Holy, Netflix!

Netflix's stock just hit an all-time high of $313 a share.

This wouldn't be so remarkable except for what happened two years ago.

Two years ago, after a remarkable multi-year run on the strength of a new video streaming business, Netflix stock blew through $300 a share for the first time.

Netflix, everyone was convinced, had discovered the Next Big Thing.

Netflix was on its way to becoming "the next HBO."

Netflix was going to disrupt and revolutionize the television business and make anyone who bet on it fabulously rich.

But then Netflix made a significant mistake.

It announced that it was going to split itself into two different companies. One company would contain Netflix's original DVDs-by-mail business. The other company would be the streaming business. Netflix was going to split into two companies, it explained, because the DVDs-by-mail business was a dying business, and the streaming business was the future.

Well, the market hated that idea.

Despite the fact that absolutely nothing at Netflix's businesses had changed, the market destroyed Netflix's stock price. The stock crashed by 75% in three months, to $65 a share.

Why did Netflix make this mistake?

Because Netflix is run by humans.

Extraordinarily talented, brilliant humans, but humans. And humans occasionally make mistakes.

But did the market conclude that the extraordinarily talented, brilliant humans who ran Netflix had just made a relatively rare mistake?

Nope.

The market concluded that if the humans who ran Netflix were so unfathomably stupid as to have come up with a harebrained idea like splitting itself in two, Netflix was obviously completely screwed.

The Netflix founder and CEO who had been lionized as a genius on the cover of all those magazines, for example?

Obviously an idiot.

Netflix was a terrible company, the market agreed. Some people said it was going out of business.

But now, a mere two years later, Netflix is setting a new all-time high.

How?

Did Netflix pull off some magic recovery?

Did Netflix introduce some revolutionary new product that no one saw coming?

Nope.

Netflix just did its thing--the same thing it was doing when the market threw up in disgust and pulverized Netflix's stock price.

Netflix just kept investing in its streaming business.

And, just as many long-term Netflix investors had hoped, the streaming business has turned out to be a pretty good thing.

So, what's the moral of the Netflix story?

The same moral as the story of Amazon, Facebook, Google, and many other excellent companies:

Ignore Wall Street.

Wall Street is so hyperactive and bi-polar, and so obsessed with meaningless short-term results, that Wall Street causes countless pretty good managers and companies to worry about all the wrong things.

Want to create the most possible value for shareholders?

Then start by creating the most possible value for your customers.

Put your customers first, and, over the long haul, your stock price will take care of itself.

Well done, Netflix!