The secret of Netflix's success

Netflix co-founder Reed Hastings is on a publicity tour for his how-to management book, in which he attempts to teach other CEOs how to manage the Netflix way.

Between the lines: Hastings' real superpower as a manager — one that he never really admits to in the book — is that, thanks to the gravity-defying Netflix share price, he isn't cash constrained. In fact, the more cash he burns, the more valuable his company becomes.

• Netflix staffers are all paid "top of personal range," which means base salaries as high as $20 million per year. Meanwhile, Hollywood producers like Shonda Rhimes and Ryan Murphy can effectively name their price.

By the numbers: In just five years — from 2015 to 2019 — Netflix had more than $10 billion of negative free cash flow. That's just the cash going out the door; it doesn't include many billions more in promised future payments.

• Cash flow improved this year because production halted on so many projects after the pandemic hit. But expect it to go sharply negative again as soon as filming restarts in earnest.

Context: Hastings is similar to Bridgewater CEO Ray Dalio, another proponent of radical honesty and the salutary effects of receiving a constant barrage of negative feedback. This week, while on book tour, Hastings still found time to fire a senior executive.

• The latest victim was Cindy Holland, the powerful head of original content, responsible for such hits as "House of Cards," "Orange Is the New Black," "Stranger Things," and "The Crown."
• Such firings are not unusual. Hastings previously fired his chief communications officer, his chief marketing officer, his chief product officer, his chief financial officer, his chief talent officer, and many, many more. He even fired Netflix's original CEO, Marc Randolph, via PowerPoint presentation.
• Multiple former colleagues described Hastings to the Wall Street Journal as being “unencumbered by emotion.”

The big picture: Columbia Business School professor Jonathan Knee reviewed Hastings' book for the New York Times, noting that "the problem of encouraging innovation in high performing work environments of the creative economy" is pretty low down anybody's list of priorities in this age of existential cultural crises.

• Hastings seems to go out of his way to avoid larger cultural issues, telling the Financial Times that "it is not smart to dabble" in news programming. He recently cancelled "Patriot Act with Hasan Minhaj," a current affairs show that won Emmy and Peabody awards.