchor in material reality”:

Every good craftsman conducts a dialogue between concrete practices and thinking; this dialogue evolves into sustaining habits, and these habits establish a rhythm between problem solving and problem finding.

The idea is that rather than thinking of design and implementation as two separate spheres—that you can create something wholly in theory, and then implement it fully in practice—misses the fact that the implementation itself is part of the thought process. By trying to implement a real solution, new problems are revealed to us which we never considered before, while problems which we thought were important sometimes end up being completely inconsequential.

Thus Randolph’s advice: if you want to know if an idea is good, you have to try it. Thinking alone won’t provide an answer. Likewise, good ideas will evolve from the feedback they receive from the world. And this evolution, this process of refinement and improvement, can only happen after ideas come in contact with reality.