The Exchanges

Q You do a lot of work with charter schools. I want to come a little bit higher level in a second, but how do you see AI playing out in the classroom and learning?

A Hugely. I mean, I think AI for teaching kids is a awesome application. Um, you know, generally you're in a classroom with 20 or 30 kids, and it's very hard for the teacher. The kids are all at different levels. Um, and it's a very industrialized model. All third graders are going to learn the same thing today. And that really, uh, again, that's for the convenience of the operator of the school and for being able to handle mass education. And AI offers the potential of every kid gets their own tutor and goes at their own pace. So, um, there's a lot of efforts going on now, um, on the board of Khan Academy, a nonprofit that's really pioneering a lot of stuff with Khan Mego, um, um, helping other, Uh, for profits like L O E L L O that does a reading app. That's amazing. So if you have a five to seven year old, um, it really helps the kid develop a confident reader. The, the AI is very patient and will listen to the kid and then correct them and, and then help them get stronger and stronger in their reading. So, you know, and we're scratching the surface. So in the next 10 years, you'll be able to have a complete K-twelve and probably university education. Uh, with AI on a phone or tablet that, um, will be really changed learning. So think of it as, as AI is getting more impactful in society, the standards of what people need to know and can know is much higher. So we've really got…

AI assessment note: “AI offers the potential of every kid gets their own tutor and goes at their own pace.”

Q you think goes into the decisions to transfer? I'm thinking as a parent, what would cause me to transfer charter schools? Uh, maybe it offers the hope of better education and better teachers, and maybe it also deviates to the negative. Um, not all of them are gonna be successful, so there's a risk involved in that. How do you, how do you think about that from the parent's perspective?

A Yeah, I mean, it's a little like, you, you know, for parents who send their kids to university, they have the same thing. Some universities, Seem good, but aren't really, or it can be a good university and you have a bad experience. So there's no perfect outcome, uh, in that. And then in general for charter schools, um, in, uh, wealthy areas where the schools are pretty good, the existing government schools, um, there's not much incentive to change. Um, and the basically, uh, so for example, in Palo Alto, California, there's no charter schools. But in East Palo Alto, which is quite poor, right next door, there's a bunch of charter schools, because the parents are desperate for change in options. So the charters have really focused on the lowest income kids, because they, um, you know, don't have great government schools, and they're willing to take a chance and try the new charter school. And some of them have, of those charter schools have worked out fantastically.

AI assessment note: “in East Palo Alto, which is quite poor... parents are desperate for change in options”

Q Was there a moment at Pure Software where you wanted to give up, or you found yourself sort of like feeling sorry for yourself, or what was that like, and how did you get out of it?

A Yeah, I don't think I felt, um, sorry for myself, uh, but I did feel like I was hurting the company back to these, uh, sales turnovers, and back to caring more about the company than myself. So I wanted the company to succeed more than I cared about myself, and so I, I, twice I went to the board of, and said, look, you should hire, uh, you know, a CEO who's got a shorthand in sales, and I'll do product, and it's fine, and, you know, um, And both times, uh, they rejected that idea, um, and it's like, yeah, you are making mistakes. They were clear about that, but overall, we'd rather, um, be investors in this company that you're doing than make that change. Um, and for me, it was a little bit, uh, it's like confession, um, you know, because I felt so guilty about those sales mistakes, um, that then, you know, offering my, uh, role, um, and sacrifice, um, It was sort of cleanse that wound, and then I'd get up and live to fight another day.

AI assessment note: “twice I went to the board of, and said, look, you should hire”

Q And have you brought the almost, uh, meritocratic focus of Netflix into, like, the culture that you were famous for there into Powder Mountain?

A Yeah, substantially. So, uh, Powder, I would say we've done, in my opinion, a slightly better job of it from the lessons that we've learned. So, in Netflix, um, there was the meritocracy and, uh, and outsiders thought it was cutthroat, thought it was Hunger Games. Um, but inside it really wasn't. People looked out for each other, helped each other quite a lot, but in the words we used to describe it, um, we're not warm and loving enough, and so it came across as, uh, brutal from the outside, ok? And so we were never really able to shake that, uh, kind of perception. And in powder we started with big hearted champions who pick up the trash. And so big hearted, of course, loving and generous as the lead word in our kind of employee motivation. Champions like, no, we really do care about performance. That's that meritocracy aspect. Um, very driven, keeper test, all the things that we had at Netflix. And then who pick up the trash is a symbol of self responsibility and everything is my job. Um, and people really do pick up the trash in both a metaphor and, and, and actual ways.

AI assessment note: “Yeah, substantially. So, uh, Powder, I would say we've done”

Q A large part of the CEO's job seems to be rooting out bureaucracy. How did you go about preventing that from creeping in?

A Well, once you have, ah, let's take, ah, um, expense policies, ok? So, you know, most companies have policies, you can spend 250 dollars in certain cities, and, you know, more in Tokyo, and, you know, less in Omaha, and they're trying to save money, right? And they're, like, trying to be careful with expenses. And then you've gotta have a whole bureaucracy to administer that, to make sure people comply with that, to educate them, and whatever. And we got rid of all of that, and we just had to travel as you would on your own nickel. Um, and you know, I'm sure there's, you know, occasionally some expense that gets done that shouldn't be, but compared to the cost of enforcement, it's tiny. So, you know, again, that's more of our freedom and responsibility approach.

AI assessment note: “we got rid of all of that, and we just had to travel”

Q I want to come back to culture for a sec. There's one question I didn't ask. What was the keeper test and how did it apply?

A Um, so the keeper test is a Netflix shorthand, um, for, uh, asking yourself if one of your employees were quitting, how hard would you work to keep them, um, to stay? Would you try to change their mind? And if you wouldn't, then you should proactively give them a generous severance package and try to recruit someone who you would feel that you would really try to keep them. And so the typical employee test that people use is, did they screw up enough that they deserve firing? So they have to really fail to deserve firing. And we want to change that presumption to be, no, it's the people that you would fight to keep. Those are the ones that you stay in. If someone is not in that, um, then you should give them a package and move on. And of course, you know, the more nuanced one is to have a conversation with them. Like, I wouldn't fight that hard, and, you know, let's try to change that, and, you know, try to, uh, not surprise them and be honest with them, but it's shifting at the standard industrial model is like, you nearly have to commit a crime to get fired, ok? As opposed to the athletic team case, which is, I think I can upgrade, I wouldn't fight to keep you, um, because I want to-

AI assessment note: “the keeper test is a Netflix shorthand, um, for, uh, asking yourself if one of your employees were quitting”

Q The other show that I want to talk about is the Dave Chappelle caused a lot of controversy. How is that handled internally inside Netflix and how do you see your role in terms of what you air or don't air?

A Sure. Um, you know, back in, 2018, 2019, ah, let's see, we probably did our first Chappelle Special in, like, 2015 or 14. Um, so we had a great relationship with Dave, um, and, ah, had done a number of his stand-ups, and they were super popular, some of our most popular, ah, stand-up shows. Um, on the same hand, we were trying to be very inclusive and to have Uh, many people be able to thrive at Netflix's employees, including our transgender employees. And so the tension became, we said to our trans employees and their allies, hey, we're very trans friendly. If you're fantastic at your job, you know, uh, again, it's great. Um, and we're an inclusive place of work. And then some of them felt that in doing the Dave Chappelle show, which had some trans jokes, Which I don't believe that Dave is anti-trans, but he definitely takes on some of the issues, um, that they were being undercut as employees, um, when we were creating a hostile work environment, uh, which got them to protest internally. So that was the storm in maybe 2019. And it was good for us to realize that we were not resolving this conflict between customer entertainment, um, and employee values. So for example, in many of our shows, people have guns and blow people up and shoot people. And, and yet we don't want a workplace that's filled like that. And so we realized entertainment is an escape where various things get…

AI assessment note: “we sat down and we did an amendment to the culture memo”

Q Well, they do it on purpose, right? Yeah, yeah, yeah. And they totally hijack my YouTube, too. All these recommended videos. I'm like, what is going on here? Talk to me a little bit about AI, and maybe riff on, uh, How you're seeing it used today and how you see it being applicable and, and yeah, just walk me through a little bit of your thoughts on that.

A Um, well, let's see, in a Netflix context, uh, Ted and Greg really lead that work. Um, you know, Ted's important quote about a year ago was, you know, you're not gonna lose your job to AI, you're gonna lose your job to a producer who uses AI. Um, and, you know, it's a tool for people to use, um, and hopefully everybody will use it and raise the level of performance just as they did with, say, digital filmmaking. Um, at, uh, Powder Mountain, uh, we haven't found very many uses for AI yet. Um, so, you know, we use AI a little bit in marketing copy, but, um, it's pretty minimal. So I think there'll be, you know, a number of businesses that, um, are impacted a lot and other ones that are impacted much less.

AI assessment note: “in a Netflix context... at Powder Mountain, we haven't found very many uses”

Q Well, if you were to take over, uh, Uh, education in charge of the country almost, uh, from a specific vector. What policies would you change? What would you change in the classroom? What would you include? What would you take away?

A Um, mostly I'd focus on school choice, um, and, uh, giving teachers the tools to create a school, um, because that you get that flourishing of, you know, there's lots of teachers who have very good ideas about what would be the perfect public school. Um, at least for some sector of kids, but they have no way to do that in the current system. So it's then allowing them, supporting them to create a nonprofit, to create a school, and then to give the parents the choice to join that school or not. Um, so the whole model of, um, uh, teachers getting to create lots of new schools, and then parents choosing which of those schools they want to go to, um, is something I think would be transformative in a positive way for kids outcomes.

AI assessment note: “mostly I'd focus on school choice, um, and, uh, giving teachers the tools”

Q How do we make that leap? It's really hard for independent mountains to compete, I would imagine, especially in the era of Epic Pass. And how do you go from casually skiing to buying a mountain?

A You know, I wasn't looking to do another capitalist thing. Um, uh, it was definitely a save the mountain because I lived there, uh, expression. Um, and we haven't done it yet. Um, so you're right that Epic and Icon are fascinating because they're great businesses and they've made skiing, you know, for 1100 bucks, you get a range of options. So it's really popular with skiers. They sell, you know, two million passes a piece. They generate, you know, a lot of the visitation. And they're becoming bigger and bigger. So, from a commercial standpoint, it's what people want. So, think of it as the Costco of skiing. Um, you know, you pay a fee, and then you get great value. Um, and, um, it's been very successful. So, I don't really have any critique of it. But there's a sector of the market, um, maybe more like Whole Foods is to Costco, um, that's a little more specialty. So, people willing to pay for uncrowded skiing. Um, and then that's super fun, and you get, um, wide open slopes and, uh, low lift lines, but it costs a little more.

AI assessment note: “there's a sector of the market, um, maybe more like Whole Foods is to Costco”

Q how you see the inclusiveness DEI playing out in the workplace and how it could be better incorporated or, cause there seems to almost be an, um, anti DEI movement at the same time now, um, Um, that's going on politically or within companies where people are questioning whether people deserve their roles just because they might be a minority or underrepresented. How do you think about all of this?

A Yeah. I mean, there's certainly, um, the U S federal government is leading this anti DEI push. Um, uh, I don't know how much it's affected Netflix. Uh, again, you'd have to ask Greg and Ted about that. Um, but I would say in general for us, we always focused on inclusion. We never called it DEI. Um, for us is we want everyone who's a Netflix employee to be able to contribute at their highest ability. Cause that's in our commercial interest. Um, so, uh, perhaps we can go as far out on a limb as, you know, some companies did. Um, but our inclusion efforts have remained strong, and again, we want people to feel comfortable so that they can contribute, uh, at their highest level.

AI assessment note: “in general for us, we always focused on inclusion. We never called it DEI.”

Q You've said, and correct me if I'm wrong, processes can be the death of innovation, yet every company needs some structure as it scales. How do you decide which processes to add and which to remove?

A Yeah. I mean, that sounds like a long quote. I would say, uh, let's, let's tighten it up of, um, Look, manufacturing provided most of the GDP growth from, ah, the beginning industrial age, so, 1800, you know, through to, I don't know, 1990, okay? Um, so, 200 years, manufacturing's providing the, the GDP growth, and manufacturing is about consistency, about driving out error, about incredible process attention, replication, perfection, um, And it's not that they weren't ad agencies, you know, in the 19 fifties that were kind of kooky and crazy. They were, but it was a tiny part of the economy. Ok, so the metaphors that we all picked up around process, think of why classrooms are basically organized like factories. Lots of things are organized like factories because it was the prevailing metaphor. And then the economy, you know, shifted a lot to, and higher value things were creative work. Um, and inventive and, uh, intellectual. And for those things that are inventive, errors are an inherent part of the process. So, um, think of it as in manufacturing, you want to drive out, um, variation. And in innovation, you want to increase variation. And so process, uh, really is the language and model of driving out variation and getting to consistency. And if you're in a safety critical business like an airline, it's a good thing. And if you're an inventive creative business where your m…

AI assessment note: “in manufacturing, you want to drive out, um, variation. And in innovation, you want to increase variation.”