The Third Wave and Steve Case’s Apple Disconnect

Former AOL CEO and Chairman Steve Case has been snagging headlines and interviews. A year after Verizon bought AOL for $4.4 billion and 16 years after AOL peaked with a market cap of $163 billion (when it bought Time Warner) Case has been talking up ideas contained in a book released last month, The Third Wave: An Entrepreneur’s Vision of the Future.

The book is a mixed bag. Case himself calls it “part memoir, part playbook for the future, part manifesto.” The title theme is his classification of the First, Second and Third Waves, which roughly correspond to the Internet infrastructure created by companies such as AOL, the software applications that have dominated the last decade and a half, and the emerging Internet of Everything. Case believes the First and Third Waves share a need for cross-sector partnerships. Elsewhere he offers a range of prescriptions: some vague (“Get in Front of the Third Wave”) and self-serving (he thinks a “Third Wave czar” could help the federal government do so); some debatable (“Make it Easier for Startups to Raise Money”—see Marc Cuban for another view on that); some reasonable (“Invest More Money in R&D”).

In the memoir parts of The Third Wave, we learn about Case’s upbringing, his role in the rise of AOL, and the investing and government-related work he has been doing since resigning as chairman of AOL-Time Warner in 2003. How AOL grew and why it merged—and failed—with Time Warner has already been covered in works by others, such as Kara Swisher and Nina Munk. The experts can decide whether Case’s account breaks new ground. What I’ll share here is one angle that seems fresh and revealing.

Remembering AOL – and Apple

The company that became AOL was first a startup known as Control Video Corporation (CVC). Case joined the CVC team in 1982, but within three years, a failed product and investor distrust forced them to “reboot.” They created a new company, Quantum Computer Services, licensed back the CVC software and struck up partnerships with Commodore, RadioShack and IBM.

Case then set out to win a rising tech star, Apple. He rented an apartment in San Francisco and “showed up at Apple’s headquarters every day—for six months.” He won a deal by persuading Apple’s customer service team to use Quantum to reduce costs and improve customer satisfaction. But the efforts to create an “AppleLink” service proved fruitless. After a year of culture clash and strategic disagreements, Apple backed out. In the end, they paid Quantum a $3 million break-up fee, which helped fund the subsequent rise of AOL.

A big deal doggedly pursued that ends up on the rocks, in part because of a cultural mismatch. Sound familiar? It’s almost a preview of the AOL-Time Warner fiasco. And yet when Case gets to that part of the story, he reveals that when AOL was considering what to buy with its highly valued stock, he suggested buying Apple, admitting that a “side agenda” of his was to bring Steve Jobs in to run the combined company. “I still like that idea,” he writes.

The Two Steves

By 2000, however, Apple had an even stronger and more focused culture (I’d called it cult-like) than it did in 1987, when it paid $3 million to escape a simple partnership with AOL’s forerunner. And while Case may still like the idea, I think it would strike many observers as far-fetched, if not a huge misread of both Jobs and the challenge of combining two very different corporations.

Such relentless optimism is a double-edged sword. It may lead to some visionary ideas—and The Third Wave has a few—that clash with the facts on the ground. It can also drive one to achieve goals, such as bringing millions of people online, that may appear unrealistic at the time, but end up leaving a lasting mark.