Washington Post
From Suburban Roots to a Global Ambition
By Mark Leibovich
Washington Post Staff Writer
Sunday , June 4, 2000 ; A01
First in a series of occasional articles
These were the dark ages before chat rooms and instant messaging, when
kids called one another together by bouncing a basketball on a
driveway. After school, the sound would echo across a cul-de-sac in
the suburban hills of Honolulu.
Steve Case heard the bouncing from his bedroom, where he was often
tinkering with a toy rocket or hatching a mail-order business or
listening to the Rolling Stones. He spent so much time upstairs that
his family called Steve's room his "office." He spent hours alone,
opting for detached forms of engagement, such as typing letters or
ordering stuff from scientific catalogues. He loved getting mail.
But Steve would heed the call of the basketball as the neighbor kids
gathered, along with his own brothers, the older Dan and the younger
Jeff. A contest seemed to bring out Steve's feistier alter ego.
Losing came tough to the Case boys, particularly Steve and Dan. "The
games would almost get bloody," says Steven Bond, who lived around the
corner. "There was always more of the physical, territory-grabbing
stuff with Steve and Danny." It didn't matter whether they were
competing as teammates or against each other. If they were losing,
they would sometimes change the rules, prompting an inside joke among
the other children. "We used to call it Case Rules," recalls another
neighbor, Lucy Alexander Black.
The games would end when Mrs. Case rang the dinner bell and her sons
retreated to a home with big glass doors and a view of the Honolulu
skyline and the Pacific Ocean. They were part of a quiet suburban
generation, the late baby boomers growing up in the 1960s and 1970s.
It was this environment, marked by affluence, sibling rivalry,
self-made entertainment and Saturday morning cartoons, that incubated
an unlikely cohort of revolutionary-some of the generals of the New
Economy.
This was the world that produced Stephen McConnell Case, the
perennially underestimated middle brother who jumped on a
once-screwball belief-that computers would become tools for mass
communication-and rode it into the media colossus America Online Inc.
As the Internet uprising has been fought under invent-as-you-go rules,
it has given rise to an audacious breed of corporate strategist. Never
have so many executives spoken so boldly of achieving global
dominance. The emergence of these New Economy titans reflects a change
not only in the scale, but also in the archetype, of corporate
ambition.
They differ from the up-from-nothing legends of the Industrial Age:
John D. Rockefeller, the son of a peddler in Richford, N.Y., spent
part of his adolescence working as a clerk in a produce firm. Andrew
Carnegie, the son of a Scottish weaver, emigrated to Pittsburgh at 12
and took a job in a cotton mill. Henry Ford was born on a farm in
Dearborn, Mich., and went to work as a machinist at 16. For them and
for other industrialists, growing up poor was an experience both
searing and transforming.
By contrast, many of their successors-Case, Microsoft Corp.'s Bill
Gates, Apple Computer Inc.'s Steve Jobs and Amazon.com Inc.'s Jeff
Bezos-grew up amid relative plenty. They spent hours hidden in their
bedrooms, basements or garages dreaming up killer ventures or creating
inventions outright. Absent any pressing material needs, they
nonetheless developed a hunger to own a commercial landscape.
How does a curious but comfortable child acquire the drive to take
over a global market? What gives him the savvy and confidence to
consolidate staggering wealth and power? And what does his path to
dominance say about the networked realm he has come to rule?
While these New Economy moguls have benefited from the last decade's
confluence of technical innovation and bull-market capital, many of
them are, foremost, studies in fiercely personal ambition born of the
serene suburbs.
America Online's oft-stated business objective, "AOL Anywhere," neatly
distills the manifest destiny of these boom years. In early 1995, AOL
reached 1.5 million homes, in one nation, on a single platform, the
personal computer. Today, the service reaches 22 million homes in 15
countries, in seven languages, on a variety of platforms, and it
delivers more messages each day than the U.S. Postal Service delivers
mail. If, as expected, AOL completes its merger with Time Warner Inc.,
Steve Case will become chairman of the largest media company in the
world.
Capitalist, Anarchist, Populist
"Those guys will work for us one day."
In his corporate persona, Case, 41, evokes the self-assurance of a
summering frat boy. He has a gawky adolescent posture, speaks in a
lazy, matter-of-fact cadence and sports a work uniform of Hawaiian
shirt tucked into khakis. But up close, his jaw is often visibly
clenched. In conversation, his body language often turns fidgety. His
stony face can be unnervingly hard to read. Around AOL, Case is known
as "the Wall."
He spends much of his time alone, ensconced in his Spartan fifth-floor
suite at AOL's Dulles campus, bunkered behind his terminal, pondering
and dispatching long e-mails to his staff. For this article, Case
granted a one hour sit-down interview, during which he was clearly
impatient with the idea of talking about himself. Like many technology
executives, he seems bored when the discussion turns to history,
personal or corporate.
Still, Case was more illuminating and reflective in a series of
follow-up e-mails, summarizing his business self this way: "I am equal
parts capitalist (building a big successful business), an anarchist
(enjoying blowing things up and starting over), and populist (really
hoping to make the benefits of this medium available to everyone)."
This article is based on those e-mails, two subsequent phone
interviews and conversations with more than 100 of Case's relatives,
former neighbors, friends and business associates. What emerges is a
portrait of a man who has come to expect success as firmly as he
distrusts it, who has repeatedly improvised his way around obstacles
while remaining starkly unfazed.
Mark Walsh, a former AOL executive, recalls a trip to a county fair
with Case a few years ago. Case became woozy after a loop-the-loop
ride. His expression never changed as he excused himself, walked into
the woods and returned two minutes later. "I just vomited," Case said
in a monotone, and then proceeded to the next ride. "Now that's
focus," Walsh marveled.
In 1994, Case joined a group of AOL employees at a paint ball outing.
"He would charge through the woods, crawl on his stomach, run directly
into the line of fire," recalls Amy Arnold, a longtime AOL employee.
"He was focused on getting the flag, and he didn't care how he got
it." At one point, Case took a hit in the face and started bleeding
below the eye. He kept playing.
That approach extends to corporate battle. Over the last decade,
according to two industry sources, Case sometimes thought that
executives at Time Warner gave him little respect in a series of
dealings. He would walk away from meetings in a slow burn, uttering
variations on, "Those guys will work for us one day."
Case is too pragmatic to bog down in revenge-he says Time Warner
officials treated him with more respect over the years than executives
at other media companies did. In any event, Case's patience was
rewarded last winter. When AOL announced its $183 billion merger with
Time Warner on Jan. 10, Case and his Time Warner counterpart, Gerald
Levin, declared their union a "merger of equals." It was not. AOL
shareholders would own 55 percent of the merged company, and it was
clear how the deal would be reported and remembered: AOL buys Time
Warner.
At least two associates-one a former AOL executive, the other a
high-level official at another technology company-have had
conversations with Case in which he recalled past treatment from Time
Warner even as he prepared to become its chairman.
He has always measured himself against larger, powerful personalities
and institutions. Early in his life, there was his older brother, Dan
Case III, who is now chief executive of the investment bank Hambrecht
& Quist LLC. Later Case took on a formidable array of naysayers,
mentors and competitors. This struggle has bred in him an aggressive
sense of how to find daylight, burrow free of crowded markets and
forge precedents as he goes. And it explains how someone like Steve
Case was driven to build an empire.
The Third Child
"He had to work to define his own path."
Early in their marriage, Dan Case and his wife, Carol, were told that
they could not have children. The couple, in their twenties, had
planned a big family, continuing the legacy of large Case clans among
Hawaii's Anglo establishment. Both were fourth-generation
islanders-Dan the great-great-grandson of a lawyer who had come from
Topeka, Kan., in the late 1890s, Carol the descendant of a sugar
plantation owner who had emigrated from England.
Dan and Carol Case filed papers that led to their adopting a newborn
girl, Carin-a few months after they had learned that Carol was
pregnant. Dan Case III was born five months later, the miracle baby.
Steve Case followed 13 months later, on Aug. 21, 1958.
Dan Case worked long hours as a corporate lawyer while his wife, who
retired from teaching to raise her three diapered children, ran a taut
household: strict mealtimes; mandatory quiet periods; and, as they
grew older, regular chores and one hour of television a night after
homework. Jeff, the fourth child, arrived four years after Steve.
When Steve was 8, the family moved to a nine-household cul-de-sac in
the Manoa Valley section of Honolulu. The children began sunny days to
the song of tropical birds and a recital of the Pledge of Allegiance
on the lawn of the nearby Punahou school, which all four Cases
attended from kindergarten through 12th grade. There were corgis named
Tuffy and Tabe in the house, plus coin collections, cribbage games,
swims in the neighbors' pools, summers at a beach rental and Sundays
at the Congregationalist Central Union Church, where the boys were
ushers.
Steve was easily bored, but adept at creating diversions. He liked
gadgetry: cameras and weather stations, then radio and cassette
recorder gizmos. With Dan, he launched businesses, beginning with a
limeade stand when they were 7 and 6, and expanding into door-to-door
sales of greeting cards and garden seeds. Steve would stay up late,
dreaming up schemes, sometimes waking Dan with ideas.
Games abounded, often spiced by gentle wagers ("Loser does the dinner
dishes"), although the parents forbade cash bets. "They never minded
doing the dishes so much as they just hated losing," Carol Case says.
Basketball provided the most regular and heated forum, usually at the
hoop mounted on the Alexanders' garage. "We figured as long as we were
out there playing, we might as well win," Steve Case says. He was
always taught to play fairly, he adds, and his father preached "humble
in victory, gracious in defeat."
When Steve and Dan were teammates, "they always seemed to know exactly
where the other one was going to pass or jump," Steven Bond says. When
they were opponents, Dan would get particularly fierce, Bond says.
"There was no way he was going to lose out to his younger brother."
Dan was clearly the most competitive Case, the one most likely to
invoke Case Rules, says Doug Alexander, Lucy Alexander Black's
brother. But he and other neighbors recall that Case Rules were a
family trait, cited in numerous games. "They would sometimes move the
out-of-bounds lines in croquet," she says. "Anything to give the Case
boys an edge." She and her brother both emphasize that it was all done
in good fun.
Dan was a classic firstborn, an A student, class president and
do-gooder. "I defined the market early in our family through
achievement," he says. "Steve was the third guy up. He had to work to
define his own path."
Steve met his brother's precedent by detouring around it. He was a
B-plus student and indulged a love of rock-and-roll as a music critic
for the high school paper, Ka Punahou ("Aerosmith . . . completely
overwhelmed the audience and made the Guess Who look, by comparison,
like a high-school dance band").
Dan and Steve say their rivalry was manageable, but there were
collisions, such as a fight when they were 13 and 12. Dan can't
remember what started it, only that afterward he vowed never to fight
his brother again. They were getting too big. "There is a bad
risk-reward here," he recalls saying to Steve. "One of us is going to
get hurt, and it's going to hurt our friendship."
So the Case brothers worked to "manage potential areas of conflict,"
Dan says. Both loved tennis and it became conceivable, given their
closeness in age and the insular world they inhabited, that they would
have to play each other in tournaments. They negotiated a deal: Steve
agreed to relinquish tennis; Dan gave up basketball.
In the mid-1970s, Dan was contemplating a number of Eastern colleges,
including Williams College, the liberal arts school in northwestern
Massachusetts that his father had attended. It came as a surprise when
Steve staked a claim to family convention and asked Dan to leave
Williams for him. Dan obliged and chose Princeton University, where he
solidified his stellar credentials while Steve went on to become a
campus maverick in the Berkshires.
The Collegiate Salesman
"The student government body was always pleading with me to rein this
guy Case in."
He was not a political agitator or prankster. "He was that guy from
Hawaii who was always trying to sell stuff," says Larry Sisson, a
Williams classmate who now works at Microsoft. Case set up tables in
the mail room to sell fruit baskets and ran a shuttle service to the
airport. He went about his businesses with the slightly manic edge of
a man unleashed.
In 1977, his sophomore year, he joined the campus entertainment
committee and began inviting headline acts to the rock-and-roll
backwater three hours northwest of Boston. "Steve said, 'We're
changing the paradigm, we're going to get Springsteen and the Cars to
play the Williams hockey rink,' " says John Svoboda, Case's
collaborator on the committee and now a venture capitalist in Chicago.
"The student government body was always pleading with me to rein this
guy Case in." Case would listen, shrug and try again.
On weekends he would sometimes borrow a car and drive an hour to Smith
College in Northampton, Mass., to see a girl from New Jersey, Joanne
Barker, whom he had met when she was a visiting student at Williams.
They dated on and off through their early twenties and married in
1985.
In college, as in high school, Case was not a great student, earning
B's. He took Computers 101 his senior year and was miserable. "This
was the punch card age," he wrote in an e-mail. "Waiting an hour to
have the cards run to see if the program worked didn't have much
appeal."
Case never cared much about circuitry. He was less interested in how
things worked than in what they could do. "I always saw technology as
a means to an end," he wrote. "I have always tried to understand
enough about the technology to be able to understand what might be
possible, while maintaining a certain distance."
Williams did not offer marketing classes, so Case majored in what he
considered the closest thing, political science. He cast his first
presidential vote in 1980, for independent John Anderson.
The most enduring lessons of Case's college years were self taught. He
spent hours in the library, reading marketing trade publications. He
also read Alvin Toffler's "The Third Wave," a treatise that posited a
world where machines communicated with one another. Case had already
come to view this world as inevitable, not futuristic. His interest in
gadgetry was growing into a fascination with interactive electronics.
Cable television was in few homes in the late 1970s, but Case kept
hearing about its possibilities of hundreds of channels and two-way
communication. In 1979, he spent the summer selling cable TV
subscriptions door to door on Oahu. He also attended a Rotary Club
speech by a brash cable TV executive, Ted Turner. "I was enthralled
and captivated," Case recalls.
As he prepared to leave Williams, Case applied to a host of MBA
programs and was turned down by them all. He sought marketing jobs at
New York advertising and media companies, including Time Inc.'s new
cable TV property, Home Box Office. But he was rejected and never got
to meet the executive who ran HBO, a Time fast-tracker named Gerald
Levin.
Deliverance Through a Modem
"After thinking about it and reading about it and imagining it, I was
actually doing it."
While Dan Case studied at Oxford University on a Rhodes scholarship,
Steve set his sights on a job at Procter & Gamble Co., known as a
great training ground for marketers. Procter & Gamble, too, rejected
Case, but he returned to Cincinnati at his own expense and finagled
another interview.
This outsized persistence-showing up and occupying a space until it
became his-would characterize his career. While the tendency could be
as annoying as it was endearing, it usually worked. Procter & Gamble
hired Case as an assistant brand manager.
He was assigned to a product called Abound, a towelette soaked in hair
conditioner that could be rubbed onto the scalp. Case launched a
point-of-sale marketing program involving an optical sensor that would
activate a demonstration video whenever a customer walked near an
Abound display. His boss, Charlotte Otto, recalls the idea as
"brilliant," but the contraption was deemed too expensive to deploy.
Case lasted almost two years at Procter & Gamble-longer than Abound
lasted in test marketing-before he took a job in Wichita, Kan.,
developing pizza flavors for Pizza Hut. He spent days and nights lost
in rental cars, scoring the national chain's pizza on five
scientifically determined categories-crust, dough, sauce, cheese and
topping.
Case's parents worried. His father, who has been at the same law firm
for 48 years, believed that job-hopping would alarm future employers
and prospective MBA programs. Dan III had returned from England and
begun his career at Hambrecht & Quist, where he became a prote»ge» of
co-founder Bill Hambrecht and a point man for the bank's signature
work with emerging technology companies. He sent Steve the marketing
plans of promising high-tech firms, knowing that he was bored at Pizza
Hut. The brothers spoke for hours by phone and saw each other often
during these years.
Case, who was not yet married, spent solitary nights in a small
condominium in Wichita. His interest in interactive media only grew
amid the arid Anywhere of middle management. He bought his first
personal computer, a bulky Kaypro model. With a modem, he discovered
an escape from the isolation: the ability to connect with a small
universe of computer users through an early online service, the
Source. "It was magical because after thinking about it and reading
about it and imagining it I was actually doing it," Case wrote in an
e-mail.
The Kaypro experience was the clunky embodiment of what was suddenly
possible-and, given how hard it was to use, the work that remained to
be done. What he craved in his early twenties was a way to pursue this
mission full time. In 1983, he found one through his older brother.
Upper and Lower Case
"Steve was a very aggressive guy."
At a trade show in Las Vegas, Dan Case introduced Steve to Bill Von
Meister, the grandiose and erratic founder of Control Video Corp. of
Vienna, Va. Control Video was a computer company that connected
set-top TV boxes to Atari games through phone lines; Hambrecht & Quist
was one of its backers and Dan Case was a board member. Von Meister
offered Steve Case a job as a marketing consultant.
Soon after Case took the job, the company's investors deposed Von
Meister and fired most of the staff-about 50 people. As one of Control
Video's rare marketing specialists, Case escaped the purge,
"definitely on the merits," says Bob Cross, a corporate turnaround
specialist who was brought in during the mid-1980s. But there was
another factor, too: "We wanted to keep Hambrecht & Quist interested
in us," he says, the implication being that they didn't want to
alienate Dan Case.
Dan and Steve were known at Control Video as Upper Case and Lower
Case. While the distinctions were awarded playfully, and by age, the
broader meaning was clear. In 1984, Dan Case stepped away from any
involvement with Control Video because of concerns over possible
conflict of interest. "People needled Steve about his own brother not
believing in him," recalls George Middlemas, a Chicago venture
capitalist and early board member. "That had to light a fire under
Steve," he says. Case said any sibling rivalry with Dan had ended
years earlier.
Either way he was, at 25, essentially leading the marketing efforts of
a company struggling to survive. In 1983 and 1984, the video game
market was dying. Control Video's chain of command was in flux, and
Case insinuated himself boldly. He helped implement a new strategy
geared to personal computer makers. He spent marathon stretches
online, trying to gain some understanding of the emerging world
there-at that point, a sparse and fringy community of hobbyists.
People who knew Case at the time say he exuded the busyness of a man
free at last to try out big notions. In his rush, Case collided with
the sensibilities of older investors, some of whom dubbed him "the
whippersnapper."
"Steve was a very aggressive guy who believed he should have been the
top dog after three days," says Marc Seriff, a Control Video founder.
"If you prove yourself to Steve, he will treat you as an intellectual
equal. It's one thing if he's 25 and you're 25. It's another thing if
he's 25 and you're 55. This was not a time when 25-year-olds
interacted with 55-year-olds as peers." Especially if the elders
already had lost a lot of money on the company. A chorus of them
wanted Case gone.
Jim Kimsey, a Washington entrepreneur who had been brought in as chief
executive, argued that Case was the only one in the company who had a
bent for marketing, as well as some knowledge of this mysterious
marketplace. Kimsey's endorsement saved Case's job, and set in motion
an odd professional co-dependency that would become the formative
relationship in Case's ascent.
AOL Emerges
"I felt determined to stick it out."
In the mid-1980s, the notion that connected computers would become
essential media seemed, at best, optimistic. Case held the idea with
the fiery certitude of an evangelist.
Usually the techies are the truest believers, Seriff says, the ones
with an intellectual stake in the product. But Case "sold himself as a
user," not as a technologist, Seriff says-he came to see the flaws and
magic of the online experience together. Bringing this experience to
the masses was a pursuit Case took personally, as if it were uniquely
his.
In 1985, Control Video rechristened itself Quantum Computer Services
Inc. It was designed exclusively for the Commodore International Ltd.
personal computer, for which Quantum had developed a nighttime
service, Q-link, that provided an array of communications tools,
games, news and soap opera updates.
Case applied his occupy-and-conquer approach to sales, driving every
week to Commodore's headquarters near Philadelphia to baby-sit the
relationship. The next year he moved to Cupertino, Calif., in an
effort to win the business of Apple Computer's Apple II machines. Once
inside, Case showed up every day for three months. Finally, Apple
officials agreed to let Quantum develop their proprietary online
service.
Quantum survived, but the company was always at the mercy of its
partners. Its survival depended on how many personal computer makers
Case and Kimsey could persuade to use its fledgling online service.
Several people counseled Case to leave the company. The online market
was showing little momentum and a smattering of rivals-particularly
Prodigy, with a $1 billion war chest from Sears, Roebuck and Co. and
International Business Machines Corp.-seemed far more promising.
But Case did not take a single interview with another company. "I felt
this was the horse I had bet on, and I felt determined to stick it
out," he wrote in an e-mail. By the late 1980s, Case and Kimsey were
the public faces of Quantum, a familiar duo in Washington area
business circles. Kimsey, a charismatic backslapper, would calm
investors and handle tense negotiations, allowing Case to focus on
strategic planning and marketing.
The commercial Internet was still a few years away, but online users
were no longer niche players-the technophiles were being joined by a
stream of "early adopters." In 1989, Quantum's service was renamed
America Online.
Case was more certain than ever that the online border was finally
opening for business and that the companies capitalizing first would
prevail. It was, he often would say, a land grab, and he launched a
mass-mailing of AOL disks to the nation's households. The esoteric
community of early online users widely derided his campaign as cheesy
old-fashioned commercialism. Case, however, was playing by different
rules.
He had, in effect, spent his entire life as a mainstream
nonconformist, an unconventional thinker in a suburbanite's clothing.
Now he would take the online experience-this novel, exotic and
sometimes intimidating experience-and try to make it safe.
Getting to the Top
"What's that saying, about the boy needing to kill the father?"
By 1990, Case was growing weary of being subordinate to Kimsey and
began agitating for the chief executive's job in late-night phone
calls with board members. "Steve always wanted more, and Jim's role
was to moderate," says Doug Peabody, a longtime board member. During
his phone conversations with Case, Peabody would say, "Look, you're
young, you have plenty of time, don't get too out front of yourself."
Kimsey himself kept telling Case he wasn't ready.
At that time, according to several accounts, Case would tell people at
industry gatherings that he was, in effect, running the company. And
he was, says John Svoboda, Case's old friend from Williams College,
who worked at William Blair, a Chicago investment house that had
dealings with AOL in the early 1990s. Svoboda recalls a meeting with
Case and Kimsey in which Case was "clearly frustrated" by the setup.
"Here was Steve the risk-taker being reined in again by someone who
wanted him to move slower."
In 1991 the board finally gave Case the title of chief executive and
Kimsey remained as chairman. The company had 130,000 customers by
midyear, a fraction of what CompuServe and Prodigy had. Nonetheless,
AOL, with just 120 employees, planned an initial public offering early
in 1992.
This was not a time when negligibly profitable companies were going
public and certainly not firms that had such uncertain track records
and were operating in quirky markets. Still, Case argued for the
offering: The company needed cash to expand at the pace he felt
necessary. The public offering was also designed to generate
publicity, and Case was anticipating top billing.
But just before the offering, AOL's directors reasoned that Wall
Street would prefer Kimsey's gray eminence to Case's boyish bearing at
the front of the company, and they stripped Case of the CEO title. He
seethed, but quietly.
The stock issue, held March 19, 1992, raised $66 million. Case, who
had been paid largely in stock options since he left the pizza
business, suddenly was worth nearly $2 million on paper. Shortly
thereafter, the board returned to Case the title of chief executive.
He was 34.
Kimsey remained as AOL's chairman and he continued to cast a paternal
shadow over Case. He seemed to relish the role of "mentor" to Case's
"prote»ge»." When AOL began drawing attention in the national press,
Kimsey would speak about "nurturing" Case. He also would point out
that "we hired him because of his brother."
Privately, Kimsey complained that Case never gave him credit for
keeping the company alive in the early days. The complaint is echoed
by former board members who remain loyal to Kimsey. "Steve has spent a
lot of time trying to attribute AOL's ascendancy to his efforts," says
George Middlemas, adding that Case's contributions have been
"immeasurable" to AOL. "But Steve's not Superman, although he seems to
have a need to convey that."
People close to Case defend his loyalty to Kimsey, noting that other
executives would have left the company in frustration years earlier.
In an e-mail, Case wrote that in the late 1980s and early 1990s, the
executive staff pressed him and Kimsey to clarify their respective
jobs. "This was hard for me to deal with," he wrote, "because I was
grateful to Jim for the role he played in getting the company started
and keeping it alive during our difficult first years. It's
unfortunate that a decade later our recollections don't mesh."
The tension between Kimsey and Case crested in November 1995, when
Kimsey assumed the largely ceremonial title of chairman emeritus. On
the way out, Kimsey said he planned to bring in an experienced manager
to help run the growing company. He was determined that there be
"adult supervision" at AOL in his absence, he told USA Today.
Kimsey now says he regrets having said that and is philosophical about
his relationship with Case. "If I had a choice between having a
grateful prote»ge» and Steve Case, I'd pick Case every time. He's made
me a lot of money." He also says: "What's that saying, about the boy
needing to kill the father in order to grow up? Maybe there's some of
that at work here. Maybe it's understandable."
Growing Pains
"We would never co-brand with a little company like you."
Shortly after Kimsey's remark about "adult supervision" appeared, Case
went out for an Italian dinner in Reston with some other AOL
executives. T-shirts printed with the legend, "I Need Adult
Supervision," were passed around the table, along with "Steve's
Troops" caps. Case was given a general's hat.
The show of loyalty came amid one of the most difficult stretches of
his life. His 11-year marriage to Joanne was ending. Then came the
news that Case was involved with AOL Marketing Vice President Jean
Villanueva, to whom he now is married. Case divulged the relationship
to the AOL board and the revelation, which became a media spectacle,
rocked the company. Steve and Joanne Case had three young children.
Serious issues were mounting at AOL. The rapid acquisition of new
users led to a nasty run of technical challenges that culminated in
late 1996, when AOL was becoming known as "America on Hold." The
company also was accused of questionable accounting practices. And in
the front office, there was more turmoil. Bill Razzouk, whom Case had
brought in from FedEx Corp., resigned in 1996 after only four months
as AOL's president.
Razzouk eventually was replaced by Bob Pittman, the former head of
MTV. Pittman is a social charmer with Hollywood tastes, an image that
can obscure a fervidly hands-on management style. Pittman's care for
micro-detail has allowed Case to move away from managing the
day-to-day operations, a task that never suited him, and concentrate
on strategic thinking-churning endless scenarios through his mind.
"Steve thinks business strategy like there's an eight-dimensional
chess game going on in his head," says Marc Andreessen, the co-founder
of Loudcloud Inc. and Netscape Communications Inc. who briefly worked
at AOL. "Very few people can think that way. It's Steve's form of
genius."
In the mid-1990s the biggest threat to AOL's viability was the
Internet. Netscape had released its trademark browser, which allowed
personal computer users to "surf" the entire global network. As
mainstream users stormed online, the days of proprietary services like
AOL seemed numbered. Why would anyone want to play in a little online
village when the Internet offered such a vast kingdom?
Case dismissed the notion that the Internet would kill AOL as "Valley
talk," reflecting a long-held and mutual ambivalence between Case and
the epicenter of the high-tech industry. Silicon Valley's hard-core
techies have mocked AOL as a pedestrian version of their elite
creation, the "Internet on training wheels." Case has believed that
the Valley's thinking tended toward dazzling technology, sometimes at
the user's expense.
When Case looked at the Internet, he saw an uncharted vastness too
unruly for the mass markets he'd been studying since Procter & Gamble.
What they would want, he believed, was a friendly intermediary.
In 1995, AOL began integrating a Web browser into its service. The
transition set off a rush of growth that included the purchases of
CompuServe in 1998 and Netscape in 1999. AOL's Dulles campus acquired
the unmistakable feel of a large New Economy organization-MBAs
zigzagging the lobby in expensive casual clothing, corporate mission
statements blanketing the walls, placards promoting "AOL Valued Work
Behaviors" ("team-player," "self-management and initiative").
By century's end, nearly 50 percent of home computer users in the
United States were getting online through AOL-but the term "online
service" had become all but taboo in Dulles. AOL now viewed itself as
a full-blown "media company." Each month, as the company grew, AOL
would achieve another milestone, often in relation to some powerhouse
that had scoffed at it earlier.
About five years ago AOL executive Ted Leonsis tried to negotiate a
co-branding agreement with Walt Disney Co., a source familiar with
those discussions recalls. "We would never co-brand with a little
company like you," a Disney official reportedly said. Leonsis went
back and reported the conversation to Case. In late 1998, the source
says, shortly after AOL's stock market value exceeded Disney's,
Leonsis sent Case an instant message pointing out the benchmark.
Case replied with a smiley face emoticon: :-).
Case Rules
"Steve seemed truly touched by the significance of what he had done."
Friends and associates say Case has seemed less embattled in recent
months, more secure, a man grown into himself. In September, he gave a
brief but sweet testimonial to Kimsey on his 60th-birthday video. He
has tried to take an elder statesman's role in a young industry,
becoming vocal on Internet policy issues. At MCI Center events, he can
be seen soldiering upstairs to hobnob in the corporate boxes. He has
given $200 million of his estimated $1.5 billion net worth to
charitable causes. He says that that's where he will devote most of
his energies in the next decade.
He is also learning to enjoy public life despite himself, a fact many
attribute to the influence of Jean Case. The couple recently had
dinner at Washington's DC Coast restaurant and were interrupted at
mid-meal. "Excuse me," a restaurant manager said. "Tony Curtis and his
wife are here and we would love to get a photo of you with him." Case
seemed to relish the absurdity of the moment.
Late last year Case embarked on his ultimate land grab: the purchase
of Time Warner. It would bring classic American brands-Time Magazine,
CNN, Warner Studios-to his empire as the online migration explodes
into a cultural revolution. Time Warner represented security for AOL
and, of course, a formal marker for the company's ascendancy. And for
Steve Case, it would also represent a bridge between the establishment
world he came from and the world he helped create.
He approached Gerald Levin about a possible merger in November. The
companies reached a tentative agreement Jan. 6. Three days later, on a
Sunday night, 10 AOL directors gathered at a Manhattan law firm to
iron out details, with an 11th director linked by phone. A cast of 18
investment bankers, lawyers and AOL staffers also packed into the
conference room as the issues flew: pricing, management teams, tax and
accounting arcana.
Case sat at the middle of the table, looking oddly serene. "Steve
seemed to be completely above it all," recalls board member James
Barksdale, former head of Netscape. As the board voted unanimously for
the deal, Case lapsed into dopey smiles.
The next day the press would note relentlessly that Levin, then 60,
wore an open-collar shirt to the news conference while Case wore a
suit and tie-a symbol that the new children had formally co-opted the
old boys. But most striking to those involved was Case's show of
emotion as he hugged and high-fived his way across the stage. "I tend
to intellectualize history as it's happening," Levin recalls, "but
Steve seemed truly touched by the significance of what he had done."
Steve Case will preside over an empire that includes the Bugs Bunny
cartoons of his boyhood Saturday mornings, the REM compact discs he
listens to today, one early cable visionary who inspired him as a
college student (Ted Turner), and another whose company rejected him
for a job (Levin). New media and old, maverick and mainstream, a big
and uncertain hunk of turf that Case rules.
Staff researcher Richard Drezen contributed to this report.
© 2000 The Washington Post Company
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