“In this environment, many companies will continue to operate in a hybrid state, where some employees will come to the office while others stay home. COVID-19 accelerated a trend that was already underway.”
There have been three important waves in history: the Agricultural Revolution, the Industrial Revolution and, now, the Technology Revolution. Key to the latter is partnership and policy. Remember: it used to be illegal for some consumers and institutions to event connect to the internet!
Steve Case is the Chief Executive Officer of Revolution, a Washington D.C.-based investment firm. He’s notably the Founder of AOL, where he focused mainly on marketing aspects for the company.
What does a post-COVID economy look like? Broadly, Steve says companies will need to reimagine themselves to not only compete, but survive.
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SPEAKER
Steve Case
CEO
Revolution
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie (00:08):
Welcome, everyone to the latest edition of SALT Talks. My name is John Darsie. I'm the Managing Director of SALT. In lieu of our global conferences, which have obviously been put on hold by the pandemic, we're hosting these SALT Talks, which are a series of digital interviews with what we think are the leading thinkers, creators and innovators in the world across finance, technology and public policy.
John Darsie (00:33):
Today, we are very pleased to welcome Steve Case to SALT talks. Steve, as many of you know, was a co-founder and the Chief Executive Officer of AOL. And today, he is the Chairman and CEO of Revolution, a Washington DC based venture capital firm that is invested across a variety of sectors. And Steve has talked about a lot of interesting themes, including the third wave of the internet, the rise of the rest, themes that are being accelerated by what we're seeing today with the pandemic, so we're very excited to have Steve here today.
John Darsie (01:04):
He came to our SALT Conference last year and had a riveting panel with Mark Cuban that was moderated by Kara Swisher that you can find on our YouTube channel as well. But I'd like to kick it over to Anthony Scaramucci, the Chairman and CEO of SALT, as well as the Founder and Managing Partner of SkyBridge to host the interview with Steve Case. Take it away, guys.
Anthony Scaramucci (01:25):
Steve, thanks for coming on. Welcome to SALT Talks. This would have been the evening, Tuesday evening cocktail party at SALT. So unfortunately, we're not there now. But hopefully we'll get back there next year. But I would love to have you start out with your personal backstory. I think a lot of people, frankly the newer generation, they could benefit from sort of the curves that came about in your career, how you got AOL started, how you transitioned eventually into Revolution where you are now.
Steve Case (01:57):
Well, first of all, it's great to be with you. I've watched some of the SALT Talks and you're doing a great job and a great service bringing out people to talk about topics. In terms of my own backstory, born and raised in Hawaii. It was a little unusual. Both my parents were born and raised there. Actually, when I was born, it wasn't even a state. It became a state on my first birthday, and grew up there and actually went to high school with then Barry Obama, who became President Obama, which is kind of an interesting, it's a small world kind of story.
Steve Case (02:21):
I went to college in Massachusetts and graduated there, ended up working for some big companies for a little while, Procter and Gamble in Cincinnati, a division of PepsiCo, Pizza Hut, in Wichita, Kansas, and then moved to the Washington DC area to join a startup that was doing some early online things. And that was a failure. But luckily, two of the people I met there and I ended up starting AOL in 1985. Back then, it's amazing thinking about how we're all working from home, Zoom calls and living in a more connected world. When we started, only 3% of people were online, and they're only online an average of one hour a week. Now, of course everybody's connected and connected ubiquitously. So we've come a long way from those early days of just trying to sell the idea of a connected world, the idea of the internet and now basically, because of this crisis, we're now living a much more online life.
Anthony Scaramucci (03:17):
So tell me about AOL. Who were the founders? Jim Kimsey was one of the founders, right? I remember Jim.
Steve Case (03:23):
Jim Kimsey brought the finance kind of perspective. Marc Seriff brought the technology perspective, and I brought more of the marketing perspective. So we were the three co-founders. It was actually a struggle to get started because back then, and as I said 1985, most people didn't really believe that people wanted to get connected. They thought it was kind of a nerdy hobbyist market, never going to be a mass market. We really struggled. We raised about $1 million to get going. And our first seven years before we went public, we raised a total over those seven years of $10 million. And then we went public in 1992. It was the first internet company to go public. We raised $10 million in our IPO and the value of the company that day was $70 million. Nobody really cared about this idea. Of course seven, eight years later, everybody got online. And our market value went from $70 million to $160 billion. It was actually the best performing stock of the 90s.
Steve Case (04:15):
So the first decade was slow and kind of a slog. It was really hard to get going, really hard to get people to believe. But then finally, things really started accelerating in the late 90s.
Anthony Scaramucci (04:27):
But Steve, talk to me, because really for our generation, I still have an AOL account and for our generation, that was the real sign of the future for all of us, when I got that floppy disk or that CD and I put it into my computer and got myself online. What was your marketing idea to make it mainstream because you had competitors. You had Prodigy, which was started by Sears Roebuck. You had others. IBM was in there with Sears. What caused that breakout? How were you able to chip into the market and make people realize that they needed and wanted that product?
Steve Case (05:03):
A mix of things. I think our team was really passionate about trying to create a service for everyday people, consumers. Some of our competitors, like you mentioned Prodigy was more focused on shopping because of Sears and IBM were partners. CompuServe, a division of H&R Block, was more focused on information. Some of the big banks, Citibank was focused on banking and everybody had a particular view of the future kind of based on the rearview mirror of the business they're already in.
Steve Case (05:28):
We looked at it with fresh eyes that we really were going to make this a mass market. We were going to make it easy to use, useful, fun, affordable, and our bet from the very earliest days was on what we call the electronic community, what now we think of as social media. It was really for us the killer app was people, connecting people. And always over half our usage was instant messaging, chat rooms, message boards, ways to connect people. Of course, that's what we're now all doing in this crisis. We're connecting online through a variety of technologies, this one being Zoom, but there are obviously many others. That was always our belief that we'll really be able to kind of break through if we had the easier to use, more useful, more fun, more affordable service, and we really focused on connecting people. And that really drove our success. And by the late 90s, about half of all the internet traffic in the United States went through AOL. So it really was the way most people got online.
Anthony Scaramucci (06:24):
Your bandwidth back then, do you remember the bandwidth? You remember at which you're operating?
Steve Case (06:29):
Well, we're pretty small. We started with 300 byte, the 12 hour, 24 hour, nobody knows that technology. But the bottom line is even 10 years into it, it would take an hour to download a single song so it's pretty and you certainly couldn't do video like we're doing now. So it was pretty rudimentary, but even then you could see there was a certain magic to the idea. Some of you may remember also the screeching modem sound when you actually got connected, but once you did get connected, you're exposed to people and ideas and connected to content, commerce in ways that you had never experienced before. And there was something magical about it even those early days when it's relatively slow and also still relatively expensive.
Anthony Scaramucci (07:10):
Well, if you remember that screeching sound, Steven, it means you have an AARP card. So let's go easy on [crosstalk 00:07:21]
Steve Case (07:21):
Sometimes the screeching sound was annoying for me. It was cha ching, cha ching, I love that dial up modem.
Anthony Scaramucci (07:26):
So let's talk about where we are now, though. And by the way, I'm a room raider. I'm looking at your room, it looks fantastic. You've got all the right motif in the room. You can tell I'm up in the attic. My wife stuffed me up here because you can see the eaves here. Hopefully she'll let me out of this thing when the crisis is over. But behind you is The Third Wave. And the book is exceptional. And so I recommend to people who haven't read the book to pick it up and read it. Because yeah, you wrote it a couple years ago now, but you're really on point in terms of where we're going, and how we're getting there. And so for people who haven't read the book, give us a quick synopsis if you will, and tell us about what you're thinking now.
Steve Case (08:05):
Well, first of all, it goes back to your first question. When I was in college, I remember reading a book. It was the late 1970s by Alvin Toffler called The Third Wave, and I was mesmerized by it. He was talking about the first wave being the agricultural revolution, then the second wave the Industrial Revolution. He was predicting, this was four decades ago, the technology revolution, the digital revolution, the internet revolution.
Steve Case (08:28):
But that's actually one of the things that inspired me to kind of pursue that path in my earliest days right out of college. So I decided to write a book a few years ago. I deliberately called it Third Wave. I had the chance to chat with him over the years and pay homage to him because he really was inspirational for me.
Steve Case (08:45):
The way I was framing it was the three waves of the internet. So the first wave was getting America Online. It goes back to what we said before when we started. Essentially, nobody was connected. By the year 2000, essentially everybody was connected. There's a lot of things around building that early days of the internet and really getting everybody online. Once everybody was online, all the infrastructure is built, all the modems were built, all the servers were built, all the on ramps were there.
Steve Case (09:11):
Then the focus became apps on top of the internet, so Facebook, Google, et cetera. The second wave has really been about software writing on top of the internet. And obviously, there are huge successes that have come out of that. The third wave, which is now just starting to take off and I think this crisis will accelerate it is when the internet really meets everyday life and starts disrupting some of the most significant aspects of our lives and most significant sectors of our economy, healthcare, education, food and agriculture, smart cities, things like that.
Steve Case (09:42):
That's really going to be the focus of this next 20 years or so. And what led me to write the book is I realized that the playbook for entrepreneurs in the first wave was quite different than the playbook in the second wave. And the third wave is going to be more like the first wave and there's a couple things in particular, I'll just touch on briefly. The first wave was only possible because of partnerships. We couldn't have done it alone. We had 300 partners that together helped create the success of AOL.
Steve Case (10:11):
Partnerships weren't really very important in the second wave, Facebook, Google didn't really need partners. They just needed a cool app that spread virally, and suddenly they were in business. In the third wave, if you really want to disrupt healthcare, you're going to have to partner with healthcare institutions. So that's one aspect.
Steve Case (10:26):
Policy's also another aspect. When we got started, hard to believe, particularly for some of your younger viewers, but it was actually illegal in 1985 for consumers or businesses to connect to the internet. It was still restricted to government agencies-
Anthony Scaramucci (10:41):
Because of DARPA.
Steve Case (10:42):
And educational institutions. DARPA had funded it and was still restricted. So we had to do a lot of things around policy to commercialize the internet, figure out what the right policy should be for e-commerce. A whole slew of things around policy and regulatory issues were front and center, breaking up the phone company which unleashed competition, a ton of things had to happen.
Steve Case (11:01):
In the second wave, policy wasn't that important. These companies again could start up relatively quickly and scale relatively quickly, didn't really have to deal with policy. In the third wave, again, healthcare, food, a lot of things we're talking about, policy, regulations are going to become important again. There's a reason why we have regulations about drug safety and things like that. And the final one of what I call the Ps, partnership, policy. The third is perseverance.
Steve Case (11:27):
As I mentioned, that first wave was a slog. It took us a decade before finally we had some some traction. You did see in the second wave and a lot of overnight successes, truly overnight successes, dorm room startups that a year or two later were global phenomenons. That's not going to happen in the third wave. It's going to be back to perseverance. Some of the most successful companies in the third wave will be built in these third wave sectors, but it's going to require the partnerships which take time to form, that's going to require engaging on policy which can be frustrating, but it's going to be very important to be successful in this third wave.
Anthony Scaramucci (12:00):
So you're touching on these broad trends so that the investments that you think are going to be offering the greatest upside are where in this third wave? That would be healthcare?
Steve Case (12:13):
Healthcare is one in particular, yeah. We've made a number of investments in healthcare. I started about 15 years ago an investment firm called Revolution. We have three parts, Revolution Growth, the later stage growth investments. Revolution Venture is more of a Series A kind of investment focus, and also a seed fund called Rise of the Rest, focused on investing at early stages and cities all around the country.
Steve Case (12:36):
But in a Revolution Growth case, we've invested in a couple of healthcare companies that are really showing great promise. One is called Tempus, based in Chicago, that's using big data and machine learning basically to do a better job of diagnosing things like cancer. Right now, if you go to MD Anderson, one of the top cancer hospitals in the country, 25% of the time, they reverse the first opinion. 25% of time, your first doctor was wrong. That's a data analysis problem. And so Tempus is trying to basically use data to create much more customized, personalized therapies based on a much more thoughtful and precise scientific diagnosis of what you're dealing with. They're now extending that into other areas.
Steve Case (13:20):
Another company we back called Talkspace is really seeing enormous growth in the last few months because they're focused on mental health delivered digitally. Instead of having to go to somebody's office to deal with a mental health professional, they're able to do that online and through texting and video chats and things like that. So obviously, it's a sad part of this crisis a lot of people are struggling with mental health issues, but we have a broad mental health problem in this country. It's only getting worse and we do not have enough people to satisfy that. We need to use digital technologies to innovate in sectors like that.
Steve Case (13:55):
So healthcare is an example. We also think there's a lot opportunity in the food space. How do you create healthier options? So we back a company called Revolution Foods, providing healthier school lunches. We back a company called Sweetgreen, focused on fast casual and they've done some amazing things during this crisis in terms of redeploying some of their resources to first frontline hospital workers, and also figuring out ways to accelerate some of the plans they had around delivery and expanding their menu to include dinner and other kinds of things.
Steve Case (14:24):
So we've invested in lots of different companies in lots of different sectors, but they tend to have this third wave dynamic where policy does usually matter. Partnerships do really matter. And place usually matters. This goes back to this Rise of the Rest. We recognize Silicon Valley as an awesome place, will continue to be an awesome place. New York City and Boston are also great beacons of innovation where there's a lot more entrepreneurial activity happening. There's also great entrepreneurs all across the country doing great things, but there's not as much attention paid to them. There's not as much capital focused on them.
Steve Case (14:57):
Believe it or not, last year, 75% of venture capital in this country went to three states, California, New York and Massachusetts, 75% while the other 47 states fight over 25%, some states like Virginia where I am or Michigan or Ohio, Pennsylvania each got less than 1% last year. California alone got 50%. Silicon Valley is great, but not that great. And so how do you make sure the entrepreneurs in these other cities have access to the venture capital they need to start and scale their businesses and that also ties in more broadly in terms of society, because these startups are the big job creators. It's not the big companies, it's the small companies, some of which will end up being the big companies. So if we're not backing startups everywhere, we're not creating jobs everywhere. We're going to have an even greater divide in our in our country. So for us, it's both an investment thesis. There's an arbitrage here. Valuations are lower, elastic kind of supply and demand. There's also a broader impact aspect of this in terms of trying to level the playing field, so everybody everywhere really does have a shot at the American Dream and every community has the opportunity to grow jobs as opposed to just watch jobs disappear.
Anthony Scaramucci (16:06):
Well, and you've done an amazing job. We were talking before we opened up the line to our viewers and delegates about DraftKings. Where was DraftKings located? Was that in California?
Steve Case (16:18):
That actually was in Boston. So there are sometimese in Boston, New York and other cities where we'll invest in. Most of our investments are in other parts of the country but there are some exceptions. DraftKings is an amazing story. A great entrepreneur, Jason Robins started initially focused on fantasy, has expanded the vision of the company to include betting now that a number of states have legalized that. And the most amazing thing over the last month that I've seen is this company DraftKings basically went public with a complicated three way merger and a SPAC and now it's trading I think at three times their market valuation, $10 million.
Anthony Scaramucci (16:52):
Well, FanDuel is part of DraftKings now, right?
Steve Case (16:53):
What's that?
Anthony Scaramucci (16:54):
FanDuel.
Steve Case (16:55):
No. FanDuel is a competitor. They were acquired by another company. But DraftKings has really emerged as the leader in that space and the fact that anybody's going public right now given the situation of the market and a company focused on sports goes public even though most sports, football, basketball, et cetera are not being played really is an amazing testament to the great entrepreneur that Jason Robins is.
Anthony Scaramucci (17:20):
You're also invested in something called Convene. Now tell us a little bit about that. What is Convene?
Steve Case (17:26):
Super interesting company that focuses on the future of work and particularly how you design workspaces. WeWork was focused on basically shared co-working space and obviously got a lot of attention, raised a lot of capital. SoftBank reported yesterday that they marked down the valuation by 90 something percent so they obviously have a challenge. The strategy of Convene is not to compete with the landlords, but to partner with them and figure out new ways to help them think about space and that's accelerating, obviously in this world where we're now working from home. At some point, we'll start returning to work, but even when we're back in the office, there'll be more of a hybrid where some people are in the office, some people will be remote. There might also be some kind of third places that people decide to congregate for special meetings and things like that.
Steve Case (18:13):
So Convene is really trying to imagine how work gets done in the future, how offices get configured in the future, and they partner with the major landlords and also major companies or major tenants to really imagine what that should look like and help build out and then manage it. They think of running off as more like hotel companies, think of managing hospitality. It's not just something to rent and then have somebody who may not have the expertise to operate, try to operate it on the side. They really believe, and we obviously believe as well, which is why we invested. It's a specialized skill. And over time, more and more people are going to rely on companies like Convene to reconceive their office space and manage it for them.
Anthony Scaramucci (18:55):
Well, and obviously COVID-19, this crisis is accelerating those situations. And so, you've been one of the great trend predictors and prognosticators, so lay out for us what your vision is sort of in the post-COVID economy, the return to normalization, but the recognition that something has changed in our culture, a lot like the way 9/11 changed the way we go through airport security. This is going to change us, not saying we're not going to go back to normal and have a good economy. But talk to us a little bit about where you see those trends going now. Are they accelerated? Are they different and how so?
Steve Case (19:36):
I think most of them are accelerating. Some of the things we talked earlier about healthcare. We've always believed that healthcare needed to be reimagined and needed to be better outcomes with greater convenience to lower costs, and we're starting to see an acceleration, particularly in areas like telehealth, where we're showing good momentum over the last 10 years but just in the last 10 weeks more has happened than happened in the previous 10 years and now telehealth has become more mainstream. That's an example of something that's been bubbling for a while. It's one sixth of our economy, it's obviously hugely important, just wasn't working the way it should.
Steve Case (20:09):
We've now seen that tipping point, if you will, and a great acceleration of that. We also think we're seeing that tipping point in the Rise of the Rest. So as people have decided to at least temporarily work from some other place, some of those people are realizing maybe they can get their work done. And maybe over time, there'll be more of a distributed workforce. There are some companies like WordPress, over 1,000 employees entirely remote. They don't have a headquarters. That's probably an extreme case. I think most people will see the value in having that shared space, a headquarters, if you will. But surely, there'll be more kind of remote operations.
Steve Case (20:44):
That will lead to more opportunity for people to decide they could live anywhere they want to live. They might choose to live in San Francisco, they might choose to live in New York City, but if they want to live somewhere else, perhaps in the middle of the country, they're going to be more able to do that now because of this kind of shake the snow globe moment we're having right now.
Steve Case (21:04):
So when it all settles out, a number of these third wave industries I think are going to be restructured. There's a huge opportunity for entrepreneurs not just to focus on reopening and rebuilding, but really reimagining what their sector should look like five, 10, 15 years from now, what their company should pivot to do, and because of what's happening here and some of the consumer trends that are going to accelerate as a result of this, some of the technology trends that are going to accelerate because of this, and also some of the trends around things like Rise of the Rest, where I think there'll be a boomerang of talent, something like 95% of people in Silicon Valley are from some other place.
Steve Case (21:42):
They went there because that was the land of opportunity. That's where the money is, like Billy Sutton, the bank robber said he went to the banks, because that's where the money is. People go to Silicon Valley because that's where the money is. Over time, if we can get more venture capital back and more entrepreneurs in more places, we will see a leveling of that opportunity gap that currently exists. That will give people more flexibility. So next time they're graduating from these great universities in the middle of the country instead of feeling like they have to go to another coast, maybe they stay where they are and some of the people that did decide to go to coast, maybe now's the time they decide to come home and have a different kind of approach.
Steve Case (22:16):
I think that has the opportunity to really create a new, more geographically dispersed, more inclusive innovation economy that could help knit the country together. So it's not just a few people in a few places doing really well and a lot of people feeling more and more left behind. We need to make sure we're creating opportunity for everybody, jobs ready. Entrepreneurs do that I mentioned earlier.
Steve Case (22:39):
And this was news to me until about 10 years ago, I was asked to work on some policy initiatives, including by then President Obama that essentially all the jobs created in this country are from new businesses, startups, small businesses in aggregate are hugely important. We're seeing that right now. We're trying to make sure restaurants and other small businesses can stay alive through this crisis. Big business, Fortune 500 companies, of course, they're hugely important. But those don't account for net job growth. There are some companies growing like Amazon, but some companies like GE declining. As a sector, those big companies do not add net new jobs. Net new jobs are from the startup. So if we're only backing via venture capital entrepreneurs in a few places, not everywhere, we shouldn't be surprised that there are a lot of people, a lot of communities that are feeling kind of left out, left behind and worry about the future instead of being optimistic about the future. So this is a great moment, I think for our country to create a more inclusive innovation economy, back entrepreneurs everywhere.
Anthony Scaramucci (23:37):
No question. And you've also been a strong proponent of immigration reform. And so could you just tell us a little bit how that weaves into these trends? Because if you get that boomerang effect, you're certainly going to need talent to be drawn upon from the rest of the world to come into this economy to help lift more and more people.
Steve Case (23:58):
Yeah, I see immigration as complicated and emotional. Peoople have strong views on it. But I just look at the data. And right now, it's pretty compelling that 40% of our Fortune 500 companies were started by immigrants or children of immigrants, including some of the most successful companies, Apple, Google, et cetera. So part of the reason we are such an innovative entrepreneurial country is we've been a magnet for talent all around the world since our inception. It is worth remembering, kind of take a step back and remembering that 250 years ago, America itself was a startup. It was just an idea.
Steve Case (24:33):
And we led the way in that agricultural revolution and led the way in the Industrial Revolution. More recently obviously, led the way in technology revolution and it was entrepreneurs leading the way as entrepreneurs are coming from all around the world, so we want the United States to remain the most innovative entrepreneurial nation. We need to continue to be a magnet for talent and not just look at immigration as a problem to solve, but as an opportunity to see and that's why kind of figuring out the right approach around immigration to make sure we are continuing to be that magnet is going to be hugely important in the next third wave.
Anthony Scaramucci (25:08):
Well, I mean corollary to that, Sal Khan from Khan Academy was on yesterday with us. And we were talking about inverting the skills pyramid. And so what are your thoughts on that? And what kind of policy initiatives or have you thought about policy initiatives that could help us expand that footprint of skills, which obviously would help us with the income inequality in the country as well?
Steve Case (25:33):
There's a number of things that need to happen. Sal has been obviously a huge pioneer over the last decade in using digital technologies, using the internet to level the playing field in terms of education. So his work is incredibly important. And I did listen to his talk yesterday you did with him and was delighted to hear that three times more traffic now on the Khan Academy site than there was before the crisis.
Steve Case (25:53):
That's an example. Obviously, there's terrible aspects of this crisis. A lot of people die, a lot of people are really suffering, including having this massive unemployment rate, but there are some glimmers of hope that we should kind of focus on and try to build on as we come out.
Steve Case (26:08):
In terms of education, I'm not an expert in it. But I do know we need to make sure we're teaching our kids the things that machines can do. And a lot of that seals around creativity, communication, things like that are going to become increasingly important as we move into this next sector. And we also need to do a much better job of reskilling. A couple of companies we backed through our Rise of the Rest fund, one in Baltimore called Catalyte, another one in Indianapolis called Kenzie Academy are doing a great job of reimagining how you tap and unleash human potential. What Catalyte's doing with AI is basically identifying people who nobody ever sat them down and said, "You know, you seem like you would be pretty good at coding."
Steve Case (26:49):
Instead, they were on some other career track, but they go through this initial test and basically get an aptitude around us and if they pass that test, they've been put in this training program where they ended up often getting double, or sometimes even triple the salary they were getting before. Sometimes it's like truck drivers who are suddenly moving into the coding world. So that's just one of many examples, not just about coding. There are many aspects of this third wave that need skills and we need to make sure we're building the skills for tomorrow for the industries of the future. And we're not just looking at the rearview mirror and doing kind of more of what we've done in the past.
Anthony Scaramucci (27:24):
Totally. John, we have some questions from our viewers out there. So I'm going to kick it over to John, who's been compiling some of those questions. Go ahead, John Darsie.
John Darsie (27:36):
Yes. Steve, you mentioned your role as an advisor to the Obama Administration. You were on his Council for Jobs and Competitiveness. You're based in Washington, DC, so you're in and around the political ecosystem. What from a government perspective can the government do to incentivize entrepreneurship around the country and help to incubate your concept of the Rise of the Rest and create the right incentives for that rise to take place?
Steve Case (28:04):
A number of things. I think there were some things the Obama Administration did that were helpful, including passing The JOBS Act, which was done in a very bipartisan way, called The Jumpstarting our Business Startups Act that updated laws that hadn't changed since 1933, so the Securities Act of 1933, to make it easier for young companies to raise capital, make it easier for companies to go public, confidential filings, things like that. So that was a success.
Steve Case (28:28):
The Trump Administration had success with the opportunity zone, which also had broad bipartisan support, identifying parts of the community where the poverty levels are the highest and creating incentives for more capital to flow into those, into companies as well as reimagining neighborhoods, real estate projects and things like that. It's still early there, but I think that holds great promise.
Steve Case (28:49):
There are a number of other things that have been proposed. Senator Klobuchar just a few weeks ago, introduced legislation that would incent more capital to go to these rising cities, what we call these Rise of the Rest cities. I think that would be constructive. And even today, the White House hosted a session on this reskilling going back to the earlier question.
Steve Case (29:09):
So how do you make sure you are moving forward trying to do it in a bipartisan way, and trying to do things that really do unleash capital, which I do think is a critical ingredient. This idea I mentioned before, 75% of venture capital going to those three states makes no sense at all. So how do you create at a local level, perhaps at a state level incentives around angel investments and other, how do you stand up more regional venture firms? What are the incentives to do that?
Steve Case (29:35):
We need to get more capital backing more of these people in more of these places, and there is role for policy. Ultimately it comes down to investors taking the risk, entrepreneurs kind of having a better idea and deciding to run with it, put everything on the line. Obviously, that's critically important. But the politics, policy does matter. It does set the table. It does set the ground rules and more focus on startups is critically important.
Steve Case (29:59):
I encourage in particular the governors who often spend a lot of time when they think about economic development, trying to get big companies to move their headquarters or to open a factory. Obviously, there's a huge focus on Amazon's second headquarters, for example. It would be way better for them to spend the same amount of time and the same amount of money, not focusing and getting the big companies to move but the little companies to start, some of which will be the big companies of tomorrow. Amazon 25 years ago, we had like four employees. It was a crazy idea of selling books online. So how do you back the Amazons of tomorrow, not try to just lure Amazon to open up an office?
Anthony Scaramucci (30:39):
When you think about the world today, and let's take the Stephen Case at 24, 25. We got a lot of young people viewing us today. Where would you go directionally? Essentially, you went to Procter and Gamble, I went to Goldman. That was our years. If you wanted finance, Goldman. If you wanted marketing, it was Procter and Gamble. But the 25 year old today is probably moving into a smaller company than the ones that you and I chose leaving school. And so what would your advice be to those people?
Steve Case (31:11):
Well, everybody's a little different. We have five kids, and they all have different interests and passions and skills and desires, and so forth. So there's not like a simplistic answer. But I do think people need to recognize the world is changing, and not focus on what exists today but imagine what might be happening tomorrow.
Steve Case (31:28):
Like Wayne Gretzky, the great hockey player, people said he was great, because he didn't focus on where the puck was. He focused on where the puck was going. He just got there just a split second before other people got there. So if somebody is spending the time to think about where things are going, again it depends on whether you're interested in medicine or in teaching or startup or what have you, how is it going to change and have a mental model in terms of at least a shot.
Steve Case (31:53):
Well, of course you won't get it all right, but at least you'll have a sense of what's possible. That's what was helpful to me in those early days. And interesting, I went to Procter and Gamble not actually because I wanted to, even though it's a great company. I wanted to start a company that helped create the internet. But when I was graduating in 1980 at the age of 21, the startup economy didn't exist. Venture capitalists were not backing 21 year olds, and nobody believes in the idea of the internet.
Steve Case (32:20):
So the reason I went to Procter and Gamble was to get some skills around marketing and it was a terrific company and then eventually figured out a way to get into starting my own company when I was 25, 26, something like that. So I think you really have to figure out what part of the world you want to have it put a little dent in and then figure out you have the right skill set to do that, not how can you develop that skill set and also recognize that it's a team sport. You can't do these things on your own. I've learned the hard way the things I've been successful, I'm involved in had a great team. The things that were unsuccessful did not have a great team. So how do you assemble the right team, get them focused in the right way. And going back to one of the principles I talked about in The Third Wave. It's now a principle, I think in this next third wave, perseverance, you got to stick with it. Often, revolutions happen in evolutionary ways. And you really need to take the long view and play the long game.
Anthony Scaramucci (33:19):
When you think about formal education today, in private universities and the competition in terms of the proliferation of universities and the rising prices, Stephen, I mean, they're going up 3%, 4% a year in tuition. And now a lot of them can't finish the semester, this semester, or they've done the semester online. They may have to do online semester next year. What's your thought on that? Have you thought anything about how that's going to change as a result of COVID-19 or just generationally change from the more traditional settings that you and I experienced as kids?
Steve Case (33:59):
Well, that's going to change a lot. And there are some folks who've been on the lead on this. Arizona State University is an example. They really started investing 10 years ago as a really inclusive approach to try to get people who had untapped potential, give them an opportunity to do it at a more affordable cost, and that often is the case to a lot of things online.
Steve Case (34:18):
Online is not perfect. We're all finding that out. But for a lot of people, the ability to do things online is a way to do it more conveniently and more affordably than if you're on campus. But I think the campus is going to change a lot this fall. I've heard different things about different colleges and universities and in graduate school. I thought that Harvard Medical School is not going to even open physically in the fall. There's other like Stanford Business School that are not going to open it all online or offline. I'm not sure that's true, but that's what I heard.
Steve Case (34:47):
I've also heard that about 25%, maybe 30% of freshmen in college that had been admitted likely are going to defer it a year and take a gap year because they don't want to miss out on what is one of the great things about that on campus immersive experience, which is the interaction with other people is not just what you learn, is also who you get to spend time with. So I think overall that sector is really going to be challenged.
Steve Case (35:12):
I think that's healthy because they needed to be challenged. They need to figure out ways to deliver better learning outcomes with more convenience and lower costs. And that's going to be a big tribe. I'm involved in all this. I now chair the Smithsonian Institution, which is known for its museum, 90 museums, but it does research operation, National Zoo, things like that. But there's a real effort underway led by Lonnie Bunch, the new head of the Smithsonian, to create a virtual Smithsonian.
Steve Case (35:40):
Not everybody can get on a plane and fly to Washington DC, spend time on the National Mall, to visit Air and Space and Natural History and some of these other terrific museums. How do you create an immersive virtual experience and allow people to access some of that idea, some of that intellectual property if you will, from any home in any classroom.
Steve Case (35:57):
So the fact that the museums now are shut down is terrible. But the Smithsonian is using that time to reimagine what the Smithsonian should be in the future. And the digital component is going to be much more important. So everybody needs to understand that the world has changed, that we saw in the last 10, 20 years a slow evolution, whether it be technology around distance learning or technology around telehealth, some of the things we've we've talked about. This is a kind of a shake the snow globe moment. When it all settles back, it's going to be different than it was and some of these trends which we're slowly building are going to really start accelerating.
Steve Case (36:35):
I'm optimistic that will result in a better healthcare system, a better educational system, a better food system, some of the things that we've talked about and some of the things we're investing in it at the Revolution.
Anthony Scaramucci (36:48):
Well, I mean, it's also a good segue. You're talking about the Smithsonian, you're doing a lot of work with your wife, Jean. You've given the Giving Pledge. You're going to give away half of your net worth to society, which is a wonderful thing that you guys are doing. And just talk to us a little bit about your charitable giving, how you're thinking about it because I know you're a great investor, that's also a form of investment. It's sort of social investing. So what are your thoughts there?
Steve Case (37:16):
Well, we started the Case Foundation over 20 years ago and my wife has run it that entire time, and over those 20 years, we've invested a number of things. Early days, we had a very significant Digital Divide initiative. We're quite concerned as technology, the internet was starting to take hold, taht a lot of kids were being left behind. So that was a significant initiative. We did things around clean water, cancer research, a variety of different areas.
Steve Case (37:39):
Right now our focus is on things like the Smithsonian for me. Jean, my wife is the chair of the National Geographic Society. She's doing amazing work, the number one brand in terms of social media, Instagram, things like that, has an amazing partnership with Disney for the National Geographic Channel and some of their other digital businesses. For me, it's Smithsonian. For Jane, the National Geographic are our two priorities.
Steve Case (38:01):
But we still with the Case Foundation also, we call the Case Impact Network are looking at how do we level the playing field in terms of opportunity. A lot of things we've talked about on this call, how do we do that from an entrepreneurship standpoint? How do we do that from an opportunity standpoint? How do we work with the groups like Business Roundtable and others that are trying to shift business from just focusing on profit, that sort of Milton Friedman view of a half century ago to recognizing profit really creates a sustainability for businesses, allows them to invest and grow and hire people. These companies also need to have more impact and more purpose. And that's going to be a big trend in the next 10 or 20 years. And that's one of the areas that we're focused on helping to catalyze any way we can.
Anthony Scaramucci (38:43):
Yeah, hopefully, there will be that cultural shift where it is certainly about profit. But also if you think about the social well being of your employees and things like that, it could actually enhance and increase profit. But John has another question for you from the audience. Go ahead, John.
John Darsie (38:59):
Yeah, we had a SALT Talk last Friday with Chamath Palihapitiya, who has been very critical even though he's based in California, he's been very critical not just of the culture in Silicon Valley, but of the system of capital formation about how it sets a lot of entrepreneurs up to fail and doesn't serve the entrepreneurial community very well. How do you feel about capital formation, how it could be improved from a venture capital perspective?
Steve Case (39:25):
I've known Chamath a long time. He actually worked at AOL out here in the DC area before he moved to California, ended up being a key executive at Facebook and obviously quite successfully pivoted into the investment world. I celebrate Silicon Valley. There are amazing things about Silicon Valley in terms of this sense of possibility. People hear an idea and imagine how big it can be. A lot of people in a lot of parts of the country hear an idea and focus on risk factors, why it might fail as opposed to why it might succeed.
Steve Case (39:52):
There's this network density of collision of people and ideas. There's a lot of capital, so there's a lot to celebrate, but I do think sometimes Silicon Valley gets a little ahead of itself. I do think in the sector, these third wave sectors, knowing something about healthcare, for example, I think is going to be important. Domain expertise is going to be important. For a lot of people still in Silicon Valley, think that if you know nothing about an industry, you can bring fresh insights. And there are many examples where that has been the case.
Steve Case (40:20):
But in this third wave, I think you need to marry those fresh insights with some perspective, knowledge and credibility if you're going to form partnerships in these third wave sector. So recognizing that it's not just about the software, it's not just about the apps, these are system level changes. And ultimately, system changes happen as people change, and you have to bring a lot of people along. That's something that I think we can make a lot of progress on and getting more of the Silicon Valley venture capitalists to not just invest in Silicon Valley, but invest in these rising cities, these Rise of the Rest cities, I think, would be hugely important as well.
Steve Case (40:54):
We're starting to see some momentum on that front. Hopefully, this crisis won't slow that momentum. Hopefully, it will accelerate that momentum. But I think Silicon Valley at least should not just focus on itself, but focus more on the country at large and engage more with policy makers because there are a lot of complicated policy issues in this third wave. And it is frustrating as Anthony knows, dealing with government kind of issues. Sometimes the bureaucrats can slow you down and that can be a source of frustration. I get that.
Steve Case (41:22):
But if we're really going to lead as a country in this third wave, we're going to need to have constructive engagement between the innovators, the disruptors, interest groups and the policymakers and figure out as we did in those early days of the internet, commercialize the internet, creating the rules of the road around e-commerce, things like that. You need to do the same in healthcare, smart cities, food and agriculture, these system level changes that are going to be essential in this third wave.
Steve Case (41:47):
So I celebrate Silicon Valley. I just want to create more opportunity for more people in more places, get more of that venture capital backing more entrepreneurs in more places, create more of that fearlessness, anything is possible mentality in the middle of the country, not just in a few places on the coast. I think that will result in a stronger innovation economy, more inclusive innovation economy and also create more opportunity, more jobs for people everywhere.
Anthony Scaramucci (42:12):
Steve, you mentioned Alvin Toffler. You remember John Naisbitt spoke Megatrends? Do you remember that work as well?
Steve Case (42:19):
Yeah.
Anthony Scaramucci (42:20):
So before we let you go, because we promised a hard out in 45 minutes, I want you to be John. I want you to channel your john Naisbitt for a second, and give us a few of the mega trends that you see over the next three, five to 10 years.
Steve Case (42:37):
Well, I think it ties in exactly what the themes that we talked about. I think a lot of sectors of the economy, a lot of arguably the most important aspect of our lives, how we stay healthy, how our kids learn, what we eat, how we move around, how we work are going to be rethought, reimagined, and that's going to create enormous opportunity for entrepreneurs who are willing to play offense when a lot of big companies are shifted into playing defense. The revolution we saw in the early days of the internet, that first wave was around communications, technology, the second wave around media, technology obviously did a lot of disruption there. I think the third wave is going to really impact critical aspects of our lives, some of the most important sectors of the economy.
Steve Case (43:20):
So it's not about any one technology. It's about systems level change in these sectors. And I also really do believe that the playing field will level but the rest will rise and we will indeed have a more inclusive innovation economy. So if I was going to pick two, I'd say watch the third wave as that wave accelerates, and watch the rise of the rest as a lot of these cities that a lot of people have given up on start rising and surprising us all in the next 10 or 20 years, when some of the most iconic breakthrough companies in these important third wave sectors are going to be from places in the middle of the country.
Anthony Scaramucci (43:55):
Well, listen, it was a fabulous conversation. We really appreciate. We covered all the bases today. We're looking forward to seeing your success as it unfolds, and just move your head a little Steve because I want to show the book here one more time. There you go. See that Third Wave right there?
Steve Case (44:13):
[inaudible 00:44:13]
Anthony Scaramucci (44:12):
The Third Wave. I very, very strongly recommend everybody that you get out and buy that book, read that book, listen to it on Audible or an audio tape. I think you'll really enjoy that. And with that, Steve, thank you. Great talk. Have a great evening. Stay safe and healthy out there, everybody, and we'll be back with SALT Talks again later in the week and next week. Thank you, Steve.
Steve Case (44:36):
Thank you. It was fun.
Anthony Scaramucci (44:36):
I appreciate it.
Steve Case (44:38):
Thank you, Anthony.
Anthony Scaramucci (44:38):
Thank you.