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Steve Case: "This Is the Time to Take Risks"

Stephen Case is nearly synonymous with America Online, the company he helped build into the world's leading online service. After engineering the ill-fated 2001 merger of AOL and Time Warner, he stepped down this year as Chairman of AOL Time Warner (AOL) under pressure from shareholders. He now is working on philanthropic activities at the Case Foundation.

He recently spoke with BusinessWeek Washington bureau correspondent Catherine Yang about technology cycles and why Silicon Valley will remain a "beacon." Edited excerpts of their conversation follow.

Q: Will tech continue to grow faster than the rest of the economy?

A: This is the third cycle in the past 25 years or so where a Silicon Valley boom period has been followed by a bust, and then the industry reboots and rebirths. There have been significant advances in technology -- in the core building blocks or infrastructure, in software, in WiFi, and in storage. But the most important thing is the juxtaposition of technology with media and with health care -- focusing more on the applications of technology, not just the technology for technology's sake.

I still believe in convergence -- where consumers get more choice, control, and convenience. That's the juxtaposition of technology and media. In the past couple of years, I've spent more time [looking at technology and] health care, particularly cancer-related. We're on the cusp of what could be a breakthrough -- more personalized health care through more monitoring and targeted therapies.

Although I'm interested in advances in core technologies, it's really how technology intersects with things people do each day [that interests me most]. That's where a lot of the focus will be over the next decade.

Q: Have companies become disillusioned with their tech buys?

A: This strikes me as just a cycle.... The kinds of strategic reasons people embraced technology to transform their business are still there. What separates the winners and losers is that the [winners] recognize that technology will continue to be an integral part of what they do, as opposed to [thinking] the bloom is off the rose and rejecting it, saying: "I told you so."

The great companies are still great believers in technology. Wal-Mart (WMT), one of the best-managed and most profitable companies in the world, is hugely invested in technology.

Q: What's the role of Silicon Valley as tech recovers?

A: Silicon Valley will continue to be a beacon for a lot of people interested in technology and will continue to have robust growth. It has been through many of these cycles -- of PCs coming on strong and then slowing down, software coming on strong and then slowing down, the Internet coming on strong and then slowing down.

People who have been around a while know this is just another cycle. Silicon Valley will be very important, but continued advancement of technology will happen in a more diffused way around the globe, in large part because of the Internet.

Q: What are the greatest threats to a tech recovery?

A: Timidity. I was at the Allen & Co. conference [and] Treasury Secretary John Snow said we were spring-loaded for an economic recovery, but, ultimately, that will only happen if CEOs believe and start making investments and start taking risks.

I've been saying for some time that what makes America great is the willingness to take risk after difficulties. It's hard to call whether people will step forward and take risks this time. If they do, that's what will allow some companies to move into the lead. You'll recall great companies in the tech world did that. Dell (DELL) is an example: It developed in the aftermath of what most perceived was the PC bust. It's true to some extent with AOL. This is the time to make investments and to take risks.

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