Basically, that outlook sounds great on paper, but is not so great to actually live.
I can also see how it would be hard to carry over into a startup, because the entire culture rests on the idea that you can pay people top of market to be there, that they don't have to worry a lot about budgets, and that you can afford to give people big checks when they leave.
What's so off-putting about: "Do well and you stick around, do poorly and you go away"?
Because I don't want to have that kind of instability if I don't get a lot of money to make up for it. It works because people know that if they get "cut" they'll be doing fine.
Also, the best people have lots of options. If there are multiple interesting options, all else being equal the extra cash will help a lot.
Sadly, I see way too many people in our industry who do get a lot of money, and still feel they're allowed to deliver little to show for it.
In a "regular" company there's usually a longer leash if you don't get that right on day 1, or if circumstances change and the specific skills you were brought in for aren't as relevant anymore.
In the Netflix model there's a by-design higher chance of it instead resulting in you losing your job.
So if you aren't compensating with $$$ for that increased risk, it's going to leave you with more of the folks without other good options and fewer of the folks who say "I can get the same money with less pressure if I take this other role instead."
Why put up with "do well and stay or poorly and you go away" when other places pay the same for better culture and less drama?
One note: high turnover causes lots of workplace challenges - so you have to have a carrot along with your stick or you'll create a doom loop. Just "do well and stick around" is way to glengary glen ross for me.
Or mathematically, the long term expected return from a volatile employment situation should be equal to the long term expected return from a stable employment situation.
Risk should be compensated by higher expected return, otherwise it's not worth it
Secondly, more often than not, doing "well" or doing "poorly" can be highly subjective and politically motivated. Also, underneath it all we're human. A great performer for years may fall off the wagon for a few quarters due to various life circumstances like death of a loved one, divorce, health, etc. Is the solution to this is to just throw them to the curb the minute they aren't performing to their previous level? If so, then I expect to be paid until the Benjamin's are pouring out of my eyeballs. You get what you pay for.
A simple example. Netflix promotes Freedom and Responsibility. Their engineers seemingly had freedom to choose their own systems to build with their own designs at their own pace. The company's guideline to their managers used to be "All that a manager does is to set context". But really? How can the leaders avoid catastrophic failures? How can the leaders keep their orgs' schedules and promises? How can the leaders draw the line between empowering and micro-management in such environment? It's not there is a runbook. And things do fail and sometimes someone do take the fall. Then who? How much? How do the leaders do it to avoid sink the culture?