The Rich Roll Podcast - Steve Case On Building Empires, Changing The World & The Internet’s Third Wave

Episode Date: August 8, 2016

It's hard to imagine, but in 1985 — the year this week's guest co-founded America Online — only 3% of Americans were connected to the internet, online for an average of a measly one hour per week. It took a decade, many near-death experiences and back to the wall pivots, but under the leadership of Steve Case, AOL would go on to become the world’s largest and most valuable internet company, driving worldwide adoption of the medium that has literally transformed every aspect of modern day life. The story is legend. After AOL became the first internet company to go public, Bill Gates gave Steve a choice — sell his upstart to behemoth Microsoft or get crushed. Believing in himself, his team and the renegade idea of community over content, Steve decided to take his chances. David against Goliath, the odds were not in his favor. But not only did AOL survive, it went on to become the top performing stock of the 1990s. At its peak, nearly half the users in the United States used AOL to access the internet. When AOL's valuation escalated to $163 billion in 2000, Steve negotiated a $350 billion merger of AOL and Time Warner, the largest merger in business history, and served as chairman of the media and communication colossus until 2003. It all looked great on paper. But paper isn't reality. Cultures clashed. The stock price plummeted. With his own take on why the historic merger faltered, Steve lives to fight another day. Today Steve is chairman and CEO of Revolution, DC-based investment firm, and the Case Foundation, a philanthropic effort that invests in hundreds of organizations with an entrepreneurial approach to strengthening the social sector. The epitome of the American Entrepreneur and a true maverick of the digital age, this week I sit down with Steve to discuss his incredible story, the current state of entrepreneurship in America, and his new book highlighting an emerging new phase of the internet. Part memoir, part business playbook, and part manifesto, The Third Wave, An Entrepreneur's Vision of The Future* bears witness to the fascinating machinations behind crafting the early stages of the internet we currently enjoy and provides an astute forecast for successfully stewarding pioneering tech entrepreneurship in the coming decades. I only had a very strict 45 minute window with Steve, so this is a pretty tightly focused discussion. It's a conversation about the internet's incipient Third Wave and the focus on partnerships, policy and persistence that will be required to tackle and transform hulking, real world sectors like health, transportation, education, energy, and food. It's about something Steve calls impact investing — fostering the nascent emergence of entrepreneurship in outlier locales beyond the typical tech hotbeds of Silicon Valley, Silicon Alley and Silicon Beach. It's a conversation about why the most valuable currency of the future is ideas. And it's about why the killer app is, and will always be, people. Steve Case has impacted our world more than anyone I have ever met. It was an honor to converse with him, and I sincerely hope you enjoy the exchange. Peace + Plants, Rich

I think we need to have a more evenly dispersed innovation economy, and we need to make sure that anybody anywhere with an idea has a shot, even a shot at the American dream. That's Steve Case, and this is The Rich Roll Podcast. The Rich Roll Podcast. Hey, everybody. How you guys doing? My name is Rich Roll. I am your host. Welcome to The Rich Roll Podcast, the show where I have the great privilege of probing the hearts and the minds of some of the most interesting and inspiring thought leaders and positive change makers across a wide variety of disciplines and specialties, everything from doctors to world-class athletes, filmmakers, environmentalists, entrepreneurs, in the case of today's guest,

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So if you're in your 20s or your 30s and you're listening to this, it might be hard to imagine a time when not everyone was online, let alone online like all day with our faces planted in our phones. Now, I might be dating myself, but I remember those times quite well. In fact, I went through both college and law school in the pre-internet days. And I still vividly recall this meeting that I had with the managing partner at the first law firm that I worked at back in 1993. And he asked me, he wanted to know why I thought the lawyers at the firm should even have a computer at all, let alone a networked system of computers. I mean, forget about the internet. Now, just imagine this. This was a time when lawyers would write long briefs, like huge

documents that would take weeks to compile. And they would do that by speaking into a dictaphone. A dictaphone. I remember going into my office the first day of this job. There was no computer on the desk in the office, but there was a dictaphone machine. Now that seems insane, of course, now, but it wasn't that long ago, you guys. And then I remember around 1994,

finding out about this thing called America Online. Now, if you were around then, you might about this thing called America Online. Now, if you were around then, you might recall seeing those AOL CDs. They were everywhere piled up in, it seems like, every retail store that you would go into. They were ubiquitous. And at the time, I also remember thinking I wasn't all that interested in it, but that would soon change. In fact, it would change everything. And today on the podcast, I'm super thrilled to sit down with the man behind all of this, a man I think it's fair to credit as one of the true maverick entrepreneurs of the digital age, a guy who was a pioneer who made the internet part of everyday life, Steve Case.

So Steve is a guy whose career began when he co-founded America Online in 1985. And that was a time when only 3% of Americans were online. And it took him a decade, a ton of near-death experiences and back-to-the-wall pivots. But under Steve's leadership, AOL will go on to become the world's largest and most valuable internet company, driving worldwide adoption of the medium that has literally transformed everything about how we live today. AOL was the first internet company to go public. It was the top performing stock of the 1990s. And at its peak, nearly half the users in the US used AOL to go online. In 2000, Steve negotiated a $350 billion merger of AOL and Time Warner. It's the largest merger in business

history. And he served as chairman of the world's largest media and communication empire in the entire world until 2003. Today, Steve is chairman and CEO of Revolution, which is a DC-based investment firm, as well as serving as chairman of the Case Foundation, which is a philanthropic effort that invests in hundreds of organizations with an entrepreneurial approach to strengthening the social sector. He's also got a new book out. It's called The Third Wave. It's part memoir, part business playbook, part manifesto. It's got tons of super interesting behind-the-scenes stuff about his life and his professional career with all the ups and the downs that he endured to get where he is today, and what it was actually like to craft the early stages of the internet that we currently

enjoy, as well as his take on how the internet evolved to where it is now and where the internet and tech entrepreneurship are headed in the foreseeable future. I really enjoyed the book. It's fantastic. It's a quick, fun, easy read. So I reached out to Steve to see if he would be open to sitting down with me and talking to me about his life and the book and his career while I was in DC. And so here we are. I only had a very tight 45 minutes with Steve. So much like last week, this is a pretty tightly focused discussion. I didn't have the bandwidth or the time to really go too deep into any one thing the way that I usually do, the way that I prefer to do. But it's great. It's a conversation about the next phase of the internet, what Steve calls the third wave, which involves transforming real-world sectors like health, education, transportation, energy, and food.

health, education, transportation, energy, and food. It's a conversation about the current state of entrepreneurship in America, particularly in outlier areas outside of the typical tech hotbeds like Silicon Valley and New York and Boston and Los Angeles. It's a campaign that he calls Rise of the Rest. He literally gets in a bus and drives across the country to meet with entrepreneurs. And it's a conversation about the killer app that made AOL succeed where even Microsoft couldn't. And it's about how success in this emerging new third phase of the internet is going to require three things, partnerships, policy, and perseverance. So without further ado, enjoy my conversation with Steve Case. You good to go? I'm good. Thanks so much, Steve, for taking the time. It's a pleasure to meet you.

I was very impressed with your book. I enjoyed it tremendously. Thank you. And I'm excited to have this opportunity to talk to you about it a little bit. Great to have you here. So, why don't we just unpack the book a little bit? You know, why did you write it and what are you hoping to accomplish by this wonderful book? Well, actually, I kind of resisted writing a book for a long time. I'm 57 years old, never wrote a book before and people even 15, 20 years ago said, I write a book about this or about that. But I was just not interested, not that motivated. And I think the reason for that was I was not so interested in talking about the past kind of a memoir. I was much more interested in talking about the future and

what's going to happen next. And it was really only a couple of years ago when I realized that there's the two waves we've experienced with the internet and the third wave was kind of beginning to build up momentum and that each of them were different. But the third wave could learn from the first wave and some of the lessons in those early days of AOL, the early days of the Internet could help inform innovators, the entrepreneurs in the third wave. So once I realized that I could write something that really is more leaning into the future, but also tell some stories from the past to help inform, you know, the future, then it became more interesting. Right. It was really fascinating to read about the early days of AOL. It kind of reminded me a little bit of that TV show, Halt and Catch Fire. Have you been watching that? You know, very different in certain respects, but just the tone and the tenor of what it must have been like at the very inception of of you know

this industry that now kind of defines our age yeah that people have when i've been talking about the book they're really surprised by some of those aspects because particularly younger people grew up with the internet as this part of everyday life and pcs and uh phones and so forth it just i tell the story of when we got started in 1985, so 31 years ago, only 3% of people were online, and they were only online an hour a week. People can't believe that. People back then, when I talk about how computers didn't even have modems built in because computer manufacturing didn't think people would want to get connected,

people were like, well, that's sort of crazy. So it was fun going to go back and talk about some of those early days and some of the lessons I tried to hopefully convey around the importance of partnerships to really drive that, which are going to become important again, and the importance of engaging on some of the policy issues. And when the internet really became legalized and commercialized, there were a lot of kind of policy issues to deal with, and frankly, perseverance. And it took us the better part of a decade before we finally broke through and people decided they wanted to get connected. And so those were some of the lessons I learned that I think are going to be applicable in this third wave.

Right. So I think there's this idea that America Online was always a large company, was always a behemoth and to see that it was really a scrappy startup in the truest sense of the word and all the energy and work that went into creating inertia out of nothing right to establish this kind of infrastructure i mean i'm one of those people that you know i remember well when those discs were ubiquitous everywhere i mean how many of those there were like a hundred million of those things maybe even more i don't know what the number was but i know it was a lot they were everywhere and and and that being kind of a defining characteristic of this first wave and maybe we should just define the three waves so we understand what we're talking about going forward the first wave really was exactly we're talking about getting people connected to the internet

getting people understand why they should get connected to the internet uh and it went from that first phase when nobody was connected nobody cared uh to by the end of the first wave, you know, 2000 roughly, everybody was connected and couldn't live without it. So that first wave was about the software and the networks and the servers and just building the core foundation, the on-ramp, if you will, and educating people about the benefits of getting connected. That then unleashed the second wave, which for the most part, the last 15 years or so, has been about apps and services riding on top of the Internet. So it's things like, obviously, Facebook and Google and Twitter and Waze and Snapchat and many other things. It's basically been the app economy.

Mobile phones have obviously been the key kind of platform for that. And a lot of amazing companies and services have been built on that second wave. But in the third wave, I think it's going to be more about integrating the internet in seamless and pervasive ways throughout our lives. And the process really changed, hopefully in positive ways, healthcare and education and transportation, energy, food, some big parts of our lives, big sectors of our economy that haven't changed all that much in the first wave or the second wave. I think we'll change a lot in the third wave, but it goes back to the original reason to

write the book. It's going to require more of what I call the three Ps in the book, more focus on partnerships, more focus on policy, more focus on perseverance to be a successful innovator in the third wave. So the opportunities are vast, but it's going to require a different mindset, I think, a different playbook to be successful. Right. And there's this idea that past is prologue because this third wave is really very similar to the first wave, which is something that you have more experience with than almost

anybody out there. The parallels between what's know, what's going to have to happen, you know, the inertia that's going to have to be created now to move these, you know, gigantic industries, healthcare, food, education, and transportation into this new era. No, I agree. And frankly, when I talk to entrepreneurs, particularly in Silicon Valley, but all over the country, you know, they don't necessarily love what I'm saying. The idea that the partnerships are going to be more important, well, that's hard. It's hard. It's easier just to create an app and drop it in the app store and hope you get lucky and get viral adoption. Partnerships that sometimes will take years to develop is kind of a pain. Similarly, policy, the idea that these are regulated businesses, you have to deal with governments, deal with regulators.

That's kind of like a bummer. Who wants to do that? That's not sexy. That's not sexy. It's kind of a source of a lot of frustration. But the reality is the things like the drugs we take or the medical devices, of course, they're going to need to be safe. And even things around smart cities and driverless cars and drones, of course, they need to be figured out some way to integrate them in a network, in a fabric where public safety is part of it. So it's just going to go with the territory if you want to innovate in these sectors, the role of policy. And again, the perseverance is kind of a bummer too. Overnight successes are awesome. These dorm room startups that a year

or two later are kind of global brands like Facebook or Snapchat, that sort of was the model in some ways of the second wave. I think in the third wave, it's going to be more like the AOL experience, which was sort of a 10-year-in-the-making overnight success. So I think I understand why people don't necessarily embrace the importance of partnerships, the importance of policy, the importance of perseverance. But I think the winners in the third wave will recognize that's going to be part of the playbook. Yeah, I think one thing that you have done extraordinarily well, and I think that makes you sort of unique in the tech industry, is how fully embedded you are in, you know, policy initiatives and being someone who understands how to work with regulators and legislators all the way up to,

you know, all the work that you've done with the various administrations and the work you've done with Obama, et cetera. You know, I'm sure part of that has to do with proximity, being here in Washington, D.C. and not in Silicon Valley. But maybe walk us through a little bit of, you know, the specifics of that and why that's going to be so important with these larger industries moving forward. I do think some of my interest or respect for the importance of this does come from being in D.C. We started AOL outside of D.C. in the northern Virginia suburbs three decades ago and watching that develop and building relationships over three decades with a variety of people in government, I think gives me me a sense of that, a perspective.

But the other was, in those early days, that first wave of the Internet, policy was front and center. It's worth remembering. Again, this seems sort of odd. But when we started in 1985 with our first service, it was illegal for consumers or businesses to connect to the Internet. That's amazing. In the 80s, the Internet was restricted to government institutions and educational institutions. If you worked for a government agency or you were working at a university, you could connect to the Internet, but consumers and businesses couldn't.

It was only in 1991 when the Internet was commercialized, and partly because of the Mark of Congress passed the Telecom Act. President Clinton at the time was an advocate of it. Vice President Gore was a big advocate of what was then called the information superhighway. In some ways, the internet revolution was kick-started when a judge here at a district court in D.C., Judge Green, broke up the phone company, broke up Ma Bell and created these regional companies, and that unleashed a lot of competition and communications drove down you know communications costs so so i saw firsthand the importance of policy and really you know kind of making that it's also worth remembering that actually the

government did invent the internet darpa government agency not too far from here in northern virginia funded you know the creation of the uh of the internet so So it was clear to me, not just because I lived here, but because I was living that first wave, you know, the role of government. And that was not that big a deal in the second wave when it really was about apps and services. Facebook and others didn't really need to deal with regulation until they got really big. And suddenly people were focused on privacy issues, other kinds of things. But it wasn't something they had to deal with to enter the market. But the innovations in the third wave, take healthcare as an example. It's one-sixth of the economy. A lot of people obviously are interested in figuring out ways to keep people

healthy or better manage chronic disease or even more life-threatening diseases, but that's going to require understanding the policy framework. There's a reason why there are regulations around drug safety, for example, or medical device efficacy. And so if you want to innovate in those sectors, you just have to understand the importance of that and factor that into your planning. So it's just a different kind of innovation. The other thing I think will be different in this third wave will be these importance of partnerships, including with the small companies, the startups, working with the big companies, the Fortune 500 companies, and sectors like healthcare. There's an African proverb I love, I cite in the book, which is,

you want to go quickly, you can go alone. But if you want to go far, you must go together. So that spirit of partnership is going to become much more important in the third wave. Right. So this second wave is really enjoying the fruits of your labor by breaking open all of these doors. And now it's just about trying to get as many eyeballs, as many subscribers to your app as possible, and just populating it with as many people and moving forward without necessarily even idea of what your sort of roadmap to profitability is. But that's all going to change when we begin to tackle these industries in the third wave. It would be great to, because the story is so extraordinary,

to just kind of revisit the trajectory of AOL from where it began to, you know, its ultimate sort of pinnacle of success and the merger with Time Warner and all of that, if we could recap that a little bit. Sure. Well, when we started in 85, it was still early days. And we had a team, a couple dozen people in Tyson's Corner, Virginia, that we raised a million dollars in our first round, which wasn't a lot at the time. One of the big competitors looming was a joint venture called Prodigy. IBM and Sears had put $1 billion into Prodigy. So they had $1 billion. We had $1 million. So we weren't going to win a head-to-heady. So they had $1 billion. We had $1 million.

So we weren't going to win a head-to-head fight. So our strategy in the early days was to partner. And we partnered with PC manufacturers, Commodore with their Commodore 64 and Radio Shack and IBM. And Apple created a variety of private label servers, like Apple Inc. Personal Edition was one of them. And we did that for the first five years or so. And then-

And it really grew out of a pivot out of another business model, though. The original intention was not to connect America. No, originally when I moved to the D.C. area, I was joining a startup in 1983 that was focused on Atari game machines. But they launched with fanfare. They immediately kind of hit the wall and were kind of teetering on bankruptcy. So it was my first wake-up call that startups, sometimes it works, sometimes it doesn't. But yeah, out of that, two of the people I met at that company, Jim Kimsey and Mark Serif, and I became the co-founders of AOL in 1985. But that first strategy for us, because we didn't have a lot of capital in the

competition, not just from Prodigy, but from others at the time, like Compuser, which was owned by H&R Block, and AT&T, and Citigroup. A lot of people were making investments in different interactive services back then. And so we have to figure out a way to enter this market with partnership. And so focusing on these private label services with computer companies was the way to get going. We also early on, you know, thankfully focused on community as the killer app. We always believed that the killer app of the internet was people, you know, and at the time a lot of people thought it would be content would be the killer app, particularly the media companies, newspapers, TV networks, all thought content was the key. Some thought commerce would be key. Sears, a backer prodigy, thought electronic commerce, electronic shopping

would be the, you know, really the key. We thought community was going to be the key. So we launched things like instant messaging and buddy lists and all kinds of things and created texting and other kind of next generation services because we thought community was important. It was only after the first five years or so that we then united our services, these private label independent services, one for the Commodore 64, one for the Apple II, one for the Tandy computer, et cetera, into one unified service, which we call the America Online. That's really when things started to really accelerate.

Right. I think the defining characteristic really was this idea that community and people was going to carry the day as opposed to content. And creating these partnerships, obviously super important in getting traction and beginning. But once it, and I think the other thing, it seems to me, and I'm interested in your thoughts on this, was just the sort of sheer accessibility of it and the user friendliness of it. The idea that you were aiming towards the average, you know, soccer mom getting online as opposed to the hobbyist. Yeah. No towards the average soccer mom getting online as opposed to the hobbyist.

Yeah. No, those early days, getting online was difficult. It was challenging. It was hard. It was expensive. I remember the early days when we got started, about $10 an hour to be connected. That's one of the reasons why people weren't using it that much. So we knew if it was going to become a mass medium, it had to be much easier to use, much

more useful, much more fun, and much more affordable. And we just kept kind of whacking away, trying to deal with all of those. So the simplicity of the software was a big priority for us, trying to lower the cost of communication so we could lower the price of the access was a big focus. And that, again, took partnerships and took perseverance. It really was a decade before finally the communications cost was lower. Finally, every PC was shipping with a built-in modem. Finally, things like the World Wide Web were created that kind of helped create a new platform for content creation and distribution. But there are a lot of things that had to go in place in that first decade to then drive the adoption in the second decade.

Right. that first decade to then you know drive the the adoption in the second decade right like looking back it's almost amazing that a you had to convince people of the value of being online oh yeah this is a huge war of the minds it's hard to believe now because everybody takes it for granted but most people back then 30 years ago when we were talking about the getting online they kind of looked kind of quizzically and said like why would like normal people do that seems like it's some computer hobbyist kind of nerds might do that but there's never again even when we went public we went pub took uh able public in 1992 as the first internet company to go public uh so we were educating people not just about aol in our business model but what the internet was and why we thought it would someday be a big deal and most investors

just looked at us like you know we were crazy were crazy. Right. And the IPO raised only like 10 million bucks. Yeah, we raised $10 million in market value of the day. We went public with $70 million. And then eight years later, it went from $70 million to $160 billion. So it was the best performing stock of the decade. But when we first went public, you know, it was sort of like a tree falling in a forest. Nobody knew or cared who we were or what we were going to do. It took a little bit of time before people kind of figured out that there's something interesting brewing here and that it was well positioned to help get America online. Was there a specific moment where you knew it was going to work and it locked in, or was it a progressive growth of adoption?

It was progressive, but there were a few kind of, going back and obviously thinking about this in the context of writing a book, I kind of identified a few kind of pivotal moments. One was that IPO, which was, I think, kind of put the internet as a business on the map. Another was two or three years later when we switched to unlimited pricing and our usage skyrocketed, our systems basically crashed

and we were down for 23 hours. People couldn't access things. And what was surprising at one level, obviously, it was frustrating and disappointing because we'd encourage people to get online and do their email and other things with us and trust us. And we were kind of letting them down. But the other side of it, which was for me a little bizarre, was it was the lead story of every TV network and the headline of almost every newspaper in the country. The fact that AOL was down for 23 hours was this national story. And even a few years before, if we had been down not for 23 hours, but for 23 days, nobody would have noticed or cared.

You might have gotten a couple angry phone calls. Yeah, I was like, okay, I don't know what that is. I could care less. So relatively quickly, it had progressed to be kind of this this fundamental almost utility almost like electricity or or something and and in those early days a decade before it was we were completely uh off on the sidelines even i'd go to computer conferences i'd be you know the only guy they're talking about the online world talking about the internet and they're like what are you doing like right it's like you should you know focus on semiconductors or focus on software or focus on computers or something

i don't know what you're doing with this online services thing but eventually it got you know got traction and i think that that eventual aspect that perseverance aspect is one of the lessons that i learned there that i think is going to be important in this third wave and the push to unlimited pricing was really motivated by this you clash that you had with Bill Gates and Microsoft, right? Like this meeting that you had with Bill Gates where he told you he was going to crush you. And you kind of sticking to your guns and deciding that you weren't going to buckle under the pressure or sell to him and go head to head. Yeah, it's easy to look at that in retrospect.

At the time, I was pretty nervous. It's like out of a movie. I was kind of freaked out. But no, we'd gone public. It had been a couple of years. We were starting to get a little bit of traction, but still hadn't really taken off. And Microsoft was very powerful.

The Windows operating system, they get like 99% market share. And they said they were going to bundle an online service with every copy of Windows and then essentially have instant kind of marketing. When people first turn on their computer, suddenly Microsoft would be there, and we would not be there. So it was scary, but we believed in what we were doing, and it was a close call. There were certainly some investors, some board members who were like,

hey, maybe we should just quit while we're ahead i mean you were you at the time 26 or something no as little as i started i was uh 26 by the time this was happening i was early 30s 32 33 something like that um but you know we we decided to you know decline the microsoft offer to acquire us and and uh and and kind of stay on our own path and and uh thankfully you know things decline the Microsoft offer to acquire us and kind of stay on our own path. And thankfully, you know, things worked for us. You know, the momentum we had with consumers was, and the kind of word of mouth was strong. That's also when we really stepped up our marketing efforts, including the blizzard of free trial disks that we kind of sent across the country, because we just realized it was never going to be easier or cheaper to gain market share,

that we needed to gain as much momentum as we could before Microsoft and others who were focused on the market really kind of went into attack mode. So we really, in the mid-90s, really tried to step up our efforts to gain market share, and it paid off. It really is a David and Goliath story. And it's amazing that Microsoft's play didn't work. Like, why do you think MSN didn't prevail? Well, I think it's a bunch of reasons. I think Microsoft is extremely a talent company. Bill Gates, obviously, is brilliant. If it's the only thing they were doing, I think they probably would have won. The fact that it was one of dozens of things they were doing and their core business really was operating systems and their secondary business

was application software. And, you know, know the internet the microsoft network online services was you know somewhere in the on-deck circle but was not their main focus i think i think helped i think also they probably brought a little bit more of a engineering mentality to the design of the service as opposed to consumer mentality they've that's changed in the last a couple decades i think they've gotten better on some consumer products and services, but in the mid-90s, that was not their core competency. And we had a great team at AOL that really was passionate and a lot of advocates in the community supporting what we were doing. So I think it was partly things that they didn't do that they could have done and partly partly things that we were, in retrospect, we did well. So the company grows, I mean, it just explodes literally until I think you grow it to

$163 billion valuation. The stock market is, you know, through the roof. And you reach this moment where you realize, like, you know, maybe this may not last forever, it's probably going to be wise to, you know, merge or start acquiring other companies to stabilize this for the long haul. And that's where Time Warner comes in, which on paper, seems like a fantastic idea, the idea that you could partner with, you know, such a vast enterprise that would create stability, you know, for the long haul, long haul, I think at the time obviously seemed like a phenomenal idea. So how does this come together and play out?

Yeah, the first step was in the late 90s as our market value increased, we did use our stock to buy a couple dozen companies, Netscape and other companies. That was the first step. But we did conclude that it was appropriate to do sort of more of a transformative merger, in part to have a more diversified mix of businesses so we weren't relying on just one business, the Coria World business, but also because we needed a path to broadband. We were the leader in narrowband when it was an era of dial-up modems. We didn't have a path to broadband. We actually argued on the policy side, including with Congress and the FCC, for what we called

open access, forcing the cable companies and broadband providers to open up their network just as the telephone networks had been required, but they chose not to. So we realized that if we're going to be relevant, let alone a leader in the broadband age, we needed to have more of a direct partnership or own cable systems. And so that was a driver as well. So we considered a variety of different things. I lay out in the book some of the options we were considering, but ultimately it concluded the best thing for us would be to merge with Time Warner, the leading broadband company with Time Warner Cable. And they also had tremendous content assets that we knew would be valuable in the digital world. Warner Music was the leading music company. Turner Broadcasting, Home Box Office, HBO were big players, the Warner

Brothers Studios, Time Inc. on the magazine side of things. So it was really an awesome company with great media assets. Their future in the digital world was unclear, just as our future in the broadband world was unclear. But we did believe that together the companies could do things they couldn't do separately. But, and this is one of the big takeaways from the book, I quote Thomas Edison, who a century ago said, vision without execution is hallucination. So yes, the idea of the merger made sense, but it didn't work because of execution.

And that didn't work largely because we didn't get the people aligned around the right priorities. Time Warner historically had been a lot of independent businesses. Time Inc. and Warner Brothers and Turner Broadcasting and HBO all really operated as separate independent companies. And the only way to make this merger work was to think about them in a more integrated way as one company. But that just isn't what happened. And so it was frustrating to watch. It's part of the deal. I stepped aside as CEO and was just going to be chairman of the board. But after a couple of years, I realized that it was time for me to go. I wasn't working in the way I was hoping or

anybody really was hoping. And so that, you know, the big takeaway there is around execution and really around people and culture. It seems to me that the cultures were so different that even no matter who would have been sitting at the top that I'm not sure that leadership could have solved it. Like if you were to ask Jerry Levin how it went left, or if you were to have, you know, sat in the CEO chair, as opposed to being chairman of the board and then, you know, rolled up your sleeves and gotten more involved, do you think that it could have worked out? Or do you think the cultural divide was just too great? I think the cultural divide was great. But I think if the timing had been a little different, the merger actually ended up being done at the peak of the internet boom,

and then the stock market cratered. And a lot of companies that had gone public actually went out of business. And so as the stock price fell, that created pressures around earnings and frustrations with people watching the value of their stock options decline. So if we'd done a little bit earlier, it might have been differently. And I think it's possible that a different leader, I mean, somebody like Steve Jobs had done a good job of bridging the world of technology and media, his work with not just Apple, but also Pixar. So something like Steve Jobs had run the company and the timing had been a little different. I think the result could have been different, but I just realized early on that it's not a lot of value in the woulda, coulda, shoulda kind of dynamics. I've just tried to learn some of those lessons and try to help tell some of

those stories with the hope that innovators in the future in this third wave might learn from tell some of those stories with the hope that innovators in the future in this third wave might learn from some of those. In this case, you know, the AOL shifted from really being an attacker, a disruptor, you know, to more of a defender, kind of more kind of protecting, you know, the status quo. And that happened particularly after the merger. But some of that was creeping in even before the merger. The company went from dozens of people to hundreds of people, thousands of people. The dynamic changed. And so the takeaway for me that I share with the entrepreneurs we work with here at Revolution is you've got to continue to maintain that attacker mentality and recognize that you have to keep pivoting and adjusting what you're

doing, but you have to be leaning in the future, focused on what's happening next, not just celebrating what just happened. Right, right. So, you know, you've kind of spanned the spectrum from these incredibly high highs of, you know, AOL at its absolute peak, and I'm sure it was very disappointing when the merger didn't work out and, you know, you saw these plummeting stock prices, etc. But, you know, I want to talk about mentality a little bit, because you strike me as somebody who doesn't really dwell on the past too much. You have always been able to always keep your focus looking forward to perhaps learn from those past experiences, but to not, you know, allow yourself to be destroyed by them. And, you know, you've seen that with other high

level, you know, executives when things don't go well, it kind of, you know, the whole thing, just the bottom falls out from underneath it and they're unable to recover and move forward. So what do you think it is about you that has allowed you to continue to innovate? I don't know. I think it partly is just, as I said at the very beginning, more interest in what's happening next, the future. And so that by definition means you're not spending a lot of time looking in the review mirror. I think personality-wise, temperament-wise, I've always been kind of even-tempered. Even in the go-go days of AOL, when things were going great, I used to say I need to delegate paranoia and figure out ways to make people,

make sure they don't get cocky or complacent. And the flip side, there were many times when I was running AOL where things were looking dire, including when Microsoft was entering the market. And I tried to kind of be the company's shock absorber, try to kind of even out those highs and lows and kind of be kind of steady, whether things are going really great or things are going, you know, kind of, you know, poorly, I think. So some of it's just a mindset kind of dynamic. But the other, to be honest, is that even though I was frustrated by what happened with the merger and how people think about the merger, I also, even to this day, think it was the right thing for shareholders, which was my principal job. We had seen, as I said earlier, the stock go from

$70 million to $163 billion in eight years. It had gone from $20 billion to $160 billion in one year. So it was a phenomenal ride. And shifting from that one business to a diverse mix of businesses, AOL had, I think it was $5 billion of revenue and $1 billion of profit. The combined AOL Time Warner had $40 billion of revenue and $10 billion of profit. And we owned 55% of that combined company. So it was the right call, even though it was the execution of that was not right. And obviously, it continues to be a source of

frustration. In the wake of that, why start Revolution? Why become a venture capitalist, as opposed to creating another startup? Well, I enjoyed, obviously, the AOL journey and learned a lot from it. But I just decided after we did the merger, it'd be more interesting, I enjoyed, obviously, the AOL journey and learned a lot from it. But I just decided after we did the merger, it would be more interesting. I think maybe a way to contribute more to work with a number of entrepreneurs, targeting a variety of different sectors. So taking on some of these third wave sectors, whether it be food or education or health care or transportation. And backing companies like Zipcar, which was one of the real innovators 15 years ago, and car sharing, or more recently, some companies in the food space like Sweetgreen that's trying to do healthier options for people, and the fast-casual restaurants or Revolution Foods doing that with schools,

just trying to be a champion of entrepreneurs in these sectors, including entrepreneurs all over the country, what we call the rise of the rest. I think there's too much focus in places like Silicon Valley, New York, not enough focus in other parts of the country. So being, in general, a cheerleader for entrepreneurship and advocate for entrepreneurs and investing in and backing and mentoring and supporting a lot of entrepreneurs doing a lot of different things in a lot of different sectors in a lot of different places felt to me like the right move, and it's worked out really well. I've been delighted to have this platform, if you will, where I have some ability to help the next generation of entrepreneurs take their ideas and really scale them into

significant, iconic companies. Yeah, I want to get into the rise of the rest movement. It's really super interesting. And it's very cool. But before we do that, I'm interested in why you said that you're not necessarily interested in, you know, chasing the unicorns, sort of taking the tack that maybe the Andreessen Horowitz's and the Chris Saka's of the world have, you know, sort of explored. So what was the what's the rationale behind that? Well, we obviously, when we're making investments, we want to have significant, you know, companies. We just rather catch them a little bit earlier. So rather than, you know, invest in them when they're already worth a few billion dollars, we'd rather invest in them when they're worth,

you know, 20 or 30 million dollars on the venture side, or maybe two or 300 million dollars with our growth. We have a revolution ventures group and a revolution growth group. So we want to help create these unicorns, not just invest in them after the fact, but obviously there are different, different firms that have different strategies. I'm not saying ours is better. It's just, it's just what we're more comfortable doing. And in a way we think we can add the most value to, you know, to entrepreneurs in the long run, generate the best return for investors. Interesting. Well, with this explosion of the tech economy have come a rise in cost of living expenses in the Silicon Valleys and New York City, San Francisco, these hotbeds of tech innovation. And yet at the same time, with the democratization of information access, it doesn't matter where

you live so much. information access, it doesn't matter where you live so much. And this is something that you've kind of identified and put your sort of money in your mouth behind in this rise of the rest movement, to the extent that you're actually getting on a bus and driving around to these interesting places to meet young entrepreneurs in the overlooked, you know, cities across America. So what has that experience been like? It's been great. I think I've visited a couple dozen cities in the last few years, and what's happening in all of them

is a remarkable momentum in terms of their startup community. But they're generally off the beaten track. It's generally not getting media attention, generally not getting investor attention. And I think that will change and needs to change. I think we need to have a more evenly dispersed innovation economy,

and we need to make sure that anybody, anywhere with an idea has a shot, even a shot at the American dream. And right now, things are tilted in certain directions. Last year, 75% of venture capital went to just three states, California, New York, and Massachusetts. And California, New York, and Massachusetts are great states, and there's a lot of innovation there. There will continue to be a lot of innovation there. But we want to focus on the other 47 states where there are also great entrepreneurs with great ideas, building great companies, but not as many people kind of championing their ideas and trying to help them scale their company. So the purpose of the Rise and Rest is really to educate people around the country about what's happening,

mostly in the middle of the country. people around the country about what's happening, mostly in the middle of the country. We've visited places like Detroit and Pittsburgh and Des Moines and Madison and St. Louis and Kansas City and New Orleans and Atlanta and Charleston. This fall, we'll be heading the southwest and going to places like Lincoln, Nebraska and Omaha and Provo and Salt Lake and Phoenix and Albuquerque and Denver. These are cities on the rise that have interesting things happening in terms of what the startups are doing. And even in the process, we're seeing interesting kind of innovations in terms of civic engagement, even the rebuilding of neighborhoods because of the work of the entrepreneurs there. So we're trying to kind of promote the rise of the rest, trying to celebrate these entrepreneurs,

try to shine more of a spotlight on them so their stories get told. And investors, you know, don't just get in cars to drive to the companies, you know, in Silicon Valley, but they also get on planes to fly to meet some of these entrepreneurs in the middle of the country. I think they'll be surprised that they really are,

you know, great companies being built. Some examples are the hottest virtual reality, really mixed reality company right now is they've raised $1.3 billion of venture capital. It's not in Silicon Valley. It's not in Boston. It's in Fort Lauderdale, Florida, magically. Or recently, Salesforce, a couple years ago, paid $3 billion to buy a company called ExactTarget in Indianapolis. they have 2,000 employees in Indianapolis, one of the hottest companies now in health tech, but started with athletic, whereas Under Armour, they're based in Baltimore.

So you're seeing this happen. And we're just trying to help tell those stories and help tell the stories of the next Under Armour, the next generation of companies, and just give them a little bit more visibility and give them a little bit more access to capital, not just from Revolution, you know, my investment firm, but also encouraging other investors to look at what's happening in these rise of the rest cities.

What has you really excited about this next wave of innovators and tech entrepreneurs? Like what, you know, beyond maybe the obvious, okay, virtual reality, you know, and the like, what are you seeing right now that you think people aren't noticing or paying enough attention to that you think is super exciting or has potential to shift culture? Well, I think what's exciting to me about this third wave

is the things that are being tackled are some of the most important aspects of our lives. It's how we stay healthy. It's how our kids learn. It's how we move around cities and how we manage energy, what we eat. I mean, these are pretty basic fundamental things and big industries, big sectors that are kind of ripe for disruption. So that general third wave thesis interests me and the whole idea that I try to convey in the book, why partnerships are more

important, policy is more important, perseverance is more important. But the two other things that interest me also happen to be P's, our place, which really ties in the rise of the rest of what we just talked about, and purpose. I'm really inspired by this next generation of entrepreneurs that are kind of rejecting the traditional Milton Friedman notion

that businesses should focus exclusively on maximizing profit. I think there's a growing number of companies, you see this with B Corps, now there's 2,000 B Corps that are registered. They're saying, sure, profit's important. Sure, we have to figure out a way to be profitable and sustainable and generate returns for our investors. But at the same time, we need to have purpose.

We need to have impact. We need to identify the impact we're going to have and measure that and report on that. And so I think that's really driving a new mindset in terms of entrepreneurship, a new mindset in terms of business. So it's the three core P's of the third wave around partnership, policy, perseverance, I think are interesting. And some of the sectors ripe for disruption are really going to, it's going to be fun to watch what happens there. But it's also going to be fun to watch the place aspect, the rise, the rest aspect is not going to happen just in the places you expect. It's going to happen all over the country, indeed, all over the world. And also watch the purpose aspect, the growth of impact investing and more purpose-driven business.

It's interesting to see the rise of social entrepreneurship and the importance of cultivating a culture of giving back that's baked into the business plan itself, right? This idea of conscious capitalism. And that seems to be working very well for some of the fastest growing companies. Yeah. And I think the model 30 years ago was if you built a business, if you're successful building that business, at some point, maybe the company creates a little foundation within the company. We did that. We created an AOL foundation.

maybe the company creates a little foundation within the company. We did that. We created an AOL foundation. And at some point, the people who led that company and have generated a lot of wealth often will create their own kind of foundation. And we created, my wife and I, the Case Foundation nearly 20 years ago. But that was sort of the traditional model. The business was really the focus. And then at some point, you focused on giving back. The emerging model is to integrate that into the core purpose of the business. And some of the businesses that we've backed at Revolution really have done that. Shinola, for example, their core purpose was creating jobs in Detroit, taking a city that had been abandoned because of the global competition in cars

and really retrain people to build stuff and prove that manufacturing can be done in the United States. That was their core purpose. Then they decided to start by building watches and over time building leather goods and other things. Or Revolution Foods, a company we backed that focused on school lunches. Their purpose was really how do you make sure kids actually have healthier lunches? It ties in with the habits they learn about health early on. It ties in with their learning outcomes. How do you do that in the process, create hopefully thousands of jobs? So of course, when we're backing these, we are backing them trying to

understand what the investment returns will be for our investors. And that has to be a key priority. But also looking at ways that they're beyond the profit, there's also can be a stated purpose that you report on. I think that's becoming more and more interesting. You've seen just in the last year, big private equity firms like Bain have started an impact fund, and big money management, asset management firms like BlackRock, the largest world, started an impact initiative. So it's beginning to get real traction. I think it will accelerate in the third wave. I think the dynamics in the third wave around these sectors ripe for disruption are going to start converging with the dynamics around place, the rise of the rest, and the dynamics around purpose and things like impact investing. So each of these things right now are developing on their own momentum and will continue to, but they will all accelerate as they come together to really power the third wave.

When we look at some of these huge sectors of the economy, take health care, for example. You know, you and I both know you go to the doctor. Most of the files are still on paper. Very few health care professionals are using their iPads. And even some of the technology that's currently available is not integrated into this system. I would imagine that the barriers to this have to do with privacy and, you know, it's the regulatory landscape. You know, how are we going to, you know, how is the third wave going to best address this to transform these industries and create the efficiencies and the, you know, the level of helpfulness that they have the potential to provide us.

Well, I think it goes back to something that we talked about. I think it's going to take time. So perseverance is going to matter. It's going to take engagement, understanding the policy framework. And it's also going to require partnerships. This is a healthcare in particular is an area where you can't go it alone. You must go together. And there's one company, Kaizen, with a rise risk called epic that's based in madison wisconsin they have now 10 000

employees they've emerged as a as a leader in electronic medical records because they've taken the long view and figure out ways to kind of work with and partner with with hospital systems all around the you know the country so that's going to be the mentality we're going to have to shift away from creating an app and dropping in the app store and hoping hoping you get a nice you know review and and you know a nice review. And people kind of talk about it on social channels, and it gets virally adopted to figure out ways to take that software and integrate it into the workflow of hospitals or the workflow of professors on university campuses. So that's why this third wave is going to require a different mindset.

And healthcare specifically, there's really three parts to it. How do you stay healthy? How do you manage chronic disease? How do you manage more life-threatening disease? Not surprising that in the last few years, most of the focus and investment has been in the first, the wellness side, because that is more of a consumer chooses, consumer pays. If somebody wants to track their steps, they go to Best Buy and buy a Fitbit. They don't need a prescription from their doctor.

They don't worry about co-pay or reimbursement. They just make that decision. And so that makes it easier. It's more of a consumer-driven business. So as you start getting into chronic disease, managing diabetes and heart disease with different medical devices, it becomes more complicated. And as you get into helping think about genomics and personalized medicine around cancer, it gets much more complicated. So we're beginning to see the innovators focus on those more challenging segments of healthcare. So I'm optimistic that if you look 10, 20 years from now, we will have a healthcare system that is more convenient, that does provide better outcomes, and does it at lower cost.

But it's going to take the long-term view and this next generation of third-wave entrepreneurs and innovators to recognize the playbook is changing. Systemically, though, it's a system that's set up on prescribe or diagnose and prescribe, right? And there needs to be a way to integrate preventive techniques into the very system itself. And I see that as the biggest challenge. As opposed to just dealing with sick people and prescribing the medication. How do we prevent them from getting sick? No, we call it the healthcare system, but it really is a sick care system. It's managed

illness as opposed to keeping people healthy. But as I said, some of the innovation that's starting to happen in sectors like the wellness sector, and it's not just the devices like Fitbit, it's also the food. I think there's a growing recognition that you really are what you eat and healthcare really begins at the end of your fork. And that's why there's a lot of innovation now happening in the food and the $5 trillion industry that everybody eats every day. And so that's one way to attack the healthcare system is through the prism of trying to educate people about what they should eat, give them healthier, more convenient, more affordable options to the things that make the most sense. So these are multifaceted system problems.

It's not going to happen overnight. It's not going to just be one company with one app. It's going to be how these things get integrated. Similarly, we talked a little bit about smart cities. Very exciting what's happening there, but it's going to require people working together in a networked way and getting the policy right. Otherwise, the promise of autonomous vehicles or the promise of drones or other things is just never going to really be something that most people can benefit from in their everyday lives. Right, right. So, you know, we're in this age of the rise of the entrepreneur, the entrepreneur as rock star, and the narrative

that gets propagated across the world is the one of, you know, Evan Spiegel, or, you know, it's like this, you know, you build an app and overnight, you're just getting millions of eyeballs on that. And this is your path to success. And in many ways, I feel like I can distill down, we can distill down your message to not so fast, like this is, this is going to be a long road, roll up your sleeves, how committed are you really to seeing this through if you really going to be a long road roll up your sleeves how committed are you really to seeing this through if you really want to be successful in this in this third wave like an antidote to the overnight i think that's right that's not to say that there won't continue to

be some overnight successes there won't be opportunities for apps and other services to continue to prevail and you know the success of an evan or others it should be celebrated but i do think as as you focus on some of these more difficult challenges in terms of how do we create a learning system that is more personalized and adaptive, and sure, some of that's going to be apps. Some of it's going to be learning in the cloud. But it's also going to be figuring out better ways to help teachers in a fourth grade classroom.

It's better ways to help professors on college campuses. How do they modify what they're doing based on some of this technology and some of this data? Those are more difficult challenges and it's going to require a different mindset, which is why the partnerships are going to become more and more important. The understanding and being a little more respectful

on the policy front is going to become more important and perseverance can become more important because they're a difficult problem. They don't lend themselves to overnight, instant solutions and overnight successes. So I think this next generation of entrepreneurs, if they embrace some of these challenges and realize the playbook is changing and hopefully do it in a more purpose-driven kind of way, hopefully do it in more places than we saw in the second wave. I'm pretty optimistic about what's going to happen in this third wave. And I think it's going to happen not just in this country but all around the world.

Policy, partnerships, perseverance. Exactly. That's it right there. I know you got to go. I hope you can indulge me with two really quick questions to round it out. The first one is, what is the advice that you would give to your younger self, that guy back in the startup days of AOL? You know, what have you learned that, you know, you would tell that guy? Well, part of it is fighting a battle worth fighting, tackling a problem worth tackling. And so some of the things I'm excited by in the third wave are exactly those kind of things. How do you really play a, you know, a critical role in unleashing a different kind of healthcare system or a different kind of, you know, kind of learning system or improving our food system, you know, kind of picking some big battles and battles worth fighting

and then taking the long-term view, recognizing it's entrepreneurship is a team sport. It's not just about you. It's about the team you built, the partnerships do matter. How do you build a network around your idea? Perseverance does matter. So how do you take the long-term view? You're going to hit some st view? You're going to hit some stumbles. You're going to hit some bumps in the road. Sometimes you're going to run into the wall,

but you just have to keep going. You have to keep fighting. I love it. Final question. Do you still have an AOL email account? Of course I still have an AOL email. Of course. What kind of question is that? I think it's going to be like the vinyl records. The LPs are coming back. They're so uncool. They've become cool again. All you folks out there who are listening to this and have your AOL email, you keep them. Do you have any of those discs?

Suddenly you're going to be one of the cool kids again. Do you have any of the discs around here in the office? I think everybody has discs somewhere. You've got to sign one of those discs and give it to me. All right. I would love that. I would love to do that. All right.

Thanks so much, Steve. I appreciate it. Thank you. It was great fun. Peace. Blants. All right, we did it. What do you guys think? Definitely a much shorter interview than I'm used to, but I really appreciate Steve taking the time and hopefully you guys enjoyed it and are left with some interesting things to ponder about these fascinating times that we live in. Of course, please make a point to check out the show notes on the episode page at richroll.com.

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green. You can click classes in the upper left-hand corner on the homepage. They're all multiple hours of streaming video content and downloadable PDFs and all kinds of good stuff. I'm really proud of them, and I think they're great. So check those out if that speaks to you. What else? Go to richroll.com for all your Plant Power merch and swag needs. I got signed copies of Finding Ultra on the Plant Power way. We got cool Plant Power t-shirts, tech tees, other schwag and merch. Good stuff. I want to thank everyone who helped put on the show today. Jason Camiolo for audio engineering and production. Sean Patterson for help on graphics.

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