Interview: Steve Case
Co-Founder, America Online

Why don't you start by telling us a little about your childhood and how you got interested in business. Where did you grow up?

Steve Case: I was born and raised in Honolulu, Hawaii. I didn't fully appreciate it. Growing up on an island is a little different than most people's childhood experiences, but I really enjoyed it.

From a relatively early age I got interested in business. I'm not sure I knew what an entrepreneur was when I was ten, but I knew that starting little businesses and trying to sell greeting cards or newspapers door-to-door or just vending machine kind of thing is -- there's just something very intriguing to me about that. So I think relatively early on I probably was on a path to be more of an entrepreneur, and I think everybody in my family kind of sensed that.

What did your folks do?

Steve Case: My father still is a lawyer, and my mom was a teacher and then later a career counselor. My father and his brothers were all lawyers, so I think that the expectation was probably for me to grow up to be an attorney, but it never really fascinated me that much. I was more interested in building things.

Can you tell us about your brothers or sisters?

Steve Case: I had an older brother who passed away recently, an older sister and a younger brother. My older brother went into business and was a very successful investment banker. He took a lot of companies like Apple and Genentech public, and then a couple of years ago died from brain cancer. My older sister is a teacher; she lives in California. My younger brother is in the insurance business in Hawaii.

What kind of schools did you go to?

Steve Case: I had the unusual experience of going to the same school from kindergarten through 12th grade so I was in what they call "The 13-year Club," which is a nice private school in Honolulu, right across the street from where I was living, so I was able to wander across the street to get to school, and it really was interesting being in the same school for so many years. Nowadays people seem to switch schools, either because they have to, and certain schools only serve certain grades, or because they move to a different place or have some particular interest, but I was in the same school for 13 years.

Was it a small private school?

Steve Case: No, it was relatively large by most school standards. There were several hundred people in each class. The whole school was a little over 2,000, because the younger grades had smaller classes than the high school did. It's a wonderful school. A few months ago I agreed to go on the board of the school. It's called Punahou School. I'm helping them build a new middle school campus. When they asked me to join the board, I told them I was flattered, but since I lived in Washington, D.C. and the school was in Honolulu, Hawaii, I'm not sure I'll be able to attend many board meetings, but I was still happy to play some role. So I just get on those calls telephonically late at night. There is a time zone difference.

Were there particular teachers that inspired you?

Steve Case: I wouldn't say that inspired me. There were teachers that would push me. I was not an outstanding student. I did a reasonable amount of work. I got generally good--pretty good grades, but I was not that passionate about getting straight A's. I was more passionate about starting businesses. In retrospect I wish I had spent a little more time on some of the studies. Whether high school or college, it's a once in a lifetime opportunity. I enjoyed high school and college, and I think I learned a lot, but that was not really my focus. My focus was on trying to figure out what businesses to start.

Were there favorite books that stand out in your mind?

Steve Case: One in particular that actually was a meaningful impact in terms of what I ended up doing -- focusing on interactive service and the Internet -- was a book I read in college in the late 1970s by Alvin Toffler called The Third Wave, and he was viewed and still is viewed as sort of a futurist, but I read the book and it talked about a world where there would be an electronic frontier and that people would be interacting with their TVs.

Toffler was seen as a futurist. Didn't that all seem a long way off?

Steve Case: When I read The Third Wave I didn't think of it as futuristic. I mean, I thought of it as being sort of the next big thing. It just struck me as obvious that some day consumers would want to decide what they wanted to see and how they wanted to get it, and not just be passive recipients sitting on a couch with a remote control, watching television or picking up a newspaper. They wanted to somehow interact and do research on things, or talk to other people or what have you. At the time in the late '70s there was -- personal computers didn't really exist. Certainly home PCs didn't really exist, but everybody had a television, so the initial focus for the first years -- in the late '70s and early '80s -- was, "How do you create essentially interactive television, two-way television?" And then later in the '80s, really when PCs started becoming more common in homes, that's when the shift was more profound towards PCs. But the Alvin Toffler vision of this, and sort of how an electronic community might form, as I said, I buy into that. I remember even when I was in college and writing, sending resumes out to different companies, my cover letter really talked about, "We're about to usher in a new digital age, and with two-way televisions and more of an electronic frontier..." And this was 1979, I guess, and most people 25 years ago, I think, thought I was a little bit loony, but I just believed. And so, I just kept pursuing that.

After graduating from high school I went to college in Massachusetts -- Williams College, a small liberal arts school which I really enjoyed. And then after that I went to work for Proctor & Gamble in Cincinnati, Ohio. They are a great marketing company. And then PepsiCo, the Pizza Hut Division, in Wichita, Kansas. But, I didn't do those too long. I think I was at Proctor & Gamble probably about two years, and Pizza Hut about one year. And when I was 24, I think, I moved to Washington, D.C., and started focusing on interactive services, and that's really what I then did for 20 years.

Did you have a sense that computers were going to be what they are in our society today? You said that at first interactive TV seemed like the direction. When did you get the idea that personal computers were going to be the focus of that revolution?

Steve Case: When I got involved in the industry, which was in 1983, I joined a company that had a product for video game machines, because back then, while very few people had PCs -- the Apple II had just come out, and the IBM PC was just coming out, the Macintosh hadn't yet come out, for example -- that a lot of people had Atari video game machines. And so the idea was, well maybe you can take an Atari video game machine, where people plug in a game cartridge, and plug in a modem, and tie that into a telephone, and essentially turn that game in the machine into an interactive terminal. Initially to download games, almost like an in-home arcade, but later for downloading e-mail or stock quotes or what have you. I thought it was a great idea, because at the time I knew I wanted to get involved in this sector.

Nobody to speak of had PCs. Modems, which you need to connect, weren't really very common either. The whole process was very expensive.

This Atari video game platform really struck me as interesting, so I joined a company in Washington, D.C. in early 1983. Unfortunately, by the time they actually shipped their product in the fall of 1983, the Atari video game market blew up and all the companies -- K-Mart and everybody which was ordering lots of these game cartridges -- suddenly was sending them all back, and the companies that were in that business, including Atari, were on the brink of bankruptcy. So this wonderful product called Game Line was a great idea, but really, really badly timed and the company essentially went into kind of free fall and had to go through several rounds of layoffs and just looked fairly bleak. But, the good news is -- in addition to getting planted in the interactive industry and moving to Washington, D.C. -- two of the people that were part of that company and I ended up in early 1985 starting what became America Online: Jim Kimsey on the business side and Marc Seriff, who is more on the technology side. I was coming at it more from a marketing side.

So even though Game Line was an abysmal flop, I remember when -- after the first sale cycle over Christmas -- there was a board meeting and I think we reported that we sold like 1,000 of these cartridges and they were supposed to sell 100,000. I can't remember exact numbers but it was way, way, way off plan and really an unmitigated disaster. And after the sales report was presented, one of the directors said, "Geez, you would have thought they would have shoplifted more than that." That's how bleak the situation was, but nevertheless I think I learned a lot about timing and how some things just have to be in the right place at the right time. I learned a lot about innovation and how you create different products and I met some people that we went off and started AOL in 1985. So, I guess it's all's well that ends well.

What gave you the courage to go on in the face of this sort of business disaster?

Steve Case: I just believed. To me, it was not that difficult. I just said,

"Okay. Well, this particular product at this particular time, I guess it wasn't meant to be." But the idea that some day people would want to be able to interact and get stock quotes and talk with other people or all these different things, I just believed that was going to happen. So I said, "Well, let's figure out another way to come at this." And what we did with this new company in 1985 is we did start focusing on PCs instead of video game machines, because we learned the hard lesson about bringing a product to market in a consumer world where it's very expensive to build a brand and get distribution and so forth. When we launched this company in 1985 we decided to partner with PC companies and use their brands and have them take the lead and spend the money. So we focused on the product and the underlying technology and the service and let other people take the lead on the marketing.

First with Commodore we created a service called Q-Link and then with Apple we created a service called Apple Link Personal Edition, and then with Tandy we created a service called PC Link, and then with IBM we created a service called Promenade. So for about five years we really were in the business of creating these private label online services for PC companies, and had them bundle that software, that service, with their PCs. And we focused -- once people turned on that PC and wanted to use the service -- on providing something that people would like and want to pay a monthly fee for. So really, I think, the fact that we saw how hard it was to build a consumer product and make it successful led us to this, I think, very pragmatic strategy of focusing on PCs and partnering with the companies that already had brand recognition and already had distribution, and could help attract customers for us much more efficiently.

So from a mishap with bad timing you learned to protect yourself better in the future and not be quite as vulnerable financially?

Steve Case: It was very pragmatic. We knew, based on that failure, that it would be difficult and probably even impossible to raise money. "Say, we just lost a lot of money trying to bring a product to market on our own in the video game world, why don't you give us a bunch more money and give us another shot and we'll try to do it in the PC world!" So we believed that strategic alliances and partnerships were critical, and we did that for five years.

The second big crisis was in about 1989-1990, one of those partnerships started unraveling, and particularly a partnership we had with Apple, which was sort of our lead partner. They just decided after we had been in the market for about a year that they didn't like the deal. They didn't like the idea. It was the first time they had ever licensed their brand name and logo to any other third party company, and in retrospect they viewed that as a mistake, because they like to have complete control of the brand. So, as a result they were starting to block our marketing program. We'd say, "Let's go do this?" They said, "No, we don't want to do that." "Let's go do this." "No, we don't want to do that." So, it was somewhat of a crisis, because we had spent all the money on the back end to build these services, to staff up the programming team and so forth, and suddenly they were in some ways blocking our ability to get customers.

We renegotiated that deal and decided, 'We really have to do this on our own. It's too complicated to do these kinds of partnerships." It was a wonderful thing to do for five years. It was a way to learn a lot and make the transition to a business that was incredible and profitable, but we couldn't rely on these partnerships forever, which led to us deciding, "Okay, we have to walk away from that strategy." I was a little nervous about it.

We had just lived through -- earlier, in the 1980s -- the costs and the tragedy really of kind of going out on your own, but the Apple alliance blowing up kind of forced us, and that's actually when we renamed that service. Instead of AppleLink we called it America Online. We said, "We have to create our own name. We have to create our own brand. Even though it's hard, even though it's expensive, even though it's risky, we've got to figure out a way to be successful on our own two feet. We can no longer just piggy back on other people's efforts." So, again that was a crisis. Everybody, myself included, was very nervous about walking away from the strategy of private label partnerships that was working and setting out on our own and taking more risks, but we felt like we had to do it, and it turned out to be the best thing that ever happened to us. Because then it really propelled us, because we had the flexibility to do exactly what we wanted without getting permission, and we were able to really drive AOL into a position of great prominence.

During the period that you were working towards this, what kind of support did you get from your family? Were they encouraging in your entrepreneurial choices or were they concerned about them?

Steve Case: I would say a mix. They were beginning to think I maybe had picked the wrong horse. They're a little more traditional. They understood Proctor & Gamble, a great consumer marketing company. They certainly knew PepsiCo. When I moved to this entrepreneurial world, a company they had never heard of, creating products they couldn't really understand, they thought it was a little bit screwy. After many years of not being very successful, there were moments when I think they thought, "Maybe it's time for Steve to pack it in and do something else. It took over a decade before we began to hit our stride.

What did they think you should do, go to law school?

Steve Case: Not necessarily go to law school. Maybe go to some other company, but I wouldn't say there was a lot of pressure to do that.

I think a lot of people, friends included, were saying, "I know you're a believer in this and all, but you know, sometimes no matter how hard you believe it just doesn't happen. Maybe you should kind of give up the ghost and try something else." But I just believed, and so I kept doing it. I just viewed each of these setbacks as a challenge, and that we wanted to stay in the game. In fact, I think because there were some of these challenges I just redoubled my own commitments. "We're going to make this happen." We were going to stick with it, and the team that we built at AOL shared the passion about this new medium and that we really were pioneers in building something. And what was fun about it is nobody knew what to do and you kind of had to make it up as you go, and that means you're going to make mistakes, and you've got to keep picking yourself up off the floor and keep going.

So it wasn't just me.

I think the support of the other team at AOL and everybody's really shared passion and belief about this and -- saying that some day everybody was going to be on line. Some day we were going to be living in a more interactive world. Some day people would feel like they're part of an electronic community. I think just that vision of that, that some day that was going to happen, I think, propelled us. There was many who had questioned whether we would even be around when that happened, but I think most people believed, even the cynics, that probably some day that would happen. And we said, "Well, rather than just sit by and wait, or fold our tent and go do something else, let's keep at it. Maybe we can be the ones who can figure this out," and eventually we were.

Did you study business in college? Did you draw on those studies to get you through these crises and setbacks?

Steve Case: Williams College is a classic liberal arts school, so there is nothing really business-oriented about it. There's no business classes. There's no marketing classes. It's really a more traditional kind of thing. So my degree was in political science, which I think was -- the closest I could come to marketing is politics. You know, for better or worse, a lot about marketing and positioning candidates and so forth, but I was sort of interested in it anyway. So, I wouldn't say that any specific course really was instrumental. I do think that a general liberal arts education is very important, particularly in an uncertain changing world. I think what a liberal arts perspective gives you, is you know a little bit about a lot of things, and look at the world as sort of a mosaic and kind of see how the pieces come together. I think that gives you a perspective that I found to be very valuable. And so in one sense, there's nothing specific that I learned that was applicable. In another sense everything I learned was a useful foundation. Because I do think -- not just in building AOL -- but just the world in which we live is a very confusing, rapidly changing world where technology has accelerated.

The pace of innovation has accelerated the speed of how companies react. Consumers have adopted it in significant ways. It has lowered some of the barriers in terms of traditional impact of television and newspapers, because now there are other ways to get information. That electronic world has also accelerated globalization and blurring of the borders between countries, creating more of a global perspective.

More recently, unfortunately, some of the challenges are related to terrorism and the fact that it's not the conventional kind of war. They're not the conventional ways to deal with things. All of these things are kind of disruptive new out-of-the box ways to think about your life and think about the world.

I think the more you have a generalist perspective, I think sometimes the more you can kind of see through the forest and the trees. And when it gets a little bit cloudy, you know, have some sense of, "Well, maybe this might happen or maybe that might happen." So I really am a big believer in liberal arts education. I think it's better -- particularly in these kind of uncertain times -- to know a little bit about a lot of things as opposed to being expert in one thing.

I guess having a sense of history helps you to see that it doesn't always go in a straight line.

Steve Case: Right. I think one of the things that was useful to me was not really college, but just reading books and studying how major consumer innovations took place. If you look back at the history of the telephone a century earlier, it took decades before it was common. Initially people said, "Why would I ever need a phone? If I want to talk to somebody I'll just go next door and talk to them." You couldn't imagine that people would have phones. So eventually, after many years, maybe there was a phone in the bar in town. If you had to make a call to somebody, you'd go to that one phone and enter a party line, a shared line, and so forth. Eventually, it got to the point where people did say, "You know, you do need a phone in your home!" By the time I was growing up everybody had a phone in their home. Today they have multiple phones in their homes and cell phones and computer access with instant messaging.

It has really been a dramatic acceleration of the different ways to communicate. But if you look back in history, those core innovations don't happen overnight. It takes a while. Similar with cars. It took a while, in part, because people thought, "Why do I need a car? I'll just get on my horse." It was only when more people had cars that people said, "Oh, it is useful." Because more people had cars, you started building roads which made the cars more useful. It's sort of this chicken and egg thing. You just have to break through and it takes a while.

That gave me some perspective and patience that enabled me to persevere in pursuing this particular vision, because I knew it takes a while for things to develop. One of the biggest challenges we had in the first decade was not that many people had personal computers. There weren't that many people to sell to, and it was hard to identify them. You had this market, and Computer . You couldn't really market generally, because the number of people with computers was so small.

Most of the people who had PCs did not have modems and could not use those PCs as communicating devices. They really were using them for spreadsheets or word processing or storing recipes or playing games or what have you. Very few people in the 1980s used them the way we now think of them today, as communicating devices, because they didn't have modems. A modem was viewed as a peripheral device. You went to the peripheral section of the computer store to buy a modem. So, it's essentially being defined by the industry as an optional, nonessential, peripheral part of the computing experience. So, we actually spent many years trying to get a modem built into a home PC, and finally we were able to convince IBM, I think it was 1989, to do that. They were the first PC company to build a modem into the PC. Once IBM did that, others felt, "Well, if IBM is doing that, we have to do it," which is what we thought would happen. And suddenly, in about a three or four-year period, every home PC had a built in modem. That single act of finally convincing IBM -- and it took years -- to build a modem into the PC was probably the single biggest factor that then drove the growth of AOL and the Internet. It was not really the inventions as much as the World Wide Web, and other things that came later, because if you didn't have a modem built in your PC, you had no possibility of getting connected. And so, it was an example of how you have to kind of put the basic building blocks. Like you had to put roads in place to make cars useful, you had to put a modem in place in a PC in order to create a mass market for consumer services.

Looking back in history and seeing how these things played out gave you some hint at what perhaps might be necessary to really have a breakout strategy for interactive services.

Lots of us are old enough to remember when "computer" referred to a room-sized machine that only existed at places like Berkeley and MIT. This revolution has happened very quickly. Did you have any idea that we would come so far so fast?

Steve Case: I'd say yes and no.

When I first got started in the late '70s, early '80s, and first was thinking about the interactive world, I believed so fervently that it was the next big thing, I thought it would happen quickly. What happened then was it's been 10 or 15 years just slogging away at this, and there were many times where it wasn't clear at all it was going to ever happen. So, finally it broke through. So, I think for me it was -- I was overestimating the pace at which it would happen early on, and then I -- and I less than most because I was a believer -- was sort of underestimating exactly when it would happen. And if you look at history of the diffusion of technology, the diffusion of innovation, that almost always happens. People in the early stage -- it goes from nobody knows about it to suddenly they're aware of it and think it's going to happen overnight. It almost never happens overnight, so then there's a period of reflection and disappointment. Sometimes even depression, where someone says, "Oh, it's never going to happen!" and then suddenly the pieces start falling together, and then it takes off and really hits a tipping point where you see the real explosive growth.

So you have to look at each of these different periods over the last 20 or 25 years. It was really only in the mid '90s -- and I had been at this for quite some time -- that it really became apparent that this was going to be a mass phenomenon, and the pace at which it was growing was so phenomenal.

I think it took us nine years to get one million subscribers to AOL, and then in the next nine years we went from one million to 35 million. We were adding a million every couple of months. And so, it just shows you that you just got to -- you stick it out. If you believe that some day it's going to happen, some day it probably will happen. You just have to make sure you're there when it's happening, and ideally you're at the front of the parade, and the principle beneficiary of when it happens, but it's not a kind of thing where you just sort of sit back and wait. The actions you take really help influence the pace at which it gets adopted. For example, the issue of essentially being the evangelist within the PC industry that modems should become a built-in part of a PC. It took us a while, but if we hadn't done that I don't know where we'd be today, but I know we would not be the kind of interactive society we are today, because that was a major kind of breakthrough. So you know, other companies weren't doing that. We took the lead in doing that. That's true in any new, innovative area. Somebody needs to step up and take the lead, and ultimately they end up benefiting, and others end up benefiting as well. But it's not like you just sit back and eventually it's going to happen. It's going to happen when people make it happen, and you have to kind of have a strategy that is pragmatic at one level, so you can hang in for the long run, but proactive in another level, so you can actually try to accelerate the pace that it's going to take for something to take off.

Since the great success of AOL and the establishment of the information super highway, a number of people have taken credit for that innovation? What is your view of who came up with this concept that we could all be connected and exchange information ad infinitum?

Steve Case: I think it's a collective effort like most things. I think different people were doing different things and built on each other's work.

I do think actually in this case the government does get credit for funding some of the basic research. Particularly DARPA, Defense Agency Research, they created the DARPA-NET, which then really became the Internet. So it's a good example of the government providing some of the core funding to create some basic research, and then backing away and having a fairly "hands off" kind of non-regulatory approach and letting the free market take over. I think that's really what has driven the success. I think there are many different companies, many different scientists, many different marketers, many different creative programmers that all played a role. I think it really was a collective effort, as I would say with AOL. Even though we started with a few dozen people, we ended up with having many thousands of people, and it really was a collective effort, and it's the kind of thing -- I think it's true with any major change -- no one person can really make it happen. You can perhaps be a lead and you can perhaps be a catalyst, but it really is about the team. And I'd say one of the great lessons I've learned over the past couple of decades, from a management perspective, is that really when you come down to it, it really is all about people and all about leadership. That just one or two people can make a huge difference.

Spending more of your time figuring out who you want to have on your team, and then pointing them in the direction that you want to go is really critical. You're only as strong as your team, and people typically don't spend enough time recruiting. One of my challenges was always being like a professional recruiter, always looking at people as free agents and figuring, "Okay. They may be doing this now over there, but they seem like they have the perspective and skills that could be helpful here. How do we figure out a way of bringing them into our fold?" Constantly being on the lookout for talent is a critical variable, I think, particularly in these emerging markets.

It sounds as if part of growing a business is not just having a good idea, but being able to work with people and respect their input and their investment.

Steve Case: No question. I have always thought that it's a mix. When I was trying to popularize the concept of the Internet -- ten or 15 years ago -- I came up with this concept of "the 5 Cs." Services needed to have content, context, community, commerce, and connectivity. After that, when I was trying to think of what the key management principles were to build into the culture, I started talking about the Ps. The P's were things like passion, perseverance, perspective and people. I think the people aspect is really the most important one.

If you're doing something new you've got to have a vision. You've got to have a perspective. You've got to have some north star you're aiming for, and you just believe somehow you'll get there, which kind of gets to the passion point. You've got to be able to take a step back and not be so caught up in the day-to-day that you don't have a sense of the broader tectonic shifts, and maybe you have to make some adjustment, which is why the perspective part is important. You've got to stick with it, because these things are not overnight successes in almost all cases. I think one of the problems I think we had more recently with the Internet boom is that they tended to be overnight successes, and people didn't really have the time to be tested in a time. They're going to go through ups and downs, and so as a result I think people lost some of that perspective. But ultimately, even though all those different factors are important, I'd say people are the most important, and if you really got the right people, and you've got them working together as a team, whether it's in business, whether it's in science, whether it's in politics, you can make a big difference. If you don't have the right people, no matter how smart you are, no matter how good your idea is, you're not going to get very far.

You have to get along with people, but you also have to recognize that the strength of a team is different people with different perspectives and different personalities. You're really trying to attract people that think like you. In some ways it's easier to communicate, but you're not going to have a diverse perspective that is critical in looking at things in a different context, and being able to focus on the future and not simply look in the rear view mirror and be looking backwards at the past. So you have to force yourself out of a comfort zone and really try to figure out what are the key ingredients, the key skill sets, the key perspectives that are necessary, and then figure out a way to attract the very best people to fill those particular roles. It's stunning to me what kind of an impact even one person can have if they have the right passion, perspective and are able to align the interest of a great team.

Motivating. Getting people to believe in your vision. That's an important talent.

Steve Case: Right. When people talking about motivating, they often talk about cheerleading, kind of a pep rally kind of approach. We did some of those things. At various stages, as the company got larger you try to figure out a way to reach a large audience, and it's more of an event kind of orientation. But I found that motivation is not really about that. It's more about instilling passion in people. Ideally they have it to begin with. They really believe they're on a mission. They really believe that what this team is doing -- in our case it was a company -- has a potential to change the world. They make the commitment of time and energy and sacrifice to figure out a way to break through. Sometimes it's more motivating to just have people know that you have high expectations, and when you're not getting there, be quiet about it, but they know that they let you down and they redouble their effort.

I don't think I'm much of a back-slapping, glad-handing kind of schmoozy people person. That never has been one of my strengths. It really was setting a direction and setting an expectation and getting the right people working together, and really focused on, "How do we get to the promise land?" Having them self-manage themselves a little bit, knowing what the expectation was, and always setting the bar pretty high.

I remember when we had -- I think it was two or three hundred thousand subscribers. I said, "We're going to get a million subscribers. We're on a march to a million." And people thought I was crazy, because they thought we'd never get to a million subscribers. We were adding, I don't know, it was, you know, 1,000 subscribers a month or something and you'd say, "Well geez, people will be dead before we get to a million subscribers." I said, "Well, we're on a march to a million and we're going to get there and here is how we're going to get there and here are the things we need to do to get there." And after a little while, a few months, people started believing we can get there, and we did get there. And we got there faster than people thought, and then we were basically on a roll, and the growth really started to accelerate. So it really was setting out that mission. It wasn't exactly the equivalent of "Let's put a man on the moon," but for us this march to a million was a big deal, because it meant we were going to go from being a little company, kind of this tiny little upstart, underfunded, nobody ever heard of, competing against giants like IBM and Sears that had Prodigy, and H&R Block that had Compuserve, and GE that had Genie, and this little company was sort of irrelevant. If we got to a million, we felt that kind of put us in the big leagues, so we were on this march to a million, and we got there.

It has been a world-changing innovation. Have you looked back on some of the ways in which computers have introduced new problems to our society? Children may have access to pornography, some crimes can be committed, some bad information can be distributed. It's sort of a mixed blessing.

Steve Case: For better or worse, that is true with any new innovation, certainly any new technological innovation. There's many good things that come out of it, but also some bad things. All you can do is try to maximize the good stuff and minimize the bad stuff.

More than a decade ago we started investing in what we called parental controls, because we felt it was really important that kids had access to the Internet, but it's equally important that parents had some control over what they accessed. And rather than we deciding sort of on our own what was or wasn't appropriate for a particular child, we thought it was important to put those tools in the hands of each parent and let them decide. And some would be very strict and some would be very lenient, but ultimately we felt it was important for parents to decide.

We actually felt it was important enough that when they created what we called a sub-account on AOL for somebody else, they actually had to go through the process of these parental controls, and either set them up or decide not to set them up, but it was integrated into the registration process. As a result, a vast majority of parents with kids ended up using these parental controls. That's an example of how you take what could be a real problem and try to mitigate some of that.

We felt it was important, in a world where access was becoming more and more critical, that we not have a digital divide between the haves and the have-nots. So we created several initiatives, and even personally through our Case Foundation, created something called "Power Up," and built 1,000 technology centers, mostly in Boys and Girls Clubs, but also in YMCAs, churches and other places, to really provide access to computers and Internet in low income neighborhoods and housing projects, so that people -- when they went to school and some homework was assigned that required the use of the computer -- the kids who couldn't afford a computer at home could still participate and wouldn't be left behind.

So there are always these challenges you face. You're not going to have to worry about a digital divide if nobody is connected. How do you create a market, so instead of having it be just a few people, the hobbyist in the corner, it's a mainstream phenomenon? As you begin to achieve that kind of mainstream success, how do you supplement and complement what you're doing from a business standpoint with things you might be doing philanthropically, or the tools you might be building into the business to try to guide it in a more positive light?

That has worked very well, hasn't it? There's increasing access in the public schools.

Steve Case: It's still a problem, and there's always going to be some divide when there's some economic disparity or technological disparity. For example, one area which is still a matter of concern is on Indian reservations. We've done some work there to build computer centers, but the basic infrastructure is generally lacking. Phone lines, for example. In a lot of the areas in this country -- not in Africa, in this country -- on Indian reservations often the infrastructure really is quite limited. So there's still some work to be done. Five or ten years ago, when it was clear the Internet was becoming a mainstream phenomenon, it was equally clear that a lot of people were being left out and could be left behind. Much of that fear has been diminished through the efforts -- not just of AOL but many other companies -- to try to figure out some way to bridge the digital divide. Now most people do have access, even if they can't afford something at home, either at school or at a library or at a Boys and Girls Club or at some other facility.

Computers are less expensive than they were. Almost every year makes them more accessible.

Steve Case: It's partly price. It's partly simplicity. One of the problems with computers, particularly for the older people, is they were befuddled by them, and the computers have gotten better. They have gotten easier to use. They have gotten less expensive. The software interfaces have made things a lot more accessible. Even wireless access is easier, because you can go to a new city with a device and have it already working when you land, as opposed to, "How do I configure this?" and "How do I make this work?" which was hard for a lot of people.

So overall the trends have been pretty good. I think the trends will continue to be good, and more people will be connected through more devices, more networks, more conveniently, more affordably. But that's not to say that we shouldn't keep the bar pretty high and try to make sure we really are doing whatever we can to make sure this medium really is as rich as it possibly can be, and can reach as many people as it possibly can.

Tell us about the merger of AOL and Time Warner. How did you see that opportunity and where do you think it could have gone better than it did?

Steve Case: Well, it certainly did not go as well as we were hoping. The merger has been difficult. Ultimately, about a year ago I stepped down as Chairman. I'm still on the board but not playing any active role and that was a disappointment. My view was it was then and even now, a logical strategic merger for both companies.

AOL -- five years ago it was growing rapidly. It was highly valued. It had a lot of things going for it, but the one area of risk and weakness was as it related to broadband technology and higher speed access. Time Warner owned one of the largest cable systems, Time Warner Cable, that provided broadband connectivity to homes and also owned the largest library of branded content, CNN and Warner Brothers and so forth. And so from my standpoint bringing these companies together would enable AOL to not just embrace broadband, but really become the leader in broadband by leveraging the distribution capabilities of the cable system and also the content assets to have a differentiated service offering. On the other side, from the Time Warner perspective, they had some great businesses that had been built over the last century by great entrepreneurs like Henry Luce, who built Time, Inc., and Jack Warner, who built Warner Brothers, and Ted Turner who built Turner and CNN. But it was being left behind, or ran the risk of being left behind, as the world became more digital and more interactive. The ability for AOL to provide sort of an Internet DNA and sort of a different perspective, that could help transition some of those businesses into a future where the growth rates were higher. Music, for example, embracing the concept of digital delivery of music as opposed to simply complaining about piracy, I thought would significantly advantage Time Warner.

When we announced the deal, everybody agreed. They thought it was a wonderful deal and made a lot of sense. Several things then happened. One was the stock market started declining for all companies, particularly for Internet companies. So when you have a merger and suddenly the stock is reduced in value, people are disappointed and frustrated and angry. I thought it would be great to move the whole company to more of an equity-based compensation, which meant instead of having large salaries they'd have smaller salaries and have more stock. So if a company was successful they'd make a lot more money. Well, the stock went down and so as a result they were angry about that.

I also dramatically underestimated the complexity of bringing these different people, these different cultures, almost different tribes together. Even within Time Warner, which had been built over many years through acquisitions. Just four or five years prior they had acquired Turner, and five years prior Time, Inc. had merged with Warner Communications. Time Warner really was a series of relatively independent companies. It made sense to run it as one company and have a more integrated view. It's sort of like the United States of America. It's important for each state to have its own priorities and its own governor but what makes America great is when all 50 states come together, pool their resources, put some power in Washington and have a strong president leading the charge. That's what makes America great. That's one of the reasons why in Europe they're trying to replicate that model and create a European Union. France and Germany and the United Kingdom and are stronger by working together than they could be working separately. That's what I believed then and it's what I believe now. Most of the people in the company did not share that view. They preferred running these things as more autonomous, independent kind of things.

So it was a well intentioned strategic merger, but I underestimated some of the complexities and some of the people aspects. I certainly didn't predict some of the timing related to the stock market. It has been a disappointment, but that doesn't mean it might still not turn out to be a good idea. For the same reason that I mentioned before, these things sometimes take time. Even though it seems like a long time to people, AOL and Time Warner have only been merged for a little over three-and-a-half years. There's still many years to come and we'll see how it plays out.

My bet is that the predictions we have regarding the way the market would work -- and how convergence with technology and then industries -- will blur the lines so you won't think of the motion picture industry or the television industry as really totally separate. And similarly, some of the principles of the Internet, which allow people to decide what to get when they want to get it, will become more common in television. I am a big believer in personal television. A company like TIVO has popularized the notion that you pick shows and record them and watch them when you want, which is how you use the Internet. You pick web sites and peruse them when you want. I think that's the way television will evolve, and people will think about television more about shows, just like they think about web sites, and less about networks.

I think some of those trends are still there. It's just going to be the efforts of a new team at Time Warner to carry some of those ideas forward.

Your analogy of the tribes suggests rival warlords who all have very powerful egos and are used to being the boss. Perhaps they didn't all have the teamwork attitude that you had cultivated at AOL.

Steve Case: I think it was a different mentality. We're now trying to instill some of that teamwork in the company now. Dick Parsons is the CEO. He's doing a good job of trying to get people to think more collaboratively. In retrospect, we probably were thinking people would change their perspectives and things could happen more quickly.

I was used to being CEO for many years and when we did the merger I was chairman. The chairman is an important job, but basically runs the board and the CEO runs the company. So I was in a position where I had a sense of where we should go, but none of the businesses reported to me, so I had limited ability to direct them day-to-day. I learned it's probably not a good thing to put yourself in a position where you can be held accountable for something that you really don't control. In new things I look , I'm trying to make sure that the alignment is right there.

Obviously this was a big blow, with your decision to step down, but it sounds like you retain some optimism that this idea can still work well in the long run.

Steve Case: There's an underlying strategic idea of what's happening with technology, what's happening with some of these consumer markets, how consumer trends are shifting, consumer habits are shifting, and people will be using things in different ways. I think there's already some evidence that that is happening. I think the jury is still out on exactly how this company can best capitalize on that, that but I continue to be hopeful that we'll be able to lead the pack, just as we did in the days when AOL emerged and led the pack in a new direction. I'm hopeful this company will be able to do that as well.

One of the innovations that you have brought along with you in your charitable work is the Starbright program. Could you tell us a little about that concept?

Steve Case: One of the things we've tried to do is use technology to help people, but particularly to help kids. And the Starbright initiative, which really was led by Steven Spielberg, was: "How do you reach kids in hospitals that are kind of lonely and out of touch with their friends and dealing with very difficult circumstances and give them the tools and experience that really is fun?" And I think Spielberg and the whole team there has done a terrific job. AOL played a role in providing some of that technology and creating some services for it, and AOL and then AOL Foundation tried over the years to do a lot of different things like that, trying to recognize that this is a great business, and we've done well in building the business, but we also shoulder responsibility, beyond just the business, in trying to make sure that these tools are used in a constructive and responsible way.

So a lot of the things we've been doing on the philanthropic side, both when I was affiliated with the company and now more independently, are trying to reinvest some of those resources in areas that I think can be pushed forward. Not always technology oriented.

One of the things I'm most focused now on, with the Case Foundation, is the notion of social entrepreneurship. I'm an entrepreneur. I like building companies, but I also like building projects, and one of the things I learned in the last five years is it's easy to start new things, particularly in the not-for-profit world. It's harder to scale them, and so we're trying to figure out a way to work with some of the not-for-profit organizations -- around maybe ten years, or already well led, already well respected -- on how to kind of get them over that tipping point where they really become more mainstream phenomena. One statistic that was startling to me is if you look at the top 20 companies, and you look at the list 20 years ago and you look at the list today, about half of the companies change every 20 years, because 20 years ago CISCO and Microsoft and some of the other companies didn't really exist. Wal-Mart. And so in the business world there's this process of constant change and evolution and a list changes. In the not-for-profit world, if you look at the top 20 not-for-profits 20 years ago and today, 19 of them are the same. One has broken through, which is Habitat for Humanity, which is a great group that we work closely with.

So the question for me is how do you get more change, more out of-the-box thinking, and more focused on scaling in the charitable sector. One of the key challenges is helping them build the leadership skills and the teams, but also how to help them get access to capital in a more sustainable way. In the business world, if you have a little idea, you get seed financing from a venture capitalist. That sort of happens in philanthropy. If that idea works, then you get what's called mezzanine financing, which is more funding, and you take it to the next level. That sometimes happens in philanthropy, but in business, when everything is really firing on all cylinders, then you go public, and then you have an ongoing mechanism to get capital. That does not happen in philanthropy. There's no equivalent of going public. So we're trying to figure out a way to fill that vacuum and really encourage not just business entrepreneurs but social entrepreneurs.

A related issue we're working on is trying to build business models into philanthropic organizations, because their number one issue is sustainability. Every year they have to go back with a hat in hand trying to raise more grant money and a better approach is to have something that is more of a recurring revenue stream. The Girl Scouts have that with their cookies program, where every year they unleash hundreds of thousands of girls to go door-to-door and sell cookies, but that's the exception, not the rule. And we're trying to figure out how to build programs like that into philanthropic organizations so they have a steady source of income.

And in some cases that business aspect becomes a core part of what they're doing. A great example of this is National Geographic. A great organization. It has been around 100 years. They decided when they were formed 100 years ago that they really wanted to educate people about the world.

Today, National Geographic has a membership side with a magazine and some television side, and they generate about a billion dollars in revenue, and they're profitable. And so at the end of the year they have some bottom line profit which they can then reinvest, because they're running it as a not-for-profit in charitable endeavors. But, the real magic in National Geographic isn't how much money they have left at the end of the year. It's the fact that through their overall focus they're reaching hundreds of millions of people and educating people about the world. It just happens to be done in a business-oriented kind of way that is more sustainable.

I think it's important to have more charitable operations work like that. You can be entrepreneurial even if you don't want to be in business. You can be a social entrepreneur focused on the not-for-profit sector. You can be an agriculture entrepreneur if you want to change how people think about farming. You can be a policy entrepreneur if you want to go into government. The idea of an entrepreneur is really thinking out of the box and taking risks and stepping up to major challenges. Trying to instill that sense of entrepreneurship in areas other than business is one of the areas I want to focus on in the years ahead.

A lot of businesses have stopped giving to nonprofits. A lot of foundations have tightened their belts. It has been a very painful time because of the downturn in the stock market, but you seem quite confident that you're going to break through that.

Steve Case: I hope we will. I'm going to play a role at least, but part of it is bringing a different perspective. I think the model of businesses make the money and then give some portion of that to shareholders and some portion of that to philanthropic organizations, and not-for-profit organizations just rely on grants every year, I just don't think is a great model. So we do encourage companies to give more. I was on a committee that was trying to encourage corporations to step up their level of giving. I do think that's important, but I think it's more important for nonprofit organizations to start thinking about sustainability. It obviously varies depending on what area they are focusing on, but looking for some way to create a sustainable recurring revenue stream, like the National Geographic example. It reaches more people, number one, as well as generating ongoing funds.

So to me it's a somewhat different model, trying to implant more business principles in not-for-profit organizations so they have that benefit of sustainability. Trying to identify the leaders that are emerging and help figure out a way to help them build their teams and get access to capital, so they can cross over that chasm and hit the big time. We also do a lot of traditional philanthropy through the Case Foundation, but the key area I'm focused on is how to move the concept of entrepreneurship into the mainstream in the not-for-profit world.

With all of your these accomplishments to your credit, you're still a young man. Are you thinking about other businesses in the future?

Steve Case: Right now I spend about a third of my time with family. One of the reasons I wanted to step down as a CEO five years ago is that I have five young kids. The oldest now is 16, but they're still sort of young and I just wanted to spend more time with them. I spend about a third of my time on philanthropy through the Case Foundation, and about a third of my time on other businesses. I do like building business. I'm not likely to go off and start something myself, because I did that and had a good run at it, but partnering with entrepreneurs if they're doing interesting things in consumer markets where there is some kind of big breakout disruptive potential and the opportunity to build significant companies that really have a profound impact on people's lives -- that is of interest.

So it's really a mix. There is some blurring between the amount of time I spend on philanthropy and the amount of time I spend on business. Maybe it doesn't make sense to view them as separate worlds. The traditional model, not just for companies but for individuals, is if you focus for a number of years on business and you make a lot of money that at some point later in life you'll focus on giving back, either by giving money away or playing some role in terms of public service.

I'm trying to figure out a way to do it in a more integrated approach that's not so disparate, and to have an impact on society. I do think that people have an obligation to give back but that doesn't necessarily mean that you give back just the traditional way. Maybe there's new ways to give back and make a contribution. I'm looking forward to some mix of philanthropy -- maybe through a somewhat different prism -- as well as helping entrepreneurs build some significant new businesses.

Do you have a sense of where the next technological revolution is going to come from, or are we done?

Steve Case: I don't think we're ever done, because the pace of technology continues to change. One area I'm particularly interested in is the impact of technology on health care. Health care is a mess. Everybody is unhappy with it. The patients are unhappy, the doctors are unhappy and the government is unhappy. The HMOs are unhappy. It's a mess and yet it's 15 percent of our GNP and it's obviously a critical part of people's lives, because everybody cares about their health and the health of their families and friends. Partly through philanthropy we created a foundation that is doing research related to brain cancer because that's what my brother died from. I'm now trying to broaden that and look at brain diseases more generically, like Alzheimer's. In other words, there's more commonality with brain diseases and a more integrated approach to brain sciences may make sense. We're also looking at the potential opportunity on the business building side in terms of having an impact on health care.

This is one of the things that dawned on me. What if I had said 25 years ago that what I want to do is help level the playing field? To give people access to technology tools so you don't have to be a big company to get your ideas published and you don't have to own a printing press. If I wanted to do that and I had created a foundation for leveling the playing field, I'm not sure what impact it would have had. Instead I went with some other people and started AOL, which achieved that social purpose as well as achieving a great business success.

So sometimes there are ways to do this through the private sector that can have a more profound impact on your chosen social cause through business, and health care I think is a great example. Education is another great example, so I'm looking at ways to do that through traditional philanthropy, through grants and encouraging collaboration as well as through funding some businesses and partnering with some entrepreneurs that might be effective.

Where does your sense of social responsibility come from? Were you raised with that?

Steve Case: I think so. I think almost everybody understands that where much is given, much is expected.

The resources you happen to accumulate, what do you do with them? You can spend the money and buy some houses or whatever, and people do some of that and that's fine. You can give the money to other people, either your family -- but usually when you do that you screw them up and it ends up not being a particularly -- it's well intended but often counterproductive. Or, you take those resources and reinvest them in things that you believe in, and that could be reinvesting in a philanthropic cause. That could be reinvesting in business causes or trying to look at it through more of a hybrid approach, which is my inclination, but I do feel a sense of responsibility. People often ask me whether I would want to move into the more formal kind of government role or public service, and I guess never say never, but my preference would be to try to figure out a way through this prism, this platform, building on my interests and strengths. Maybe there's a way I can leave the world a better place than I found it, but in a different way, and that's what I'm going to be continuing to work on in the years to come.

When you look back on the first half of your life, what are you most proud of?

Steve Case: I'm pretty proud of my family, so that's a good start. I think AOL from a business standpoint has been a terrific success. The Internet is now taken for granted and really is part of everyday life, which 20-25 years ago people thought was science fiction. I'm proud of the role I played there. I'm proud of the company we built and I'm proud that many of the people who made a lot of money on AOL focus a lot of their time now on giving back. So there's a lot of things to be appreciative and thankful about.

I focus less on looking back and more on looking forward. That was all interesting. It was a great journey for 20-plus years. Some ups, some downs but overall a great experience. The question now is "What's the next journey? What's the next challenge?" That's really where I'll focus. For better or worse, I'm not one to spend a lot of time looking back and remembering the good old days. The good old days still may be lying ahead, and rather than celebrating the past, why not embrace the future?

I think we live in extraordinary times and there are many challenges, but there are also many opportunities. Bringing a perspective which is a more entrepreneurial, out of the box, swing for the fences perspective is where I can contribute and I'll be looking to do that in as many different venues as makes sense.

Are there any budding business entrepreneurs among your kids?

Steve Case: It's probably a little early to say. They're certainly not doing some of the things I was doing at the time. But the wonderful thing about kids, and having five of them you really see this, is how different each is. It really is extraordinary. For just the same reason I said at the age of 45 I'm not quite sure what lies ahead, from ages 9 through 16 I don't know, and I'm sure they don't know, and that's what makes it fun.

My guess is all five will go in different directions and will have wonderful, productive, constructive lives and wonderful families, but also find their own passion and stick with it and persevere and bring with it a certain sense of perspective, a recognition that it really is about people. The people you hang out with, or the people you align in some part of a team, really are the key ingredient to success and I think to happiness.

Before we go, we'd like to ask you about the American Dream. What does it mean to you?

Steve Case: I think it's really about hope and optimism and possibility. I think a great example -- because we happen to be talking when Ronald Reagan passed away, and this has been a week celebrating his life. I think he is the prototypical example of the American dream. Somebody who came up from modest beginnings, had a certain perspective on life and was an actor, when people didn't necessarily think he could act or that he should act, and then moved from that into a position of leadership in the Motion Picture Association, and then decided to move into politics as governor and then president. I think most people would have to say -- whether you liked his politics or didn't -- that he in his 93 years on earth lived an extraordinary life and really is an example of the boundless possibilities and optimism of America.

There are many other examples, but I think that's really what it's all about. Anything is possible if you put your mind to it and you really work hard and you bring the right perspective to it. You shouldn't focus on why you can't do something, which is what most people do. You should focus on why perhaps you can, and be one of the exceptions.

I find it interesting that in America, even though most people are more optimistic and most people around the world do view America as the city on the hill and more entrepreneurial and more risk taking and less traditional, still in America most people don't take risks, and most people are pretty traditional. It's actually a relatively small number of people that really are those risk takers, and a relatively small number of people that end up really having an impact on the world, and it doesn't take a lot of people. It just takes a few people who really care and stick with it, and that I think is what America is about. I think that's one of the things that's great really about The American Academy of Achievement, really shining a spotlight on that notion that anything is possible, but it starts with somebody having a dream and sticking with that through thick and thin.

Thank you. It's been a pleasure speaking with you.

Thanks.

This page last revised on May 01, 2008 16:05 EST