Going Public

(May 2002: 49 months post-launch)

IN THE WEEKS AND months following September’s painful layoffs, we started to notice something.

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We were better.

We were more efficient. More creative. More decisive.

Winnowing our staff made us leaner and more focused. We no longer had time to waste, so we didn’t waste it. And while we certainly had to lay off some very talented individuals, we’d been left only with superstar players. With superstar players doing all of the work, it was no wonder that our quality of work was very high.

You see this often in successful startups. The business gets off the ground because of the focus, dedication, and creativity of a small group of dedicated people. It hires, grows bigger—and then contracts itself. It rededicates itself to its mission—and often, accomplishes it through the renewed focus and energy of its most valuable members.

Hiring and keeping star players is about much more than just quality of work, however. It’s a culture thing. When you retain only star players, you create a culture of competitive excellence. It’s more fun to come to work when you know you’re part of the handpicked elite. Plus, it’s much easier to attract other elite talent to your team when you’ve established a reputation for superstar talent.


In some ways, Netflix in late 2001 was like June 1998 all over again: a handpicked team of extremely capable people, working very hard on a singular goal: one million subscribers. And just like 1998, we hit it—this time, months in advance. By Christmas.

We reached the finish line early in large part because Tom Dillon had found a way to guarantee quick shipping—next-day shipping—to users all over the country. In many ways, it was an extension of our Sacramento tests—and our old idea about users mailing DVDs to each other. Turns out you didn’t need to build huge, expensive warehouses all across the country to ship DVDs if 90 percent of the DVDs people wanted were already in circulation. Tom had applied to shipping a principle we all understood intuitively: when it came to movies, people were lemmings. They wanted to watch what everyone else was watching. If you’d finished Apollo 13 yesterday, then it was highly likely that somebody else wanted it today. Conversely, if the next movie in your queue was Boogie Nights, it was just as likely somebody else was returning it that day. Tom’s brilliant idea was to recognize that when a user mailed a DVD back to us, it didn’t need to go to a warehouse the size of a Costco. It didn’t even need to go back on a shelf. It could go right back out the door to someone else! And we could run that business from a shoebox.

Tom analyzed hundreds of thousands of data points to figure out where to place small Netflix shipping “hubs,” basically storefronts the size of your neighborhood Greek restaurant. His data showed that you could service 95 percent of the country with next-day delivery if you judiciously placed about sixty of these hubs all across the country. They weren’t warehouses; they were “reflection points.” Nothing was really stored there. DVDs coming in would almost immediately “bounce” right back out to other customers.

Here’s how Tom’s reflection-point method worked: Customers mailed their watched DVDs to the post office closest to that region’s reflection point. At 9:00 each morning, a local employee would pick up the mail, and for the next three hours, that employee (and four or five others) would use a slitter to open the mailers, remove the discs, and scan each DVD into a Netflix inventory program. The DVDs would temporarily go into neat piles on the table. The employees would transmit all that data to headquarters in Los Gatos, and while they took their lunch breaks, our servers would match up all the DVDs that had come in with all the movies those customers wanted next. After lunch, the employees would scan each disc again, but this time, the system would spit out a mailing label bearing the address of the customer who wanted the disc next.

The process worked obscenely well. Out of every hundred discs that arrived each day, ninety of them had a customer in that region who wanted them, so out the door they would go. Another seven or eight of the hundred DVDs would be new releases or high-demand items that no one wanted that day but which we were pretty sure somebody would want within a day or two. These discs were stored in the reflection point’s tiny shoebox library. Of the hundred DVDs coming in, there were usually only two or three for which we didn’t have an immediate customer—or anticipate there being one soon. These—and only these—were sent back to the mothership warehouse in San Jose.

This might sound like hyperbole, but Tom’s method was one of the greatest innovations in the history of shipping. It was efficient, fast, and cheap. It meant that we didn’t have to waste money on big warehouses. Since we didn’t have movies sitting on shelves—even overnight—our utilization of inventory was exceptionally high. All we needed were a few dozen cheap storefronts, a couple hundred remote employees, and a bunch of shoeboxes and—bingo: next-day delivery to almost every mailbox in America.


We’d survived. We were hitting our goals. But things were different. So many parts of the original founding team were gone. Jim was working for an Amazon affiliate called WineShopper. Te was working for Zone Labs, an internet security startup. Vita had been laid off in September, and so had Eric. Christina had taken time off for a health issue in 1999 and had never been able to return full-time.

The original crew of skilled generalists had been replaced with superstar specialists. I was glad to be working alongside some of the most brilliant minds in Silicon Valley. But as one of the last links to the original team, I was starting to wonder about my future role in the company. Where did I fit? More importantly—where did I want to fit?

By early 2002, I was spending most of my time in product development. To me, that’s where the energy really was. We were, even then, looking toward a day that didn’t include DVDs. The growth of broadband DSL technology in the early 2000s was making it newly feasible to stream content online. We knew it was only a matter of time before streaming began to compete with physical media, and we wanted to position ourselves to take advantage of technological shifts. It was kind of funny, really—we’d finally figured out a way to make our original idea of DVDs by mail work, and here we were, looking ahead to a future without either DVDs or mail.

We knew digital delivery was the future. But how soon would that future arrive? And what form would it take? Would people download their movies, or stream them? Would they lean forward and watch on their computer or lean back and watch on their television? What kind of infrastructure would have to exist before the technology could be widely adopted? And what about the content? Did you start by focusing on a single genre, and if so, which one? And how did you convince the studios that their movies—once in digital form and so easily copied and shared—were safe in your hands?

To answer these questions, I talked to movie studios, television networks, software companies, and hardware manufacturers. A few things were clear:

The first was that the studios and networks were terrified of being “Napster-ed.” They’d watched the music industry fall victim to widespread piracy and cratered sales, so they weren’t very keen to give up digital rights. No matter how many assurances I gave them, they didn’t trust the digital future. The way they saw it, once TV shows and movies were digitized, they’d lose all control of their product—along with any ability to make money off it.

The second was that hardware and software companies were going full speed ahead, digital rights be damned. Apple, Microsoft, and pretty much every other major computer company were working overtime to take advantage of the jumps in bandwidth speed, and were designing products that could conceivably deliver very large files—movie-sized files—directly into viewers’ homes.

Everyone was competing for the same prize: Who would own the portal that would deliver entertainment directly into viewers’ living rooms? Would it be the producers of the content, like movie and television studios? Would it be the developers of the hardware and software necessary to view it in the home? Or would it be the cable companies—which were already delivering content to millions of homes?

I spent a lot of time that fall and winter spitballing with Neil Hunt, who had joined Netflix in 1999 and was now in charge of our programmers. Tall and rail-thin, Neil rarely ventured out of his cube without a coffee cup in his hand—sometimes gliding into a conference room with a full French press, which he would punch down a few minutes later, ideally at the exact moment he was trying to make a point. Neil was soft-spoken, delicate, and somewhat reserved. Many times, when he knew he would soon need to do a code review for a colleague, I would watch from my window as he did laps through the parking lot, steeling himself to deliver the bad news. He was undeniably brilliant. At a company where meetings usually hit decibel levels just short of a Stanley Cup Final, Neil didn’t need to shout. As soon as he began to speak, people would lean in to listen.

Like me, Neil saw the national increase in internet bandwidth as a possibility: a way to use digital means to deliver Netflix movies directly to TV sets and further shrink the time between finishing one movie and getting the next one. Instantaneous streaming wasn’t possible in 2002, and downloads would take hours—but we were betting that even so, passively downloading a movie while you were asleep or at work was still preferable to getting in the car and driving to Blockbuster. In our ideal, spitballing world, customers would always have a few downloaded movies ready to watch in a device on top of their TV, and an even bigger list of movies in their queue. They could choose a movie to watch, and when they were finished, they could just mark it as complete. Then their queue would automatically start downloading the next film on the list.

The next day? Boom, new movie to watch.

Still, it was tough sledding convincing the studios and tech companies that our idea was a good one, and even more difficult trying to convince them that we were the ones to pull it off. As far as they were concerned, we were just a content company that had figured out how to use the post office. Digital delivery? Leave it to the big boys.

I’ll never forget driving out of Microsoft’s headquarters with Neil after a particularly dispiriting meeting with some of their executives. We were in Redmond, a suburb of Seattle, and I couldn’t help but think of my trip to Amazon with Reed three years before. But this time, instead of a shabby office building in a rough part of town, I was driving through a glittering corporate campus, shaded by towering redwoods and bordered by pristine artificial lakes. Instead of rough-looking men huddled outside a methadone clinic, there were Microsoft employees playing ultimate frisbee on manicured lawns.

Our meeting had been with two of the technical gurus working on their upcoming Xbox gaming station. They were only a few weeks away from launch, but Microsoft was already late to the party and was in a desperate scramble to catch up to Sony and Nintendo. In an effort to leapfrog these competitors, the Xbox would include two killer features: an ethernet port and a hard disc, which would allow the Xbox to connect to the internet and then store whatever it downloaded. Publicly, Microsoft was positioning these features as a way to enhance the gaming experience, but we knew that they were looking into using them for downloading television and movies—and we’d been eyeing a potential partnership. The way we saw it, Microsoft had the technology, and we had the content.

But the whole thing had fizzled. As usual, the answer was cloaked in politesse, but the message was the same: Why do we need you?

“What a waste of time,” Neil was saying, slumped over in the passenger seat as I took the turns in the Microsoft roundabouts at high speed. “Travel all the way up here, rent a car, just to hear a polite ‘no thanks.’”

“No doesn’t always mean no,” I said, and smiled.

Neil groaned and waved off what I’d said as a platitude, a lie to make him feel better. “Stop trying to cheer me up,” he said.

But I wasn’t kidding. Hadn’t I seen it before? All of the consumer electronics companies saying “no thanks” to our “3-FREE-DVDs!” coupons. Alexandre Balkanski shaking his head wearily. Over and over in the Netflix story, I’d listened to people tell us no—and then watched as, slowly, they changed their minds. Or were proved wrong.

I knew that our idea was good. It might not happen now, but it would one day.

Here’s what I’ve learned: when it comes to making your dream a reality, one of the most powerful weapons at your disposal is dogged, bullheaded insistence. It pays to be the person who won’t take no for an answer, since in business, no doesn’t always mean no.

An example:

My dream coming out of college was to land a job in advertising. Quite a leap for someone who had graduated with a degree in geology, but I’m optimistic. And persistent.

The only job in advertising accessible to an undergraduate with my nonexistent qualifications had been a position as an account manager, the “suit” who was the interface between the client and the advertising agency’s creative team. Although this was predominantly a job that went to MBA graduates, some agencies did extend their recruitment to undergraduates, so I jumped at the chance to interview when a representative of N. W. Ayer came to campus.

To my surprise, I made the first cut and was invited with a dozen other students to come down to New York City to interview. After a full day of meeting with representatives from almost every department, I again got the news that I had made the cut, the only one from my school to do so. I was now one of only five students from throughout the Northeast, all of us competing for a single job.

I didn’t get it.

I bounce back quickly, so my disappointment in not having gotten this dream job quickly turned to confusion. What could I possibly be missing that some other candidate had? Ignorant of all the invisible criteria that were being applied to me (and that I would be especially aware of when it was later my turn to be on the hiring side of the table), I frankly couldn’t conceive of what I was missing.

So I decided to ask.

I wrote a long letter to every single person who had interviewed me, taking the opportunity to recap for them all of my positive traits. I explained that while I had concluded that I must be missing something important, I was hoping they might be able to explain to me exactly what that was. “You see,” I explained, “since there is a one hundred percent certainty that I will be applying for this job next year, I would like to take the time to work on whatever skills I am deficient in.”

I’m cringing thinking about this now.

But it worked. Just four days later, I got a call. One of the senior partners in the agency wanted to meet with me. This was the guy who ran the whole business side of the agency. Several days later, as we sat in a plush corner office forty-two stories above Sixth Avenue, he offered me the job. It turned out that none of the candidates had actually been offered the job the first time around. N. W. Ayer knew that being an account executive was a selling job. A turning-a-no-into-a-yes type of job. So they had said no to all of us.

And I was the only one of the candidates who hadn’t taken no for an answer.


Microsoft didn’t agree to partner with us. But someone would.

In the meantime, I was quietly redefining my role at Netflix. I wasn’t president anymore. Technically, I was an executive producer—even then, we were starting our transformation from geeky software startup to full-fledged entertainment company. (Now, if I could only remember which dry cleaner had my New Media Outfit…)

Reed had the reins. And he deserved them. Raising over $100 million in capital would never have been possible without him. His leadership had taken us through the dot-com bubble’s age of irrational exuberance—and beyond it.

I was in a funny position. I’d founded Netflix. I had seen the coming internet wave and had paddled in at just the right moment. It had been, in the beginning, my company. But slowly, ever since that fateful PowerPoint from Reed, things had shifted. I was fine with that. Reed’s emergence as the face of the company had saved our asses. But it had also left me somewhat marooned between the past and the future. And the future was something I was thinking a lot about in 2002.

I had family I adored: three young children and a beautiful marriage with my best friend. I wanted to make sure that the future was assured, for each of them. And though I’d earned enough at my previous startups to live comfortably, this was going to be a financial event of a totally different magnitude. Put simply: I didn’t want all my assets to be tied up in one company’s stock, no matter how much faith I had in it. I had seen too many people lose everything due to circumstances beyond their control, and I was smart enough to know that I didn’t want that to be me. If we were going to go public in 2002—and after we hit one million subscribers in December, and Barry started making the rounds again with banks and potential investors, that was looking likely—I wanted to be able to sell my stock.

The problem, of course, is that banks and investors don’t usually view a high-ranking executive in the company selling off massive amounts of stock as a good thing. It looks bad—like he knows something they don’t.

That wasn’t the case for me. I had complete confidence that Netflix was going to succeed. I’d never been surer that the company we’d built was destined for long-term success. I just wanted the option to sell.

For that to happen, I needed to be way less visible to banks and investors. I couldn’t be listed as “president” on our S-1. That meant two things needed to happen: First, I needed a title that didn’t make it look like I was in charge. And second, I needed to give up my seat on the Netflix board.

The first was easy. I don’t care about titles, and I never have. “Founder and Executive Producer” was fine with me.

Leaving the board was a little harder, though. I’d fought hard for that seat. And I’d already almost lost it once. Soon after assuming the role of CEO, Reed had asked me to give up my seat so that an investor could take it. I’d refused, adamantly, arguing that I’d give up my title as CEO, I’d even give up some shares—but I wouldn’t give up my seat on the board of directors. That was one step too far. I wanted some control over the direction of the company, and I thought it was important that a founding member of the company was there to counterbalance the interests of the VCs.

“Everyone who’s ever been on a board says that they’re only interested in the success of the company,” I’d told Reed. “But you and I both know that ‘success’ means a slightly different thing to VCs than it does to a company’s founders.”

This is true, by the way. It’s something I tell startup founders all the time now. VCs will always say that they’re aligned with your mission, that they want what’s best for the company. But what they really want is what’s best for their investment in the company. Which isn’t always the same thing.

Everyone is aligned when the wind is blowing the right way. It’s when a storm comes up that all of a sudden it becomes apparent that people have different goals and objectives.

Reed hadn’t quite seen it that way. But Patty, the Reed-whisperer, had agreed with me.

“If things go bad,” she’d asked him, “who do you want around the table? Who do you want there, so that when you need to ask a tough question, you know you’ll get a straight answer?”

Reed later told me that the second Patty asked that question, he knew that keeping me on the board was the right thing to do—not just for me but for the company.

So giving up my seat in 2002, after I’d fought so hard to keep it, was a somewhat bitter pill to swallow. But it was a decision I had to make if I wanted the financial security of liquidating any material amount of my stock. It was clear by early in the year that no dot-com bubble was going to stop us this time. We were going to go public. And it was going to be a life-changing event.

Too bad I had no idea what that change was going to look like.


“Dad, what’s a tail number?”

Logan strained against his seat belt in an attempt to see out over the dashboard. I rolled up my window as the metal gate slowly opened in front of our car. Ahead of us, a plane sat waiting for us on the runway, its wing lights blinking in the predawn sky. I drove out to meet it on the tarmac.

“I asked the same question last time I did this,” I told him.

It was May 22, 2002—the day before our IPO, and about five years after I’d first lobbed the idea of DVDs by mail across the car to Reed. I wasn’t driving a Volvo anymore. Six months earlier, my economic confidence growing, I’d finally taken the plunge and bought a new car, an Audi allroad. It had four-wheel drive for driving through snow, adjustable height suspension for back-road approaches to my favorite surf spots, and, of course, space for two car seats in the back. It wasn’t a luxury car, in most people’s eyes—but it felt like one to me. I covered my embarrassment about such conspicuous consumption by never washing the exterior and always keeping a surfboard, a bicycle, or a wet suit stashed in the back.

The Audi wasn’t the only upgrade in my life since our ill-fated trip to Blockbuster HQ in Dallas. The plane was a step up, too. We weren’t flying in Vanna’s Lear anymore. Instead, Reed had chartered a Gulfstream G450. Where the Learjet was small and delicate, like a toy plane, the Gulfstream was heavy, powerful, and menacing. The stairs leading up into it were solid and substantial, unlike the Lear’s flimsy, dangling steps. Upholstered and plush, with huge leather club chairs, the interior felt like the lounge of a luxury hotel. Forget having to stoop—the ceiling was full height. The walls barely seemed to curve. Without the circular windows, it would be easy to forget that this lounge would soon be heading east at almost 700 miles per hour.

Logan could barely believe his eyes. Pushing past me as he came through the doorway, he excitedly yelled an inventory of all the plane’s luxurious appointments. “Check it out!” he said, running down the aisle. “A couch! On an airplane!”

He launched himself onto it, stood back up, then jumped again to a new position a few cushions down. After a few moments he chose his own money seat, sat back comfortably, crossed his legs, and beamed. “This is my seat,” he announced.

I stashed my backpack under the polished walnut table that sat between four of the club chairs and settled in. Turning to look out the window, I could just see Reed’s gold Avalon pulling up to the plane. Walking briskly across the tarmac, he was clearly in business mode: black linen pants, the gray turtleneck, this one with a Netflix logo on the chest.

I’d made the appropriate gestures toward business attire myself. I was wearing my only clean pair of khakis and a gray blazer, the collar of my black polo haphazardly escaping from beneath it. I’d dug up a pair of black tasseled loafers and polished them the night before, and I’d worn my “dressy” glasses, a pair of tortoiseshell frames that—I thought—made me look like an economist. In a nod to sartorial elegance and techy flair, I’d made sure to clip to my belt my trusty StarTAC phone.

“Big day tomorrow,” Reed said as he settled into the seat across from me. “Merrill is thinking we’ll probably be in the thirteen- to fourteen-dollar range.”

He leaned out into the aisle to wave to my son. “Hi, Logan.” He added, “Lookin’ sharp!”

Logan smiled and waved back. He did look good. Lorraine had spruced him up nicely. When we’d decided that he would accompany me to New York, we had quickly decided that his usual uniform of shorts and T-shirts probably wouldn’t cut it, and Lorraine had made a trip to Mervyn’s, the discount clothing store at the Capitola Mall. She’d returned with a blue blazer (“Special! $39.99!”) and a sharp pair of $18.49 black loafers.

“I don’t care how much money we’re going to have after this,” Lorraine explained to me as she expertly cut the tags off the new jacket. “He’s ten. It just doesn’t make sense to spend a lot of money on something he’s just going to grow out of.”

“Or spill something on,” I added.

Lorraine had also picked up a red necktie for him, but once Logan learned that I wasn’t planning on wearing one, he insisted on leaving his behind, substituting a shark-tooth necklace he hadn’t taken off since his summer on the beach as a Junior Guard.

Just as I got up to show Logan how to fasten his seat belt, Barry stepped onto the plane, briefcase in hand. As usual, he looked better than all of us: banker’s haircut, blue blazer, blindingly white shirt, and—unlike the rest of us—a beautiful silk tie.

“My name’s Barry,” he said, leaning over the top of his seat to shake Logan’s hand. “Glad to see you’ll be helping with the opening.”

It was just like Barry to treat a ten-year-old-boy like he was an executive of the company—or at least like he one day could be. You never knew who might end up being useful to you.

“Jay’s running late,” he said to no one in particular, settling into a chair. He pulled a yellow pad out of his briefcase, then slid his case into the space next to his seat.

Jay was Jay Hoag, one of our VCs. It was no surprise that he’d wanted to come east with us—he was our biggest investor. Jay had co-founded a venture capital firm called TCV, short for Technology Crossover Ventures, with the mission of supporting companies with investments both before and after their IPOs. His support had been critical to our success. TCV had not only led our Series C funding in early 1999 with a $6 million investment, but more importantly, they had convinced LVMH, the French luxury goods conglomerate, to follow their lead. Based almost entirely on Jay’s having vouched for us, the LVMH representative had flown to Silicon Valley, taken a single one-hour meeting with me and Reed, and then, just a few days later, wired over $25 million.

Best of all, on April 4, 2000—just ten days before the dot-com bubble truly burst—TCV had gone all-in, with an additional $40 million. Considering the timing of that investment—and the Silicon Valley carnage that followed—Jay must have been pretty sure that he’d seen the last of his firm’s money. It must have been especially pleasing for him now, two years later, to be flying toward a Netflix IPO—just one more passenger on the last leg of a wild ride.


Somewhere over Nebraska, as we descended for refueling, Barry pulled out his phone.

“Just want to see how the book is building,” he told us, tucking the phone between his ear and his shoulder and opening his pad to a clean page. “Market’s almost closed. They should have a pretty good idea of what’s queued up for tomorrow.”

“Building the book” is the final stage in the run-up to an IPO. The process had reached peak intensity just a few days before, when Reed and Barry had gone on the road to present the Netflix story to potential investors.

On the day you take a company public, only some of the stock is bought by individuals—“retail,” in Wall Street terms. The majority of what gets sold on day one is institutional: large funds managed by sophisticated investors who are taking the long view. Think pension funds, university endowments, retirement funds, mutual funds—not to mention “ultra-high-net-worth individuals,” people with so much money that they hire entire offices of investment professionals to manage it.

Since Merrill Lynch, the lead bank in the consortium that was taking us public, had committed to selling more than $70 million worth of stock on opening day, they weren’t going to leave anything to chance. So in the two weeks leading up to the IPO, they had put together a tightly choreographed “road show” that covered all the major financial markets. Like a Broadway production of Miss Saigon opening in New Haven before hitting the Big Apple, the road show began far from Wall Street and ended in New York. Starting in San Francisco, in front of tech-friendly investors, the chartered jet had made stops in Los Angeles, Denver, Dallas, Chicago, and Boston before finally landing for two days in New York City. At each stop, Barry and Reed had been rushed from office to office, conference room to conference room, breakfast meeting to lunch presentation, cycling through all the reasons Netflix was a compelling investment.

It took them a while to hone their pitch—to figure what worked, what was confusing, what they should leave out. At one point, mid-tour, after a tough night with a crying child, I had come to the office at five in the morning to find Joel and Suresh already at their desks.

“You’re here early,” I’d said, feeling as groggy and disoriented as Joel and Suresh looked.

“We’ve been here all night, actually,” Joel replied, explaining that Reed and Barry had been getting a lot of pushback about churn—the rate at which subscribers canceled their subscriptions.

“We’ve been looking at how different segments are behaving. But every time we send Reed the data he’s looking for, he comes back with another question.”

“Doesn’t that man ever sleep?” Suresh asked, rubbing his eyes.

The answer to that question was: barely.

But even Reed gets tired. By the time he and Barry got to New York, the two of them were basically sleepwalking through the presentation. Luckily, they’d honed it to a fine, focused point. By the end of the tour, Barry told me later, they were finishing each other’s sentences, anticipating investors’ questions before the words were even out of their mouths.

Once Barry and Reed finished the tour, the baton was passed to Merrill and its fleet of salespeople, who followed in their footsteps, gathering in whatever demand Barry and Reed had created, and then funneling it to the main desk in New York, where it was tabulated in a detailed electronic register, still called—by tradition—“the book.”

The book wasn’t written in indelible ink, of course. All of the preliminary orders—excuse me, “expressions of interest”—had been made with only a rough idea of price. Some customers wanted Netflix regardless of what it was going to cost, while others had a clearer view of what price it would eventually trade at—and could then set strict upper limits. Below that price, they were in. Above it, and they were out.

The bank’s challenge, the morning of our IPO, would be to figure out the ideal number to use as the opening price for individual shares. Set the price too high, and interested purchasers would drop out—and we would miss our $70 million target. Set it too low, and Netflix would leave millions on the table.

Another complicating factor? Given the choice, the bank didn’t really mind a price that was too low. Part of the reason they’d fought so hard for a deal with us—above and beyond the big commission—was the opportunity to give their best customers an opportunity to buy low at the opening and sell high at the closing. Banks call that an opening day “bounce.”

A bounce is not necessarily a bad thing. The quick jump in price can show the public that a company is “hot” and has “momentum.” But if somebody was going to make a ton of money on day one, we wanted it to be us, not Merrill Lynch’s customers. We wanted a healthy bounce—but we didn’t want to feel like we were being launched off the trampoline.



Logan paused mid-bite, a huge scoop of vanilla ice cream balanced on his spoon. “Barry’s talking on the phone. On the plane. I thought we couldn’t do that.”

He looked at me quizzically, carefully spooning ice cream into his mouth, then looking down to gather up more of the brownie at the bottom of his sundae.

“Pretty cool, right?” I couldn’t help but smile at his enthusiasm. “You want to make a call? Maybe call Mom?”

I hit speed dial for home and waited for Lorraine to pick up.

“Greetings from Omaha,” I said when she answered. “I’ve got someone here who wants to talk to you.”

Logan grabbed the phone and filled Lorraine in about the ride. He barely took a breath until he recounted the menu for lunch: Caesar salad, baked potato, and filet mignon, which he pronounced “min-yin.”

“He sounds pretty excited,” Lorraine said when I finally managed to get the phone back.

“A little wound-up. But very happy. You should have seen him when we got to cruising altitude. He was doing somersaults down the aisle. No joke. A forward roll between the seats.”

“Well, I’m glad he’s happy,” Lorraine answered, and, imitating Barry, lowered her voice to a stage whisper. “Tell him not to get used to it.”

I looked over to where Logan was scraping at his dish, trying to coax the last bits of chocolate sauce into his spoon. I wasn’t any less excited than he was—I was just better at hiding it. Truth be told, I think that was true for all of us. If we were honest, we would have all been doing somersaults right along with him.


It was well after dark when the town car crunched to a stop under the portico of my parents’ house in Chappaqua. Logan was fast asleep, slumped against my shoulder.

I was home again.

“Welcome back, Mr. New Media Executive,” my mom said, holding open the door for me as I carried Logan up the front steps and into the kitchen. He blinked sleepily in the sudden light when I set him down.

“You can sleep in the den,” my mother said to him. He nodded and shuffled up the stairs.

I slept that night in my childhood bedroom, surrounded by my books, my beer bottle collection, and my Little League trophies. In some ways, it felt like I’d never left. I was forty-four years old. I was married and had three kids of my own. I owned a big house and an Audi allroad. But inside, I still felt like I was in high school, excited about the next day’s soccer match against Fox Lane.

How would I feel the next day, after it was over? Would I feel like more of an adult? And what about the money? Would that change me?

Lorraine and I would certainly worry less, I knew that. But I didn’t think we would be any happier. If growing up in Chappaqua had taught me anything, it was that happiness existed on a totally different axis than money. I grew up around fabulously wealthy, fantastically miserable people. You could spot them a mile away—impeccable loafers, beautiful bespoke suits, and an empty half smile on their face.

I tossed and turned most of that night, my mind endlessly anticipating everything that could possibly go wrong. What if I woke up and the market had collapsed overnight? What if there were another terrorist attack? What if Reed were hit by a bus? What if, after all this work, I had to go back to square one?

The only thing that calmed me down was staring at the train on the dresser against the wall—one of my father’s most elegant creations, completed sometime in the mid-seventies. The steam engine gleamed in the moonlight, so that the pistons almost seemed to be moving. It was the last thing I saw before I fell asleep.


In many ways, it was an anticlimax.

Like most tech companies, Netflix was going to be listed on the Nasdaq exchange, which is 100 percent electronic. There is no trading floor, no mass of hysterically shouting traders in flamboyant blazers, no balcony with a bell to ring. At the Nasdaq, every trade happens almost instantaneously—buyers matched with sellers—within an invisible, efficient, quiet, and orderly world of computer servers.

That iconic image of the happy entrepreneur, ringing a bell over a sea of people, covered with falling ticker tape? That was the New York Stock Exchange. Sorry, wrong address.

While total digitization might make for efficient markets, it’s a bit of a letdown if you’ve been building toward an IPO for almost five years. If we wanted to celebrate the actual first trade taking place, we had two options: gather in a windowless, climate-controlled Nasdaq server room somewhere in Weehawken, New Jersey, or watch things go down from the Merrill Lynch trading floor. Which, I hate to break it to you, has just about the same amount of drama as the windowless server room. But at least it has vending machines—a long row of them lined up in an alcove opposite the elevator.

Logan found them immediately.

“Are those the ones Uncle Randolph was talking about?”

“Something like it,” I replied. Logan’s uncle, my brother, was a banker at Merrill Lynch. One evening at our house, Randolph had shared stories from the trading floor, with Logan listening wide-eyed.

“These are people who gamble for a living,” Randolph had started off. “So they’re always looking for something new to wager on. I mean anything. One time, the bet was whether a trader could finish one of every item from the vending machine in a single day. We all kicked in twenty bucks apiece and told him he could keep the pot if he finished, but it was the side bets that were insane. People were throwing around hundreds of dollars wagering whether he would make it or not—and if not, where he’d quit.”

At this point, Logan’s eyes were wide.

“For most of the morning he was making good progress. He made it through the Snickers, the Fritos, and the spearmint gum, which he chewed once and then swallowed. But by the time he got to the Doritos, he was visibly flagging. There were three rows of them. So one of my friends—who had a sizable side bet going that the guy was gonna finish—ran downstairs to the Duane Reed we had on the first floor of the building.”

“Why?” Logan asked.

“To buy a blender,” Randolph said, cracking up.

Now Logan was in front of the vending machines, eying the wares, doing calculations of his own.

“No way,” he said. “There’s just no way.”


The trading floor may have been quiet, but it was huge: an unbroken stretch of desks that filled a room the size of a football field. Each desk supported three monitors, positioned at a slight angle to one another, so that the occupant of each station could see an unbroken stretch of screen from one side to the other. Some of the traders had a second row of three screens perched above the first. The screens were full, with colored lines tracking the seemingly random movements of various financial instruments. Each station had a special oversized keyboard containing the standard QWERTY, augmented by dozens of other keys—a crazy mix of letters and numbers that seemed almost nonsensical. The traders had no problem manipulating these bizarre keyboards, though—they played them like prodigies blasting their way through Chopin.

Each station had a giant phone console, all of its red buttons blinking crazily. When Logan and I arrived, Barry had one of the phones cradled between his shoulder and his ear, his jacket half off, animatedly talking to someone. Reed was calmly answering emails at the next desk. Jay Hoag was standing off to one side, relaxed as always in his wrinkled blue oxford shirt.

“Nothing happening yet,” Jay reported. “The markets are about to open, but they’re still working on finding a price. Could be another hour or so.”

He pointed over to a corner of the trading floor, where four or five traders were frantically talking into their phones, some of them into two at once.

“Every time they try a new price, they have to call everybody back. This could take a while.”

This presented a bit of a problem. We could wait all day—but back in Los Gatos, the mood was a little different. Since Los Gatos was three hours behind New York, the entire company had come in early for a 6:00 opening day breakfast. Everyone was assembled in one of our downstairs wings, eagerly awaiting the start of trading. I’d promised that I would call in periodically from the floor to report, but what was I going to say?

There was nothing happening.


At 9:15 a.m. Eastern Standard Time, fifteen minutes before the opening, I called the offices.

“Good morning, Los Gatos!” I announced, imagining my voice echoing from the big speakers that had been set up. I pictured everyone stopping their conversations and putting down their coffee. This, for them, was the moment. They didn’t know the moment hadn’t yet arrived.

“I’m here on the Merrill Lynch trading floor with Reed, Barry, and Jay,” I continued. “It’s about fifteen minutes before opening, and…” I paused, trying to figure out what to say. “Well, um, absolutely nothing is happening.”

There’s nothing like trying to describe the process of “price matching” to a roomful of people you can’t see or hear. I felt like a baseball play-by-play announcer trying to fill airtime during a rain delay. Turns out, it takes a lot of skill to make a room full of desks sound interesting. I was boring myself—I can’t imagine how bored my audience was.

Finally, mercifully, Patty picked up the line and suggested that maybe I should just call back when I had more information to share.

Amazingly enough, Logan wasn’t the least bit bored by the delay. He was fascinated by everything. One of the traders showed him how to bring up market quotes. He learned to use the Bloomberg terminal and searched for news about Santa Cruz. He typed away, happy as a clam at high tide.

For me, though, the wait was unbearable. In between my random reports back to Los Gatos—There’s a guy talking on two phones at once. There’s someone watering a plant.—I paced the floor, biting my nails. I felt like I was in the hospital waiting for a loved one to come out of surgery. Imagining every possible outcome—most of them bad—made me nervous and jittery. I needed something to do. Eventually, remembering the disposable camera Lorraine had shoved in my jacket pocket, I occupied myself by taking photos. I got Barry on the phone, Reed staring pensively. The one I took of Logan—looking up from his desk chair, hands clasped in front of him, a serious look on his face, as if he were deeply concerned with the erratic futures pricing of the Krugerrand—is still one of my favorite photos of him.

When the moment finally came, there were no flashing lights. No clarion of trumpets. No announcement at all, really. Just Barry wandering over to where Jay, Reed, and I were huddled and announcing:

We’ve got a price.

Across a long screen on the wall and the top of most of the monitors in the room, there was a crawl of letters and numbers reflecting trades as they were happening. An experienced trader could watch the crawl and have an immediate and visceral understanding of what was happening: APPL—16.94 _MSFT—50.91 _CSCO—15.78. We all turned our eyes to the screen, staring, trying not to blink and miss it. Even Logan knew something important was happening and turned his eyes up to see if he could figure out what everyone was looking at.

And there it was: NFLX—16.19.

Finally, I had something to tell Patty.

“Put me on speaker,” I said.


On the floor, it was a strangely emotional celebration. Reed and I hugged. Barry, Jay, and I shook hands. I bent down and gave Logan a long squeeze. The various Merrill execs who had been shepherding us through the process stopped by to give their congratulations. Someone opened a bottle of champagne. Even Logan had a few sips. He hated it.

Reed and Barry were going to stick around to speak to reporters, but my job as the play-by-play announcer was done the second I heard cheers erupt in Los Gatos. Logan and I could leave. Our flight didn’t leave Teterboro—the general aviation terminal that handles private flights in and out of New York City—until five o’clock. In the meantime, we had the afternoon free.

I knew what I wanted to do. I wanted to see the Intrepid, the World War II aircraft carrier permanently docked at a pier on the Hudson. There was a museum there, too, and a submarine.

But first, there was a more important errand Logan and I had to take care of.

We descended to the street and as we pushed our way out through the revolving doors, I carefully peeled off our security name tags and tucked them in my backpack as a souvenir. I raised my hand, and a cab slowed to the curb. “Eleventh Street and Sixth Avenue,” I told the driver as I climbed in after Logan.

“Where are we going?” Logan asked.

“You’ll see,” I said. “I know you’re a California kid, but it’s time you were baptized as a New Yorker.”


As the cab pulled into the late-morning traffic, I settled back on the cracked seat and watched out the half-open window as the blocks spooled by. It was starting to dawn on me that my life had just irreversibly changed course. In the time it took for a ticker symbol to scroll across a screen, an entirely new path had opened up. For the first time in my adult life, I didn’t need to work. And I never would have to, again.

The cab stopped for a red light, and I found myself gazing out the window at the people in the crosswalk in front of us. A man in a suit, frowning over a donut. A woman in a nurse’s uniform, tired after a twelve-hour shift. A construction worker, his yellow hard hat in hand.

They all had to work. But I didn’t. Just a few hours before, I’d been the same as them—but now, suddenly, things were different. I didn’t know how I felt about the shift.

It wasn’t a question of money. It was a question of usefulness, of the pleasure of utility. Working, for me, was never about getting rich—it was about the thrill of doing good work, the pleasure of solving problems. At Netflix, those problems had been incredibly complex, and the joy came from sitting around a table with brilliant people and trying like hell to solve them.

I didn’t love Netflix because I thought it would make me rich. I loved Netflix for the Nerf guns. The water fights. The limericks. Coins in the fountain, epic argumentative battles in the conference room. I loved it for freewheeling brainstorming sessions in the passenger seat of a car, for meetings in a diner or a hotel conference room or a swimming pool. I loved building the company, watching it stumble, then rebuilding it again. I loved the arrivals and the departures, the triumphs and the losses—the raucous laughter at the offsite and the stunned silence on Vanna White’s jet.

I loved it for Christina, Mitch, Te, Jim, Eric, Suresh, and all the hundreds of other people who had sacrificed their nights and weekends, worked holidays, canceled plans and moved appointments. All to help Reed and I make a dream come true.

It wasn’t about the money. It was about what we did before we ever knew we’d get it.

So what happened now?

I wouldn’t be getting the money right away. In the interest of preventing a flood of selling, the banks had required that all of us agree to hold our shares for six months. So in a way, nothing was really changing. In a few hours, I’d get on a plane and fly back to California, and I’d probably head straight back to the office to deal with email for a few hours before heading home.

After all, we still had a lot to do. Blockbuster was gunning for us. We were hearing disturbing whispers about Walmart entering online rental. We still had tons of things we wanted to test. And I was eager to get back to my research on streaming.

But a part of me knew that one phase of the journey had just ended. The dream was a reality. We’d done it—we’d turned an envelope and a Patsy Cline CD into a publicly traded company. It was the sort of success we’d all hoped for, the thing that we had promised the people who had invested their money in us. And had held out as a reward for those who had invested their time. The sort of success that, for most people, would call for caviar, champagne, and steaks the size of dinner plates. A long dinner at Le Bernardin, followed by a nightcap or three at the Ritz.

But that’s not where my son and I were headed.

The cab stopped and I shoved a twenty through the partition. Outside, the banner of Famous Ray’s Pizza shone dully in the daylight. Pies laden with pepperoni, sausage, and cheese rotated on spindles in the window. For a moment, before I opened the door, I savored that scene—on the day I’d dreamed about for years, minutes after the entire trajectory of my life changed, I was going to have a slice of genuine New York pizza with my oldest son.

I was just where I wanted to be.

“Are we there yet, Dad?” Logan asked, looking up from the printouts he’d smuggled from the trading floor, listing thousands of share prices.

“We sure are, Logan,” I answered, and opened the door. “Come on. We made it.”