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Book Entry

Silicon Valley’s Culture Clash

Reed Hastings, Netflix’s chief rule breaker.Credit...Christophe Archambault/Agence France-Presse — Getty Images

Today, we are devoting the DealBook newsletter to an essay by Jonathan Knee, who writes the “Book Entry” column for The Times. In it, he uses a new book out this week from Reed Hastings of Netflix to consider what it says about the culture of Silicon Valley, and to explore how our relationship with technology (and technology companies) is changing. Three other astute observers of the tech industry — Leslie Berlin, Antonio García Martínez and Shira Ovide — also weigh in.

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Jonathan A. Knee is a professor of professional practice at Columbia Business School and a senior adviser at Evercore. His latest book is “Class Clowns: How the Smartest Investors Lost Billions in Education.”

What explains the end of America’s love affair with tech? As with many passionate affairs, time has a way of taming new love’s ardor. As the internet moves into middle age, and technology has increasingly become associated with “Big Tech,” it is perhaps not surprising that the naïve presumptions of young love have begun to fade.

The consistent theme that underlies many cultural critiques of Silicon Valley is that innovators behind the dominant platforms invoke a high-minded libertarian ideology to justify a range of unjustifiable, self-interested actions. This includes the shameful treatment of women and minorities, the exploitation of personal customer data, crushing competitors while colluding with peers and failing to help the government protect our national security. Something has gone off the rails, whether this is the result of a conspiratorial “merger of a hacker’s radical individualism and an entrepreneur’s greed,” as Noam Cohen argued in his polemic “The Know-It-Alls,” or simply the result of how “audacity often veers into arrogance,” as suggested by Leslie Berlin’s calmer history, “Troublemakers.”

The Big Tech standard bearers are the so-called FAANG stocks: Facebook, Amazon, Apple, Netflix and Google. Only one of these has largely escaped the adverse turn in public opinion: Netflix. There are many possible reasons for this, including that Netflix is a fraction of the size of the others and it has eschewed acquisitions that might attract regulatory attention. But the key differentiator may be something less coldly financial and more softly subjective: Culture.

Netflix’s chief executive, Reed Hastings, has always been the adult in the room. He was in his 40s when Netflix went public in 2002 and had previously served as a public company chief executive. All of his counterpart FAANG founders were in their 20s or early 30s when they took their companies public. Most brought in professional management to either serve as chief executive or otherwise provide so-called adult supervision.

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Today’s DealBook Briefing was edited by Jason Karaian in London.

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Although trained in computer science, Mr. Hastings’s preoccupation at Netflix has been organizational design as much as product and technology. His PowerPoint presentation from 2009 on Netflix’s corporate culture had been viewed by well over 15 million people by the time it was updated and condensed in 2017. Sheryl Sandberg, the adult supervision at Facebook for its founder Mark Zuckerberg, said the initial presentation “may well be the most important document ever to come out of the Valley.”

By picking this moment in time to publish a book called “No Rules Rules: Netflix and the Culture of Reinvention,” Mr. Hastings risks being drawn into the broader questions and controversies that he has largely avoided. The book is narrowly focused on how to most effectively manage creative enterprises. And as if to underline his hope to avoid wider social and political topics, he is joined in the endeavor by Erin Meyer, a respected professor at Insead business school in France. They largely succeed, but it is impossible not to be struck by how distant the problem of encouraging innovation in high performing work environments of the creative economy is from the more existential cultural crises we are all currently grappling with well beyond the borders of Silicon Valley.

The management approach advanced in “No Rules Rules” is striking in its simplicity: Get the best people, give them honest feedback and empower their decision-making. Although Hastings has been talking about these three key elements for years, it is still jarring to see them synthesized and applied in context.

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Credit...Penguin Random House

Strikingly, having the best people involves a regular “keeper test.” If a manager won’t fight to keep an employee as an indispensable star, the solution is a generous severance package. In place of annual reviews — salaries are adjusted based on the market, not individual performance — a system of continuous written and live, 360-degree feedback serves a remarkable degree of organizational transparency. The result is a work force with high “talent density” who can be trusted to use their own judgment.

The confidence in unsupervised employee decision-making — managing by “context, not control” — allows Netlix to get rid of annoyances like expense processes and vacation policies. Managers also have unlimited authority to make financial commitments within their domain without approvals. At least as many people would find the lack of approvals, rules and metrics terrifying as would find the level of autonomy liberating. That divide is presumably a major determinant of who applies to work at Netflix in the first place.

Given the current hostility to the technology sector, the rejection of established H.R. wisdom and intensity of the organizational upheaval promoted by “No Rules Rules” may generate controversy. Mr. Hastings could have remained under the radar during the Silicon Valley’s cultural maelstrom. Instead, he has entered the fray with an important contribution that provides the beginnings of a road map for the sector to regain trust.

Although there is much to legitimately debate in the details, it strikes me that the overarching approach to culture endorsed by Netflix speaks directly to the fundamental failure in technology industry leadership. Both the book and the first page of Netflix’s famous presentation are organized under the same banner: Freedom and Responsibility.

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This is the corporate equivalent of the Peter Parker principle, uttered by Uncle Ben to his superhero nephew in the first “Spiderman” film (unfortunately not currently available on Netflix): “With great power comes great responsibility.” Where Netflix’s tech peers have fallen down is by emphasizing empowerment — their own corporate prerogatives as well as that of their high-performing employees — without establishing a clear context for understanding the corresponding responsibilities, both internally and externally. “No Rules Rules” demonstrates how hard, but essential, it is to take the responsibility side of the equation seriously. Many may find the “keeper rule” inexcusably brutal, but it is hard to argue with the seriousness with which the company takes its responsibility to develop its people.

Netflix is not immune to the cultural blinders of the Silicon Valley bubble. The term “diversity,” despite significant academic research supporting its role in fostering creativity, is largely absent from the first 200 pages of “No Rules Rules.” They wait until the very end, when the authors discuss the management challenges posed by the introduction of Netflix simultaneously in 130 new markets in 2016. It took until then for the company to add “inclusion” as a corporate value, and in 2018 Netflix hired its first head of inclusion strategy; this is presented as a result of expanding the business rather than something that’s intrinsically valuable.

It’s right to be skeptical that this book will have any meaningful impact on the technology industry’s willingness to embrace corporate and personal accountability as central to its culture. Nonetheless, “No Rules Rules” demonstrates that it is not only possible to pursue both freedom and responsibility at the same time, but that for Silicon Valley and the rest of us to thrive together, it is essential.

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Bosses of technology companies love to talk about how unique their corporate cultures are. Openness. Autonomy. Mission-driven. Snack bars.

There’s truth to this. But I’m just not sure that tech company cultures are so distinct anymore — partly because they have been copied to death.

Netflix is unique. But it and other tech companies are getting less unique by the day. No ideas stay confined for very long.

A lot of companies now tell employees that work is about a mission, not just about a paycheck. Employers have copied a lot of open floor plans common in tech companies, and some of their perks. Empowerment is spouted by every human resources director. Hedge funds have high-minded philosophies about radical transparency. A lot of this is hokum, but that’s true at some tech companies, too.

Not all of this was influenced by the technology industry, of course. Workers everywhere have demanded different things from their employers. But as Silicon Valley’s legend grew, the management methods there spread.

Shira Ovide, writer of The Times’s On Tech newsletter (sign up here)

Our current relationship with technology reminds me of our relationship with food. Granted, we may not need tech in order to survive, but many of us do rely on it to work, to learn, to document and to connect.

We like, and even love, many foods — fresh baked bread, piping hot tacos — and the same is true for much of our tech. Would you voluntarily give up the smartphone or tablet that many of you are probably holding right now? Your favorite app? Your ability to access vast catalogs of music or to have video chats with your doctor or relatives who live far away?

As is also true for food, we have reason to be cautious, and even angry, about how some tech is made and the inequalities of access to it. Some food companies deliberately engineer their products to make us addicted. So, too, do some tech companies. Working conditions in both the food and tech industries can be suboptimal, and in some cases downright dangerous and exploitive.

Under public pressure, hazardous food additives and ingredients have been regulated out of our food supply, and unfair labor practices are under scrutiny. Now that we’re discussing the toxicity of tech, we need to be specific: Which technologies nourish society, and which are making us sick?

Leslie Berlin, project historian for the Silicon Valley Archives at Stanford University and author of “Troublemakers”

What backlash? Whenever I hear about the “tech backlash,” I glance at Facebook’s share price, consider that the tech sector is the only thing holding up the stock market and wonder just what planet the speaker lives on. I also imagine Facebook’s internal usage dashboards, which must be similarly off the charts (not to mention Zoom’s).

Times have never been better for tech. Work-from-home orders were less of a hit to productivity than management thought, and many founders, C.E.O.s and other senior executives have decamped for gorgeous rural areas or “second-tier” cities with shockingly high qualities of life. Every weekend features a traffic jam of moving trucks in front of my Bay Area apartment building.

While much of the rest of the country struggles with economic stagnation, tech companies keep growing, hiring and filing for I.P.O.s. The Bay Area has never been a more challenging place to live, but in a poll of my (admittedly biased) tech-heavy friends and followers, over a third said that their lives improved during the pandemic.

If there’s a tech backlash going on, few in tech seem to realize it.

Antonio García Martínez, author of “Chaos Monkeys”

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“Every new technology has real issues that have to be thought through and, you know, we’re in that phase for social media,” Mr. Hastings told The Times’s Maureen Dowd in a new interview. He spoke about other aspects of the tech industry, Netflix’s place in it, and the unique company culture he has built, as revealed in “No Rules Rules.”

As Maureen writes of the Netflix founder:

He started a delivery system for movies, and now his company is one of the most powerful forces in movies. In the capital of drama, Mr. Hastings is, without drama, ripping out the infrastructure and replacing it with his own.

“There’s a conflict between the head and the heart,” Mr. Hastings said, describing the radical candor that is a hallmark of how his company is run. “Coldly rational and calculating,” is how a fired former Netflix manager put it, adding that it was still an “amazing fun ride.”

Read the whole thing.

What do you think? Is Netflix a model for other companies? Is Silicon Valley a model for other industries? Send your thoughts to dealbook@nytimes.com. Include your name and location and we may include your response in a future newsletter.

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