Make Exploring A Habit

In That Will Never Work, Netflix co-founder Marc Randolph describes his obsessives quest to start a new company. The only thing he knew was that he wanted to start a business selling something on the Internet:

“I kept a little notebook of ideas in my backpack and carried it with me everywhere I went: driving, mountain biking, you name it. It fit into the pocket of hiking shorts really nicely. I'd even take it surfing – leaving it in my backpack on the shore of course. There's a reason why rejected idea #114 is ‘personalized surfboards, machine shaped to your exact size, weight, strength, and surfing style.’”

Every day on the drive over the hill into Silicon Valley, he’d pitch his business partner Reed Hastings on ideas. One day, “We’d been discussing idea #95 in my notebook: food custom-blended specifically for your pet. The idea was good, but it was too expensive…” Another day, it’d be custom-milled baseball bats or personalized shampoo by mail. Most times, Hastings shot down Randolph’s ideas as implausible, but Randolph would go back to the drawing board, undeterred in his quest. In search mode, he was willing to entertain a wide variety of potential new businesses.

Potential cost structure was a big consideration for Randolph and Hastings. That’s actually what had disqualified an idea written on the office whiteboard, “VHS ONLINE STORE”: “More than anything, it was expensive. It’s easy to forget how much VHS tapes used to cost… You were looking at $75 to $80 a tape. There was no way we could afford to assemble a VHS library big enough to tempt users away from the video stores…”

Despite the fact that it was an attractive business otherwise, with clear pain points in the current offering from retailers, the cost structure just didn’t make sense for a moderately capitalized start-up. That’s why it was such a big deal when DVD’s made their way into US test markets from Japan in 1997:

“‘Compact disc-sized’ is what caught my eye. A CD was much smaller than a VHS tape. And much lighter. In fact, it occurred to me that it was probably a small and light enough to fit into a standard business envelope, requiring nothing more than a 32-cent stamp to mail. Quite a difference from the heavy cardboard box — and expensive UPS shipping rates — a VHS would have required. (We) did some digging and found that the studios and manufacturers were planning on pricing the DVD as a collectible item – $15-$25 per disc. That's a far cry from what had happened in the eighties, when studios responded to the newly ubiquitous video by raising the prices on tapes… VHS by mail was dead. But DVDs by mail could work…”

There’s so much here, obviously! What struck me was that, because of their habit of exploring a broad variety of ideas, Marc Randolph and Reed Hastings were uniquely positioned to take advantage of a market shift. Having explored loads of possibilities, he was particularly primed to realize the connection that a new technology represented. He was constantly looking!

Related: Carry A Notebook
Related: Entertain Trivialities
Related: A Majority of Blind Alleys
Related: Make Connections
Related: Look for Connections

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