How Netflix Builds a Culture of Excellence | Elizabeth Stone (CTO)

Netflix's first economist CTO reveals the frameworks behind building and maintaining one of tech's most legendary high-performance cultures.

Elizabeth Stone is chief technology officer at Netflix and, remarkably, the first economist to ever be named CTO at a Fortune 500 company. Previously serving as VP of data and insights at Netflix, she has also held leadership roles at Lyft, Nuna, Merrill Lynch, and Analysis Group. Her unique journey from economics PhD to leading technology at one of the world's most admired companies offers invaluable insights into building cultures of excellence.

Key Takeaways

• High talent density is the prerequisite for everything else—without exceptional people, candor, freedom, and responsibility become dangerous
• The Keeper Test creates accountability for maintaining excellence: "If this person said they were leaving, would I fight to keep them?"
• Excellence isn't about working long hours—it's about caring deeply about outcomes and holding yourself to world-class standards
• Feedback must be timely, specific, and followed by active help to close gaps rather than waiting for annual performance reviews
• Centralized data teams with functional diversity outperform embedded specialists when partnership and objectivity matter most
• Economics training provides unique value in understanding incentives, unintended consequences, and systematic problem-solving approaches
• Career acceleration comes from translating between technical and non-technical stakeholders while setting others up for success
• Transparency builds trust—sharing leadership meeting notes and admitting failures creates psychological safety for honest feedback

Timeline Overview

• 00:00–08:32 — Background and Economics in Tech: Elizabeth's unique path from economics PhD to Netflix CTO and why tech companies should hire more economists
• 08:32–27:44 — Career Growth and Excellence: The secret sauce behind rapid advancement at four companies, plus frameworks for maintaining world-class standards
• 27:44–43:54 — Netflix Culture Foundation: How high talent density enables candor, the Keeper Test philosophy, and why traditional performance reviews don't exist
• 43:54–51:44 — Freedom and Responsibility: What practices other companies shouldn't attempt, plus examples of innovation that emerges from minimal process
• 51:44–01:02:31 — Organizational Structure: Why Netflix keeps data and insights centralized, plus leadership practices for staying connected to individual contributors
• 01:02:31–END — Personal Practices and Lightning Round: Advice on presence, early morning puttering, and how endurance sports build mental resilience

The Economics Advantage: Why Tech Needs More Economists

Elizabeth Stone's journey from economics PhD to Fortune 500 CTO represents more than an unusual career path—it demonstrates how economic thinking provides unique advantages in technology leadership. Economics training offers systematic approaches to understanding incentives, predicting unintended consequences, and simplifying complex problems into tractable frameworks.

"Economics is a flavor of data science," Stone explains. "It's a useful perspective to add to things, especially in a business context and especially in how we want to simplify problems in a way that makes them feel tractable."

This perspective proves particularly valuable when designing internal systems and external products. Economic thinking helps leaders anticipate how people will actually behave given certain incentives, rather than how they should rationally behave. When Netflix launched live content like WWE programming, Stone's role involved translating technical constraints into business language while ensuring content strategy aligned with technological capabilities.

• Economics provides frameworks for understanding both rational behavior and systematic deviations from rationality
• Training in causal inference and experimental design transfers directly to product development and A/B testing
• Economic modeling helps predict market dynamics and competitive responses before they occur
• The discipline's focus on optimization under constraints mirrors many technology and business challenges

Stone's rapid career progression—from associate to VP in three years at her first company, manager to COO in two years at Nuna, VP to CTO in three years at Netflix—demonstrates how economic thinking translates into business value. Her ability to bridge technical and non-technical stakeholders stems partly from economics training in communicating quantitative insights to diverse audiences.

The Secret Sauce of Consistent Career Acceleration

Across four different companies, Stone achieved remarkable advancement by focusing on team success over personal ambition. Her approach centers on dedication to excellence, translating between technical and business stakeholders, and systematic observation of successful behaviors around her.

"I really need to deliver for that team," she explains about her motivation. "The way in which I build partnerships with people I work with is that I really care about setting other people up for success and being someone that people want to work with."

This team-first mindset creates a positive feedback loop. By genuinely investing in others' success, Stone builds the kind of partnerships that enable larger initiatives. Her economics background helps her serve as a translator between technical teams and business stakeholders—a skill that becomes increasingly valuable as organizations scale.

• Dedication means holding yourself to world-class standards in reliability, follow-through, and responsiveness to others
• Translation skills between technical and non-technical domains become more valuable as companies grow larger and more complex
• Systematic observation of high performers accelerates learning and skill development
• Setting others up for success creates the partnerships necessary for career advancement

The "last 5% is the 5% that really matters" principle, taught by her mother, shapes how Stone approaches work quality. This isn't about perfectionism or long hours—it's about caring enough to deliver excellence when others depend on your work.

Stone's introverted nature actually accelerates her learning through careful observation. As an only child who naturally observes behavior patterns, she systematically studies what makes other leaders effective, adapting techniques that align with her authentic style while avoiding approaches that feel inauthentic.

High Talent Density: The Foundation of Everything Else

Netflix's culture rests on a fundamental premise: you cannot have candor, freedom, responsibility, or excellence without first establishing exceptionally high talent density. This principle, deeply rooted in Reed Hastings' founding philosophy, shapes every aspect of how the company operates.

"We can't really have any of the other aspects of the culture including candor, learning, seeking excellence and improvement, freedom and responsibility if you don't start with high talent density," Stone emphasizes.

This approach requires behaviors that feel unnatural to most humans. Giving difficult feedback, receiving criticism gracefully, and making tough decisions about team composition all depend on having people capable of handling such an environment. Without exceptional individuals, these practices become destructive rather than constructive.

• High talent density enables giving direct feedback because people can handle and act on difficult truths
• Freedom and responsibility only work when people have both strong skills and excellent judgment
• The culture creates a virtuous cycle where excellent people want to work with other excellent people
• Maintaining standards requires making difficult decisions about fit when performance doesn't meet the bar

The Keeper Test operationalizes this commitment to excellence. Managers regularly ask themselves: "If this person said they were leaving today, would I fight to keep them?" If the answer is no, they should have a conversation about whether Netflix is the right fit.

This mental framework forces honest evaluation rather than avoiding difficult conversations. The goal is making these discussions mutual observations rather than surprises, which requires ongoing feedback throughout the working relationship.

The Keeper Test: Accountability for Excellence

Netflix's Keeper Test transforms an uncomfortable truth—that not everyone belongs in every role—into a systematic management practice. Rather than avoiding difficult performance conversations, the framework creates regular accountability for maintaining team quality.

"No one wants to think that way," Stone acknowledges. "It's very hard to say to someone I think this isn't the right fit. We have to introduce some of those reflections in order to encourage the behavior."

The test serves multiple functions beyond identifying performance issues. It creates a regular rhythm for managers to reflect on team composition and individual development. Employees often ask "Am I passing your keeper test?" which opens productive conversations about expectations and growth areas.

• The framework prevents managers from avoiding difficult conversations about performance and fit
• Regular reflection on team composition helps identify development opportunities before problems become severe
• Employees appreciate clarity about expectations rather than uncertainty about their standing
• The practice requires ongoing feedback throughout the year rather than waiting for formal review cycles

Importantly, Netflix eliminated traditional performance reviews in favor of real-time feedback and annual 360-degree evaluations focused purely on development. This approach forces performance conversations into day-to-day management rather than bureaucratic processes.

Stone receives about 300 pieces of feedback during annual cycles, some referring to events from months earlier. This reinforces the importance of giving feedback immediately rather than saving it for formal review periods.

Candor Through Transparency: Sharing Leadership Context

Netflix's culture of candor extends beyond direct feedback to radical transparency about organizational decisions and leadership thinking. Stone exemplifies this by sharing detailed notes from leadership meetings with her entire organization—a practice that pushes traditional boundaries of information sharing.

"I take notes in leadership meetings and I share those notes with the whole organization," she explains. "Sometimes it includes candor around reflections on things that aren't going well or problems we need to solve."

This transparency serves the "context not control" principle that guides Netflix management philosophy. By providing context about leadership priorities and challenges, teams can make better decisions without requiring detailed oversight or approval processes.

• Sharing leadership meeting notes helps teams understand strategic priorities and trade-offs
• Transparency about problems and failures creates psychological safety for others to admit mistakes
• Context sharing enables distributed decision-making without constant escalation
• Open communication builds trust between leadership and individual contributors

Stone's willingness to share information that "probably pushes the boundary a little bit" demonstrates how candor requires intentional practice. Natural human tendency is to control information flow, but high-performing cultures require fighting against this instinct.

The recent example of implementing individual contributor levels illustrates this transparency in action. Rather than pretending the change went smoothly, Stone conducted a public postmortem acknowledging implementation challenges and areas for improvement.

Freedom and Responsibility: What Others Shouldn't Attempt

Netflix's famous "freedom and responsibility" culture enables remarkable innovation, but Stone warns that other companies shouldn't attempt this approach without extremely high talent density. The lack of prescriptive processes and strict guardrails requires people with exceptional judgment and skills.

"If we want to create a work environment where we are not prescriptive about how people solve problems or the scope of problems that they could tackle, that would be very hard if not dangerous if we didn't have high talent density," Stone explains.

This philosophy manifests in minimal planning processes, lack of vacation tracking, and giving individual contributors significant autonomy to identify and solve important problems. Many Netflix innovations in content delivery, encoding, and personalization emerged from individual contributors rather than top-down direction.

• Freedom to explore problems and solutions requires people capable of identifying high-impact opportunities
• Minimal process works only when people have strong judgment about priorities and trade-offs
• Individual contributors must understand business context to make good decisions about time allocation
• Innovation emerges when smart people have space to experiment without bureaucratic constraints

The challenge lies in maintaining efficiency at scale while preserving the cultural elements that drive innovation. Netflix continues seeking the "sweet spot" between operational discipline and creative freedom as the organization grows.

Stone notes that unlimited vacation policies and flexible work arrangements only succeed when people naturally hold themselves to high standards. Without intrinsic motivation for excellence, such policies can become problematic rather than empowering.

Centralized Data Teams: The Power of Functional Excellence

Netflix's decision to maintain centralized data and insights teams—rather than embedding specialists within business units—represents a deliberate choice about priorities. While most companies move toward embedded structures as they scale, Netflix preserves centralization to maintain functional excellence and objectivity.

"The benefit we get is we get to think about our functional expertise—are we really world's best data engineers, world's best data scientists," Stone explains. "It also allows us to be really objective. Our job is not to tell the story that someone wants to hear with the data."

This structure requires extraordinary partnership between centralized teams and business stakeholders. Data scientists work on problems for teams they don't report to, demanding high trust and clear communication about priorities and objectives.

• Centralized teams can maintain cutting-edge technical expertise across the entire organization
• Cross-pollination of ideas happens more naturally when people work across different business areas
• Objectivity increases when teams aren't incentivized to support predetermined conclusions
• Career development benefits from exposure to diverse problems rather than narrow specialization

The consumer insights team represents an unusual integration of qualitative research with quantitative analytics. Rather than separating user research from data science, Netflix combines these capabilities to create what Stone calls "a superpower" for understanding member behavior.

This full-stack approach enables tackling complex problems like recommendation systems by combining behavioral data analysis with attitudinal research about how people want to discover content.

Leadership Practices: Staying Connected at Scale

As organizations grow, senior leaders face increasing pressure to spend time on strategic issues rather than connecting with individual contributors. Stone deliberately fights this trend through structured practices that maintain connection across organizational levels.

Her approach includes regular office hours where anyone can book time, "ask me anything" sessions with teams of various sizes, and responsive communication practices that treat individual messages as high priority.

"I still have bi-weekly office hours where people sign up for slots. People book them out many months ahead and it's just an opportunity to stay in touch," Stone explains. "Both examples are about making the time for it—it just wouldn't happen if I didn't make it a priority."

• Office hours create structured opportunities for individuals to connect with senior leadership
• Responsive communication builds trust and demonstrates respect for others' time and contributions
• "Ask me anything" sessions provide transparency about leadership thinking and company direction
• Personal connections become the foundation for professional relationships and career development

Stone's emphasis on presence during one-on-one conversations reflects her belief that human connection drives both personal satisfaction and business results. Many of her closest friendships originated from professional relationships, creating a community that extends beyond formal work structures.

The practice of treating individual conversations as "sacred" while acknowledging less attention during large meetings shows realistic prioritization. Rather than claiming perfect presence in all situations, Stone focuses energy on interactions where deep connection matters most.

Common Questions

Q: What is the Keeper Test and how does it work at Netflix?
A: A mental framework where managers ask "If this person said they were leaving, would I fight to keep them?" It creates accountability for maintaining high performance and having honest conversations about fit.

Q: How does Netflix maintain such high standards without traditional performance reviews?
A: Through real-time feedback, annual 360-degree evaluations focused on development, and regular keeper test conversations between managers and reports throughout the year.

Q: Why does Netflix keep data teams centralized instead of embedding them in business units?
A: To maintain functional excellence, enable cross-pollination of ideas, preserve objectivity in analysis, and provide better career development through exposure to diverse problems.

Q: What makes Netflix's "freedom and responsibility" culture work?
A: Extremely high talent density—people with exceptional skills and judgment who can handle minimal process and make good decisions about priorities and trade-offs.

Q: How can leaders stay connected to individual contributors as they become more senior?
A: Through structured practices like office hours, responsive communication, "ask me anything" sessions, and treating one-on-one conversations as high priority.

Elizabeth Stone's journey from economics PhD to Netflix CTO demonstrates how systematic thinking, team-first orientation, and commitment to excellence create sustained career success. Her insights into building and maintaining high-performance cultures offer practical frameworks for any leader seeking to elevate organizational standards while preserving human connection and individual growth.

Netflix's culture proves that radical transparency, high expectations, and minimal bureaucracy can coexist when built on a foundation of exceptional talent. For leaders willing to make difficult decisions about team composition and invest deeply in others' success, Stone's approach provides a blueprint for creating environments where both individuals and organizations can achieve world-class results.

The key insight is that culture isn't just about values or policies—it's about systematic practices that reinforce desired behaviors while making undesired behaviors uncomfortable or impossible. By making excellence the path of least resistance, Netflix has created a self-reinforcing system that attracts and retains the kind of people who thrive in high-performance environments.

Practical Implications

• Implement keeper test thinking: Regularly assess whether you would fight to retain each team member—use this reflection to drive honest performance conversations
• Give feedback immediately rather than saving it: Address issues when they occur rather than waiting for formal review cycles to provide development guidance
• Share leadership context transparently: Provide teams with information about strategic priorities and trade-offs to enable better distributed decision-making
• Hire for additive skills and perspectives: Look for people who raise the bar for the entire team rather than simply meeting current requirements
• Focus on outcomes over process: Emphasize results and impact rather than specific methodologies or time investment when setting expectations
• Centralize expertise where objectivity matters: Consider keeping analytical and research functions independent from business stakeholders to maintain credibility
• Create structured connection opportunities: Establish office hours, AMA sessions, and responsive communication practices to maintain relationships across organizational levels
• Set world-class standards consistently: Apply the "last 5%" principle to deliverables and follow-through while helping others achieve the same level of excellence
• Translate between technical and business stakeholders: Develop skills in explaining complex concepts to diverse audiences to increase organizational effectiveness