25 years ago, Netflix laid off a third of its employees and learned a lesson about ‘talent density.’ New cuts will test whether it still works

Sometime after Netflix’s 2001 layoffs, Patty McCord told Reed Hastings she was having a blast.

The company was broke and couldn’t hire.

The people left were doing twice the work.

Nobody was arguing or complaining.

Hastings, Netflix’s co-founder, gave McCord an assignment: “Go figure out why.” Her answer was “talent density,” the idea that a small group of exceptional colleagues will outwork a bigger team.

It became the foundation of Netflix’s culture, and of the “keeper test” its managers still use to decide who stays.

Twenty-five years later, Netflix is cutting again.

The company is eliminating roughly 1,000 jobs, about 6% of its workforce, in a restructuring announced Wednesday .

The cuts fall largely on its product, technology, legal and human resources teams.

McCord ran human resources.

This time, the company has plenty of money and a growth problem.

Netflix is still expanding, just not as fast as its leaders or its shareholders want.

Its stock is down 22% this year and 42% over the past 12 months.

In February, it lost a bidding war for Warner Bros.