A public company has every obvious reason not to share earnings widely with employees before announcing them to the market. Netflix does it anyway.
Netflix’s policy is long-established and central to how the company operates. The legal exposure, competitive risk, and market-moving consequences are significant. Despite these, Netflix made a distinctive bet: that the value of internal transparency outweighs the potential risk. The bet only works if the trust runs both ways; handing employees sensitive, non-public information requires that they commit to strict confidentiality.
A few years ago, that bet was tested. Netflix claimed its access logs showed that a single employee had viewed sensitive financial data on several titles, including what the company had paid for Dave Chappelle’s special The Closer, and shared that information outside the company, where it surfaced in a Bloomberg report. The employee, B. Pagels-Minor, denied leaking it to the press, saying they had gathered the data and shared it internally to make the case that Netflix should invest more in trans content. That dispute was never fully resolved in public. What is not in dispute is the rest of the picture. Pagels-Minor was Black, trans, nonbinary, and pregnant. They co-led two of the company’s employee resource groups and were among the most visible organizers of an internal walkout protesting Netflix’s handling of The Closer.
The optics of firing that person for leaking sensitive information were as bad as optics get. Every reasonable counsel — legal, communications, political — would have argued for an exception: a suspension, a negotiated exit, or some face-saving accommodation.
Netflix held the line anyway. A spokesperson said the employee may have been motivated by hurt, but that maintaining a culture of trust and transparency was core to the company.
The true test of a value is what happens when honoring it is expensive, unpopular, and tempting to rationalize away. A culture that makes its exceptions when the cost is high has already told its people the truth: their values are negotiable, and the negotiation is open. Everyone inside learns to read the conditions under which the line will move. Netflix taught the opposite lesson in a single decision of holding a hard line.
That moment is significant for revealing a generalizable, yet rare, pattern we have observed in our own work: the combination of a distinctive set of principles, a culture-obsessed CEO, signal-intensive practices that embed those principles into daily work, a strategy that requires the behaviors the culture produces, and a refusal to compromise when the principle is tested at its hardest. In combination, that pattern allows the people who believe in the culture to commit more deeply, and the people who don’t to find the door faster. It leaves no room to sit in the middle. It is also, we’ll argue, the structure that has to be in place for a culture to drive extraordinary performance.
We have spent nearly three decades inside the senior leadership teams of hundreds of companies, often on this precise question. Earlier in our careers, the two of us worked inside two of the companies examined here, Meredith at Bridgewater and Darren at McKinsey. We have watched distinctive cultures get built, and we have watched them dissolve. This dissolution is usually not the result of a single decision but the result of a hundred small accommodations that each seemed reasonable at the time. What follows is drawn from that vantage.
To be clear, companies win for many reasons: a winning strategy, bold bets made at the right time, favorable industry structure, the timing of capital markets, and luck — more specifically, what Jim Collins calls “return on luck.” Plenty of companies have achieved success without distinctive cultures. They got the other variables right, or the timing right, or both.
A distinctive culture is not required to build an enduring company. But if you have decided that culture is one of the levers you want to pull — if you believe how work gets done at your company is a real driver of performance — then there is only one kind of culture worth building.
The central thesis
We call it a black licorice culture.
Jerry Garcia once said about the Grateful Dead’s appeal: “We’re like licorice. Not everybody likes licorice. But the people who like licorice really like licorice.”
That is our central thesis applied to company building. A winning culture should be divisive. It must be distinctive enough that people will either love it or hate it. No one will be unclear.
Almost every company believes it is creating a winning culture. Almost none are. What they are actually doing is trying to have it both ways: to cast the widest possible net and to stand for something specific, as if breadth and distinctiveness were independent dials. In reality, breadth and distinctiveness are controlled by the exact same dial. Past a certain point, every increment of breadth costs an increment of distinctiveness, and the values get quietly sanded down to cast the wider net. The result is the culture you have seen a hundred times. Values broad enough to include everyone. Norms calibrated to avoid offense. Statements written by committee and acceptable to all stakeholders. A culture that, in any meaningful sense, is no culture at all. It signals nothing, demands nothing, and commits to nothing.
What makes this watered-down version of culture so pernicious is that no CEO experiences themselves choosing it. The leaders who land here do not feel like they are compromising. They feel inclusive and principled at the same time when, in reality, they are being neither.
A black licorice culture refuses this tradeoff. It chooses the narrow net of a distinctive culture on purpose. And it anticipates the obvious objection: a narrower net means a smaller talent pool, fewer exceptional people who will join, a self-imposed handicap in the war for talent. The objection sounds right, but it is wrong, because it misunderstands what a net is for. A wide net does not catch more of the right people. It catches more people, and then the company pays, continuously and forever, to manage the mismatch: the friction, the politics, and the slow bleed of people who never quite fit and are slow to leave. A narrow net pulls more of that cost earlier, through self-selection. The sorting happens either way. The only question is whether it happens before people join or after, and after is far more expensive.
This is the one thing a diluted culture can never produce: clarity. Clarity for the people deciding whether to join. Clarity for the people deciding whether to stay.
The company building a black licorice culture creates a contract with its employees. When a company is unambiguous about what it stands for, the people inside it can decide whether to enter that contract with full transparency about what will be expected of them and what they will get in return. They can answer the question, Is this the very best place in the world for me, and am I willing to give what is expected of me in return? And they can answer it honestly, because the terms are visible. The opt-in is meaningful precisely because the opt-out is also meaningful. None of this makes an exit painless, or makes the power symmetrical. But ambiguity does not protect employees from power. It usually protects the organization from having to say clearly what it will demand.
This distinctiveness is the spine of any culture worth building. Without it, no other element of the system matters.
The ingredients
Distinctiveness alone is not enough. For the spine to support a culture that actually drives performance, four other conditions have to hold around it.
A CEO who is obsessive about culture.
This is non-negotiable, and it is the condition most often missing in companies that aspire to distinctive cultures and fail. Culture cannot be delegated to a CHRO or outsourced to consultants. The CEO has to live it visibly, demand it unapologetically, and refuse to allow drift. Hastings was obsessive about Netflix’s culture for two decades. He wrote and rewrote the culture deck. He drove the keeper test, described below, into every people decision. He held the line when the line was hard to hold. And his own conduct made the culture credible. Every successful black licorice culture has a CEO who role-models, with unusual consistency, the very standards the rest of the organization is held to.
At Bridgewater Associates, where Meredith spent time earlier in her career, Ray Dalio was similarly obsessive. The Principles — the emergent guidebook for operating at Bridgewater — were not a side project. Instead, every time Dalio ran into a challenge (or, as he would say, a “case at hand”), he abstracted away the principles that helped him deal with it well. Through experience, he generated principles about everything from investing (“Be a hyper-realist”) to managing people (“Evaluate accurately, not kindly”). These principles grew from lived experience, but were rigorously codified, applied, tested, and revised over time. Dalio himself authored the principles, led by the principles, and held his employees to the bar of “principled management.” Foremost among these principles was the expectation of “radical truth and radical transparency, ” which is an explicit expectation that even the most uncomfortable information is shared openly.
A small set of truly distinctive management practices
By management practices we don’t mean the standard HR tactics of performance reviews, hiring rubrics, and onboarding decks. Those practices are standard-issue and downstream of the culture. We mean the unique, even weird, operational practices that embed the culture into how work actually gets done — the ones a competitor could not, and certainly would not, replicate.
At Netflix, the “keeper test” is one such practice. Every manager regularly asks, Would I fight to keep this person if they tried to leave? The answer reshapes who stays. Another practice is the company’s five-word travel policy that trusts each employee to “act in Netflix’s best interest,” explicitly supporting the autonomy pillar of the culture. The commitment to share company information is a third.
Similarly, at the end of Dalio’s leadership of Bridgewater, the architecture of radical transparency had become vast: Every meeting was recorded. Custom-built apps enabled sharing of observations. Among them, the “dot collector” enabled real-time transparency as every employee rated every other employee’s performance. The “issue log” open-sourced the collection of problems and identified the responsible parties at fault. And Bridgewater’s “baseball cards” provided accumulated stats, enabling full transparency into both ongoing feedback and annual reviews. What stood out from Meredith’s experience at Bridgewater was the full commitment and immense investment to embed principled management into every aspect of the company. None of these were imported best practices. They were homegrown, specific investments supporting Bridgewater’s bet about how truth is discovered and shared.
McKinsey offers a third reference point. In an earlier era, when Marvin Bower’s vision of ‘One Firm’ was still the organizing principle and Darren was there early in his career, the firm embedded its culture in two distinctive practices: one for acquiring talent, one for developing it. While most firms deputize managers to hire on day one, every McKinsey consultant had to complete a full year of structured interview training before being deemed competent to interview a single candidate. The signal was loud: the firm’s most consequential decision, who joined, was a craft, not a casual exercise.
Acquiring talent was only half of it. Developing talent mattered just as much, and in a way that itself reinforced the One Firm vision. Every consultant spent two to four weeks each year in structured development experiences at a global location. Instead of training each cohort cost-effectively in their local office, the firm sent them halfway around the world to work alongside colleagues from a mix of locations, absorbing the cost in time and money as a deliberate investment in cohesion. The first practice operationalized the firm’s commitment to talent excellence. The second ensured that a McKinsey consultant in São Paulo and one in Tokyo had been shaped, in part, by the same relationships and the same formative experiences.
These practices are unmistakable signals that the culture is real and non-negotiable. The company operates differently. It demonstrates that culture deserves the time and expense.
A handful of visible refusals to compromise the culture
A culture is built in the moments when its values collide with another legitimate interest, particularly when the tradeoffs are significant. Without these moments, and without the public refusals they precipitate, no one believes the values are real. With them, the signal is amplified.
Netflix enforcing the transparency policy is the canonical example. So is Coinbase founder Brian Armstrong’s 2020 memo declaring his company a mission-focused workplace that would not host political activism, after which roughly five percent of the workforce took the offered severance. Some refusals relate to internal topics, like these, aimed at employees. Others face outward and teach both customers and employees just as much about what a culture values. Costco’s decades-long refusal to raise the price of its $1.50 hot dog is a refusal to abandon its commitment to customers, even at the expense of its own margins. Yvon Chouinard’s decision to transfer Patagonia’s ownership to a trust in 2022, forgoing billions in personal wealth to ensure the company’s environmental mission would outlast him, is a founder refusing the usual prize of founder success. These moves are targeted at different audiences with the same basic cultural articulation: each tells employees which tradeoffs are not open for negotiation and what a culture unequivocally values.
At Bridgewater, the refusals were continuous rather than episodic. Dalio held the line on truth and transparency through years of public criticism of his management style, periods of external skepticism, and the exit of talented people who could not operate in accordance with principles. The firm recruited exceptionally talented people, only to have a handful of them “make it to the other side” — passing the eighteen-month hurdle after which new employees proved themselves compatible with Bridgewater culture. The firm absorbed those losses - losses of time, talent, and reputation - because the alternative, softening the line, would have meant the culture was negotiable. It was not.
Alignment with the strategy of choice
This may be the most often overlooked, and the most often violated, of all the requirements. Distinctiveness for its own sake is just personality. To drive performance, the culture has to generate the precise set of behaviors the strategy requires.
Netflix’s strategy demands rapid bets in content and product, which require talent density at the highest levels and the ability to surface uncomfortable truths quickly. The transparency culture and the keeper test are not decorative. They are structurally necessary for the strategy to work. The same is true of Netflix’s content strategy: a company programming for hundreds of millions of people across cultures cannot let every employee’s personal values become a veto over the slate. Similarly, Bridgewater’s strategy is to produce superior investment decisions through relentless truth-seeking in a domain where conventional thinking is already priced in. The radical transparency, the array of supporting applications, and the demand that any associate be willing to confront a senior investor with a better argument — all of it is the strategy operationalized as culture.
The right question is never: What culture do we want? It is always: What culture does our strategy require?
This raises a hard question the framework has to answer: what happens when the strategy changes? Here, the distinction that matters is between a culture eroding and a culture evolving. The two can look identical from the outside, and yet they could not be more different underneath. Erosion is the culture giving way under ordinary pressure: social discomfort, the retention of a talented but culturally mismatched employee, a shareholder’s complaint, the slow pull toward the center. Evolution, on the other hand, is the culture being deliberately repositioned because the strategic landscape has structurally changed and the business itself must change. The way to differentiate between erosion and evolution is not how leaders talk about it; every erosion gets narrated as evolution. Instead, the differentiator is whether leadership can name the specific strategic requirement the old culture no longer serves, the specific behavior the new strategy now demands, and whether they are willing to make the new culture every bit as sharp as the one they are leaving. A culture can evolve and remain black licorice, so long as the new configuration is just as distinctive and just as likely to be rejected by the people it does not fit. What it cannot afford to do is dilute toward the center and call that maturity.
When all five elements are present — distinctiveness as the spine and the four conditions arrayed around it — a culture stops being a poster on a wall and becomes a competitive system. The system reduces internal friction at the source. When the values are clear and non-negotiable, the politics shrink. When the kind of person who thrives is unmistakable, the wrong-fits self-select out. When the leadership has been visibly tested and the line has held, the second-guessing stops. Energy that would otherwise be consumed by drama and misalignment flows into the work.
These five conditions are not a menu. They are interlocking dimensions that reinforce each other and the culture as a whole. Distinctiveness without alignment to strategy is a founder’s self-indulgence. Strategy without cultural distinctiveness is execution without an operating system. A culture-obsessed CEO without distinctive practices is conviction without infrastructure. Distinctive practices without visible refusals become a set of discretionary rituals. And refusals without strategy are just theater, or arbitrary rulemaking. Each condition supplies what the others cannot, which is why removing any one of them brings down the rest.
In nearly three decades of this work, we have watched many leadership teams encounter these ideas and embrace them in theory. The few that have been consistently successful refuse the inevitable exception requests: the brilliant executive who violates the norm, the high-performing team that refuses to play by the same rules, the board member who insists the language be made less sharp. We have watched cultures begin to dissolve in exactly those moments, not because anyone rejected the culture, but because each accommodation looked small and reasonable on its own. The few who actually build a black licorice culture are not the ones who understand the framework best. That is the easy part. They are the ones whose CEO has the nerve to make the company distinctive in the first place, the discipline to embody it congruently, and the resolve to hold the whole structure in place at the precise moment it costs them something real. That combination is rarer than any insight, and it is what separates the cultures that become unmistakable from the ones that stay merely aspirational.
The why beyond performance
There are two further benefits of creating a distinctive culture that are worth naming.
The first is human. Most adults spend the majority of their waking lives at work. Whether that time is lived in flow, in alignment with values one has actively chosen, in the texture of craft — or in friction, drama, and ambient compromise — is one of the most consequential variables in any human life. A black licorice culture gives people the clarity to choose which type of company they give their life energy to.
The second is societal. There are no universally right values, and no universally right cultures. Claiming in the abstract that one company’s values are superior to another’s says more about the person making the claim than about the companies themselves. That is not a problem to be solved. It is the point. What makes a culture right as a performance system is not the abstract virtue of the values it picks. Instead, it is the fit between those values and the strategy they serve, and the honesty with which it lets people choose. A world of thousands of distinct cultures, each unapologetic about what it is, each operating within the basic ethical and legal guardrails that bind us all, is a world of real moral diversity. It’s the kind of diversity that lets individual humans find the place where their values, their work, and their daily lives actually align.
The world is starving for it: leaders willing to be specific in a society that increasingly rewards blandness, to take a stand when doing so risks being deeply misunderstood, and to hold the line when it actually costs them. That courage is the gift. To the people who join, the gift is clarity about what they are signing up for. To customers, the gift is the full force of the company’s attention on them and their needs, undiluted by internal drama.
The licorice does not need to be loved by everyone. It only needs to be unmistakably itself, so the people who love that flavor of licorice can find it.
