Steve Case: Vision Without Execution is Hallucination | E34
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Vision without execution is hallucination. Having a big idea is important, but it's really the starting point. Ultimately, it's how you execute that idea, which really comes down to having the right people focused on the right priorities. Entrepreneurship is a team sport and you just got to make sure you spend a lot of time making sure you have the right people focused on the right things. And if you do, anything is possible. If you don't, nothing's possible.

Welcome to In Search of Excellence, which is about our quest for greatness and our desire to be the very best we can be. To learn, educate, and motivate ourselves to live up to our highest potential. It's about planning for excellence and how we achieve excellence through incredibly hard work, dedication, and perseverance. It's about believing in ourselves and the ability to overcome the many obstacles we all face on our way there.

Achieving excellence is our goal, and it's never easy to do. We all have different backgrounds, personalities, and surroundings, and we all have different routes on how we hope and want to get there. My guest today is Steve Case. Steve is one of America's best-known and accomplished entrepreneurs who was instrumental in making the internet part of our everyday lives. He was a co-founder and the CEO of America Online, also known as ALL, which is a pioneer in getting people to use the internet for the very first time, and

and which at its peak had half of the internet users in the United States using it. AOL was the first internet company ever to go public and was the best performing stock in the 1990s after it reached a valuation of $160 billion.

Steve is also a co-founder of Revolution Ventures, a very successful venture capital firm that has invested in more than 500 companies since its formation in 2003. Steve has a tremendous passion for helping entrepreneurs and is also a dedicated philanthropist. He is the founding chair of the Startup America Partnership in an effort to accelerate high growth entrepreneurship throughout the country and was the founding chair of the National Advisory Council on Innovation and Entrepreneurship. Among many other boards, Steve is also the chair of the Smithsonian Institution, the

According to Forbes magazine, Steve has a net worth of $1.4 billion. And finally, at least as far as interests go, he is the author of the New York Times bestselling book, The Third Wave, An Entrepreneur's Vision of the Future. And he is about to release his amazing new book, Rise of the Rest, How Entrepreneurs in Surprising Places are Building the New American Dream. Steve, it's a pleasure to have you on my show. Welcome to In Search of Excellence. Thank you, Randall. Great to be with you.

I always start my podcast with our family because from the moment we're born, our family helps shape our personality, our values, and the preparation for our future. You grew up in Honolulu in an upper-middle-class family. Your parents were fourth-generation Hawaiians that go back more than 100 years, and they were married for 61 years before your dad passed away. Your dad, Dan, was a championship swimmer when he was younger. In 1945, he joined the Navy and served as an elite underwater demolition team that was a precursor to the Navy SEALs.

After working in the Army, he worked very long hours as a corporate lawyer and eventually started his own law firm where he represented the state's powerful sugar and pineapple companies. Your mom, Carol, was an elementary school teacher who retired after her fourth child was born to stay at home and raise you, and she later became a career counselor. Can you tell us how your parents influenced your life? And as part of that, can you talk about being permitted to watch only an hour of TV at night, the types of chores you had to do around the house?

and the message on your Christmas cards each year? And on a related note, in the world of Instagram and TikTok and social media and being addicted to it, should parents be limiting the hours their children spend online?

Well, there's a lot there to unpack. Well, first of all, it was wonderful to grow up in Hawaii at the time. Actually, when I was born, Hawaii wasn't even a state. It became a state on my first birthday. And both, as you said, both my parents had a long history there. And some of the lessons I learned, some of the perspectives I

I took from them. One was about hard work that, you know, nothing important ever is done easy. And, and just the kind of focusing on what you need to do and getting the job done, whether it be at the, you know, the kid doing homework, or as you said, different chores, you gotta work hard and get it done. The second was humility. They both were quite successful, but never had errors about it. Never bragged about it. We're kind of understated and didn't really like people that were, you know, kind of a little too kind of,

braggadocio, and also the importance of serving your community. They both were quite active in all kinds of different things. And at Honolulu, I saw firsthand the importance of kind of giving back, trying to contribute to your community in different kind of ways. And a final one, which I think was an interesting lesson, was when I was, I don't know, maybe 10 or 11. They basically said whatever money they made, they weren't super wealthy, but because of the law firm, other things, they had some money.

none of it would go to the kids. All of it would go to philanthropy, in particular to a Punahou school in Hawaii. I think that was both because they cared about that school and wanted to support that school. And again, were very philanthropic and wanted to be supportive in the community. But also, I think, was a signal to all of us as kids, like, you better go out and find your own way and have your own life and pick your own priorities and have your own journey. We don't want you to kind of just be a chapter in our story. So those were some of the things I took away from

from growing up in Hawaii and also both of my parents. How about the world of Instagram, TikTok, social media? Should parents be limiting the amount of time they spend online?

Probably. It's like you mentioned the hour of television at the time because they wanted us to make sure we were getting our homework done. They didn't want us to be spending too much time glued to the television. So there was this rule that we could only essentially pick one or two things to watch each week and the rest of the time we should be doing other things. Not necessarily studying, could be playing outside, could be reading a book, whatever, but they didn't want us to be glued to the TV. I think that probably was helpful. It is challenging, obviously, for

parents, particularly in today's world where there is so many technologies. And before there was one television in one living room that everybody could keep an eye on as opposed to everybody having phones and iPads and other kinds of ways to stay connected. But trying to, whether it's forced in some way or just strongly encouraged, I don't think it's healthy if people spend too much time on social media.

You were born an entrepreneur. When you were six, you set up a roadside juice stand with your brother Dan using limes from your own backyard. You charged two cents a cup, but many of your customers gave you a nickel and let you keep the change. And from a very early age, you learned the value of high margins.

A few years later, the two of you formed Case Enterprises, a business that sold everything from seeds to greeting cards by mail and by going door to door. Somehow, and this is crazy, Case Enterprise won the exclusive rights to sell a brand of Swiss watches. And even though you didn't sell a single watch, that didn't stop you from moving ahead. You created an affiliate of Case Enterprises called Aloha Sales Company, which sold ad circulars that you and Dan typed on your own typewriters. And the two of you even shared a newspaper route.

You never made much money, but that wasn't why you did it. Can you tell us why you did do it and what you learned from these experiences? And as part of this, can somebody learn to be an entrepreneur or do you have to be born with the gene? I wasn't setting out not to make money. I just, none of the ventures were particularly successful. So I didn't make money.

But I did enjoy, frankly, I didn't know what an entrepreneur was when I was a kid. I just enjoyed the idea of starting things up and having ideas and creating little businesses. And as you said, none of them really ended up being particularly successful, but I just enjoyed it. It was fun to also do not all of them, but many of them in association with my brother, who is about a year older.

And so I think I did learn a lot about trying different things. Some, some things work, some things didn't work yet. Even things like selling greeting card door to door. One point selling cable television in the 1970s door to door where,

95% of the time, maybe even 99% of the time, they slam the door in your face because they have no interest. You just have to keep knocking on more doors. Eventually, you get to a yes. And so I think that was an important lesson to learn early on. In terms of the question around, are you born an entrepreneur or are you kind of a nurture nature discussion?

I think there are a lot of people that are born entrepreneurs, but I've also met a lot of people that early on had no sense of that was their path and kind of stumbled into it. So my experience is it is something that some people just have a certain

certain ability to deal with ambiguity, certain willingness to take risks. But there are also a lot of people that come to it, including some people later in life, that they think they're doing something else and they see an opportunity and pursue it and suddenly figure out a way to create a pretty significant business. One great example, I remember when I was just

kind of still relatively young was the story of McDonald's, the fast food restaurant. Ray Kroc was selling, I think it was in his 50s, and selling milkshake mixers, going essentially around different places saying, you're making milkshakes, you should buy my mixer.

and suddenly got a bunch of orders from a couple brothers in some place in California called McDonald's and said, "What's going on there?" and went to visit and was fascinated with the model, essentially one of the first fast food concepts, ended up essentially buying it. In his 50s, essentially becoming an entrepreneur and scaling McDonald's into a pretty large business. Part of the reason I even wrote this new book, The Rise, The Rest, I believe people everywhere in the country stumble onto those ideas. They see

There's something that could be done better. It's just that many people in many communities never understand what the next step should be in turning that to the business or don't have the ability to access some of the initial startup capital to get started. And what we've been trying to do really for the last decade is try to create more opportunity for more people in more places. So there can be more Ray Kroc stories. So whether you start early as I did and kind of had an interest in business and then stumble into something

In my case, the idea of being part of building the internet or whether you find something later in life that you see something that's part of your experience that just does frustrate you. So this could be done better. And instead of just being frustrated by it, you actually do something about it. And for a lot of folks, that increasingly is starting a company that can actually address that, a better product, a better service, a better service.

way forward. And if we can encourage that with everybody, you know, whether they're, no matter where they're born, no matter where they live, no matter what their, their background, that if you have an idea, maybe you have the chance to be an entrepreneur and we just need to figure out ways to help you go from that initial instinct, that initial idea, almost that initial light bulb moment and actually turn it into something.

As an interesting factoid, I know you know my close friend, Brad Keywell. We met when we were eight years old in Hebrew school. His first business he started with, six years old, was a greeting card company as well. He sold them in local stores. Well, Brad, no doubt, did better than I did. And then I do remember, I think it was in college where he met Eric Lofkoski, who ended up co-founding a number of companies, including Groupon and others. So great example of not just having your own

kind of interests, but also the people you end up bumping into can end up being transformative in terms of the life choices you end up making. Right. We have a saying that you are the company you keep. And I think when we were at Michigan together, there were four of us who had our own business, maybe five. It was Brad, very successful.

Guy named Happy Walters, who was in the music business, the entertainment business. I know Happy as well. So a great guy. Jeff Blau, you probably know as well. CEO of

related group. So he's done very well. And I was the fourth. Maybe there were one or two who had little business as well. I sold t-shirts door to door. And one of the most important and valuable lessons I learned in college was going door to door and cold calling and getting 100 doors shut in your face, like you said. But it's the one sale. After the one sale, you don't care about the other 99 people that said no.

Yeah, totally agree. I remember one business I did in college also kind of ties into the kind of go-to-market strategy, who's your customer kind of mentality, which is I had this idea of selling fruit baskets to students during exam week, that instead of just eating junk food, if you're staying up kind of late, you had to eat fruit. But I knew the students themselves

probably wouldn't have the desire to buy the fruit, nor necessarily even the money to buy the fruit. So I ended up targeting their parents and said, "Well, your kids are studying hard. Don't you want them to eat healthy?" And that actually worked out pretty well where parents were willing to foot the bill to get these fruit baskets to their kids doing that intense exam time frame. Just another example

seeing an opportunity at that point happened to be in college figuring out what to do in terms of that particular product but then also figuring out what's the best way to essentially bring that product to market and who are the logical customers for that which even though the consumer was the student the better customer to pay for it was their parents

Let's talk about education, which I think is one of the most important ingredients of our future success. You graduated from the private Punahou School, a K-12 school with 3,700 students that was founded by Protestant missionaries in 1841. In 1841, a school that was ranked as the greenest school in America in 2008 and 2009, in which Sports Illustrated ranked as the nation's best sports program. At some point, you were the most famous person who had gone there until President Obama showed up as a freshman when you were a senior.

After high school, you went to Williams College in Massachusetts. It was your first choice, and your dad also went there. From the minute you got there, you knew you were going to be a businessman. Williams didn't offer a marketing degree, so he majored in political science because it was the closest thing to marketing. You were not a dedicated student. You didn't particularly care about grades, in which you forstees. Instead, similar to your childhood, your full-time campus occupation was to start and then promote one business venture after the other. You use your dorm room as an office and sign up your roommates as business partners.

We just talked about Williams Fruit Baskets. You also created a record label called Purple Cow Records, whose only known album was a Simon & Garfunkel-influenced compilation entitled The Best of Williams, Volume 1, 1978, and which sold for $4. You also took control of a company called Magic Bus, a poor performing student-run shuttle that transported students to the airport and made it profitable after a short while. You wrote music reviews so you could get free concert tickets. You also were the lead singer in two rock groups, The

The Vans, which was an imitation of the cars, and The The, which was influenced by the Knack, whose one and only hit was My Sharona. Obviously, none of this is tech-related. We're going to talk about the specifics of your career in a few minutes. But before we do, can you tell us about the one computer class you took in college and what you thought about it? And can you tell us about Alvin Toffler's book called The Third Wave and how both influenced your future and how it should influence our future?

Well, the computer class I took, and this was the late 1970s, it was still the era of punch cards. Personal computers had not yet been invented. So you had to write a program and then basically take it to somebody to run these punch cards. And then two or three hours, you get the result back, which for some was a success. For me, more often was a failure. I got something wrong in my formulas. I had to go do it again. So

My first experience with computing was sort of a negative one. I said, this is kind of hard.

not that interesting and so forth. So later when personal computers started emerging in the early 1980s, I saw that as a way of addressing some of the problems I saw in my first experience with a computer class. But I didn't do particularly well in that class. As you said, I was not as focused on grades as I perhaps should have been. I was doing what I had to do to stay sort of in that

in the middle zone, but I really was more passionate about the things I was doing outside of the classroom in terms of some of the businesses I was getting involved in. The other thing I did outside the classroom was I kind of stumbled onto this sense of the idea of the internet. And this, again, was well before the internet was available to people. It was still a government kind of technology and some educational institutions had it.

but the Alvin Toffler book. And he was a futurist and also wrote other books, Future Shock and some other ones. But he wrote a book, I think it was 1979, maybe 1980,

called the third wave. And I was mesmerized by it. He basically was saying that the first wave of innovation was the agricultural revolution. And then that was followed by the second wave, which was the industrial revolution. And he was predicting, and this again was over four decades ago, that the third wave would be the digital revolution. And he talked about essentially the world we now live in where

We're kind of hyper-connected and able to access people and services through this, what he called sort of the electronic cottage, the electronic frontier. So when I read that, I knew I wanted to be part of that. I wanted to help make that idea kind of come to life. So both the experience in that computer class, some of the frustrations, which led me to, even when we started AOL, how do you make it easier to use, more useful?

more fun, more affordable, and reading Alvin Topher, and then also reading a lot while I was at college, different magazines talking about the idea of video text and teletext and interactive TV and some services like Minitel in France and Prestel in the UK. They were the beginning pioneering services of this interactive world, what we now think of as the internet world. And that was just captivating. And so that really was, when I was graduating, I knew that's what I wanted to focus on.

After you graduated from Williams College, you applied to a bunch of MBA programs. In your applications, you wrote that you envisioned a future when two-way cable systems would make the standard television set a combination of information line, newspaper, school, computer, referendum machine, and catalog. The schools were not impressed. You were rejected by all of them. You also applied for jobs at the prestigious New York advertising firm J. Walter Thompson and also applied for a job at HBO. You were rejected by both of those as well.

In search of excellence, how valuable is a college education and is it even necessary? And if you want to go into business or progress in your career once you're working, what's your view on the value of an MBA or other graduate degree in areas outside of law and medicine?

Well, I think it varies depending on kind of really who you are and what you really want to do. I think college education and graduate education for some can be helpful, both in terms of kind of learning certain skills, particularly I learned at Williams College, which is a kind of a classic liberal arts school. There are some things, even if the specifics themselves in terms of courses I studied, some much of that I would not necessarily remember the process of

learning new things, digesting information, sorting through things, analyzing things, then communicating things. That skill set has served me quite well. As you said, when I was graduating, I actually knew because of some of the things I just talked about, the third wave and others, what I wanted to do was do something with the internet. But in 1980, there was still more of an idea, not really an industry. So there weren't companies to apply to to be part of that.

Back in 1980, venture capitalists weren't backing 21-year-old kids with crazy ideas. That led me to pursue a somewhat more traditional path with some bigger companies. I knew I wanted to do that. It just took me a while to figure out what to do. As you said, I did apply to several business schools. They all rejected me. One of them was Harvard and

about, uh, I guess six years ago when my first book, the third wave came out, I was on a book tour and going to a Boston TV station and we drove by the Harvard business school campus. And I said, let's stop the car. And I wandered in and we filmed what turned out to be kind of a funny little, uh, you know, video talking about why you'd be asking, going to the admissions office, asking why they rejected me and, and, uh, and so forth. But yeah, to me it was,

I was just trying to figure out how to kind of break into that. And then, you know, trying different things made sense. As you said, I wrote this essay that ended up being pretty accurate in terms of predicting the future. But most people reading it back then probably thought it was kind of crazy. They thought they wanted to, you know, hire somebody who maybe had a different perspective on things. But I kept at it and eventually, you know, I was able to, you know, get my first job, then my second job and able to then propel that into a,

some of the entrepreneurial opportunities I had. No online companies. So you end up taking a job at Cincinnati for Procter & Campbell, which had a great marketing program. You figured that'd be a good way to build up some business skills. Your first job there was doing a test market of new products in cities like Indianapolis, where you worked on products like Lilt, the home hair perm kit, and a hair conditioner called Abound. You saw that one of the ways they launched new products like shampoos was through something called sampling.

where they would put a little small version of the shampoo in a little packet and distribute it with newspapers or direct mail, hoping that people would like it and buy it, which ended up being a core strategy for AOL during your years of hyper growth where you distributed many millions of free trial versions of AOL by sending discs in the mail.

You then worked at Pizza Hut for a couple of years in Wichita, Kansas as the director of new pizza development where you would travel around the country eating pizza. As you tested new product combinations, you found that people continue to like the plain old cheese pizza and sauce pizza the best, which taught you to keep things simple. Another lesson that would serve you well and have a huge impact on your success. You mentioned Ray Kroc. His famous motto was, keep it simple, stupid, kiss.

We're going to talk about control video in a few minutes, but before we do, I want to talk about stepping stones that nearly all of us have in our careers. In search of excellence, if we can't immediately get a job in the field we want to pursue, how important is it to take jobs in different industries that we may not enjoy very much or even dislike, where it's not obvious how they will help us to get to where we want to go? And how important are these early experiences and lessons to our future success?

Well, I think you just have to, as you said, take a first step. Even if it's not the ideal step, you have to take that first step. And for me, I actually thought that because there was not internet companies I could join or because there weren't venture capitals willing to back do internet companies back then, I should go learn some things and get some credibility that might lead to opportunities emerging down the road. So Procter & Gamble was one of the companies I

I thought would be great at the time and still to this day, they have one of the great training programs for young people around consumer products and brand management and so forth. But again, further kind of example of maybe I wasn't the best interviewee or maybe I didn't have the best resume. Maybe some of those mediocre grades were coming back to bite me. Procter & Gamble actually interviewed on the college campus, but they rejected me as well. So

But I decided I really wanted to work there. So I wrote to them and said, I'd like a second chance. I'd like to, I really believe that it would be a good fit for me. I think I'd be a good fit for you. And yeah, I'd like to have another chance. And they said, okay, well, if you'll get to New York on thus and such a day, a few weeks from now, somebody will be there. And so I did that. It was a snowstorm and five or six hours by bus to get there. And

Finally got there and showed up. And I think the fact that I was so passionate about pursuing it and was willing to jump through hoops to get them to take me seriously again, probably led to that time they decided they would hire me. And I moved to Cincinnati. And as you said, did learn some things there that I probably wouldn't have expected would end up applying to what we then later did with AOL, such as some of the sampling kind of tactics you mentioned, giving people free samples, which

They were doing for shampoos. We ended up doing for, as you said, our AOL trial discs. I was there about two years and actually enjoyed it. I did learn a lot from it, enjoyed being in Cincinnati. But again, I had a bigger aspiration. I wanted to get involved in

something more entrepreneurial. So I left and went to Pizza Hut in Wichita, Kansas, which at the time was a division of PepsiCo. And I had a promotion in terms of going from being a manager to director and a pretty good increase in salary. But also I figured that would be a good

you know, learning ground for me as well, because Procter & Gamble has always been sort of a kind of a top-down kind of command and control operation. Most of the big decisions were made at the headquarters.

Pizza was sort of the opposite. The power really was in the hands of the local restaurant owners who were franchisees. They really were making a lot of the decisions. And so I was only there about a year, but some of that experience also, not just in terms of keeping things simple in terms of the products, but also recognizing how decisions get made and sometimes how big company kind of executives versus more entrepreneurial kind of founder types end up making different decisions and also end up

kind of having a cadence that's quite different. Things tend to be pretty slow in big companies. Things tend to be pretty fast in small companies. So again, that was a takeaway. It had nothing to do with pizza. It had nothing to do with Pizza Hut or even PepsiCo. It had to do with

being on the ground and seeing what was happening. And the last point with Pizza Hut, you mentioned I traveled around, and I did. That company was headquartered in Kansas, but I thought, I think at the time there was something like 50,000 independent pizza restaurants in the country. And I said, rather than sit here in our corporate offices and our test kitchens trying to create new things, I bet somebody out there somewhere has a great idea, and maybe we just take that idea and put it through the

the Pizza Hut system. I think we had something like 5,000 restaurants at the time. So that's why I'd end up spending a lot of time traveling around. And frankly, it tied it in with the work I've been doing over the last decade with Rise to Rest, traveling around the country, trying to find entrepreneurs with interesting ideas, really builds on the idea of traveling around the country, trying to find interesting pizza restaurants

products or pizza-related products that could be a champion. The lesson there is it's good to hit the road and see things firsthand. If you're on the road and you're meeting people and bumping into ideas, that's one way you can be entrepreneurial. If you're just sitting in your

home or sitting in your office, you're less likely to bump into the people that might change your life or the ideas that might change the way you think about things and lead to some startup idea or some strategic insight that you only really could get by being kind of out and about. So even to this day, that's part of the reason why we do these Rise the Rest bus tours. We want to be in those cities. We want to meet the entrepreneurs on their own

home turf. We want to see what's happening in each of these communities. And it's no different than what I was doing 40 plus years ago, traveling around the country, looking for the next great pizza idea.

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In 1983, your brother Dan, who had become an investment banker, invited you to attend the Consumer Electronics Show in Las Vegas, where he introduced you to the directors of a company called Control Video, a struggling computer game company that offered you a marketing position on the spot. You jumped at the opportunity that fit with your desire to pursue your vision of an interactive world of a computer-based communication and entertainment.

who eventually became the marketing director at the first board meeting you ever attended. You are 25 years old. One of the board members named Frank Caulfield, who later became one of the founders of Kleiner Perkins, Caulfield & Byers, one of the best venture capital firms in history.

looked at the company's sales numbers for the holiday season and said that you would have thought customers would have shoplifted more than that. The company was in a free fall. It ran out of cash. And then you recognized that was when the startup thing was tough. The company eventually rebounded through some partnerships you made. And eventually, you and two other people you met there, Jim Kimsey and Mark Sarif, decided to leave two years later in 1985. The three of you started what became AOL. But let's go back to the downfall of control video.

Over the years, both as an entrepreneur and as an investor, I've learned more from my failures, actually much more than my successes. In search of excellence, how important is failure and our ability to overcome it? And as a venture capitalist yourself, assuming everything about two companies is equal, would you rather invest in an entrepreneur who has failed at least once or invest in an entrepreneur who has never failed? Well, first on the control video side,

My brother Dan, late brother Dan, was an investment banker and would see new company ideas from time to time. And he did send me, when I was working at Pizza Hut, the idea for this company before it got launched. And I thought it was interesting. There was some risk I told him about, but I thought there was a lot of opportunity. And then I did go to that Consumer Electronics Show and met the team. I consulted with him for a little while before deciding to join full-time.

And it was actually, to me, a lesson in timing. The idea they had was actually a pretty good idea. This is back in 19...

1982, 1983, that at the time, very few people had personal computers, home computers. They were just beginning to come on the scene. But a lot of people had Atari game machines. And so the idea of this company was they created a product called GameLine that essentially was a game cartridge that also was a communications modem. So you'd plug the game into your game console and also plug it into your phone line. And you then could download video games

Almost like having an in-home arcade. You can basically play any game you want from this central store. Almost like Netflix is today for video games four plus decades ago, which was a great idea. And actually when it was announced, there was a lot of enthusiasm, a lot of retailers, Toys R Us and other big players at the time bought a lot of these game line products. But by the time the product actually came to market,

the whole Atari game market and ecosystem had imploded. It went from being really popular to being really unpopular just as they were coming to market. And that's why this, you know, the thing you mentioned from Frank Caulfield, one of the board members was, was true that the sales were abysmal. So that led to, you know, having to lay off, I think it was 70, 80% of the company and having to,

kind of hunker down and try to figure out a way to survive. I worked on a couple of things, including a partnership with one of the phone companies at the time, Bell South, just to provide some capital to allow it to survive. But after trying to just stay alive for about 18 months, 24 months, then we decided it was time to take some of the learnings we had and some of the people that were part of that company and launch a new company that was focused then on instead of the Atari game market on the personal computer market.

And that really led to the founding of, in 1985, of what we initially called Quantum Computer Services, but eventually got rebranded as AOL. Let's talk about failures and successes. Is a failure a necessary ingredient of success? And I want to go back to the question, two entrepreneurs, everything else equal, one failed, one hasn't, which would you rather invest in?

I'd rather invest in somebody who had a success but also had some failures. So it's sort of a mixed bag. If they've had a string of failures, that actually is a concern. If they've just had successes and never had to deal with challenges, never kind of really been under the gun, that's a problem as well. As you say, you learn a lot from the struggle. You learn a lot from the failures, including the importance of continuing to

fight the battle, whether that control video example, or even some of the early days of our new company, Quantum. There were several times where we almost went out of business and we kept fighting at it and eventually we're able to be successful. I think that persistence, that perseverance really kind of paid off. So I think it is important if you're anything that's really worth doing, some battle worth fighting, some mountain worth climbing is going to take

take time. So you've got to be patient and be hard. It's going to often be two steps forward, one step back. And having that resilience, having that persistence, having that passion is critically important to do that. And also having a certain humility, knowing that it can be difficult. And that does come, as you said, from having some failures that you got knocked down the ground, but you got up, dusted yourself off and said, all right, let's take another shot.

Let's go back in time to 1985, 37 years ago, when many of my listeners and viewers weren't even born yet. As crazy as this sounds, when you started in 1985, it was illegal for customers or business to connect to the internet. That time, the internet had been funded by an agency within the Department of Defense called DARPA, the Defense Advanced Research Projects Agency, and was restricted, as you said, to educational institutions and government agencies, which meant you had to focus on policy and how to commercialize it.

When you launched, only 3% of people were online and they were online for only an hour a week. At that time, no one really knew or talked about or cared about getting online. It was a small niche and people considered it a hobbyist market. Most people didn't even have computers. And if you did have one, you want to get online, you needed to buy an external modem that could connect you to the internet through a dial-up phone line. It was super slow. It would take a couple of hours to download a single song and you couldn't do video. Your goal was always to expand it, make it much more mass market, a mainstream thing. And every you did...

was geared toward that goal of making it accessible, easy to use, more useful, more fun, and more affordable. When you started, there were two very well-funded companies in the space that had a huge head start on you. CompuServe, which had around 800,000 users and was owned by the publicly traded H&R Block. And Prodigy, which had been a joint venture between IBM and Sears, which had 1.1 million members. The critics said you would never last.

How could you possibly compete with these multi-billion dollar companies? And even your mom thought you were crazy. I want to freeze frame the story here. We're going to talk about the three Ps and the rise of the rest in a few minutes. But before we do, what's your advice to future entrepreneurs who think about starting a company, survey the playing field and see companies with a huge head start, either because they've been around a long time, they're well-funded, they have great management teams, and they said to themselves, this is crazy and I'm not going to do it.

Well, several things. First of all, even though there were some bigger companies, it was still, as you said, a very small market. So it felt like this was still the first inning and there are more innings to play and the leadership could change. So

The fact that it was still an emerging market, yes, there were critics who thought it would always be a niche-y, hobbyist thing. And a lot of people thought most people would never have a desire to be on the internet. It sounds crazy now, but that was the conventional wisdom when we started 37 years ago. But we believed eventually people would get online. That gave us the conviction that we should start something and a belief that we could figure out a way to compete. Another challenge, though, was it was hard to raise money. We were based in

Northern Virginia, most of the venture capital at the time was in places like Boston and San Francisco. There were essentially none in the Washington, D.C., Northern Virginia area. So that made it harder to get started. And we were only able to raise $1 million of venture capital. My comparison, the company you mentioned, Prodigy, had $1 billion, which then led us to say, well, we can't beat them if it's a head-to-head battle. They'll crush us. So we need to figure out another angle.

And one of the angles was to establish partnerships with PC manufacturers so they could take the lead on marketing since we didn't have any money to market. And another was to focus on really trying to create a simpler, more graphical service that would have broader consumer appeal and specifically to focus on community. Some of those big players you mentioned like CompuServe, one, they focused on content. Others like Prodigy focused on commerce.

We thought the place to focus was on community. We thought that people would be the killer app of the internet, which has certainly turned out the case. You see that now with social media. But also, it was the most practical thing for us to do because we could launch that with less capital than if we had to build up a library of content or a whole distribution strategy around commerce. So all those things really led us to launch a different kind of service that was

essentially private label, white label services in partnership with the computer manufacturers that was focused on simplicity to drive consumer adoption and also focused on community because we believed that would be the place to focus. So that really kind of drove our first few years of effort. I think really taking a step back in terms of how your listeners might take some insights and lessons from it is

Even if you know what mountain you want to climb, it's not obvious what's the right path to get there. Sometimes you'll try one path, it won't work, you'll go another way. But sometimes you shouldn't take the obvious path, you should find another path, a path less traveled, if you will. Maybe that's your way to enter the market in a unique and differentiated way versus just trying to do more of the same and run the same plays that the other folks, including some of the existing leaders, were running.

It took you a challenging seven years to get to 200,000 customers. When you did in 1992, as I mentioned in the intro, you became the first internet company ever to go public. You grew like a weed. In 1996, you passed a billion dollars in revenue. On September 8th, 1997, you acquired CompuServe. On November 23rd, interestingly, you bought Netscape for $4.2 billion. And after the deal closed, Netscape co-founder Mark Andreessen, who is now one of the most successful venture capitalists in the world, joined AOL as chief technology officer at

At this point, AOL was worth twice as much as Berkshire Hathaway. You were 40 years old, worth $1.5 billion, and had become an American icon. Less than a month later, you announced that you were buying Time Warner for $164 billion in stock, making the combined value of the company $350 billion in what the press called the deal of the century. The rationale for the merger was simple. It would help Time Warner get into the digital age. It'll help you get into the broadband age.

Unfortunately, the minute the deal was closed, everything went south. The internet ad market collapsed, the dot-com recession happened, the hope for synergies between the two companies never happened, and the SEC launched an investigation into your accounting practices. By the time you stepped down three years later after the merger, the company had lost $200 billion in value. Today, looking back, the deal has been described as the biggest train wreck in the history of corporate America. I'm

I mentioned a few of the things that went wrong, but I want to focus on what you said was the most important reason the deal was a failure. Hugh, tell us about the Thomas Edison quote and why it's the biggest lesson you've learned as an entrepreneur and as a venture capitalist.

It's a great quote. Tom said it's obviously one of America's greatest innovators, greatest entrepreneurs. Over a century ago, he said, vision without execution is hallucination. Having a big idea is important, but it's really the starting point. Ultimately, it's how you execute that idea, which really comes down to having the right people focused on the right priorities. And the vision for AOL and Time Warner coming together

was quite compelling. It was compelling then. It's even more compelling today. If you look back at some of the things that we said were possible two decades ago and some of the new services that have launched since and Netflix and Spotify and other things like that are just examples of that. But that wasn't good enough. Ultimately, we weren't able to kind of unify the company, drive the synergies, take the lead on digital music or take the lead on streaming of movies. And much to my disappointment, the

The company was operated really as completely independent sort of siloed divisions as opposed to thinking about it as more of a unified kind of company, more of a unified platform. So it was hard because I was the founder who had led a company for more than a decade and had, as you said, great success. As part of the deal with Time Warner, I agreed to step down as CEO. So I went from running something to more watching, not really having the steering wheel under my control. And it was frustrating,

certainly for me to watch a number of decisions get made that ended up being a mistake. But I did at least take away this lesson around execution and making sure that you really do have the right people focused on the right priorities and all of the things we do now at Revolution and certainly the things we're doing related to Rise of the Rest. I think build on that lesson, that having that powerful idea is important, such as

rise and rest in terms of investing in entrepreneurs in different parts of the country. That's important, but how do you actually make that happen? There's a whole slew of things that need to happen. You need to set the right priorities and put the right people in charge of those. It sounds simple, but it's one of the key lessons I continue to learn and even relearn that ultimately all does come down to people. Entrepreneurship is a team sport. You just got to make sure you spend a lot of time making sure you have the right people focused on the right things.

If you do, anything is possible. If you don't, nothing's possible. - We've talked about some of the critical elements of executing and having the right people. We're gonna talk about revolution and your rise of the rest funds

and its mission in a few minutes. But before we do, I want to talk about one of my favorite topics, which has been one of the main ingredients of my success, preparation, but not the kind of preparation most people think about. It's what I call extreme preparation. 99% of the time, I'm always the most prepared person in the room, which means that if someone prepares one hour for a meeting, I'll usually spend at least five and in some cases, 40. Can you tell us how important preparation has been to your success and give us a few specific examples?

And going a step further, how important is extreme preparation, going way above and beyond what would be considered regular great preparation? I'm talking about the kind of preparation that you spend 30 to 40 hours on for a single event or meeting.

Well, my experience, including with AOL and more recently with Revolution and Rise the Rest, is one of the most important aspects to really get takeoff, kind of really get acceleration, really have significant growth, significant impact. It requires partnerships. There's a great African proverb, you want to go quickly, you can go alone, but if you want to go far, you must go together. So a lot of my career, the last four decades, has been around establishing partnerships. And to your point, it

It takes time. You've got to really understand who are the right partners, what are their motivations, how are decisions likely made in that organization, what might be a win-win approach that could result in them being interested. So I spent a lot of time trying to figure out who those partners might be, a lot of time trying to analyze which ones to really focus on, a lot of time then trying to really dig deep in terms of understanding what's going on there and what some of the motivations are, what might really

catch their attention. So it's kind of your form of preparation is trying to make sure that rather than just kind of wander into something and hope for the best, that you really are thoughtful and trying to think through almost like playing 3D chess and really think a few steps ahead and really be thoughtful in terms of what likely will have the greatest impact and what are some of the paths that might lead you to being able to convince them

to do something with you. And I continue to learn that lesson. All the things we do really are animated by, accelerated by partnerships. And it takes time to really kind of figure out what they should be and then figure out how to get them and then figure out how to execute against them, build on them. So there aren't just things you talk about, but things that really do end up moving the needle in terms of the impact you're trying to have. Let's talk about the other thing

parts of success. In search of excellence, can you tell us about the three P's and the characteristics of great entrepreneurs? And can we talk about these one by one? Sure. Of all the different things I've learned from a different, not just my AOL experience, but as an investor, I realized that there were a few things that really were pretty consistent that really were key drivers. And I called them the three P's.

And we've talked about a lot of this already. One of them is perseverance, really trying to kind of take the long view that I've learned that sometimes revolutions happen in evolutionary ways. They end up twists and turns that are kind of hard to predict. And if you really care about something, you really think it's important, you really have to persevere. So that was one of the key piece I've learned and continue to relearn that, how do you keep

Keep fighting, keep persevering, even when the chips are down, even when others might give up, even when you might be surrounded by skeptics and doubters. If you think it's important, you've got to persevere. And then we talked about passion. Where does passion rank and the factors? Passion, I think, really kind of...

animates the perseverance point. It's hard to keep fighting if you don't really believe it's in the mission. And so there's sort of a linkage between really trying to understand what is possible and really being super excited, whether it be in those early days for me, I was passionate about the idea of the internet. I just believed

in the idea of the internet. I just believe the world would be better if everybody was connected to the internet. More recently, I just believe in the idea of rise and rest. I just believe that if entrepreneurs everywhere have a shot at the American dream, that's better for them, that's better for their communities, that's better for the country. And that passion then leads me to persevere, including, as I said, some of those difficult days with AOL where we were struggling and almost didn't make it, or some of the challenges we've had over the last decade with rise and rest. So

passion and perseverance are critically important and sort of linked. Thanks for listening to part one of my amazing conversation with Steve Case, the incredible co-founder of AOL who is changing the entrepreneurial landscape of America. Be sure to tune in next week to part two of my awesome conversation with Steve.