Tsundoku is the art of buying books and never reading them. That almost happened with No Rules Rules. The book taunted me from my bedside for over a year. Well, Tsundoku no more, I have read the book.

I’ve always admired Reed Hasting’s management style. It even came up during my initial interviews with Parsely. Saying and doing are two different things, especially when applied to an organization. This book fills in the “how?” to emulate the lessons Reed teaches.

Here are some of my highlights.

1. High Talent Density

A CFO asks a CEO: What happens if we invest in developing our people and then they leave us? The CEO responds: What happens if we don’t and they stay?

The foundation of any company is high talent density. You’ve probably heard about the “rock-star principle”, it’s rooted in a famous study. The study attempted to quantify the difference between the best and average programmer.

The researchers expected that the best programmer would outperform his average counterpart by a factor of two or three. But it turned out that the most skilled programmer far outperformed the worst. He was 20 times faster at coding, 25 times faster at debugging, and 10 times faster at program execution than the programmer with the lowest marks.
Source: CNBC

It’s not easy to hire for high talent density, it generally results in a smaller workforce. But it’s not a numbers game. Reed recounts a story of the early days where they had to layoff 1/3 of their staff. While expecting morale to plummet, the opposite occurred. A renewed sense of passion flooded over the office. The smaller workforce was also easier to manage.

To be clear, the takeaway isn’t for organizations to start laying off their staff. The message is a great workplace is stunning colleagues. If you are lucky enough to experience this, don’t take it for granted.

2. Freedom and Responsibility

Once you’ve hired a great team, it’s time to let them shine. Freedom and responsibility is the grease of the innovation machine. High talent density means you can trust that people are working in the best interest of the company. This lines up with another book I love called Turn The Ship Around! by David Marquet. Reed says “leading with context, not control”, David says “leader-to-leader”.

The person with the best insight into what’s best for your situation is you. Empowering others to take control is powerful for a company. The book talks about how Netflix encourages employees to take bets.

These bets don’t come free, you bear the responsibility of the outcome. Sometimes a manager disagrees with an employees bet. The discipline for the manager is to not override the employee. The discipline for the employee is taking responsibility of the outcome. It’s not your job to please your boss, it’s to do what’s best for the company.

This shifts the focus from “telling people what to do” to “aligning people with the company’s goals”. High talent density means you can describe the goal and let others figure out the steps. It’s fundamental to effective delegation.

3. Giving Critical Feedback/Candor

Giving critical feedback to others is tough. It’s a muscle you need to train. One that’s key to the growth mindset. At Netflix, it is tantamount to being disloyal to the company if you fail to speak up when you disagree with a colleague or have feedback that could be helpful. How then should a company best incentivize giving feedback?

Reed describes an early iteration where they gave anonymous feedback. He believed anonymity was key to getting the best feedback. This is a natural response that makes sense on paper. What happened in practice, was the opposite.

Author’s provided vague and ambiguous feedback for fear of giving up their identity. Recipients had no way to clarify. The anonymity also encouraged people to vent in nasty or sarcastic ways.

One employee found the process disingenuous and started signing their name. This lead to others following suit.

If you wouldn’t say it to someone’s face, maybe you shouldn’t say it all

Netflix encourages employees to give feedback at all times. This is most important with critical feedback since it’s sensitive to time and context. They use a brilliant framework for giving feedback:

When giving feedback:

Aim to Assist: Feedback must be given with positive intent. Giving feedback in order to get frustration off your chest or intentionally hurting is not tolerated.
Actionable: Provide some concrete steps for what the other person can do to improve.

When receiving feedback:

Appreciate: Stop your urge to go into flight or fight mode. Try to really listen to the feedback. Say thanks.
Accept or Discard: You are required to listen and consider all feedback provided. You are not required to follow it.

The hardest part, for those who are unfamiliar with critical feedback, is how to structure it. Prior to this book, I had rarely given feedback and when I did it felt, off. The thin line between brilliant jerk and being selflessly candid is hard to walk without guidance. Don’t tolerate brilliant jerks. Feedback that is actionable, aims to assist, and mixed with a dash of empathy, ensures no hard feelings. This catapulted my feedback giving journey.

Feedback benefits both your managers and coworkers. Remember The Emperor’s New Clothes? If you see a problem with your company’s direction, you should speak up. Making candid feedback the norm allows others to speak up without fear of repercussion. Everyone makes mistakes, have productive, blameless conversations about them. Good leaders understand this.

4. The Importance of Alignment

Alignment makes or breaks teams. It becomes more serious as you climb into leadership roles. Reed uses the phrase “aligning on a north star,”, one I use often. This goes hand in hand with “leading with context not control”

When one of your people does something wrong don’t blame them. Instead ask yourself what context you failed to set.

Alignment is a tree, not a pyramid. A fully aligned company reduces the bureaucracy of decision making. Netflix encourages employees to make their own calls. But, it’s not only alignment with the organization, it’s alignment with your actions.

Take their open vacation policy for example. There’s an example of a manager who, while likely agreed with the policy, never took much time off. The story talks about the confusion team members felt when they were told one thing, but saw another. You can’t say you believe in something, you have to show commitment with your actions.

An example that comes to mind for myself in being too available after hours. My actions would sending the wrong message. I would never ask someone to be available after work hours, but my actions weren’t aligned with that. My actions would reinforce processes that would be the exact opposite of my intentions.

5. Innovation Cycle

Netflix is big on the idea of experimentation and bets. A key element of the innovation cycle is:

We don’t expect employees to get approval from their boss before they make decisions

This comes after having an aligned high talent density. Reed talks about a cycle for pushing out your ideas.

Farm for Dissent
For a big idea, test it out
As the informed captain, make your bet.
If it succeeds, celebrate. If it fails, sunshine.

From personal experience, this is a great process for enacting organizational change. I’ve used this to push larger changes on my path to becoming a staff engineer.

It’s ok for a bet to fail. Your assumptions may have been wrong or the timing not right. That’s why the are called bets. What’s more important learning from bets and taking risks. If you don’t take risks, you stagnate.

Conclusion

I loved this book. It matched up with many of the values I look for in companies and gave pragmatic advice. I recommend you check it out!