Latest / Giant Ideas / AOL Co-founder, Steve Case: AI Lessons from the Internet Boom

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AOL Co-founder, Steve Case: AI Lessons from the Internet Boom · Giant Ideas

• 0:00
  SPEAKER_01: Steve, welcome to Giant Ideas.
• 0:01
  SPEAKER_01: Great to have you here.
• 0:02
  SPEAKER_00: Great to be with you.
• 0:04
  SPEAKER_01: Okay, we're gonna take a walk down memory lane and really talk about what your founding of AOL in the 90s can teach us about the current moment.
• 0:12
  SPEAKER_01: So you started AOL in 1985 when there were a tiny fraction of people online.
• 0:18
  SPEAKER_01: Today everyone agrees that AI is the great platform shift.
• 0:21
  SPEAKER_01: When you look around today, what feels similar and what feels entirely different?
• 0:26
  SPEAKER_00: Well, it's on the it's a it's in as you'd expect the mix.
• 0:29
  SPEAKER_00: When we started in 85, as you mentioned, only 3% of people were online.
• 0:32
  SPEAKER_00: Those 3% were online an hour a week.
• 0:34
  SPEAKER_00: Most people didn't think the internet would ever take off.
• 0:37
  SPEAKER_00: Most people didn't think it'd ever be mainstream, but more like a niche hobbyist hacker kind of market.
• 0:43
  SPEAKER_00: And it really took a decade from the time we got started, to the point where it started building momentum in the mid-90s when things started taking off for a bunch of reasons why, in retrospect, why it took so long.
• 0:53
  SPEAKER_00: But it was certainly frustrating at the time.
• 0:55
  SPEAKER_00: I think with AI, it's it's sort of at one level, it seemed like an overnight sensation, you know, with ChatGP uh GPT launching three or so years ago, getting to 100 million users in uh 90 days.
• 1:08
  SPEAKER_00: But in fact, it took 75 years baking in the oven because AI has been worked worked on by some some in labs for for literally decades, uh even longer than uh than the internet.
• 1:17
  SPEAKER_00: So it's sort of a in the difference is it was very, very slow for the buildup of the internet, faster on terms of uh the adoption of both consumer enterprise adoption of AI because all these platforms are built, all the connectivity existed.
• 1:32
  SPEAKER_00: So when you had something interesting, a lot of people could adopt it really quickly.
• 1:35
  SPEAKER_00: The other dynamic, which is sort of startling for me, is when we launched AOL, our first round to get going.
• 1:42
  SPEAKER_00: The first round of venture capital was$1 million.
• 1:46
  SPEAKER_00: Over seven years, we raised a collective total, grand total over seven years, several rounds of$10 million.
• 1:53
  SPEAKER_00: We went public in 1992, the first internet company to go public in our IPO.
• 1:58
  SPEAKER_00: We raised another$10 million.
• 2:01
  SPEAKER_00: Uh and now, of course, companies are getting seated with a billion dollars and going public at a trillion dollars.
• 2:08
  SPEAKER_00: So that is certainly different.
• 2:10
  SPEAKER_00: And the last point I'd say is I'm more on the policy politics side of it.
• 2:14
  SPEAKER_00: When the internet was coming out and started to build in the 80s, in particular the 90s, there's a debate about what the right public policy should be in terms of how to you know kind of what the rules of the road should be, what sort of guardrails should be.
• 2:28
  SPEAKER_00: But because it was growing so slowly, the general sense was sort of a light touch rip regulation made sense until we saw more cards.
• 2:36
  SPEAKER_00: Uh AI obviously is growing quite rapidly.
• 2:38
  SPEAKER_00: The adoption is really, you know, kind of astronomical, which is forcing, you know, folks, whether it be here in Washington, D.C.
• 2:44
  SPEAKER_00: or Brussels or other places, to say, okay, what what what should we do here?
• 2:47
  SPEAKER_00: And obviously there's a tension between, you know, letting just letting it rip and you know trying to maximize innovation, but take some risk or or going too far the other uh direction and constraining things prematurely.
• 3:00
  SPEAKER_00: And so that you know, the policy debate is is now uh is happening faster with AI than it did with internet.
• 3:05
  SPEAKER_01: I think uh that the the size of those rounds that you raised, and you were the pioneering company of the internet era compared to today's is definitely illuminating.
• 3:13
  SPEAKER_01: Another stat I heard was you guys took nine years to get to a million users, which was a huge number at the time.
• 3:18
  SPEAKER_01: I think Chat GPT got to a hundred million users in a in a year or so.
• 3:22
  SPEAKER_00: So what do you think that that's no even it was like three or four months?
• 3:26
  SPEAKER_00: So no, it was it's it uh it was it was crazy.
• 3:30
  SPEAKER_00: And and and you know, again, the venture capital back then in the 80s, there was a small number of firms writing relatively small checks.
• 3:37
  SPEAKER_00: And the only companies that really could get funded were companies that were viewed as pretty capital efficient.
• 3:41
  SPEAKER_00: Now there's so much more money.
• 3:43
  SPEAKER_00: Uh you can you can take some bigger bets.
• 3:46
  SPEAKER_00: Uh, and obviously that's what you're trying to do at Giant.
• 3:49
  SPEAKER_00: Uh so that's positive.
• 3:50
  SPEAKER_00: You know, more innovation can happen.
• 3:52
  SPEAKER_00: The part that I'm I'm not as wild about is these companies, whether it be SpaceX now at$2 trillion or Anthropic OpenAI, you know, probably going public around$1 trillion.
• 4:03
  SPEAKER_00: That's great for those companies.
• 4:04
  SPEAKER_00: It's great for those investors, but it's not great for retail investors.
• 4:08
  SPEAKER_00: One of the things I loved about AOL was when we went public, the market value that day was$70 million.
• 4:14
  SPEAKER_00: Seven years later, when we were merging with Time Warner, it was$160 billion, something like 11,000% increase.
• 4:21
  SPEAKER_00: That went in the pockets of retail investors.
• 4:24
  SPEAKER_00: And so the fact that companies are going public much, much, much later at much, much, much higher valuation.
• 4:29
  SPEAKER_00: There's some upside, but a lot of downside for the public investors.
• 4:33
  SPEAKER_00: And that part of it doesn't, I don't, I don't allow.
• 4:35
  SPEAKER_00: But obviously, I celebrate innovation, I celebrate entrepreneurship and and uh certainly celebrate these recent successes that are that are now going public.
• 4:44
  SPEAKER_01: Uh reality and phenomenon will reverse and there will be more opportunity for uh retail investors to I mean you could see, I guess, with Robin Hood and the likes, that is there is a bit of a tide moving against that where people are getting access to some of these companies in the private markets.
• 4:58
  SPEAKER_00: Well, I'd say yeah, the certainly the the late stage private markets have been so robust that it did give access to you know capital that was uh unprecedented, and so there was less of a need to go public.
• 5:09
  SPEAKER_00: And in my era, you really raised, you know, and uh we weren't alone.
• 5:12
  SPEAKER_00: I mean, we were a little bit lower at 70 million, but Microsoft, Amazon, Nvidia all went public around 500 million.
• 5:20
  SPEAKER_00: Uh and so these these these rises to the you know trillion dollar plus level again happen in in the public markets.
• 5:27
  SPEAKER_00: I do think the the IPO market, the window, if you will, is is is opening.
• 5:33
  SPEAKER_00: There are clearly dozens of companies, uh, some of which we're involved in that you know confidentially filed to go public.
• 5:38
  SPEAKER_00: And so I think you'll see a pretty robust IPO market over the next you know six, twelve months, assuming these big, big IPOs hold.
• 5:46
  SPEAKER_01: Aaron Powell So going to the early days of AOL, you were really ahead of the wave.
• 5:50
  SPEAKER_01: How did you in those early days distinguish from you know when it wasn't necessarily so easy from being too early, or or whether you kind of you know you were right right on the money?
• 6:01
  SPEAKER_00: Well, we were we're definitely early at the time, but as I said, a small market.
• 6:04
  SPEAKER_00: There weren't you know too many uh competitors.
• 6:06
  SPEAKER_00: Uh most people didn't see it as being that big a market.
• 6:10
  SPEAKER_00: I remember having a big debate with the the personal computer manufacturers at the time, the IBMs, the apples of the world.
• 6:17
  SPEAKER_00: Because when we started, uh, in order to get online, you needed to have a modem in your computer.
• 6:23
  SPEAKER_00: And modems shipped it as a peripheral device.
• 6:26
  SPEAKER_00: You know, for the first decade, you had to buy a computer and then decide, I want a modem, and go buy a modem and plug it in and figure out how to make it make it work.
• 6:33
  SPEAKER_00: Otherwise, that was not a connected computer and you couldn't access, obviously, the the internet.
• 6:38
  SPEAKER_01: And you had you had some quite creative ways of trying to get people connected, right?
• 6:42
  SPEAKER_01: From a marketing standpoint.
• 6:43
  SPEAKER_00: Well, we well, the third step was trying to get those modems built in.
• 6:46
  SPEAKER_00: So we'd we'd be debating this with the PC manufacturers, build the modems in.
• 6:49
  SPEAKER_00: They said, why would we build the modem in?
• 6:51
  SPEAKER_00: Like only like 20% of the people who buy computers end up buying modems.
• 6:54
  SPEAKER_00: So it why would we you know make it you know raise the cost to everybody when only a few want it?
• 6:58
  SPEAKER_00: So, well, we actually think that's the killer apple for the personal computer.
• 7:01
  SPEAKER_00: And eventually they did it, and eventually that's when things started accelerating.
• 7:05
  SPEAKER_00: We also, as you as you know, were very aggressive in trying to get our free trial disk.
• 7:08
  SPEAKER_00: At the time we launched, most of our competitors were charging for the software, charging uh up front fee to join the you know the service.
• 7:16
  SPEAKER_00: We said we're gonna make it the software free and give people a free month because we believed if they actually took the time to try our service, they'd fall in love with it and become you know ongoing subscribers.
• 7:26
  SPEAKER_00: And that that worked well.
• 7:27
  SPEAKER_00: It was sort of a we distributed you know gazillion free trial disks and and really kind of slammed our foot on the accelerator trying to drive you know adoption.
• 7:35
  SPEAKER_01: Aaron Powell And you were 26 at the time, right?
• 7:37
  SPEAKER_01: Going up against the behavior.
• 7:39
  SPEAKER_01: Yep.
• 7:39
  SPEAKER_01: When we started, I was 26.
• 7:40
  SPEAKER_01: Yeah.
• 7:40
  SPEAKER_01: Yeah.
• 7:41
  SPEAKER_01: What gave you the confidence to do that?
• 7:42
  SPEAKER_01: You've said, I think, many times that confidence is a key criteria of successful entrepreneurship.
• 7:47
  SPEAKER_01: Take us back to 26-year-old Steve Kay saying, I'm gonna take I'm gonna take on these titans.
• 7:51
  SPEAKER_00: Well, I think some of it was probably youthful naivety, which I think is sometimes sometimes healthy.
• 7:57
  SPEAKER_00: I think I thought it'd be easier than it turned out uh to be.
• 8:00
  SPEAKER_00: I but I did really did believe in in the idea of the internet, which again, of course, seemed obvious now, but the time seemed kind of crazy quixotic.
• 8:08
  SPEAKER_00: And so I just I couldn't get I didn't know exactly how it was gonna play.
• 8:11
  SPEAKER_00: I didn't know exactly how our company would would you know work, whether we would even survive.
• 8:16
  SPEAKER_00: But I I believed in the idea of people getting connected.
• 8:20
  SPEAKER_00: I believed in the idea of communicating in new ways with texting and and um you know message boards and chat rooms.
• 8:27
  SPEAKER_00: I believed that content would eventually be distributed in different ways.
• 8:30
  SPEAKER_00: I believed e-commerce would eventually happen.
• 8:33
  SPEAKER_00: So I just fundamentally believe, which I think gave me and the team we had, that sort of the, you know, the the grit, this, you know, the you know, kind of stick to it to stick with it because you know it seemed like that idea eventually was gonna happen.
• 8:47
  SPEAKER_00: Sometimes it felt like the light was at the tunnel, end of the tunnel, it was flickering, and sometimes people were adding more tunnel because it just seemed like it was hard to really break out.
• 8:56
  SPEAKER_00: But fundamentally believed eventually it w it would happen.
• 9:00
  SPEAKER_00: And so I think it was a combination of that, you know, kind of just not 26, you know, kind of being willing to take the risk, able to take the you know, the risk, coupled with uh really uh fundamentally believing that the idea was a sound idea and somehow, some way we would, you know, get the world online.
• 9:18
  SPEAKER_01: That core insight and that belief in the internet that allowed you to, I guess, to outmaneuver the the incumbents who I guess perhaps were a bit slower to seeing the value of it.
• 9:26
  SPEAKER_01: Or yeah, I'm just trying to figure out how you just a bit maybe a bit more tactical, how you how you outgun these guys with so much less capital.
• 9:34
  SPEAKER_00: Well, I think the the main thing was there was a few other venture-backed startups, but not that many.
• 9:40
  SPEAKER_00: Most of the big players were were, as you say, the incumbents, uh a big force like ATT, the largest you know, a phone company, or uh CompuServe and the Source were you know, two of the early, early pioneers.
• 9:52
  SPEAKER_00: One of them was owned by H and R Block, GE, General Electric, was launching a service called uh you know Genie.
• 9:58
  SPEAKER_00: Microsoft was was uh planning to enter the market with uh with uh with uh their own uh service.
• 10:04
  SPEAKER_00: So they were kind of big companies trying to figure out what to do about this emerging opportunity, but they didn't see it as that big an opportunity.
• 10:12
  SPEAKER_00: They didn't necessarily put the A-team on it, they didn't necessarily kind of devote the time to it, which is always a challenge with large companies.
• 10:19
  SPEAKER_00: They have a lot of priorities.
• 10:21
  SPEAKER_00: And for us, there was one priority, which is staying alive and trying to figure out some some path to thrive.
• 10:26
  SPEAKER_00: For others, they were there's a bunch of things on their their their uh agenda.
• 10:30
  SPEAKER_00: So they they should have prevailed.
• 10:32
  SPEAKER_00: They had great brand names, they had obviously limited capital compared to what we had, uh, but they just didn't have the same passion, they didn't have the the same focus.
• 10:42
  SPEAKER_00: It also helped, though, because in retrospect, I think it helped because it was growing so slowly.
• 10:46
  SPEAKER_00: It wasn't like everybody was trying to get into it.
• 10:48
  SPEAKER_00: You know, people just thought it was sort of this niche thing.
• 10:50
  SPEAKER_00: I'd go to you know personal computer conferences, some of the PC Forum and agenda and things like that in the in the 80s, even the early 90s, there'd be hundreds of people there, all of them focused on hardware and and software and you know, chips.
• 11:05
  SPEAKER_00: You know, I like I was a guy focused on the internet for for many of those years.
• 11:09
  SPEAKER_00: So I was it was kind of lonely at one level, but also that might it was not as hyper competitive as it became 10 years later when suddenly there was a gold rush mentality around the internet.
• 11:19
  SPEAKER_00: So, you know, if you if you're if you're early, I think the lesson is you know sometimes revolutions happen in more evolutionary ways, and you really have to you have to be patient and and be a little bit of a uh a contrarian.
• 11:30
  SPEAKER_00: But that also means that you might have the opportunity to build some capabilities before everybody else piles in.
• 11:36
  SPEAKER_01: Well, history doesn't repeat but it rhymes.
• 11:38
  SPEAKER_01: But we're back to chips these days now.
• 11:40
  SPEAKER_01: Um that's the focus.
• 11:42
  SPEAKER_01: But I think one thing that has changed is you know you were up against maybe sleepy or slower incumbents, but the incumbents today, the Googles, the Metas, the Nvidia's, the Amazons, they are so on the ball, right, for every kind of technological transformation that at the forefront again of this AI one.
• 11:57
  SPEAKER_01: So in some ways I think there's stiffer competition better than 40 years ago from the incumbent leaders.
• 12:02
  SPEAKER_01: So what what do you think uh uh applies today from some of the lessons from AOL?
• 12:06
  SPEAKER_00: What do you think people maybe misunderstand about AI where there might be uh an opening for well I'd say the the the it's hard to take on the big boys in in sort of the core platform uh uh AI, sort of the LLM side of things, because that's really you know kind of like a hundred billion dollar plus ante to play.
• 12:25
  SPEAKER_00: So that that one you know is basically, you know, the whether it be uh the the Googles or the Microsoft or or others have really been the you know the leaders there.
• 12:34
  SPEAKER_00: Thankfully there have some new companies, obviously Anthropic and OpenAI in particular, and OpenAI largely, I think, because of the partnership on the money from uh from from Microsoft that really fueled their their um their growth.
• 12:46
  SPEAKER_00: Uh so on that side of things, I think uh definitely you you the the big tech incumbents have had a big structural advantage and does result in essentially big tech getting getting bigger.
• 12:58
  SPEAKER_00: Where it's you know now shifting uh quite rapidly is what I think is more like vertical AI as opposed to more platform AI.
• 13:05
  SPEAKER_00: And that's where the technology meets the real world, and that's where it's not just about you know that what you're building, it's how you then integrate it into these industries, healthcare and transportation and agriculture, you know, big, big sectors, big, big important aspects of our lives.
• 13:20
  SPEAKER_00: And the incumbents there are a little bit different, not just the you know, the tech giants in places like Silicon Valley, it's also the leaders in healthcare like a United Health in uh in Minnesota.
• 13:31
  SPEAKER_00: And so how do you how do you work with those incumbents as an entrepreneur?
• 13:35
  SPEAKER_00: I think partnerships are going to become much more important in this next uh phase, what they've called the internet's third wave.
• 13:41
  SPEAKER_00: Uh, and you're seeing that kind of uh you know take hold where the incumbents recognize things are happening, recognize they need to move, don't necessarily have the you know the team in place and the the agility to move, so see the value of partnerships and the and the younger companies see the you know the value of those partnerships as well as accelerating their growth and their ability to you know kind of enter markets more quickly with more credibility.
• 14:04
  SPEAKER_00: Now, partnerships are hard, so it's tricky to form those, but I think you're seeing more and more of that.
• 14:09
  SPEAKER_00: Some of the companies we back, like Clear, the biometric technology, now a public company uh that allows you to move through airports more quickly, kind of a fast pass.
• 14:18
  SPEAKER_00: That you know, the biometric technology was interesting, but it was the partnerships they formed with the airports, the airlines, with the transportation authorities that really resulted in the value creation, similarly back to company uh also public now called Tempest, using uh AI focused on oncology and other kinds of things.
• 14:35
  SPEAKER_00: Again, the core technology they built was terrific, but the partnerships they form with the leading cancer hospitals, so that the data they're able to ingest is what really makes that company kind of work.
• 14:46
  SPEAKER_00: And that dynamic of partnerships, I think, becomes much more important.
• 14:50
  SPEAKER_00: So as entrepreneurs, I think part of this is saying, okay, who are you competing with?
• 14:55
  SPEAKER_00: And is there an opportunity for some co-opetition?
• 14:58
  SPEAKER_00: Is there, rather than assume they're gonna be a competitor, is there some way to align with them?
• 15:02
  SPEAKER_00: And that was the philosophy I had in the early days of of AOL.
• 15:05
  SPEAKER_00: I said, and every everybody's a potential competitor until they start shooting at us, and then we'll say, okay, they're they're they're they're they're I'm a potential partner until they start shooting us, and then we'll have to you know redefine them as a as a competitor.
• 15:17
  SPEAKER_00: But leaning into this and trying to kind of co-opt you know big, big players and have them on your side, I think is very important.
• 15:23
  SPEAKER_01: Okay, so going back again in history to a moment which in many ways marked the top of the kind of first, I guess, internet bubble.
• 15:31
  SPEAKER_01: Uh your merger with Time Warner.
• 15:33
  SPEAKER_01: It has been described as the worst business deal or merger of all time, um, which I think is uh perhaps not fair, but looking back on it, what do you think people misunderstood?
• 15:42
  SPEAKER_01: Do you regret it?
• 15:43
  SPEAKER_01: Um any lessons uh for entrepreneurs listening to this today?
• 15:47
  SPEAKER_00: Well, I think it's fair to say it was the worst merger because it didn't it didn't work.
• 15:50
  SPEAKER_00: We had ultimately ultimately had to be unwound.
• 15:53
  SPEAKER_00: Uh it wasn't the worst merger, I'd say, for AOL shareholders, which was which was you know my job.
• 15:58
  SPEAKER_00: We uh I if I recall the deal, it was over 25 years ago, but our shareholders got you know 55% of the you know combined company uh and you know our valuation had soared from I mentioned 70 million when we went public and 160 billion when we did the merger.
• 16:13
  SPEAKER_00: I think a year or two before the merger, it was like 20 billion, so it'd gone up dramatically.
• 16:17
  SPEAKER_00: And so we really felt it was strategically important to use that currency, if you will, to have a more diversified set of businesses.
• 16:24
  SPEAKER_00: And we also believed it was strategically critical that we were the leader, AOL was the leader of narrowband dial-up internet, but we didn't have a real path to broadband.
• 16:33
  SPEAKER_00: So merging with the largest cable company in uh in the United States, which also had these content brands and had a much more diversified business.
• 16:41
  SPEAKER_00: I think that 30 billion of revenue, uh, uh we were like 5 billion of revenue, something like that, is strategically made a lot of sense.
• 16:47
  SPEAKER_00: And to this day, I still think strategically makes a lot of sense.
• 16:50
  SPEAKER_00: And some of the things we said we could do 25 years ago have become companies like Spotify and Netflix and other things that absolutely could have been part of a all-time war.
• 16:59
  SPEAKER_00: But the lesson really is about execution.
• 17:02
  SPEAKER_00: You know, we the vision of what these companies could do together, the vision of convergence of technologies, I think it now is is is pretty obvious.
• 17:10
  SPEAKER_00: The fact that the company wasn't able to capitalize on its assets and its and its lead ultimately came down to people and and and priorities.
• 17:19
  SPEAKER_00: There was you know was a culture clash between the old and the new and sort of the more traditional business models and new business models.
• 17:27
  SPEAKER_00: It never really came together as one company, never really had much collaboration, never had much uh integration.
• 17:33
  SPEAKER_00: Uh, and as a result, ultimately had to be unwound.
• 17:36
  SPEAKER_00: And so to me, that was a rather searing lesson uh that you know, kind of knowing where you want to go is is important, but having a path to get there with the right people on the bus in the right seats working together in the right way is really where the the rubber meets the road.
• 17:50
  SPEAKER_00: And I've tried to carry that lesson uh you know forward in the things we've done uh more recently.
• 17:55
  SPEAKER_01: Would you do it again?
• 17:56
  SPEAKER_00: Yeah, I would do it again.
• 17:57
  SPEAKER_00: Just from a standpoint, uh as CEO of AOL and representing shareholders, uh it would it was strategically the right thing to do, even if it didn't work out the way obviously I and others were hoping.
• 18:07
  SPEAKER_01: And you've been in a previous bubble, the internet bubble.
• 18:11
  SPEAKER_01: Is your kind of pattern matching antenna going off at this moment in time?
• 18:16
  SPEAKER_00: Yeah, no, obviously things have changed and the the the scale of the revenues that companies like Anthropica Achieving is is staggering.
• 18:22
  SPEAKER_00: There were a lot of companies going public around 2000 that essentially had no revenues.
• 18:26
  SPEAKER_00: It was more, you know, kind of a uh an ID on a napkin or you know, talking about how many people were were using their their product, but they hadn't figured out a path to monetize it.
• 18:35
  SPEAKER_00: So that is quite different.
• 18:36
  SPEAKER_00: The the scale of the revenues are really quite you know quite extraordinary now, and the growth rates are quite extraordinary.
• 18:42
  SPEAKER_00: That said, as I said earlier, the you know the valuations are up there.
• 18:47
  SPEAKER_00: Uh, and so there there is likely at some point to you know to be a correction and and a sorting out, and and uh and that's like a healthy process.
• 18:56
  SPEAKER_00: Having more things funded, more things for them, more things scaling, I think is great.
• 19:01
  SPEAKER_00: Uh, but eventually there is a winnowing process, and I think we'll inevitably see that in AI and probably in the next you know year or two, three.
• 19:10
  SPEAKER_00: Um uh but that doesn't mean that, as I said before, the continued pace and arc and and momentum around innovation won't continue.
• 19:16
  SPEAKER_00: And that happened with the internet.
• 19:17
  SPEAKER_00: When it the dot com crash, some people said, ah, the internet's a fad.
• 19:21
  SPEAKER_00: I guess we should pull back and stop investing.
• 19:24
  SPEAKER_00: That was exactly the time to double down because the internet wasn't a fad.
• 19:27
  SPEAKER_00: And what's happened since that, you know, the last 25 years has been staggering.
• 19:31
  SPEAKER_00: And so I think there's a difference between how markets evolve and some of the cycles of those markets, how consumers and enterprises adopt, you know, kind of technologies, and how investors, you know, kind of underwrite that, whether as private investors or or public investors, and and you know, you shouldn't confuse the two.
• 19:48
  SPEAKER_00: They're really two separate things happening, and and you have to kind of look, take a step back to make sure you you understand that.
• 19:55
  SPEAKER_01: How has it been for you as both an entrepreneur and investor living through the 90s and then living through this current era?
• 20:00
  SPEAKER_01: How would you describe the cultures between those two decades?
• 20:04
  SPEAKER_00: Well, it's obviously you know, venture capital's grown up, entrepreneurship has grown up.
• 20:08
  SPEAKER_00: When I was starting uh AOL and I said I was 26, it was viewed as kind of you know weird and kind of risky.
• 20:14
  SPEAKER_00: Most people were you know working for big companies or big consulting firms or bank, big banks or what have you.
• 20:19
  SPEAKER_00: You know, entrepreneurship was more fringy.
• 20:22
  SPEAKER_00: Now it's more mainstream, more people got take that path when they're they they they graduate.
• 20:27
  SPEAKER_00: And obviously there's a lot more uh investors as well.
• 20:29
  SPEAKER_00: So it's matured in a in a significant way.
• 20:31
  SPEAKER_00: At the same time, some of the core fundamentals about you know being curious, kind of peeking around corners, getting a sense of what you think might happen next, and deciding is it something you so you know, have so much conviction about, so much passion about that you want to be part of making it happen when then and jumping in either as an entrepreneur or as a as an investor to try to kind of steer it.
• 20:52
  SPEAKER_00: Uh so that that dynamic, I think, you know, remains the same.
• 20:56
  SPEAKER_00: And I think there are opportunities as we were talking about because of the fact that these new sectors, you know, the biggest industries in the world, the most important aspects of our lives are now up for grabs, uh, creates an unprecedented level of uh innovation disruption.
• 21:11
  SPEAKER_00: Uh and so the opportunities in the next 10, 20 years are gonna be just uh just phenomenal.
• 21:16
  SPEAKER_01: Yeah, one thing I would observe is that I mean the technology entrepreneurs have always been, I think, at the forefront of culture over the last 20 years.
• 21:22
  SPEAKER_01: You were on, I think, the cover of quite a few magazines back in the day.
• 21:25
  SPEAKER_01: But uh the centrality of technology to the culture, both the economy, but also um kind of software culture, I think is is really accelerated over the last uh decade, I'd say.
• 21:35
  SPEAKER_00: I'd say that's true, but uh there's also I think a growing backlash against technology, and particularly focused on around AI.
• 21:43
  SPEAKER_00: I think we need to be a little careful and uh bring bring some humility to this because sometimes when we all are talking, as we just were talking about disruption is a good thing.
• 21:52
  SPEAKER_00: Well, for a lot of people, disruption is a bad thing.
• 21:54
  SPEAKER_00: It means job loss for their family, job loss for their community, and there's a growing backlash around.
• 22:00
  SPEAKER_00: Technology, use of smartphones and social media, AI, what the impact's gonna be, robotics, what's the what's the impact gonna be?
• 22:07
  SPEAKER_00: Is it sort of gonna be more of this dystopian world where there's you know a lot of job loss and and so forth?
• 22:13
  SPEAKER_00: And that's starting to bubble up even this, you know, recently last month or so.
• 22:17
  SPEAKER_00: A number of people uh making commencement speeches when they mention AI got booed.
• 22:22
  SPEAKER_00: And I think you're gonna see this as a growing political issue, uh, maybe even one of the, you know, beyond affordability, one of the core issues in the next, you know, in the United States, the next presidential you know, kind of campaign.
• 22:33
  SPEAKER_00: Because there's a uh a dynamic here that is building.
• 22:36
  SPEAKER_00: That's part of the reason why we've been so passionate over the last decade in arguing for the dispersion of innovation, don't just back companies in Silicon Valley, back companies all across the country, what we call Rise of the Rest.
• 22:47
  SPEAKER_00: Now we've made over 200 investments in 100 different cities.
• 22:50
  SPEAKER_00: That's partly an investment thesis where there are great entrepreneurs building great companies, and valuations tend to be lower so we can generate great returns.
• 22:57
  SPEAKER_00: But there's also a broader purpose to it, which is the biggest job creators are young companies, the innovators, you know, the startups under five years old.
• 23:05
  SPEAKER_00: Uh, and so backing more of them in more places, creating more jobs in more of those places will offset, at least in part, the job loss that's inevitable from uh the disruption, including from AI.
• 23:16
  SPEAKER_00: And so we've got to make sure people all across the country, all across the world see the benefits in their own lives, in their own families, in their own communities of what's happening with technology.
• 23:25
  SPEAKER_00: Otherwise, they're going to see a growing and potentially very significant backlash that could hobble the development of some of these technologies just as they're starting to take flight.
• 23:36
  SPEAKER_00: So I think we all need to celebrate what's happening and cheer on what's happening in terms of the innovators, you know, kind of taking these risks and taking these shots on goal and trying to figure out better ways to deliver health care, better ways to think about farming, better ways to manage money, whatever it might be, but also recognize that you know, with that disruption creates dislocation and and and frustration and anger.
• 24:01
  SPEAKER_00: Uh and you know, we just need to figure out a balanced way as a society to get the benefits of innovation, but make sure there it's a more inclusive innovation economy, not just a few people on the coast benefiting and everybody in the middle of the country feeling left out and left behind.
• 24:15
  SPEAKER_00: Otherwise, we're going to have a uh a real political revolution uh in this country and and around the world that could could set back the the pace of technology innovation quite a bit.
• 24:25
  SPEAKER_00: So it's just about, you know, I think it's about balance and and nuance and and as I said, maybe a bit of humility as well.
• 24:32
  SPEAKER_01: Yeah, you've been pretty consistent that you think AI is a long-term benefit, but in the short term, perhaps uh pretty destructive to jobs.
• 24:39
  SPEAKER_01: And I guess that is another cultural kind of difference maybe from the nineties a bit, but I would say technology perhaps had a slightly more idealistic kind of um yeah view on things than it maybe it does now.
• 24:51
  SPEAKER_01: Would you agree with that?
• 24:53
  SPEAKER_00: Yeah, I agree.
• 24:54
  SPEAKER_00: I think some of this is new technologies, you know, initially people don't really pay attention.
• 24:58
  SPEAKER_00: Then when they start paying attention, a lot of people are kind of skeptical, it's not really gonna work.
• 25:03
  SPEAKER_00: And it finally starts, you know, getting some traction and and growing, people start paying more attention, then it really kind of starts taking off, like sort of the you know, the the dot-com boom, you know, kind of era.
• 25:13
  SPEAKER_00: You know, maybe we're in that, you know, with the with AI now.
• 25:16
  SPEAKER_00: Then it's sort of like this gold rush, everybody wants to be part of it.
• 25:19
  SPEAKER_00: And people only see the upside, they don't see the downside, either as from an investment standpoint or from a societal standpoint.
• 25:25
  SPEAKER_00: And then it settles out a little bit.
• 25:26
  SPEAKER_00: And the internet, I'm I'm proud of the role we played in getting America online, getting the world online, uh, and the impacts it's had in so many ways that are really quite profound.
• 25:35
  SPEAKER_00: But I also recognize there's some unintended consequences of things that happened, including what's happened with uh with social media and some of the mental health issues related to that.
• 25:44
  SPEAKER_00: We didn't really think about that, you know, 30, 40 years ago.
• 25:46
  SPEAKER_00: We were just thinking about, oh, we can figure out different ways people can communicate, different ways people can create and distribute content.
• 25:52
  SPEAKER_00: How can that not be all positive?
• 25:55
  SPEAKER_00: And so just to me, the the lesson there is focus on the positives, but also recognize and pay attention to some of the negatives and try to maximize the positive and hedge against some of the negatives.
• 26:05
  SPEAKER_00: And that's that's gonna be the necessary conversation with with AI as well.
• 26:09
  SPEAKER_00: You know, recognize all the different things it's doing that can you know make things work better in our in our lives, but also recognize there are going to be some you know some downsides to it.
• 26:20
  SPEAKER_00: I think overall the impact of AI will for sure be significant.
• 26:24
  SPEAKER_00: There will be some new jobs that we can't imagine today will be created, but there also is going to be a lot of job loss, and probably the job loss will exceed the job gain, which then again creates more of a societal question and what what what what's the right policies associated with that?
• 26:37
  SPEAKER_00: And we need to engage on those topics, not just uh not just have our head in the sand and ignore them.
• 26:43
  SPEAKER_01: And we asked this question of all our guests that come on the show.
• 26:46
  SPEAKER_01: If you had three photographs that defined your life, or important decisions or moments, what would they be?
• 26:55
  SPEAKER_00: Good question.
• 26:55
  SPEAKER_00: I I I feel like I've had a little bit of a like a forest gump life, having multiple lives and met a lot of people a lot of different different ways.
• 27:03
  SPEAKER_00: I I'm not sure I could pick three, and I've of course I'm super proud of a family of five kids, six grandkids, and probably would pick some of those photos.
• 27:11
  SPEAKER_00: But I'd say just in terms of the arc you know of my business career um or life more broadly, I guess.
• 27:19
  SPEAKER_00: Probably one would have to be Hawaii, grew up in Hawaii, born and raised in Hawaii, was there for my the first 18 years before I went to college, and I think that obviously was a you know kind of a formative uh experience.
• 27:31
  SPEAKER_00: Uh second would have to be something related to AOL, where it'd be a photo when we were just a couple dozen of us in it's in a you know kind of a mediocre office trying to figure out how to survive, or when the company went public and uh got started its rise in terms of uh uh prominence, that would probably have to be one.
• 27:51
  SPEAKER_00: Um more recently, over the last uh two decades, revolution has backed a lot of companies across a lot of sectors.
• 27:57
  SPEAKER_00: But one area that we're particularly focused on now, which I think is really interesting, is what we call Revolution Places, which actually is uh recognizing that in a world where there's more technology, there's there's there's there's more AI, uh, people are gonna really value real people in real places, having real authentic experiences.
• 28:14
  SPEAKER_00: So we're doing a lot of things in in travel and hospitality.
• 28:17
  SPEAKER_00: And you know, another photo would be just about a year ago.
• 28:20
  SPEAKER_00: We opened uh our first resort in Costa Rica.
• 28:22
  SPEAKER_00: We have a 600-acre peninsula there.
• 28:24
  SPEAKER_00: We're master planning and opened that with the CEO of Hilton.
• 28:27
  SPEAKER_00: And that was sort of a bringing that idea to life.
• 28:30
  SPEAKER_00: And that would be another one I would I would put.
• 28:32
  SPEAKER_00: But yeah, I I could give you dozens of those.
• 28:33
  SPEAKER_00: Those are just a few that that come to mind.
• 28:35
  SPEAKER_01: I have to ask, if you grew up in Hawaii, does that mean you're a mean surfer?
• 28:40
  SPEAKER_00: I'm a body surf.
• 28:41
  SPEAKER_00: I did uh some board surfing, but mostly body surfing, and uh I do get back a few times a year.
• 28:45
  SPEAKER_00: We also have some uh you know some companies in in Hawaii, and so that that that was you know fun.
• 28:51
  SPEAKER_00: I actually was just back a couple weeks ago for my 50th high school reunion, which I admit makes me feel a little old, but it was fun to fun to be back.
• 28:59
  SPEAKER_00: And it's a great school.
• 29:01
  SPEAKER_00: Actually, in the in the forest gumpish you know, coincidences world, I actually was went to high school with Barack Obama, who ended up being uh president.
• 29:09
  SPEAKER_01: If you were 26-year-old today, what would you be spending the next 10 years of your life building?
• 29:17
  SPEAKER_00: Well, uh it's hard to generalize because I've I've learned that different people have different interests, different passions, different skills, and uh kind of you have to understand not what just the market opportunity is, but how what you you you're really good at and you know matches up with that.
• 29:31
  SPEAKER_00: Uh but if you have that innovation gene, that entrepreneurial you know kind of gene, I think recognizing that we are at a pivotal point in time, that the continued march of technology, including obviously AI, but other things as well, it's gonna accelerate the opportunities for that across a whole variety of industries, not just you know, AI from a Silicon Valley-centric, platform-centric, LLM-centric kind of way, but how that gets, you know, kind of impacts more broadly some of the largest industries in the country.
• 30:01
  SPEAKER_00: That's a you know, really big opportunity.
• 30:03
  SPEAKER_00: So if there's something there, you know, healthcare or something else that you're particularly passionate about, that would certainly be one.
• 30:10
  SPEAKER_00: What's happening in areas like drug discovery is extraordinary.
• 30:13
  SPEAKER_00: So that would be one set of things.
• 30:14
  SPEAKER_00: The other set of things, which is what I'm spending more time on now with what we call revolution places, is what are the industries, the sectors that AI is not going to disrupt?
• 30:24
  SPEAKER_00: You know, what are the businesses that are really more defensible in a in a more AI-centric uh kind of kind of world?
• 30:30
  SPEAKER_00: And I think there is something uh to that strategy.
• 30:34
  SPEAKER_00: And for our for us, that is directed around some of the things we're doing with real estate and hospitality in Hawaii and Costa Rica and with the exclusive collective and some other kinds of things.
• 30:43
  SPEAKER_00: And Barry Diller is a great internet investor, starting with IAC, created dozens of companies, ended up being public.
• 30:49
  SPEAKER_00: I don't know what the current hundreds and hundreds of billions of dollars of value creation essentially is on the same path.
• 30:55
  SPEAKER_00: His biggest investment now is in MGM, and he's in the process trying to take it, take it over because and he told me the reason for it is it's it's an industry that AI can't disrupt.
• 31:03
  SPEAKER_00: So either go all in on AI and be you know, kind of one of the pioneers there, or you know, kind of take what might be viewed right now as a little bit more of a contrarian view, and what are the the industries as sectors that either you know aren't going to be disrupted by AI or like physical places, you know, resorts might actually be advantaged by AI and autonomous vehicles and other kinds of things that make being in places easier and the desire to be in those places with with people you care about even more important.
• 31:31
  SPEAKER_01: Yeah, I read about Barry Dilla taking or making his bid for MGM, I think, at 86, which is awesome.
• 31:36
  SPEAKER_01: But he's got he's got a good uh he's got a good uh nose for what's next.
• 31:39
  SPEAKER_01: So I think that's uh an RE manual as well, starting the Avengers company to kind of take advantage of.
• 31:45
  SPEAKER_01: I think I think brand like iconic brands, real-world experiences, and I think anything that requires a human intelligence or other non-technology businesses that I think will really sustain.
• 31:56
  SPEAKER_01: And then I think within technology we talk a lot about things that require complex coordination or potentially hard-to-tech stuff, right?
• 32:03
  SPEAKER_01: Where there is some sort of um real kind of industrial mode, uh regulatory modes, I think, are another thing.
• 32:09
  SPEAKER_01: So yeah, it's obviously a discussion in in many ICs around the world at the moment.
• 32:13
  SPEAKER_00: Um but which is great.
• 32:15
  SPEAKER_00: It's uh it's not just you know what what are the technology plays to invest in, but as you said, that even this company we have exclusive collective, which has exclusive resorts, inspirado, one fine stay, these three brands, they're using a lot of technology, but we we've learned that with a high net worth audience in particular, you know, there's a lot of decision fatigue and a lot of friction, and there is a desire to have uh uh somebody you can trust to make sure if you're planning a vacation with your family or you know, that that you know there's gonna be nothing's gonna go wrong and it's uh everything's gonna go right.
• 32:45
  SPEAKER_00: So there's gonna continue to be that that personal touch in some industries and just understanding which are the ones where you can really move the needle there, I think is you know creates opportunities for for entrepreneurs and and for investors.
• 32:56
  SPEAKER_01: As always, when there's great change, there's there's great opportunity with the bounce of the ball.
• 33:00
  SPEAKER_01: So Steve, thank you so much for coming on Giant Ideas again to share your background, your story.
• 33:04
  SPEAKER_01: Uh it was it was wonderful to chat.
• 33:06
  SPEAKER_00: Thank you.
• 33:06
  SPEAKER_00: It's a great, great conversation.