12. World Changers Book

Reed Hastings: Netflix

Reed Hastings my heroes for creating my favorite hobby: Netflix. The idea for the company was sparked with an unfortunate situation when Reed Hastings had forgotten about a rented VHS tape. When he went to return it six weeks later, his late fee was hiked up to $40. I thought it was hilarious and so typical that the first thing that came to Hasting’s mind was, “my wife is going to kill me.” That was when he realized that there had to be a better way. He questioned: Am I really considering lying to my wife over this movie rental? Is it possible to create a movie-rental business by mail that would abolish all late fees and ask customers to pay a monthly late fee?

Days after this movie rental incident, it occurred to Hastings that a gym had a much better business model than a movie rental business. He associated the idea of paying a monthly gym fee, allowing customers to exercise as little or as much as they want, with movie renting and realized that this was something that people would like. The be-all and end-all for the idea of Netflix was when Hastings experimented sending a few music CDs in envelopes to himself through the mail. When they arrived perfectly intact it was the deciding factor.

Luckily, Hastings had prior capital from his work as CEO at Pure Software to fund the launch of Netflix. This was vital in order for Netflix to succeed because it lost money for four years straight until finally making a profit in 2002 when the company went public. Once the company’s success skyrocketed, it completely disrupted the movie rental business to the point of running Blockbuster out of business. After a while, Hastings made the observation that his business would be even more convenient if customers could watch movies instantly. He made the transition from the U.S. Postal Service to video streaming to customers’ homes on TVs, game consoles and computers, allowing people like me to binge-watch entire TV series to their heart’s content.

John Mackey: Whole Foods

Whole Foods hatched from John Mackey and his then girlfriend opened a small vegetarian food store in 1978. Mackey, a free-spirited college dropout, observed the bad eating habits of Americans and the health problems that ensued. Their goal was to make a modest living by helping people live healthier lives. In order for his business to grow, Mackey used networking to prove other investors wrong and nurture his company. He first persuaded a person he played pickup basketball with to contribute to the cause, which allowed him to network and merge with Clarksville Natural Grocery store and open the first Whole Foods Market in Austin, TX.

Eight months later Austin experienced its worth flood in 100 years, completely flooding Mackey and his partners out of business. The entrepreneur associated this setback with the idea that he couldn’t keep all his eggs in one basket. He realized that expansion was necessary for success in this case.

Mackey and his business continued to thrive; causing him to question what else he could do to benefit his customers. He asked himself how he could make it easier for people to learn lifestyle-changing habits in a fun and social environment. One of the ideas he experimented with was forming “wellness clubs”. These were clubs at Whole Foods that customers could join for a fixed monthly fee to attend all the store’s cooking and health classes that they wanted to. The clubs even offered occasional discounts on store items.

Reid Hoffman: LinkedIn

Reid Hoffman founded LinkedIn in 2003 fairly confident that it would become a popular social network in time. LinkedIn is the world’s largest professional network on the Internet, boasting over 100 million users in over 200 countries. Hoffman’s educational background includes a cognitive science degree from Stanford University and a master’s in philosophy from Oxford University. Before LinkedIn, he had been working on a number of tech companies including SocialNet and PayPal. This gave him the experience to launch his newest idea.

Reid Hoffman associated his past experiences in Silicon Valley to develop his newest idea. He knew that he would need to get his first million users before the website actually became a real network and gained value. By using his prior knowledge from his work with SocialNet and PayPal, Hoffman followed a philosophy that financing strategy is the most fundamental step, and product distribution comes next. Many people think that product strategy should come first, but Hoffman explains that if you build a great product without great distribution, the product dies. Additionally, if you can’t raise money, it doesn’t even matter if you have a great product. Hoffman knew he could raise the money he needed from his prior work with PayPal.

When deciding whether or not he should pursue his idea of LinkedIn, Hoffman begged the questions: What is becoming possible or necessary that wasn’t possible before? Is a new product or service able to take over an existing market or create a new marked? With all the opportunities that the internet was providing for people, particularly in the job-search enterprise. Hoffman observed that eventually, all of these employers and job seekers would need a place to post their professional resumes online in the form of public profiles. I see this as a disruptive innovation in itself because instead of job searches only being a one-way process, applicant seekers were now able to directly contact promising job candidates instead of hoping for responses from a traditional ad. Additionally, it makes things so much easier for, say, college students like me who are just beginning to build their network. For example, after my SUSA New York City trip, I used my LinkedIn to connect with the UMD graduates that we met at the various companies. I most likely wouldn’t have done this if I didn’t have a user-friendly social media website to do this on.

At the time, Hoffman had been experimenting with three different ideas until he finally decided that LinkedIn would be the best because it was the most different from what everyone else was doing. Starting a new company requires originality and confidence that you can make it work, two things that Reid Hoffman definitely possessed. Once he decided to start work, he networked with people he had worked with on his previous endeavors in Silicon Valley. Except for two, the founding team of LinkedIn was everyone who Hoffman had worked with at SocialNet and PayPal. The others were people who Hoffman knew from Stanford and previous jobs. This proves that Hoffman had a strong network of connections that were willing and able to help him when he had a vision.

Herb Kelleher: Southwest Airlines

Luckily, one day in San Antonio, Herb Kelleher happened to be networking with one of his law clients, Rollin King over lunch. It was there that the two men came up with the idea for a low-fare airline that would be able to breakthrough the highly regulated airline industry by staying strictly domestic, following intrastate routes only. He then questioned what else would be necessary for this company to succeed. How could he gain the most faith in his company from employees?

His questions were answered with the keen observation that people are far more productive when they are having fun at their job. Kelleher was definitely able to reinforce this view, with everything from Elvis costumes at company parties to his help with baggage handling during the holiday season. I have seen the fun culture of Southwest Airlines firsthand on many flights around the country. One of the very first plane rides I remember was on a Southwest flight. The flight began with a group of flight attendants explaining the safety procedures in the form of a humorous rap. My brother and I thought it was so entertaining and I attribute this pleasant travel experience to my love of flying to this day. 

Naturally, when the company started being successful, lawsuits started to erupt. Kelleher was able to associate his teachings from law school to effectively combat these law hurdles for the first 10 years of Southwest’s life. Southwest Airlines is now responsible for 90% of all low airfare competition in the U.S. and is the largest domestic airline in the country.

Phil Knight: Nike

The concept for Nike started in Phil Knight’s elective class at Stanford. It was there that he wrote a paper asking the question: “Can Japanese sports shoes do to German sport shoes what Japanese cameras did to German cameras?” The paper proceeded to explain Knight’s plan to produce superior sports shoes in Japan, where the labor force is exponentially cheaper. Knight realized this business was something he wanted to do, so he went on a trip to Japan to observe business practices there for himself. He was blown away by the high quality and low costs that shoes had there.

Thanks to his networking skills, Knight convinced a Japanese entrepreneur to allow him to sell the shoes in the U.S. The first thing he did was send the athletic shoes to his old track coach, Bill Bowerman. Bowerman was so impressed that the two decided to team up and become partners in this new business venture. In 1972, Knight took a risk of experimenting with manufacturing running shoes in Mexico. This turned out to be a great success, and Knight signed with sponsoring his first professional athlete, a Romanian tennis star.

One of the core values of Nike is promoting athletics. Knight makes it his goal to associate the powerful athleticism of top athletes like Michael Jordan with every aspect of the brand. He understood that 60% of Nike products are purchased by people who don’t actually use the apparel for sports. However, the idea behind buying a Nike product is what makes the company so successful.