2,500 years ago, Xerxes — King of Kings, Emperor of the Persians — invaded Europe with a large army determined to subjugate the upstart, independent Greeks. He failed miserably.
About five years ago, Reed Hastings — CEO of Netflix and a kind of modern-day King of Silicon Valley — embarked on a campaign that almost destroyed his company.
Hastings raised the prices of Netflix effectively by 60% driving hundreds of thousands of subscribers to cancel their accounts. The stock price dropped precipitously from around $350 to $50. A growing chorus of analysts predicted the end of Netflix. He then announced that he was splitting the company into two forcing subscribers to now manage two different accounts. More cancellations followed.
Today, about five short years later, the stock price has risen from a low of $50 to a pre-split price of more than $700. The subscriber base has not only stopped declining but has grown from under 20 million to more than 93 million.
How did Netflix not only survive but turn itself around? What happened?
Unlike many Kings, CEOs, Generals, or Presidents, Hastings quickly realized that he had blundered. And then he said something rare and remarkable for a CEO — much less a Silicon Valley CEO.
What did he say? He uttered the five most important words in my first book, Customers Included — and these are not my words or the words of my co-author. These are his words.
He said publicly that this series of blunders had been caused by:
“…arrogance based on past success.”
I’ve given close to 200 Customers Included talks in the last three years (at companies ranging from Apple to Walmart). In each and every one of these sessions, I have told the story of Netflix and asked my audiences to write these five words down and remember them.
How did Reed Hastings figure this out when so many in history going all the way back to Xerxes could not recognize when their arrogance had blinded them? In my sessions, I walk through some important next steps that Hastings took to focus on the basic needs of his customers and to repair the damage.
But I also like to imagine that perhaps he sat down with Xerxes in a bar near the Netflix offices. After they ordered drinks, maybe Xerxes told him about his blunder.
The Persian Empire was the mightiest empire of its day. According to Herodotus, Xerxes was able to assemble millions of soldiers and support personnel to form the invasion force (modern historians say it was a smaller but still massive army). Perhaps Xerxes explained this to Hastings and added that they not only had people, but they had technology.
For example, perhaps Xerxes boasted to Hastings that they did something no one else had done before: they bridged the Hellespont. The Hellespont is the body of water that separates Asia and Europe. This was an incredible feat of engineering and made possible the land invasion of Europe. It also boosted the confidence of the Persians making them feel invincible — nothing not even large bodies of water could stop them.
Despite, however, the technical prowess and massive army, the Persians still lost. They made a series of mistakes based on their overconfidence and arrogance. Perhaps Xerxes explained all this to Hastings and warned him that arrogance can lead to blindness and blindness can lead to disasters. As a result, maybe Hastings left that bar determined to listen and learn from Xerxes — not to mention from his customers and colleagues.
Tonight, February 7, I’m kicking off a series of discussions with a group of Collaborative Gain members, scholars, and others to discuss a number of Greek tragedies including the oldest surviving Greek play, The Persians by Aeschylus. Written only a short time after the actual battles, this play shows some real sympathy for Xerxes, despite the fact that he had razed Athens during the war.
Why were the Greeks sympathetic to the arrogant Xerxes who had caused so much death and destruction?
They understood — thousands of years before behavioral economics confirmed — that all humans, Greeks, Persians, and everyone else — believe they cannot err and, as a result, make blundering mistakes.
