Reed Hastings

Reed Hastings

Hastings at Web 2.0 Conference, 2005
Born Wilmot Reed Hastings, Jr.
October 8, 1960 (1960-10-08) (age 56)
Boston, Massachusetts, U.S.
Residence San Francisco, California, U.S.
Alma mater Bowdoin College
Stanford University
Occupation Co-founder and CEO of Netflix
Net worth Decrease US$1.26 billion (August 2016)[1]
Board member of Facebook, KIPP, DreamBox (company)
Spouse(s) Patrician Ann Quillin[2]
Children 2

Wilmot Reed Hastings, Jr. (born October 8, 1960) is an American entrepreneur and philanthropist. He is the co-founder and CEO of Netflix and serves on the boards of Facebook and a number of non-profit organizations. A former member of the California State Board of Education, Hastings is an advocate for education reform through charter schools.[3]

Early life and education

Hastings was born in Boston, Massachusetts, the son of Joan Amory (Loomis) and Wilmot Reed Hastings.[4] His maternal great-grandfather was attorney Alfred Lee Loomis.[5] He entered Marine Corps officer training through their Platoon Leader Class and spent the summer of 1981 in Officer Candidate School at Quantico, Virginia.[6]

Hastings joined the Peace Corps after graduating from Bowdoin College "out of a combination of service and adventure"[7] and went to teach high school math in Swaziland from 1983 to 1985. Hastings credits part of his entrepreneurial spirit to his time in the Peace Corps.[7] "Once you have hitchhiked across Africa with ten bucks in your pocket, starting a business doesn't seem too intimidating." [8]

After returning from the Peace Corps, Hastings went on to attend Stanford University. He graduated in 1988 with a master's degree in computer science.[9]

Founding of Pure Software

Hastings' first job was at Adaptive Technology, where he invented a tool for debugging software.[9] "I worked for Audrey MacLean in 1990 when she was CEO at Adaptive Corp.[8] From her, I learned the value of focus. I learned it is better to do one product well than two products in a mediocre way," says Hastings.[8]

Hastings left Adaptive Technology in 1991 to found his first company, Pure Software, which produced products to troubleshoot software.[7] The rapidly growing company soon proved challenging for Hastings as he lacked managerial experience. "As the company grew from 10 to 40 to 120 to 320 to 640 employees, I found I was definitely underwater and over my head," said Hastings.[6] "I was doing white-water kayaking at the time, and in kayaking if you stare and focus on the problem you are much more likely to hit danger. I focused on the safe water and what I wanted to happen. I didn’t listen to the skeptics."[6] Hastings' engineering background didn't prepare him for the challenges of being a CEO and he asked his board to replace him.[10] "I tried to fire myself — twice," Hastings says.[10] "I was losing confidence."[10] The board refused and Hastings says he learned to be a businessman.[7] "I was an engineer myself. We doubled our revenue every year, but my transformation from engineer to CEO was when Morgan Stanley took the company public in 1995."[7]

In 1996, Pure Software announced a merger with Atria Software.[7] The merger integrated Pure Software's programs for detecting bugs in software with Atria's tools to manage development of complex software.[11] "With a single vendor and a unified sales force, we'll be able to make a really profound difference in the way people develop software," Hastings said at the time of the merger.[11] The Wall Street Journal reported that there were problems integrating the sales forces of Pure Software and Atria after the head salesmen for both Pure and Atria left following the merger.[12]

In 1997, the combined company, Pure Atria, was acquired by Rational Software, which triggered a 42% drop in both companies' stocks after the deal was announced.[12] Hastings was appointed Chief Technical Officer of the combined companies[12] and left soon after the acquisition.[13] "I had the great fortune of doing a mediocre job at my first company," says Hastings.[13] "We got more bureaucratic as we grew."[13] After Pure Software, Hastings spent two years thinking about how to avoid similar problems at his next startup.[13]

Founding of Netflix

In 1998 Reed Hastings co-founded Netflix, offering flat rate movie rental-by-mail to customers in the United States.

In 1997 Hastings and Marc Randolph co-founded Netflix, offering flat rate movie rental-by-mail to customers in the United States.[14] Headquartered in Los Gatos, California, Netflix has amassed a collection of 100,000 titles and over 44 million subscribers.[15] "I got the idea for Netflix after my company was acquired," said Hastings.[6] "I had a big late fee for 'Apollo 13.' It was six weeks late and I owed the video store $40. I had misplaced the cassette. It was all my fault. I didn’t want to tell my wife about it. And I said to myself, 'I’m going to compromise the integrity of my marriage over a late fee?' Later, on my way to the gym, I realized they had a much better business model. You could pay $30 or $40 a month and work out as little or as much as you wanted."[6]

Hastings said that when he founded Netflix, he had no idea whether customers would use the service.[7] "Netflix was originally a single rental service, but the subscription model was one of a few ideas we had—so there was no Aha! moment. Having unlimited due dates and no late fees has worked in a powerful way and now seems obvious, but at that time we had no idea if consumers would even build and use an online queue."[7]

Netflix culture

After his experiences at Pure Atria, Hastings was concerned with the problems of growth. If building an entertainment company was his public goal, his private goal was to build a company that would grow rapidly without losing its entrepreneurial spirit in the process. Netflix was a test-bed for his theories.

As Netflix grew, the company began getting noticed for its innovative management practices—the results of the culture Hastings was exploring—called "Freedom and Responsibility."[13] Netflix is known to pay salaries that are typically much higher than customary to attract the best talent and is one of the few companies where employees can choose annually how much of their compensation they want in cash vs. stock.[13] "We're unafraid to pay high," says Hastings.[13] Other innovations include their treatment of employees who don't meet expectations.[13] "At most companies, average performers get an average raise," says Hastings.[13] "At Netflix, they get a generous severance package," because that way managers don't feel too guilty to let average performers go.[13] The company also gained notoriety for eliminating sick and vacation time for employees, and instead allowing them to manage this time off individually.

Hastings would meet each new employee and discuss the culture and his theories about it. Over the years his personal presentation codified into a Powerpoint slide deck that was widely shared internally, reviewed and tweaked by upper management, and refined actively. In August 2009, Hastings posted this internal culture guide online for public scrutiny. It laid out Hastings' strongly held beliefs about workers and management.[16] As of January, 2015 the deck has been viewed more than 10.5 million times.[16]

Internet television

Hastings is a proponent of Internet television and sees it as the future.[17] "I think there's a huge category of people who will watch movies on laptops," says Hastings.[17] "And remember, it's not the laptop of today. Think of the laptop in five years. People will continue to want to watch movies on TV. No doubt about it. But laptop screens are improving. And young people are living on laptops."[17] He credits YouTube for his shift in strategy for developing a video streaming service.[18] Netflix launched a service in 2007 to stream movies and television to computers.[17] "What we're finding is that young people, under 25, are watching our streaming on their PCs in huge numbers", says Hastings.[17] "They operate more portably than we do with our big screen TVs."[17]

Controversy

In July 2011, Netflix announced that subscription prices were changing: that DVD rental prices would drop by 20%, but that the initially free streaming service would now be charged. For many customers this represented a savings, but for the group that both received discs and enjoyed streaming, it would result in a cost increase of up to 60%. The move led to reported customer backlash, cancellations, less than projected subscriber growth, and a decline in stock price.[19] In response, Netflix admitted to poor public relations decisions in announcing the change[20] but kept its policy in place.

Two months later, in September 2011, Netflix announced that it would spin off its popular DVD business under a new brand name, Qwikster, leading to customer and market confusion.[21] Netflix reversed the decision less than a month later.[22][23][24] During this time, the company's stock value plummeted and Hastings was asked about resigning, but he flatly rejected the idea. "I founded Netflix," he told an interviewer; "I've built it steadily over 12 years... [and] this is the first time there have been material missteps. If you look at the cumulative track record, it's extremely positive."[25]

Other business interests

Hastings has been a director of the board of Facebook since June 2011.[26] As of September 2016, he is reported to own over US$ 10 million worth of Facebook shares.[27]

Hastings also served on the board of Microsoft from 2007 [28] until 2012.[29]

Educational and political activism

California State Board of Education

After selling Pure Software, Hastings found himself without a goal.[9] "I was so ego-identified with [Pure] that I felt like a failure," Hastings says.[9] He became interested in educational reform in California and enrolled in the Stanford Graduate School of Education.[9] In 2000, Governor Gray Davis appointed Hastings to the State Board of Education, and in 2001, Hastings became its president.[9] Hastings spent $1 million of his own money together with $6 million from Silicon Valley venture capitalist John Doerr to promote the passage of Proposition 39 in November 2000,[30] a measure that lowered the level of voter approval for local schools to pass construction bond issues from 66 to 55 percent.[9][17]

In 2005, Hastings ran into trouble on the State Board of Education when Democratic legislators challenged Hastings’ advocacy of more English instruction and language testing for non-English-speaking students.[31] The California Senate Rules Committee refused to confirm him as the Board president.[31] The California State Legislature rejected him in January 2005.[31] Governor Arnold Schwarzenegger, who had reappointed Hastings to the board after Hastings' first term, issued a statement saying he was "disappointed" in the committee’s action.[9] Hastings resigned.[9]

On April 3, 2008, Steven Maviglio reported that Hastings had made a $100,000 contribution to California Governor Schwarzenegger's "Voters First" redistricting campaign.[32]

Charter schools

Hastings is active in educational philanthropy and politics.[3] One of the issues Hastings most strongly advocates is charter schools, publicly funded elementary or secondary schools that have been freed from some of the rules, regulations, and statutes that apply to other public schools, in exchange for some type of accountability for producing certain results, which are set forth in each school's charter.[3] "If public schools don't adopt the same principles of competition and accountability as exist in the private and nonprofit sectors, they will continue to deteriorate," says Hastings.[3] "One way to permanently impact the system would be to have 10 to 20 percent of California schoolchildren enrolled in charter schools.[3] That would be critical mass, and enough of a force to induce a competitive dynamic in the system," he added.[3] Hastings is a founding member of NewSchools.org, Aspire Public Schools, Pacific Collegiate School, and EdVoice.net.

On July 11, 2006, the Santa Cruz Sentinel reported that Hastings had donated $1 million in startup funds to Beacon Education Network to open up new charter schools in Santa Cruz County, where he lives.[33] "Small schools aren't for everyone but in some kids they work better in terms of academic preparation for college," Hastings said.[33] "The small school focus is particularly true for students who don't get as much academic support at home."[33]

On March 4, 2014, Hastings delivered the keynote address at the California Charter School Association meeting in San Jose, California. During this speech, he argued for the elimination of elected school boards, saying in part "the fundamental problem with school districts is not their fault, the fundamental problem is that they don’t get to control their boards and the importance of the charter school movement is to evolve America from a system where governance is constantly changing and you can’t do long term planning to a system of large non-profits" [34]

In response, California School Board Association Jo Lucey said "Public oversight of local government is the foundation of American democracy. Nowhere is this more evident than in our public schools, where voters entrust boards of education with the education of our youth."[34] Newark, New Jersey elected School Board member and former Deputy Mayor Alturrick Kenney and Milwaukee, Wisconsin Teachers Union President Bob Peterson responded to Hastings by saying that unelected school boards are not democratic. They added that elected school boards are necessary to slow-down the process of privatization of public schools, and that unelected school boards work to expand privately managed charter schools. Kenney and Peterson also said privately run charter schools are not run democratically, have relatively little accountability, and the data does not show charter schools outperform public schools.[35]

Technology

Hastings is a member of Technology Network, a political network of business executives that promotes technology growth and innovation.[36] TechNet brings its members together with national policy makers to advance America's global leadership in innovation.[36] Hastings served as CEO of Technology Network for a year.[37]

In April 2004, Hastings published a Wall Street Journal op-ed advocating the expensing of stock options.[38]

Politics

On August 1, 2007, the Los Angeles Times reported that Hastings, a Democrat, had donated $1 million to a committee formed to support California State Superintendent of Schools Jack O'Connell's candidacy for Governor of California in 2010.[39]

On April 12, 2009, Hastings donated $251,491.03 to Budget Reform Now, a coalition supporting California Propositions 1A to 1F.[40] If Proposition 1A had passed, it would have authorized $10 billion in "temporary" sales, use, income and vehicle taxes imposed as part of the 2009-2010 budget agreement would each have been extended for one or two years, resulting in a further tax increase of some $16 billion.[41]

In 2016, he endorsed Hillary Clinton for president.[42]

Personal life

Hastings lives in the San Francisco Bay Area, is married, and has two children.[9]

He was featured in a front-page article in USA Today in 1995, posing on his Porsche.[43] He has said that if he ever appears on the front page of USA Today again it will "not [be] on the hood of a Porsche, but I would [pose] with a bunch of movies."[43] One of Hastings' favorite movies is Gloomy Sunday.[8]

In 2012, Hastings was photographed by Kevin Abosch for his project FACES:TECH.[44]

References

  1. ↑ http://www.forbes.com/profile/reed-hastings-1/
  2. ↑ http://wagcenter.com/entrepreneur-wags/patty-quillin-netflix-ceo-reed-hastings-wife/
  3. 1 2 3 4 5 6 Stanford Online. "Charter schools advocate Reed Hastings to speak April 12" by Thouraya Raiss. April 5, 2000.
  4. ↑ http://humphrysfamilytree.com/Royal/Larson/Edw3-ReedHastings.pdf
  5. ↑ John Reeves (November 12, 2012). "9 Fascinating Things About Reed Hastings and Netflix". The Motley Fool.
  6. 1 2 3 4 5 New York Times. "Out of Africa, Onto the Web" by Reed Hastings as told to Amy Zipkin. December 17, 2006.
  7. 1 2 3 4 5 6 7 8 Inc.com "How I Did It: Reed Hastings, Netflix" by Patrick J. Sauer December, 2005
  8. 1 2 3 4 CNN Money. "Questions for... Reed Hastings" Interview by Matthew Boyle May 23, 2007.
  9. 1 2 3 4 5 6 7 8 9 10 Stanford Magazine. "Home Movies" by Joan O'C Hamilton. January/February 2006.
  10. 1 2 3 USA Today. "'Charismatic' founder keeps Netflix adapting" by Jim Hopkins. Updated March 23, 2006.
  11. 1 2 Wall Street Journal. "Software Firms Pure and Atria Agree to Merge in Stock Deal" by Don Clark. June 7, 1996.
  12. 1 2 3 Wall Street Journal. "Investors Pan Rational's Plan To Buy Pure Atria for Stock" by Don Clark. April 8, 1997.
  13. 1 2 3 4 5 6 7 8 9 10 Business Week. "Netflix: Flex To The Max" by Michelle Conlin. September 24, 2007.
  14. ↑ "Netflix Facts". Netflix. Retrieved March 2, 2007.
  15. ↑ "Press Release". Sec.gov. Retrieved June 26, 2012.
  16. 1 2 Netflix Culture of "Freedom and Responsibility".
  17. 1 2 3 4 5 6 7 Wall Street Journal. "Movie Man" by Jason Riley. February 9, 2008
  18. ↑ Reed Hastings Video Streaming (Starts at 15:01)
  19. ↑ "Company Town". Los Angeles Times. September 15, 2011.
  20. ↑ Loftus, Tom (September 19, 2011). "Netflix Customers: Sorry Doesn't Cut It, Pal". The Wall Street Journal.
  21. ↑ Can Netflix fix its mistakes? http://www.forbes.com/sites/panosmourdoukoutas/2011/10/10/can-netflix-correct-its-strategic-mistakes/
  22. ↑ DVDs will be staying at Netflix http://blog.netflix.com/2011/10/dvds-will-be-staying-at-netflixcom.html
  23. ↑ PCWorld Video, PCWorld   September 20, 2011 4:13 PM (September 20, 2011). "Netflix Says Sorry, Then Irks Customers Again with Qwikster". PCWorld. Retrieved June 26, 2012.
  24. ↑ Qwikster Goes Qwikly: A Look Back On A Netflix Mistake http://www.huffingtonpost.com/2011/10/10/qwikster-netflix-mistake_n_1003367.html
  25. ↑ Goldman, Andrew (October 23, 2011). "Reed Hastings Knows He Messed Up". The New York Times Magazine. The New York Times Company: 22. Retrieved November 9, 2011.
  26. ↑ PRNewswire.com "Facebook Names Reed Hastings to Its Board of Directors" June 23, 2011.
  27. ↑ "REED HASTINGS Insider Trading Overview". www.insidermole.com. Retrieved 2016-09-27.
  28. ↑ PRNewswire.com "Microsoft Board of Directors Adds New Member and Declares Quarterly Dividend." March 26, 2007.
  29. ↑ "Microsoft Announces Reed Hastings Will Not Seek Re-Election". October 9, 2012. Retrieved December 28, 2012.
  30. ↑ Wall Street Journal. "Silicon Valley Moguls Spend On Education Ballot Battles" by Ann Grimes. October 31, 2000.
  31. 1 2 3 California Department of Education. "O'Connell on Reed Hastings - Year 2005." January 12, 2005.
  32. ↑ the California Majority Report. "Is Reed Hastings Six Figure Contribution to Schwarzenegger's Redistricting Effort Simple Revenge?" by Steven Maviglio. April 3, 2008.
  33. 1 2 3 Santa Cruz Sentinel. "Netflix CEO gives $1 million to open charter schools" by Matt King. July 11, 2006.
  34. 1 2 Washington Post. "Netflix’s Reed Hastings has a big idea: Kill elected school boards" by Valerie Strauss. March 14, 2014.
  35. ↑ Response to Netflix CEO Reed Hastings , Alturrick Kenney and Bob Peterson, The Real News Network, 2014.05.04
  36. 1 2 Technology Network
  37. ↑ New York Times. "One Man's 2 Challenges" by Laurie J. Flynn. June 3, 2002.
  38. ↑ Wall Street Journal. "Expense it!". April 4, 2004
  39. ↑ Los Angeles Times. "State GOP awash in red ink" by Evan Halper. August 1, 2007
  40. ↑ "California Secretary of State - CalAccess - Campaign Finance". Cal-access.sos.ca.gov. Retrieved June 26, 2012.
  41. ↑ Archived April 6, 2009, at the Wayback Machine.
  42. ↑ Nelson, Louis. "Hillary Clinton racks up business endorsements".
  43. 1 2 Wall Street Journal. "Netflix's CEO Is Mobilizing For Battle With Amazon" by Carl Bialik. October 20, 2004.
  44. ↑ The Next Web article
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