I was reading through Netflix’s corporate policies — or rather, the absence of them — when I realized something that most commentators seem to miss. The story of Netflix’s “no rules” culture is not a story about removing rules. It is a story about replacing rules with something far more demanding: personal accountability.

Every company says it trusts its employees. How many actually prove it by eliminating every safety net, every approval chain, and every bureaucratic checkpoint — and then making that system work at a scale of thousands of employees across dozens of countries?

The Day Netflix Stopped Counting Vacation Days

In 2003, Netflix made a decision that the HR world thought was reckless. They eliminated vacation tracking entirely. No accrual system. No maximum days. No minimum days. No forms to fill out. No manager approvals for time off. Employees would simply take vacation when they felt they needed it and coordinate with their teams to ensure work got done.

The reasoning, as Reed Hastings and Patty McCord explained it, was disarmingly simple. Netflix did not track the number of hours people worked each day. Nobody clocked in or clocked out. So why were they tracking the days people did not work?

“We should focus on what people get done, not on how many days or hours they worked. Just as we don’t have a nine-to-five policy, we don’t need a vacation policy.”

— Reed Hastings, No Rules Rules (2020)

The key word there is “should.” It sounds obvious when you say it out loud. Of course results matter more than hours. But implementing that belief as actual policy requires a level of institutional courage that most companies simply do not have. What if people take advantage? What if someone takes three months off? What if nobody takes vacation at all because there is no system telling them they have earned it?

Netflix’s answer to all of those questions was the same: we hired adults, so we will treat them like adults.

The One-Sentence Expense Policy

If the vacation policy raised eyebrows, the expense policy made jaws drop. Netflix’s entire expense policy fits in a single sentence:

“Act in Netflix’s best interest.”

That is it. No per-diem rates for meals. No pre-approved hotel lists. No maximum airfare thresholds. No forms requiring three levels of management sign-off before you can book a conference registration. Just five words and the expectation that you will use judgment.

I wondered how this could possibly work in practice. In every company I have ever seen, expense policies exist precisely because some percentage of employees will spend irresponsibly if given the chance. Netflix knows this too. The difference is in how they handle it.

The Accountability Mechanism Nobody Talks About

Here is the part that most articles about Netflix’s “no rules” culture conveniently omit: the system is not without enforcement. It is without bureaucracy. There is a critical difference.

Netflix conducts a 10% annual audit of all employee expenses. An internal team reviews a random sample of spending across the company. They are not looking for minor infractions or penny-pinching violations. They are looking for patterns of abuse — employees who are consistently spending in ways that a reasonable person would not consider “in Netflix’s best interest.”

When they find abuse, the consequence is severe. First-offense termination. Not a warning. Not a conversation with HR. Not a performance improvement plan. Termination.

And here is the detail that makes the system truly effective: managers are required to tell their teams when someone has been fired for expense abuse. The identity is kept anonymous, but the fact of the termination and the reason for it are shared openly. Everyone on the team learns that the trust system has teeth.

I find this mechanism fascinating because it inverts the traditional approach completely. Most companies build elaborate approval systems to prevent bad behavior before it happens. Netflix lets behavior happen freely and then responds to the bad behavior with decisive consequences. The message is unmistakable: we trust you completely, and if you violate that trust, you are gone.

No Travel Policy Either

The expense philosophy extends to travel. Netflix has no travel policy. No required use of a corporate booking tool. No mandate to fly economy on domestic flights or stay at budget hotels. No per-night hotel caps.

The expectation is the same as everything else: use your judgment. If you are flying to a meeting that starts at 8 AM and there is a red-eye that gets you there at 6 AM, Netflix trusts you to decide whether you will be more effective arriving exhausted on the cheap flight or well-rested on the flight that leaves the day before with a hotel stay. The company would rather you show up sharp and effective than save $200 on airfare.

This approach terrifies traditional finance departments. But Netflix’s argument is that the cost of the bureaucracy — the procurement systems, the approval workflows, the time employees spend filling out forms, the managers spending reviewing those forms — often exceeds the money saved by those controls.

Why This Only Works With Talent Density

I want to be honest about something: this system would be a disaster at most companies. And Netflix knows it.

The “no rules” approach is not a standalone philosophy. It is the second half of a two-part system. The first half is talent density — the relentless commitment to hiring and retaining only the highest-performing people, enforced through the Keeper Test.

I wrote about this in detail in my article on The Secret Strategy to Success of Netflix, where I traced how Hastings and McCord discovered that a smaller team of exceptional people outperformed a larger team with average performers. That discovery is the foundation on which every “no rules” policy rests.

“The best thing you can do for employees — a perk better than foosball or free sushi — is hire only ‘A’ players to work alongside them.”

— Reed Hastings and Erin Meyer, No Rules Rules (2020)

When every person on the team is an “A” player, the risk of abuse drops dramatically. High performers tend to be intrinsically motivated. They do not need rules to tell them to work hard, and they do not need expense caps to tell them to spend responsibly. They are invested in the company’s success because they take pride in their work.

Remove the underperformers who might abuse the system, and you can safely remove the rules designed to constrain them. The rules were never for the top performers anyway. They were always for the people who should not have been there in the first place.

The Virtuous Cycle

This creates what McCord and Hastings described as a virtuous cycle:

1. High talent density means you can trust people with freedom
2. Freedom attracts more top talent who want autonomy
3. More top talent increases talent density further
4. Higher density enables even more freedom

Each turn of the cycle reinforces the previous one. The company becomes more attractive to exactly the kind of people who thrive without rules, and less attractive to the kind of people who need them.

The Book That Explained It All

In 2020, Hastings co-authored “No Rules Rules: Netflix and the Culture of Reinvention” with Erin Meyer, an INSEAD professor who brought an outsider’s analytical eye to Netflix’s culture. The book did something important — it did not just celebrate the no-rules approach, it examined its costs, its failures, and the specific conditions required to make it work.

Meyer’s contribution was crucial. She interviewed Netflix employees across multiple countries and levels of seniority. She documented cases where the system broke down, where cultural differences made the approach more difficult, and where the company had to adapt its principles for international contexts. The result was a far more nuanced and honest account than any corporate press release could provide.

What I found most valuable in the book was the acknowledgment that removing rules does not reduce accountability — it increases it. When there is no policy to hide behind, every decision you make is fully yours. You cannot say “I was just following the travel policy” when you book a questionable flight, because there is no travel policy. You own the decision completely.

That is a profound shift. Most corporate systems are designed to diffuse responsibility — approvals, committees, policies, sign-offs. Netflix’s system concentrates it. Every employee is fully responsible for every dollar they spend, every day they take off, every decision they make. For the right people, that is exhilarating. For the wrong people, it is terrifying.

A Company That Proved Trust Scales

When Netflix eliminated vacation tracking in 2003, they had a few hundred employees. Today, they have over 13,000 employees in more than 190 countries. The no-rules system has scaled across languages, cultures, regulatory environments, and an employee base that has grown by orders of magnitude.

That is the part of this story I find most compelling. It is easy to trust 50 people in a single office. It is something else entirely to trust 13,000 people scattered across the globe. Netflix proved that trust, when paired with high talent density and clear accountability, does not break at scale. It strengthens.

For anyone managing a team, building a company, or questioning whether all those approval workflows are really necessary — I think Netflix’s experiment offers a powerful lesson. The rules you create for your worst employees are often the rules that drive away your best ones. Remove the rules, raise the talent bar, enforce consequences for abuse, and trust that the adults you hired will act like adults.

That is not chaos. That is the most demanding form of accountability there is. And Netflix has spent over two decades proving it works.