My New Found Love And Respect For Reed Hastings

Apr.20.12 | About: Netflix, Inc. (NFLX)

While I have always been the introspective type, I have been doing quite a bit of thinking lately. Without getting overly mushy and philosophical on you, as I experience success in life, while indebted to many and incredibly grateful, I cannot help but ask "why me?" I've seen several folks around me lately receive lethal doses of bad, often life-altering or life-ending news. If nothing else, it puts many of the relatively small things we deal with each day into perspective.

For the last year or so I have been incredibly hard on Netflix (NASDAQ:NFLX) CEO Reed Hastings. That side of me is not going anywhere anytime soon. I still have fundamental disagreements with his outlook for, and the way he runs Netflix on a day-to-day basis. I do not think his company can survive without drastic changes and/or more lifelines in the form of cash infusions.

During this introspective period, I have been reading quite a bit about visionaries - people like Robert F. Kennedy. In the ten years or so I have spent studying RFK's life, one of his most famous quotes continues to stick with and move me:

Some men see things as they are and say why. I dream things that never were and say why not.

Kennedy often used those words when speaking about larger-than-life issues such as poverty and civil rights. Even so, we can apply them to the world of business and innovation.

I could see that quote leading off an Apple (NASDAQ:AAPL) television commercial in the days of Steve Jobs, no doubt. And it also applies to the other great visionaries, like Jeff Bezos at Amazon.com (NASDAQ:AMZN), who are few and far between. Notice, I do not say "too few and far between." It's better for all of us that we live in a world with only a handful of true visionaries, who can not only see the future, but execute it, their way, in both the short- and long-term.

Jobs and Bezos epitomize the ability to do just that. Each dreams and dreams big, but they never let their dreams get in the way of running a company. At least not to the extent that it's ever mattered much.

The more I think about it, up to a point, Hastings belongs at least in the same ballpark as Jobs and Bezos. If you cannot acknowledge this, I do not think you are being objective. Consider what the man has done and who he is. He's living the dream.

He sold a company and learned from the experience. He had the DVD-by-mail idea while he was running errands one day between the gym and the video store. Now, he's a CEO who lives in what is probably a sick house in Northern California. He cashes in millions worth of stock options on a regular basis. He has the ability to give loads of money to a worthy cause he clearly believes in - charter schools. And, when he's at work (and at home or elsewhere thinking about work), his job is to think about how you'll entertain yourself before you even know how you will do so.

As much as I love my life and am grateful for what I have in it, you cannot help but look to Hastings and think, "sweet deal."

Hastings appears to be an introspective guy as well. That's just a guess. Most creative visionaries are. From Jobs to Bezos to Howard Stern to Bruce Springsteen. Just as he thinks deeply about Qwikster and the price increase, I have to believe he does about the bigger picture as well.

One of the great things about Steve Jobs, from what I gather, is that he put loads of competent people in place to run different parts of the operation. That accomplished two incredibly important things.

First, it showed that Jobs realized his own limitations. While he demanded complete control over much of the day-to-day (e.g., marketing), he relinquished it in areas he either was not proficient in or did not have time for. Second, Jobs delegated certain tasks because that gave him the time "to think about how you'll entertain yourself before you even know how to do it." Simply put, he did not let his big-picture mind mess up the short-term.

I truly believe Hastings has thought along these lines with respect to the situation at Netflix. This is not to say that the company does not employ capable and talented people. The issue I see is that Reed Hastings has too much control over things he's not very good at controlling.

As I noted earlier this year, Hastings should take a cue from his friend Mark Zuckerberg at Facebook (NASDAQ:FB) and hire a strong COO to run the day-to-day operations at Netflix and manage the short-term. This person's job should be, largely, to check Hastings by saying, "While I see your vision here, Reed, we have to do this and that first. There's a balance between sacrificing the near-term to realize the future."

A good COO would have stopped Hastings and CFO David Wells in their tracks as they effectively began to dismantle the profitable and high-margin DVD side of Netflix's business. And, at the very least, he or she would have been a stronger voice against Qwikster and the price increase than Hasting's buddy wading in a Jacuzzi.

Do not mistake this article as bullishness towards Netflix. It's still a complete and yet-to-be-mitigated disaster. That said, given my love and respect for the world's greatest visionaries, I should have been giving one of them more of the benefit of the doubt than I have all along. Hastings can turn Netflix around, but only if he takes a page out of the book of Jobs and recognizes his weaknesses so he can better focus on his strengths.

Disclosure: I am short NFLX.

Additional disclosure: I am short NFLX via a long position in NFLX puts.