Stephen M. Case, who stepped down amid controversy as chairman of Time Warner (TWX) in May, 2003, has given BusinessWeek a preview of the Apr. 4 launch of his new business venture, Revolution. The private holding company will invest in startups that, over the next two decades, will take on incumbent companies in health care, wellness, and resort vacations. Banking on aging boomers' desire for a healthier, more balanced life, Case already has invested in luxury vacation club Exclusive Resorts and Tucson-based wellness resort Miraval. Now he's negotiating potential investments in companies that help consumers manage their health care.
As he did with AOL, the company he built and then merged with Time Warner, Case hopes to catch new markets on the verge of turning into mainstream consumer businesses. On Mar. 11 and 17, Case talked with BusinessWeek Correspondent Catherine Yang in Revolution's new Washington (D.C.) offices about how he came to this stage in his life, the lessons he learned from the AOL-Time Warner merger, and the impact of his brother's death. Following are edited excerpts from those conversations:
Q: Why did you decide in January, 2003, to resign later that year as AOL Time Warner chairman?
A: For a variety of reasons, fair or unfair, I had become a distraction. The best thing to do as a major shareholder was to step aside. That was the right thing to do for the company, but it was not necessarily the right thing to do for me. I was frustrated and disappointed because I believed in the company.
Q: The year preceding your resignation, 2002, was a rocky one. CEO Gerald M. Levin had just resigned, the AOL division was floundering, and allegations of AOL's accounting violations surfaced. How did you navigate those events on a personal level?
A: Things like that frustrate and disappoint. But in the same year, my brother died. That's harder to deal with than any criticism of the company. It helps keep things in perspective.
Q: Was it difficult for you to step down as chairman?
A: It was a burden lifting. It wasn't like I was loving what I was doing. So I ended one chapter and started another. For 20 years, I'd shouldered the responsibility -- initially to build and defend AOL against competitive threats. Then, as chairman of the newly merged company, I tried to deliver on the promise of the merger. I was frustrated I wasn't able to do it.
Q: How did you arrive at the idea to launch Revolution?
A: As I reflected on my 20 years at AOL, there was some good stuff and some bad. I actually liked the first 10 years more than the second -- and the second 10 years is where the fame and fortune came. The first 10 years was just building the business, trying this and trying that, and struggling -- maybe we'll make it, maybe we won't. Being closer to the product, the consumer, and the marketing and interacting with the team -- that's just the stuff I love.
But when it got from being a little company on a crusade, to a big company, I was less good at it. Part of it is just recognizing there's something to this building of businesses that happens to play to my strengths. I just think it's a lot of fun.
Q: What lessons did you learn from the AOL Time Warner merger?
A: I'll start with the bad ones. I'm not trying to point the finger. I was chairman without portfolio. None of the businesses reported to me. I understood that going in, but I thought I'd be able to influence the strategy more than I was able. Maybe I was inept and ham-handed in doing it. Maybe I didn't understand the complexities of the businesses, the different cultures, and the emotional intelligence sides of things.
I learned it's not smart to put yourself in a position where you are held responsible for something but don't have the authority to make things happen. I'd rather buy control of companies. My new companies may fail, and that's my problem. But at least if my name and reputation are associated with them, I have control of my destiny.
Q: What did you learn about your management abilities?
A: I was a better builder than a manager. I'd rather focus on maximizing the opportunities swinging for the fences than minimizing the risk with bunts and singles. Large organizations are complicated. Some of it may have been this issue of not having that much real authority. Some of it also is maybe I'm just not good at that. So, why don't I focus on stuff I am good at?
Q: What were the good lessons from AOL?
A: What I liked about AOL was that it was always about building a business that happened to be profitable but also happened to empower consumers. Of course I was hoping it would make money. But it was as much about changing the world. Even though it sounds a little hokey, it's true.
Q: At Revolution, why aren't you focusing on investments in the Internet?
A: Frankly, I like new things. I feel like I made a contribution to building a more interactive world. And I'm proud of that. Now the opportunity is to do different things and leverage that. Health care and the Internet make sense.
Q: Taking on the health-care system is an ambitious goal. What are the chances you'll actually make a change?
A: Maybe 10 years from now, I will have wasted a lot of time and money, and it's a great embarrassment. But I'm willing to put my money where my mouth is. It's silly for me to raise expectations too much, but I think I'm right on the basic trend, which is shifting power to consumers.
Q: Why are you taking on the health-care industry?
A: Three years ago, my brother Dan was ill. I went to the hospital once with him because he had to have a weekly blood test. Standing in line, waiting around just seemed so inhumane. It's a blood test -- can't he do that at home?
I also remember looking at a Web site listing different specialties to pick a doctor. I didn't understand what to click on. It reminded me [of when] the Internet got started. CompuServe thought it was easy because they were selling to hobbyists. I thought it was hard. We spent a lot of time making it easy.
To me, it's the same sort of thing in health care, which is monumentally complex, confusing, inefficient, and inconvenient. Meanwhile, it's the biggest industry in the country, and everybody hates it! Can I fix it? I don't know. But I do know the best contribution I could make would be to attack that problem through the prism of building companies.
I believe 20 years from now the health-care system will be fundamentally different. It will be organized with consumers at the center as opposed to the periphery. I just believe that.
Q: What do you want to do with your wealth?
A: If you can build a company and make money, great. But eventually, my intention is to give all my money away. I told my kids that. [Wealth] is not particularly helpful to kids. It's almost a burden. It's better to allow them to do their own thing and have their own successes.
Q: What do you think your reputation is today in the business world -- the guy who helped build the Internet or the guy who messed up a big merger?
A: I don't know. There are lots of cycles to markets -- boom and bust -- and also in perceptions of people. The conventional wisdom of Steve Case as genius or fool was highly cyclical. The truth was always in the middle.