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Kelechi Iwuaba

NETFLIX ISSUED ITS third-quarter earnings report last month—and it was stellar. Just when everyone thought its growth was done, the streaming service added 2.4 million new subscribers. Quarterly revenue increased 5.9% year over year to $7.93 billion.

More important, cash from operations and free cash flow grew rapidly, up 261% and 14% respectively. For long-term investors, these are the metrics that matter most because they show the business is making money.

Netflix wanted us to know this, as well. During its earnings call, the company took a swing at the competition. Management said the company is earning between $5 billion and $6 billion a year in operating profit, while most of its streaming rivals are still losing money.

I give a lot of credit for Netflix’s success to two factors: the power of inertia and the power of storytelling. You can see inertia in Netflix’s enormous subscriber base, which is currently around 220 million worldwide.

Among the 137 million total households in North America, more than 53% subscribe to Netflix. But even that figure underestimates its dominance. After all, think about all the password sharing, where family and friends in different houses use one account. I wouldn’t be surprised if as many as 80% of North American households have access to Netflix, one way or another.

How does it keep so many users? Undoubtedly some people must think about dropping, but they don’t follow through. The answer to this stickiness—apart from the service’s addictive movies and TV shows—is inertia.

And it’s a global phenomenon. Netflix has more than 73 million subscribers in the U.S. and Canada, and nearly 73 million more in Europe, the Middle East and Africa. There are 39 million subscribers in Latin America, plus another 35 million in the Asia-Pacific region.

According to Isaac Newton’s first law of motion, an object in motion will tend to remain in motion unless acted upon by a larger force. And an object at rest will remain at rest unless acted upon by a larger force. The Netflix subscriber base seems completely at rest, happy to curl up on the sofa and binge-watch from the safe confines of home.

As an engineer, I also see inertia playing an outsized role in other, larger ways. It’s easy to allow our day-to-day lives to stay the same. Why make changes if things are generally okay? This leave-it-alone behavior can lead to poor outcomes. Just consider the possible effects on our finances:

  • We stay in debt because we can just keep making the minimum monthly payments.
  • We don’t save because we have a job that pays our bills.
  • We take ever more investment risk as stock values go up, failing to rebalance and leaving ourselves vulnerable to a big market decline.
  • We stay in jobs we hate because it’s just easier than searching for something better.
  • We don’t take training courses or certifications to improve ourselves because our career is in a decent spot.

The problem with this “if it ain’t broke, don’t fix it” approach is that things regularly go wrong in life. The question isn’t “if” something will break, but rather “when.”

How can we free ourselves from inertia’s hold and avoid leaving ourselves financially vulnerable? We should act less satisfied and instead follow this advice from Morgan Housel, author of The Psychology of Money: “Aim to be financially unbreakable: be able to stick out swings in the market and stay in the game long enough for compounding to work its magic.” In other words, we should create a financial fortress to withstand the storms that will eventually come our way.

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When offering such advice to others, I’ve tried to use logic. If I presented a good enough argument, I thought, those listening to my reasoning would change their mind and do what’s best. This turned out to be mostly a myth.

I’d forgotten about the powerful force that made me change. It wasn’t logic and reasoning, but rather storytelling—the other great Netflix strength. The financial stories that influenced me could have been about what happened to me or to other people I knew, but they’ve had a greater impact on my behavior than any number of quarterly reports or stock charts.

This post is nothing more than my ask, and perhaps even a plea, that more people share their financial stories. Money is seen as a taboo topic—but I see that as a crucial failure by us humans.

Throughout history, the way we’ve learned is by word of mouth, through stories that are shared down the generations. But when it comes to this one subject that affects every part of our life, we’ve decided it should never be spoken about—at least not with the personal details that make stories powerful. By choosing to be silent, we help perpetuate a cycle of money failure that drags down a large portion of the population.

I implore everyone who reads this: We are the finance nerds in our social circles, and we need to share our stories with friends and family. You might think to yourself, “I don’t have everything figured out. Who am I to give advice?” But that’s an even better perspective, because it means you can relate to others much better than a trained financial expert. For instance, every single item in the bulleted list above is either something that I’m dealing with now or have dealt with recently.

When given the opportunity, please speak up, because we know the financial stories that can overcome inertia—and thereby put people on a better life path.

Kelechi Iwuaba is an engineer, a Nigerian-American and a self-taught finance nerd who lives in Atlanta. He loves talking about all things finance to anyone willing to listen. In his free time, Kelechi creates finance videos, records the “Rambling Mind” podcast and writes a blog. He loves volunteering at his local church and playing soccer at every opportunity. Follow him on Twitter @KelechIwuaba. Kelechi’s previous articles were That First Step and Once Upon a Dime.

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Rick Connor
Rick Connor
23 days ago

Fine article Kelechi. Inertia is indeed an amazing force. Sometimes it helps us – say from knee-jerk reactions – and sometimes it holds us back. To me, it comes down to developing the judgment to know when to stick and when to change. At 65, I’m still learning every day. Thanks,

David Lamb
David Lamb
24 days ago

“The problem with this “if it ain’t broke, don’t fix it” approach is that things regularly go wrong in life. The question isn’t “if” something will break, but rather “when.” ”

Absolutely true, and so I ask when will it “go wrong” for Netflix? One potential vulnerability is its future growth: “Among the 137 million total households in North America, more than 53% subscribe to Netflix. But even that figure underestimates its dominance. After all, think about all the password sharing, where family and friends in different houses use one account. I wouldn’t be surprised if as many as 80% of North American households have access to Netflix, one way or another.” If 80% of the market already have access, then only 20% remains to be captured…

Andrew Forsythe
Andrew Forsythe
24 days ago

Kelechi, very good post. I’ve likewise soon forgotten most of the stats and charts and it’s the stories that have stayed with me. There’s something hardwired into us that makes stories so compelling, and that hasn’t changed over the centuries.

steveark
steveark
24 days ago

Very well crafted post with lots of embedded wisdom. I’m an engineer too and perhaps we have an advantage over some other professions in that the idea of continuous improvement is woven into our work practices and that has to spill into our world view at least a little bit. Nice Kelechi, nice!

Ormode
Ormode
25 days ago

Unfortunately, the reason investors can make money is that most people spend money like drunken sailors. If no one ran up credit card bills, how would bank stocks be profitable? If we really managed to persuade everyone to be rational and frugal, our stock accounts would tank.

Nate Allen
Nate Allen
24 days ago
Reply to  Ormode

Perhaps temporarily until the market had time to adjust and react. The US savings rate is a paltry 3%. Worldwide, savings is around 25% while some regions are much higher. (For instance, Asian cultures tend to save more, above 35%.)

If the general US population were to save more and spend less, it is doubtful that the stock market would tank long term. In fact, it might be a healthier society overall which might lead to better long-term performance.

Last edited 24 days ago by Nate Allen
John M
John M
25 days ago

We talked about cancelling Netflix a long time, finally did – and then within a few months we re-upped. My wife had an interest in one of their shows, and we’re really enjoying ‘Extraordinary Attorney Woo”. Funny how those things go.

I tend to be numbers oriented, so the power of storytelling often escaped me. As I’ve gotten older I’ve realized the incredible extent to which stories influence people. Good insights, and good luck with your financial future!

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