Notes for ep. 640 — Steve Case, AOL cofounder & author of “The Third Wave,” on internet revolution & innovation roadmap

Steve Case, Co-Founder AOL, Author

“Vision without execution is hallucination” — Thomas Edison

Today Jason talks with Steve Case, co-founder of AOL about the Internet revolution and innovation roadmap outlined In Steve’s new book “The third Wave: an entrepreneur vision of the future”.

Read these notes (or watch or listen to the whole episode if you have an hour to spare) and ind out what he means with “The third wave”: why he quotes Shakespeare (“Past is the prologue of future”) referring to the similarities between the first wave, the one he rode taking AOL from nothing to deca-corn status and the third wave, the one unfolding in the present as entrepreneurs rush to integrate the internet with everyday life.

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Why Steve Case wrote this book

• It’s his first book: he was never interested in writing his memories about what happened in the past, he’s always looking forward and focus on the future
• A couple of years ago he realized the coming third wave of entrepreneurship is going to be different than the second one but it has some similarities with the first wave and he could write a book about his past experiences and the future
• Most of the book is about the future and what he thinks will happen next
• He also included some stories of what happened in his career as an entpreneur, the lessons learnt, what worked and what didn’t that would be helpful for entrepreneurs to realize that the dynamics of this third wave are going to be different than the ones we’ve seen the in the past 10–15 years (what he calls the second wave)

What AOL meant for Jason and many people

• The first experience older people had online happened through AOL, chatting, reading stories, seeing a picture online for the first time
• Jason sold 2 companies to AOL as a part of the Green House program in the ’90 and then sold them Weblogs, his biggest success in life
• The Green House program was an ante-litteram YCombinator: they invested in startups to build the next generation of companies while getting some equity in exchange of help with the distribution AOL could provide

The early days of AOL

• The first version of AOL was a white label version where they built other people’s online services
• They started in ’85 when only 3% of the people were online for an average of an hour a week
• They didn’t have lots of money: the had raised a million dollars in the first round and had to figure out a way to enter the market cause they didn’t have the money to build and launch their own service
• Building private/white label tech was the strategy to get to the market
• They partnered with Commodore, RadioShack, IBM, Apple and used the money to build their own platform– for the first 5 years that was their focus, no direct to consume brand
• In ‘99 they launched their own brand, America Online — it wasn’t their plan to launch it, they were happy with their white label business

How Apple’s NO made AOL inevitable

• Apple didn’t want to have an online service: they had to weasel their way into their customer support department with the promise it would lower the costs of customer support
• He had to move to SF for 6 months and everyday show up at Apple HQs and figure out who to talk to convince them to build the Apple Link Personal Link
• Apple agreed to build it but they plugged the plug, they didn’t want them to use the Apple brand anymore and give away software for free (they wanted to sell it at their Apple Stores)
• Apple Link go-to market strategy was to make it as easy as possible to try it out with a free trial
• Apple didn’t like the idea of giving away free software cause their business model was selling software
• They didn’t like the idea of bundling it with magazines or use direct mail cause they wanted people to go to their App Stores
• Apple settled with 3 million dollars to rescind the contract and they used the money to launch Apple Link personal edition rebranded as America Online (originally Online America)
• In 2002–2003 they discussed internally to buy Apple but never went anywhere — people were too busy to run what they had acquired in the post AOL-Time Warner merger of 2001

The first wave

• During the first wave, companies like Cisco and AOL built the infostructure of the internet, the foundational technology, the software, the network and worked to get everybody parts of that, educating people on why they did have to be online
• Nobody could do it on their own, it required a tapestry of alliance and that dynamic is gonna be important again in the third wave
• E.g. Google needed distribution so they partnered with Yahoo and AOL to be the default search engine — as a result AOL ended up buying 5% of Google at a good price, a couple of years before Google’s IPO

The second wave

• In the second wave it was all about building apps and services on top of the internet (Google, Facebook, Twitter, Waze, Snapchat etc)
• Twitter was inspired by the status under the nickname people had in the AOL AM messenger app

The third wave

• In the third wave the opportunity is to integrate the internet into real world parts of society
• Healthcare hasn’t been changed much by technology and should be more technology based to be more effective and cost effective
• Education should be more personalized and adaptive learning for kids in schools
• Plenty of opportunities in energy and transportation with smart cities, driverless cars, IoT etc

The 3Ps

• Partnership, policy, perseverance are going to define the third wave
• These things will work if the innovators realize it’s not just about the software
• It’s how you take them and integrate in real life which will require to partner with some of the players (schools, hospitals) and understanding the policy implications — cause those sectors are regulated
• Innovators will have to have a constructive dialog with the policy makers in order for them to succeed (PARTNERSHIP and POLICY)
• The “break things” approach, pushing the rules like Airbnb or Uber has done is healthy but some policies and laws are just roadblocks you can’t avoid and they are there for a reasons
• For example, they protect people’s safety on the streets in the case of driverless cars, people’s health in the case of health companies like Theranos or 23andme
• Uber is out of business in countries like Germany and South Korea cause they are not even allowed to enter the market)
• In some cases you can work around roadblocks but for example, in fintech you can’t build a lending platform, a crowdfunding platform around equity or debt unless you get the policy makers’ permission
• If you really want to revolutionize healthcare, education, food, energy, transportation, financial services you will have to deal with policy makers’
• For this reason, it will take more time and the mindset of failing quick and moving on to something else if something doesn’t work will have to change
• The idea may be right but it will require patience and PERSEVERANCE

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