Are you ready to meet a visionary entrepreneur shaking up the tech world and rethinking the American Dream?
I’m Guy Kawasaki, and this is Remarkable People – a podcast dedicated to inspiring listeners to reach their full potential. And in this episode, I’m thrilled to introduce you to Steve Case, a billionaire with a passion for building startups that can change the world.
You may know Steve as the co-founder of AOL, a company that revolutionized how we interact with the internet. But since then, Steve has been on a mission to spark the Rise of the Rest, a trend that will see big startups from the US heartland rise to dominance and break the coastal monopoly on tech unicorns.
With two books under his belt and a degree in Political Science from Williams College, Steve is a true thought leader in the world of entrepreneurship. And on this episode of Remarkable People, he’ll share his insights, experiences, and vision for the future of the American Dream.
Don’t miss this opportunity to learn from one of the most remarkable entrepreneurs of our time.
Please enjoy this remarkable episode with Steve Case: Democratizing Entrepreneurship!
If you enjoyed this episode of the Remarkable People podcast, please leave a rating, write a review, and subscribe. Thank you!
Transcript of Guy Kawasaki’s Remarkable People podcast with Steve Case: Democratizing Entrepreneurship:
I'm Guy Kawasaki and this is Remarkable People. We're on a mission to make you remarkable. Helping me in this episode is the remarkable Steve Case. He is a billionaire with a passion for building startups that can change the world. Steve has a dream that challenges the traditional idea that the future of the American dream lies solely in Silicon Valley.
Instead, he believes in the Rise of the Rest, a trend that will see big startups from the US heartland rise to dominant and break the coastal monopoly on tech unicorns. Steve is a co-founder of AOL.
This is the company that changed the way we interacted with the internet and made the internet part of our daily lives.
He holds a degree in political science from Williams College and has spent the last fifteen years as the CEO of Revolution, a Washington, DC based investment firm that supports entrepreneurs at every stage of their journey.
Steve also serves as the chair of the Smithsonian Institute and the Case Foundation. In 2014, Steve embarked on an ambitious journey leading eight bus tours in the interior of the United States. He traveled to forty-three different cities and covered 11,000 miles.
He was bringing entrepreneurs and investors together to spark the Rise of the Rest trend. Unfortunately, his mission was cut short by the COVID pandemic, but Steve remains steadfast in his commitment to this cause.
Steve is also an author having written two books, The Third Wave: An Entrepreneur's Vision of the Future and The Rise of the Rest: How Entrepreneurs in Surprising Places are Building the New American Dream. These books outline his vision of the future of entrepreneurship and the role it'll play in shaping the American Dream.
I'm Guy Kawasaki. This is Remarkable People. Now here is the remarkable and longtime friend, Steve Case. I want to tell the story of the night that Apple terminated AOL or quantum computing.
Let's just start right there.
Because that is just one of my favorite stories in life. You correct me if I'm wrong. But the way I remember it, we had dinner at Il Fornaio in Palo Alto and it was Kathy Ryan and you and Dave, I can't remember Dave's last name. It was the day that Apple terminated the contract.
You were supposed to make AppleLink into a consumer-facing product, not just for Apple employees. Apple with its infinite wisdom changed its mind and blew up your contract and you guys were all depressed and distraught because there went your customer.
I swear, I think I told you, Apple just did you a favor. Now, you can go build something great and you won't be checked to Steve Jobs's whims and the Apple legal department and all that. It's a representation of what happened.
No. That's basically correct. I think at the time I thought you were just being nice trying to buck us up. Turned out to be some truth that just like the backstory is when we started America Online, AOL in 1985, only 3 percent of people were online. They're online an average of one hour a week and we wanted to get America Online, but we didn't have much money.
We had just raised one million dollars of venture capital. We needed partnerships and particularly partnerships with the PC manufacturers. We'd done a deal with Commodore for the Commodore sixty-four and with Tandy for the Radio Shack computer and the deal with IBM for their new pc. Then we did this great deal. What I thought it was a great deal with Apple to create, as you said, AppleLink personal edition and we built it and we launched it.
But a few months after we launched it, they decided, "Come to think of it, we don't really like the idea of partnering with some outside company giving the Apple brand name to somebody else. We want to tear up the contract and do something on our own." You are correct in remembering that story.
Because we could no longer call it AppleLink, we had to quickly figure out what we were going to call it.
We didn't have any money left to hire a branding firm. We had internal contest and America Online ended up emerging from that. As you said, ultimately, it did force us to move away from some of these partners and set down our own track in terms of trying to build something more independently.
You were correct at dinner. Thank you for bucking us up when we were all bummed out, but it turned out to be a good thing.
Okay. Now, the second part of the story is even better. I hope I remembered this part right, too. The second part of the story is you said, "Guy, why don't you help us with some consulting and some online appearances?" I of course said "Yes." I did some for you. I swear about two years later, we met at a conference and you said to me, "Guy, are you still doing consulting?" I said, "No, not really."
"Are you still doing any conferences for us?" "No, not really." Then you said, "Guy, did we ever give you any stock?" I said, "No, not really." But I really didn't help you that much. Then you said, "No, guy. I said I would give you stock. I'm going to give you stock."
You gave me 2,000 shares. Trust me when I tell you Steve, those 2,000 shares, they were biblical just like the loaves and fish. They literally turned into millions of dollars. You bought my first house. I just want you to know.
You're very kind. But we do remember some of that backstory and I think because we were no longer going to have the Apple brand name. We're going to have to be off on our own. The credibility you had broadly, but certainly within the Mac community, given all the work you'd done on Evangelism, we thought would be very helpful as a bridge.
I was delighted when you agreed to help us out and do some different events for us as we repositioned and moved away from AppleLink towards our own America Online. It was only fair that you get stock options for that. I'm glad it worked out. I'm glad you didn't just sell your stock at the IPO because it ended up obviously ... Yeah.
No. I held on for a long time. My only regret is why didn't you hire me at that point, because then I would own a professional basketball team and a hockey team.
I'd be starting this venture capital firm to help people in the Midwest and drive around on a bus.
You were probably too expensive at the time. We probably couldn't afford you. But we could at least afford a little bit of you. Anyways, have a great journey. I guess that goes back to over three decades. I think the deal with Apple was probably 1988, 1989, something like that.
A long time.
I tell people, I have told hundreds of thousands of people that story, not because of trying to brag about how I made money on AOL or anything, but I think it's one of the greatest stories I have ever experienced of an example of personal honor because at that point, two or three years later, you had no real obligation to give me those 2,000 shares.
That was purely because you are an honorable person. There was no written agreement. There was nothing. It was pure honor. For that, I thank you and I admire you to this day.
Thank you. You're very kind, Guy. We had done a handshake and wanted to honor our side of the deal. I'm glad you got the options. I'm glad you kept the options. I'm glad they ended up being worth some money and even help you buy a house. You're kind to say that.
Okay. Now that we got the history out of the way, I would like you to first describe your bus tour and what you found and what you saw on this incredible Ken Kesey like bus tour.
It was amazing. Ultimately, the reason I decided to write this book is I spent most of the last decade traveling around the country, sometimes on our bus tour, sometimes just flying into different cities, sometimes even my wife and I have an RV and just driving across the country.
It's just remarkable what's happening in different cities around the country in terms of startups and innovation.
We met hundreds and hundreds of just amazing entrepreneurs. The more I looked at it, the more I said, "These are stories that need to be told. They really are surprising places." Most people don't think of as strong startup ecosystems, great entrepreneurs building these amazing companies and decided we want to do it.
But a little bit more backstory there, which goes back to our collective roots in Hawaii that the impetus or kind of the initial driver for Rise of the Rest and doing bus tours, which we started doing about eight or nine years ago, was actually a little more than that, eleven or twelve years ago when I was asked by President Obama, a classmate when I grew up in Hawaii to chair an initiative called Startup America Partnership to try to shine a spotlight on entrepreneurs in different parts of the country.
I did that for a couple of years and worked on some policy issues including what's called the JOBS Act, the Jumpstarting Our Business Startups Act, and worked on a jobs and competitiveness council. That just opened my eyes to two things that maybe I should have been aware of, but I frankly wasn't, which is that number one, most new jobs in the country are created by new businesses.
That big business, Fortune 500 accounts for a lot of jobs, but as a sector it doesn't account for a lot of job growth because there's some companies growing but other companies declining.
Similarly, small business is super important and it also accounts for a lot of jobs, but also as a sector doesn't really create new jobs. If one restaurant goes out of business, it likely replaced by another restaurant and will hire about the same number of people.
Most of the new jobs come from new companies under five years startups. That was one interesting point.
The second was that not every new company wants or even needs venture capital.
But as the correlation between the ones that do raise venture capital and their ability to scale quickly, build significant value, create lots of jobs in the vast majority of those hyper-growth companies, those big successes do raise venture capital.
At the time we were doing this, 75 percent of venture capital was going to just three states, California, New York, and Massachusetts. That really set me on this path and then led to even these road trip journeys and loading up a bus traveling around different cities, now visited dozens and dozens of cities by bus. That really was the impetus to then sit down and actually write the book.
Because every time I'd report on what was happening in cities like Indianapolis or Columbus or Baltimore or Atlanta, Buffalo, Minneapolis, I could name dozens of them, people say, "I had no idea that the things were happening there. I had no idea there was an interesting startup community developing there."
Decided, "Okay. I got to tell the story of those entrepreneurs and tell the story of those cities being renewed and revitalized because of the work of those entrepreneurs. That led to writing the Rise of the Rest.
Do you think that if you didn't perceive people's accents as you traveled around these cities? Don't you think that entrepreneurs are more similar than different, whether you're in Sand Hill or you're in Omaha?
Also, I think that creativity, ability to see an idea and see it as an opportunity, which is what entrepreneurs do. They see something in their lives, usually some problem they think needs to get solved and say, "I'm going to go do something about it" and actually go start a company to do something about it.
People with those insights are universal. It's happened all over the country, indeed all over the world. It has historically been an opportunity gap or if you are in many parts of the country, don't really have as much of a shot. It really is hard to raise the venture capital you need to get started, which leads to some people in the middle of the country leaving feeling like they have to be in a place like Silicon Valley. They're not going to really be taken seriously, not going to really have a shot.
That leads to the last several decades has been essentially a brain drain of people leaving these parts of the country to go to the coast. What we're trying to do, and we're starting to see a little evidence of is create a boomerang of people returning.
The idea as you say of entrepreneurship can be more universal. We can level the playing field in terms of opportunity by backing more people and more places that they choose to leave where they are to go to some other city, whether it'd be San Francisco or New York or Boston or some other tech hub.
Obviously, they should have the right to do that. But they shouldn't feel like they have to go there in order to really have a shot at building something and really a shot at the American dream. That's what needs to be addressed.
Going back to our common roots in Hawaii, at least the way I remember it, I felt constricted in Hawaii. I felt not so much because there wasn't venture capital or something like that, because I didn't understand that at all back then.
But in Hawaii I just felt that if you were doing really well, you manage the hotel or you manage Liberty House in the Ala Moana Shopping Center or you did something for Dole Pineapple, and that was it. It was agriculture, tourism or retail.
I felt constrained. I was just so happy to move to the mainland and see that there's a whole another world out there. Did you encounter a challenge of getting people to dream bigger?
Yeah. I agree with your assessment. I even have a part of the book talks about this growing up in Hawaii was a wonderful experience in many respects as you certainly understand. But it was somewhat limiting in terms of ... It was more focused on the businesses that existed, the industries that existed and wasn't really leaning into the future, wasn't really imagining what was going to happen next, a little bit coasting on its momentum around tourism.
It was interesting just the way I thought about it when I was growing up in particularly the sixties, early seventies there. As an island or a state, it had evolved from being really dominated by agriculture, as you mentioned, pineapple and sugar really were the industry 100 years ago to when those businesses became less competitive and global competition intensified, they had to pivot.
They pivoted to tourism and thankfully the Boeing business jet things like that suddenly made tourism more possible and more people could come to Hawaii. Quickly, people moved to got build the tourist sector, which I think was necessary and for the most part had been helpful.
But there wasn't, as you said, that much interest in looking at other things. As I've traveled around the country, that is a dynamic that I've noticed that sometimes communities are a little cautious, a little risk averse, a little too focused on protecting what's there.
One of the great things about is a place like Silicon Valley is it's focused more on the future, what's next? What's possible?
Part of the reason to write the book was to try to inspire more people in more places and more community leaders in those places, whether it'd be the big company CEOs or the mayors or the governors or the university leadership to try to create that sense of possibility that allows entrepreneurship to flourish you.
As you say, capital is important, talent is important, but the culture is also critical. My hope is we'll create that entrepreneurial culture and that sense of wonder and possibility in more parts of the country.
What if these parts of the country, because this has happened to me many times, they express a fear that if we educate our young people and show them all the possibilities in the world, we're going to cause a brain drain and they'll never come back. Obviously, you and I have not come back. Is there a brain drain paranoia?
There is some, again, different places. But I think both of us haven't come back permanently. But we have done a number of things to try to be supportive of Hawaii and supportive particularly of entrepreneurship in Hawaii. There's a continuing, I think commitment, even if it isn't coupled with full-time moving back home.
But this brain drain thing is real. I talked about a little bit before where people, younger people are graduating from some of these colleges with these educations feel like they need to go to someplace else where there is more opportunity and their parents and loved ones are generally supportive because they too feel like the opportunity will be better in someplace else.
The question is how do you change that paradigm? When people are growing up in certain places or graduating from college or universities in certain places, they feel they can stay where they are and still have a great career opportunity as opposed to feeling like they have to move away.
To me, it's a broader issue of I don't think people are necessarily saying we shouldn't educate people because they might leave.
I think they recognize we should educate people about the wider range of things. While that might create more risk that some might leave, it also may create more opportunity for them whether they stay or leave. If we get enough people educated and enough people focusing on the future and we do raise or have access to more venture capital back more these new companies that get started, then fewer of our people will leave and some of them will even decide to return and suddenly we can be on the road again and really trying to create some momentum.
To me the most, I don't know, searing example I guess would be one word I have in the book is the story of Detroit. Which is 100 years ago, Detroit was in essence, Silicon Valley.
At the time, the car was the hot technology of the day, everybody wanted to be part of the car revolution and people moved to Detroit and droves and the city was booming.
It was, as I said, Silicon Valley's been the last couple decades. Then be for a whole host of reasons, Detroit lost its way, lost its entrepreneurial mojo, lost 60 percent of its population. The year before we rolled in on our Rise of the Rest bus, which was eight or nine years ago, the city of Detroit went bankrupt. It had been the leader of the pack and suddenly it was in free fall.
What's happened in the last decade or so, and particularly the downtown Detroit area is remarkable. We backed some companies like StockX and Shinola, neither which existed ten years ago, both of which now have well over 1,000 employees and have built very significant businesses that are leading to the renewal, the rebirth, the renaissance of Detroit.
As you travel around the country, you see all these different stories, whether it's our own experience growing up in Hawaii and some of the dynamics there or what's happened in Detroit or what's happened in dozens of other cities.
My main point and the reason I write the book is I just feel like this is a moment that how do you capitalize on the moment and shift the dynamic so more parts of the country are more supportive of entrepreneurs, they can win that battle for talent, they can win that battle for capital, they can launch some of the big companies of tomorrow and really have a stronger community than they would if they just kept focusing on more of the same.
In a sense, a chicken and egg question, do you think that ideas cause funding or funding causes ideas?
It starts with the ideas because people don't have an idea. It's hard to be able to attract the funding. It is fair to say more people connect with or move to places which have more capital. Again, Silicon Valley being the most obvious example. It becomes a magnet for talent and you have a lot of brainstorming around new ideas and iterating around new ideas.
That results in more ideas being launched into the world in part because more people can join your team and help you scale that and more capital will help fund that. It does result in certain cities continuing to do well.
This notion of increasing return, the network effect kind of momentum begets momentum dynamic. But interesting, it goes back to what I said before around the core of entrepreneurship is seeing a problem and deciding to do something about it and turning it into an opportunity.
People living in different parts of the country or different parts of the world are going to see different problems that they will identify as different opportunities. That's what we're starting to see more of a ... I love the story, a company in Chattanooga built essentially like a Bloomberg data platform for the trucking and logistics industry.
Their insight was that they needed to be more technology, more of a platform approach to manage that in that industry. The reason they started in Chattanooga, and the reason they had an insight that was an interesting business to start was most of the big trucking companies in America are headquartered in Chattanooga.
Of course, they would bump into that idea, and of course, they would have some initial customers that they could help them scale that. That's an example of where somebody was living. They saw an opportunity that if you're sitting in a skyscraper in New York City, you probably aren't going to stumble into the idea of a platform for the trucking and logistics industry.
We're seeing more and more of that. Thankfully more of those entrepreneurs are starting where they are and scaling where they are as opposed to feeling like, "Okay. Now that I've seen that problem, I have had that insight, that 'aha' moment I've decided I want to go build something. I now must leave where I am to build it in some other place because that's where most of the capital is." That's what's starting to change in the last decade.
Some of this also just is ... when you look at some of the history, there's a value in having a significant company that's successful that spins off other companies. Going back to the beginning of our conversation, I saw this firsthand with the AOL and particularly the 1990s when it went from dozens of employees, 100 employees, at our peak, 10,000 employees mostly in the Northern Virginia area and some people did make money on stock options and had experience growing a company and suddenly dozens of other companies got started and got backed because of that.
You saw that similar dynamic recently in Indianapolis. This company, exact Target was acquired by Salesforce. Now there's dozens of enterprise software companies in Indianapolis.
My favorite story actually is Seattle because forty years ago, Seattle was really struggling. It was over-reliant on some industries that were in decline. It wasn't clear what its next act was.
Its next act, as you well know, turned out to be Microsoft. Microsoft actually was started by Bill Gates and Paul Allen in Albuquerque, New Mexico because they wanted to be close to the key partner there in the early days of the personal computer. The only reason they ended up moving to Seattle, they wanted to go home.
They decided to go home because both of them were from Seattle. Then fast forward to ten, twenty years, obviously, Microsoft's successful. Guess what? There's this guy at a hedge fund in New York, Jeff Bezos, who says, "I have this idea of building this amazon.com to sell books online. I'm going to drive across the country and set up shop in Seattle because that's where Microsoft is. I bet that I could pick off some of their engineers to go build amazon.com."
The success of Microsoft in Seattle led to essentially Jeff moving to Seattle and the success of Amazon in Seattle as well as other companies that have done well there, Starbucks and Costco and others. Suddenly, Seattle is a strong tech hub and it was mostly because of that backstory.
After traveling around and hearing these different stories and learning some of the history on some of these places, I think are remarkable story and also an optimistic story at least to me, of what can be the next chapter in terms of the American story and how do we create an innovation ecosystem, an innovation economy that is more inclusive, that does include more people and more places and give those people more hope and more opportunity.
What has been the root causes of the disparity in investments in companies led by women and people of color? How did we get to this position?
Yeah. No. It's terrible. I have a whole chapter on the diversity imperative in the book, because I mentioned the data around place at 75 percent of venture capital goes to just three states. But you shift from place to people it actually gets quite a bit worse. Women are 50 percent of the population. Female founders get less than 10 percent of venture capital.
Latinos are 18 percent of the population. Latino founders get less than 2 percent of venture capital. Black Americans are 13 percent of the population. Black founders get less than 1 percent of venture capital.
The data is pretty clear that it does matter where you live and it also does matter what you look like if you have an idea whether you have a real shot. It comes back to basically networks that the reason place like Silicon Valley do so well is most of the venture capital is based there.
Again, historically most of the investments have been made there and most of those venture capitalists don't really have networks that connect them to other parts of the country. That's changing and obviously, we're doing what we can to help change that. Most of the entrepreneurs in other parts of the country don't have the networks to connect to those venture capitalists.
That's also true for more diverse founders. They just don't have the same networks, the same access that the other founders do. When we talk about leveling the playing field, it really is a broader goal, a broader mission to make sure everybody with ideas in terms of companies they want to start does have access to the people that can help them take that idea and scale it and building out.
You should also know, but maybe not all your listeners know, the idea of venture capital is relatively recent, just started about a half century ago and it started in New York and then there's some in Boston and then are some in San Francisco. Not surprisingly, that then led to those clusters becoming more and more significant over the past several decades.
Venture capitalist historically have focused on what they often call pattern recognition. They say, "If I backed an entrepreneur who's successful, I'll back more people like that." If most of those entrepreneurs they backed were white guys who graduated from Stanford then worked at, I don't know, Apple or something, and they're living in Silicon Valley, they'll make more investments in those people in those places leveraging their networks."
How do you extend their networks to be more inclusive, other people in other places? How do you create on-ramps for those entrepreneurs in other places to really have a shot of raising the capital and need to get going?
What's the answer? What have you discovered to reduce this disparity?
Part of it is hitting the road. These communities we're in tend to be more diverse that some of the cities themselves tend to be more diverse. Also, when we do come to town and our team does the planning on these bus trips for six months in advance, we're very intentional about reaching out to different parts of the community and make sure that when we're there and meeting entrepreneurs, driving around town on bus, it is more of an inclusive group of entrepreneurs. It's more reflective of the face of that community.
We also make sure that when we have pitch competitions, we always are intentional about having more diversity on stage pitching. As a result now over 40 percent of the investments we've made with our Rise of the Rest seed fund are female founders or founders of color, which is still not what it should be, but it's a lot better than you see from more traditional venture firms.
You think that when we look back maybe decades from now, obviously, the pandemic created a lot of pain and suffering and bad things. But it has really changed I think people's outlooks ... As a venture capitalist, there used to be this assumption that I only want to go to board meetings within one hour driving distance of Menlo Park.
But if every board meeting is now on Zoom, what difference does it matter where the company is? You think the pandemic net has been good for increasing deal flow and diversity?
Yeah. No. As you say, I hate to say pandemic's been good because it's been terrible in so many respects. But if you're looking for a silver lining, it has accelerated what we're talking about. It has accelerated leveling the playing field, has accelerated the growth in these Rise of the Rest cities.
I think we hit a tipping point two or three years ago. As you said, some of that was because venture capitals realized that if they were suddenly doing pitch meetings by Zoom, the entrepreneurs could be someplace else, isn't necessarily having to be a mile away, they could be 1,000 miles away.
Suddenly, that created more opportunity for more of the entrepreneurs in these other places.
You also saw some people including some venture capitalists, but also some entrepreneurs leave where they were to go to someplace else. A lot of them thought they would just do that temporarily. But some have decided to stay there permanently and either continue to work remotely for the organization they were previously working for or do something else in the community or start their own fund in that community or start their own company in that community.
It's been this unlock before a lot of people felt like unless they were. Particularly in Silicon Valley, because in the leadership there they just didn't really have a shot and now they feel like they have more of a shot. They feel like they have more flexibility.
I think we're still coming to terms with what post-pandemic world might look like. It was shake the snow globe moment for the world and we're still watching to see how it all settles out.
But for sure one of the things that is going to be more durable is this flexibility in terms of how you live and how you work and where you live and where you work and more openness to remote work and hybrid work. That plays into the trends that we were seeing building even pre-pandemic as we were working in these cities over the last decade.
Yeah. I think if we look back ten years from now, the pandemic would've been the tipping point that really accelerated this shift to a more inclusive entrepreneurship and strengthening more and more cities as startup hubs and giving more and more entrepreneurs in those cities more of an opportunity to start and scale companies.
Great. You mentioned the words pattern recognition a few minutes ago. I'd like to hear your pattern recognition for identifying promising entrepreneurs and companies.
Arguably Steve, you could make the case that you have a broader exposure to entrepreneurs than almost anybody in the United States because everybody else in Sand Hill for a long time only looked at deals within one hour of Sand Hill.
As I said before, there are a lot of great entrepreneurs within one hour of Sand Hill, but most of those entrepreneurs are living a somewhat shared experience and are likely to identify problems in their lives that might be really important to them, but maybe not as important to other people in other parts of the country living in more rural areas or what have you.
I think that does result in missing out on some of those opportunities. I should say here at Revolution, my investment firm, we really have three groups.
What we've been talking about is the Rise of the Rest seed fund where we've made 200 investments in 100 different cities in partnership with a regional venture firm. We partner with over 300 regional venture firms.
At that seed stage, it's very early identifying an idea in the beginnings of a team to really take that idea and scale. We also have Revolution ventures, which is somewhat later, more of a series A or as well as Revolution growth later stage still. The way we think about entrepreneurship and the companies we back is of course different whether it's at the seed or venture or growth stage.
But in general, for me, it starts with the idea. Is this a battle worth fighting? Is it's an interesting idea that has the potential to be a big company and something that could be important in the world? Is it a battle worth fighting? Is it a mountain worth climbing? That's number one.
Number two, you quickly go to the team. It's not just the entrepreneur, it's really the team that's taken that idea to scale and do they have the right mix of skill sets and perspectives to really be able to scale that? Then is there some evidence that the mice are eating the cheese, that there's actually some product market fit and this is something that's resonating.
The last one I think is very important and going to be increasingly important, our partnerships. Could you have some initial partners that can really help you scale the business? As I mentioned, the early days of AOL, we would never survive without the partnerships. It really was critical to get us going because we had much bigger competitors.
I don't know if you remember. There was one called Prodigy backed by IBM and Sears and they had committed one billion dollars to Prodigy. We had raised one million dollars. We clearly weren't going to beat them if it's hand-to-hand combat. We needed to do something different. For us that was partly focusing on the community, what's now people think of as social media, but also focusing on partnerships.
That's another aspect, I guess, increasingly important. There are a lot of examples in the book of industries like healthcare where the technology you build is a table stakes just to get you in the game. The real value is forum based on the partnerships because you've got to get hospitals to integrate it and doctors and nurses to use it and health plans to pay for it and even regulators to allow it.
Otherwise, your invention, your innovation isn't going to really matter much. That's the era, I think, where partnerships are more important, healthcare, food and agriculture, financial services, a lot of those sectors. It's not just about what you do on your own, it's how you partner with others and together unleash systems in level change.
Now can we go back to this concept of people and the team? I'd like to know how you assess a person because I've been on hundreds of pitches and every team says, "We're bright, aggressive, visionary, passionate, hardworking, and honest." Nobody says, "I'm a slovenly, disgusting, ugly, stupid, lazy person."
Honestly, Steve, I think you want entrepreneurs who are on the spectrum of Asperger's or ADHD, or OCD, but we won't go down that path. How do you tell someone who's full of shit, where someone is a legitimate entrepreneur?
It's a fair question. Sometimes you have instinct on it, but more often it's based on a more deliberate understanding of their backstory, how they got to now. It also ties in, well, as I said before, what's the team dynamic that they've building? Do they really have a respect for different voices, different perspectives, different skill sets?
If it's a team that basically all looks and sounds the same as it's sort of a monochrome, that would make me nervous, particularly in a lot of these sectors that are going to change a lot.
I think having diversity around the team is ... Again, it's not just diversity in terms of women as opposed to men or Black, Latino, others, although that's part of it. It's also diversity in terms of their own experiences. Do they have relevant experience for the industry that they're trying to disrupt?
The other dynamic, I'm sure you've seen this many times is you definitely want somebody who is super passionate and will never give up somehow figure out some way to get the other side some way to survive and eventually some way to thrive.
That confidence, I guess is important. But a little bit of humility helps as well. Being able to respond when you're pressed on different questions in a way that is confident but also not too arrogant I think is also important.
That's again, increasingly important in the industries that do require partnerships. It's not just we're moving out of the era where it was a dorm room startup and you created an app and dropped it in the App Store and it spread virally. Then if you're lucky enough to have success, you'd figure out a way how to monetize that.
Into an era where I've called it the internet meets the real world. In order to be successful, you need to have real partnerships. Those partnerships need to share your vision and be able to believe that you have what it takes to help them move into the future and also that they can be trusted. The aspect I think is the other piece that I spent a lot of time trying to think through it as does our team.
What if any aspects of entrepreneurship can be taught?
That's a great question. All my career I've been asked, "Is entrepreneurs born or made? Is it innate or is it taught?" Early on it probably would've been more in the camp that it's something that you're born with. I certainly was. I always had some interest in the future interested in building things and it was a curiosity and a thirst for learning new things and so forth.
Not everybody I was growing up with, obviously, shared that view. But I've also seen a lot of examples from my career of people who essentially stumbled into being entrepreneurs later in life when they're in their forties, fifties. It was not something they were born with, it's not something they even were focused on, not something they necessarily expected to be good at. But they stumbled into an opportunity, turned that into a pretty significant business.
Given that you, I've seen enough of those now. I believe both could be true that there's some people who start with a certain way of thinking and a certain way of acting that give them early on an advantage.
But you're also seeing more and more entrepreneurs who didn't start as entrepreneurs. They came to it later in life.
This will be more common I think in this next twenty years. It goes back to what I was saying about some of the sectors up for grabs like healthcare. In that sector, having some domain expertise, having some credibility based on the experience you've had will be important in terms of establishing partnerships.
Some of the dynamics that we collectively saw in terms of some of the most significant Silicon Valley success stories, PayPal, for example, part of the backstory there was the reason PayPal was successful is nobody on the team knew anything about credit cards or much about financial services.
They're able to bring a fresh naive perspective, being able to ask questions that some of the incumbents had been there for a while didn't ask, and that led them to some insights that led to PayPal being a successful company. That was true. But having no domain expertise in an area like healthcare is not going to be a strategic advantage.
It's going to be harder for you to get the traction because you're dealing with people's lives and companies or hospitals that are going to need to believe that you can bring some fresh perspective but also understand what's happening. One story in the book that I love is actually a founder who was in San Francisco, was working for a hedge fund in San Francisco by the name of Carter Malloy, who had the idea of essentially creating a platform to allow people to invest in farmland.
He launched that company called AcreTrader, but he actually moved from San Francisco to Fayetteville, Arkansas because he said, "If I'm going to be successful with the AcreTrader, the first step is getting farmers to want to be on my platform and to trust me to be on the platform. I'll have more success with those farmers if I'm in Arkansas where they are, at least some of them are than if I'm in San Francisco."
That company has now gone on to raise a significant amount of money and growing quite rapidly. That's an example of he knew he had an interesting idea, but it was only going to be successful if he was able to get people in that sector to believe in him. He would be more likely to be able to do that if he was in a place that was closer to where they were.
What do you want to see in a pitch?
I think it goes back to some of the things I said before. I have to first of all get captivated by the idea, is this something interesting? I quickly start trying to see, "Okay. Is this a team that can really execute? I learned many times over my career that having an idea is important.
The vision thing, if you will, is important. But ultimately, it's about executing the idea, which is why the team is so important.
Then some evidence that this is really going to resonate with the market there. It could be early evidence, particularly at the early stage, but some evidence that this really is likely to get some traction.
Let's say that a governor or a mayor is listening to this podcast and they buy into this. They buy into spreading out entrepreneurship, revitalizing their community, all the good stuff, everything you espoused. What does this mayor or governor do tactically as the next steps?
The good news here is just in a decade we've been working on this, we've seen a pretty dramatic shift, a pivot in terms of the way governors and mayors are thinking about economic development. Historically, they always were thinking about economic development in the context of trying to get a big company to move their headquarters or a big company to open a factory.
It was really focused on the big companies, the incumbents if you will. Over the past decade, we've seen a growing awareness of the importance of new companies, the importance of startups.
The mayors are being very aggressive in terms of ... Many mayors, not just a few in terms of trying to position their city to be a stronger startup city.
Some of that is just telling the story of that particular city. More people are aware of what's happening in Chattanooga. They benefited more than a decade ago when the mayor led an effort to build, at the time, maybe it's still, they have in check, was the highest speed broadband in America, not in Silicon Valley, not in New York City, in Chattanooga, Tennessee.
That helped them get people to pay attention. Really, what's going on in Chattanooga and led to more people moving there, more people to investing there. You've seen a similar dynamic in places like Northwest Arkansas, a lot of focus around the place-making there.
Some governors in particular have also put in place some incentives and got financial incentives like Angel Tax Credits.
It's actually an incentive to make an investment in these early stage companies. Many are pushing to try to get more venture capitalists to start there. One of the things that's really was encouraging, we did a pitch book partnership with Rise of the Rest and pitch book the last year.
One of the takeaways from it is in the last decade since we started this effort, 1,400 new venture capital firms have started in these Rise of the Rest cities, 1,400 didn't exist a decade ago.
Some of that is the advocacy of the mayors and governors in doing things. You also have seen some mayors most visibly in the last couple of years, Mayor Suarez in Miami that really decided to use the pandemic as a moment to really create more buzz and momentum around Miami.
At one point, he even had a billboard in Silicon Valley saying, "Come to Miami, it's a rising startup city and if you need any help, reach out to me." It's been encouraging to see this. They said, "This pivot from existing companies to new companies and recognizing that in many ways, startups, these new companies do represent the future for their communities.
Because there's one data point that I included in the book as it's so striking is that about half of the Fortune 500 companies turn over every twenty years. If you have three or four Fortune 500 companies in your city, that's great. But statistically you're going to likely lose half of them over the next twenty years.
You can't just focus on the existing big companies. You have to focus on incubating, launching or new companies, some of which will of course fail, because that's the nature of startups. But some could be the big companies of tomorrow, the Fortune 500 companies of tomorrow.
I think they now get that and they're much more focused on trying to be a magnet for talent, be a magnet for capital, create a vibrant community that is supportive of entrepreneurs.
What's your reaction when you read about the governor of Wisconsin announcing Foxconn is going to build LCD panels and this is going to create a lot of jobs and make Wisconsin a center of tech?
I'm not a big fan of it for the reason I just mentioned it. I get it if you're a governor, it's a good photo op and a good story that shows you're doing things that try to create more jobs in your community, and that's partly what your job is.
The data on that has generally not been particularly good in terms of the payback, in terms of the investments those states are making in those particular jobs versus if they had a comparable focus and comparable investment in new companies.
One thing that was interesting to see was when Amazon did its second headquarters search, must have been four or five years ago now, 230 cities around the country applied to try to win the battle to be the chosen as the next second headquarters site for Amazon. What that forced those communities to do is work together in a more collaborative way to tell their story.
Here are the advantages of the city or that city. Also identify some of their weaknesses, things that needed more attention. What's been happening in the last few years is a lot of those cities are now building on some of those strength and trying to address some of those weaknesses. I think that bodes well for what can happen in the next ten or twenty years.
You mentioned creating more jobs. But whenever I hear people talk about creating more jobs, it just rubs me the wrong way, because I don't think the goal of a business is necessarily to create more jobs. It's to create more customers, which of course will mean more jobs. But if an entrepreneur came to me and said, "One of my goals is to create jobs."
I would be thinking, "I don't want somebody who wants to create overhead. I want someone who creates something mean and lean without a lot of unnecessary labor costs. You're telling me the opposite of what I want to hear, or am I clueless, Steve?"
That’s certainly one way to look at it. Of course, you're right. Ultimately the question, how many customers, how much revenue and can you generate? How quickly can you scale it? How can you build some competitive moats that's allow you to sustain your advantage, sustain your differentiation, and do that as leanly as possible?
Of course, that's part of the way you have to think as an entrepreneur and part of the way you have to think as an investor. But we are talking about ... because the mayors who have a different mode, or a different focus, and part of what they need to focus on is job creation and need to understand the role new companies play in driving the creation of jobs.
But also we're seeing more and more entrepreneurs who recognize what they're doing isn't just about their particular business. They do recognize they have a broader impact in their communities, a broader impact even in the country.
I think that's helpful. I think it actually allows some entrepreneurs to even fight harder to be successful, because it's not just about how they're benefiting themselves or their investors or their employees, there's a broader impact and an important impact in the community.
One example I wrote about in the book is an entrepreneur, Jonathan Webb, who had an idea for a company to create essentially what's now the largest indoor greenhouse in America.
He also designed it. He used 90 percent less water. It's sustainable. He picked the site in eastern Kentucky in part because it's 70 percent of the US population is within a twenty-four-hour drive of their location. You can get the fruits and vegetables to the market faster.
But also he was motivated by the idea doing all that, creating his company to grow fruits and vegetables in a more sustainable way that would be tasty and could get the market in a very rapid efficient way. But he also wanted to create more jobs in eastern Kentucky. He had grown up in an area that people think of as Appalachia coal country that had struggled for a number of decades.
He wanted to build a company that would change the food systems and move away from industrialized food to much more healthier sustainable food. But he also had the goal of creating a company that would create jobs. I think he's now created over 500 jobs in an area that has had no hope for several decades.
He's working harder, I think, than other entrepreneurs might because of this broader impact he can have including on the community he cares about. Yes. You got to focus on the core business. You got to focus on growing those revenues and making sure the expenses are less than the revenues, and you can generate a profit that allows you to sustain.
But there's some other things you can increasingly focus on, whether you care about the climate or you care about healthcare or you care about your community or you care about your country. That's partly what's motivating a new generation of entrepreneurs.
I guess the answer is to your politicians, you say you're creating jobs; and to your investors, you're saying you're going to create a mean, lean, customer-creating machine. You just have to change your pitch a little, huh?
Yeah. Of course, it depends on your constituency. One other point I'll make on jobs, which is not pitch on the entrepreneur side, but the pitch on the community side, and again, I saw this firsthand with AOL, but we've seen this in many other cities, is it's not just the jobs created within the companies themselves, it's the jobs created around the companies.
The data says for every job in a startup company, there's about five other jobs in the community building houses or serving restaurants or what have you to serve that growing population. That's why this can have a more broader ripple effect on communities and over time on the country itself.
What do you think the effects will be on entrepreneurship of an anti-immigration, immigration policy?
Terrible. Terrible. No. This is one of the issues I've worked hard on without much success over the last decade. I testified in the Senate, I think it was probably eight or nine years ago now, of the need for immigration reform, the need to continue to win what's now a global battle for talent.
One of the great things that's powered the American story over nearly 250 years is the fact that we have been a magnet for people who wanted to live a better life and wanted to bring a pioneering spirit and a willingness to take risks, including often the risk even of coming to America. That's led to some of our most successful companies.
About 40 percent of the Fortune 500 companies were started either by immigrants or children of immigrants. But we have made it more difficult to come to the United States. We have made it more difficult to stay in the United States, and that creates some risk in terms of this next era that if we cease to be ... Which hopefully won't be the case. But if we cease to be the most innovative entrepreneurship in the world, likely is in part, maybe in large part because of immigration policy, instead of creating a magnet, has created more of a disincentive for people to come or disincentive to people to stay.
It goes back to our discussion around job creating. How you do look at it differently if you're an investor entrepreneur versus you're focusing on a community or focusing on the country, the data on immigrant entrepreneurs is pretty compelling. They are job makers, not job takers. The historical political battle over immigration really does not apply here.
These are jobs that are being created in this country, including a lot of really great high paying jobs. If we weren't allowing that immigrant entrepreneur to start and scale in the United States, and they were forced to do it in some other country, our country would be deprived of all those benefits. Not just job creation, but broader economic growth.
Hopefully, we came close. Just the past summer, there's some legislation that Congress passed. The CHIPS and Science Act that did a number of good things around re-shoring semiconductors and funding regional hubs, which will be very helpful to this Rise of the Rest effort. There also was a start-up visa provision that was in the bill, but ultimately didn't get included in the final legislation. Hopefully, we'll get something done here in the not too distant future.
We're doing this interview the day before the general election in 2022. Things could go south, far south. That's maybe a bad analogy. Things could really get messed up tomorrow. We may have the most anti-immigration, immigration policy ever if Congress changes hands and stuff.
Yeah. We'll see what happens tomorrow. But there's certainly some likelihood of a big change, at least in parts of Congress that will impact what the priority issues get attention over the next couple of years. I think that there is some risk that the need particularly focused on high skilled immigration to focus more on that, maybe it will be more difficult.
I would say though that my own experience is it tends to be fairly broad and not bipartisan support for immigration policies that attract entrepreneurs who want to start and build in the United States. Where it gets more dicey and more difficult are some of the issues around the border, some of the issues around the dreamers, that's where things get somewhat more challenging.
It is possible. It's certainly not likely just given nothing's happened in the last decade on this. It's possible even there was a change in Congress. There might be the ability to move forward on something related to high skilled immigration like the start-up visa, but I recognize that the politics of that seem to be getting more challenging, not less challenging.
If high skilled immigration was the rule, I would be in Japan working at a Starbucks right now. My family would not have gotten in because our only skill was picking sugar cane.
Yeah. Fair enough. Fair enough. Which is why when I testified in Congress, it was for more of a comprehensive immigration reform, and there with legislation passed at the time, or it was being considered at the time, did not pass. That really dealt more comprehensively with immigration. In retrospect though, I think even the advocates for it felt like by trying to get everything done, it ended up getting nothing done.
Perhaps taking the different pieces, got it one at a time, will likely get more traction as opposed to trying to do something that is too broad, too comprehensive, and therefore just very complicated politics.
This is the very end of the interview. But I'm going to tell you a rule for my interviews, which is if I asked you a question and you don't want to answer it, you just say, "I'm not going to argue with you. I'm not going to even record that you said no." Okay. With that ...
I'm totally fine with that. I actually listened to your podcast with Stanley McChrystal where you mentioned three questions that you were thinking of asking but didn't want to offend him, and he not only answered them. The first, I don't know, fifteen or twenty minutes with him answering all three. I liked Stan.
... McChrystal is intimidating fellow.
Yeah. Thank you for sending his book, by the way. I appreciate that.
You really should read his book, Risk. I'm telling you, it's the best leadership book I have ever read.
It's right there.
Obviously, you can't see what he just did. But he just held up a copy of Risk. I will tell him that you have it, because I sent it to you. I'm an evangelist for Stanley McChrystal and Risk. The question is, do you care to try to explain J.D. Vance?
For the people that haven't followed this, J.D. Vance is a candidate for the Senate, and by the time this airs, we'll find out whether he wins or not. The polls right now suggests he likely will win. He got to be fairly well-known, I guess now six or seven years ago when he wrote a book called Hillbilly Elegy and then he moved to Washington, DC for a year and worked for me to help launch the Rise of the Rest fund.
We started with our bus tours, which we talked about, but about five years ago we decided to launch a fund and we've had thirty, thirty-five of the most prominent individual entrepreneurs and investor, people like Howard Schultz, and Jeff Bezos, and Eric Schmidt, a bunch of people who are all investors with us in this fund.
J.D. helped launched that fund. Then after a little over a year of being in DC, he moved to Ohio, started his own venture fund there in Cincinnati, and then a year and a half ago decided to run for Senate and created some controversy because he was quite anti-Trump when Trump was running and even after Trump became president.
But then when he decided he was going to run for Senate in Ohio, he pivoted and instead of being anti-Trump became pro-Trump to secure Trump's endorsement, which he did, and that's part of the reason why he won the nomination and may very well end up being the senator from Ohio. I was surprised and disappointed by that pivot.
Some of the things he's said in this last few months have been certainly inconsistent with things he told me a few years ago, and some of them were even quite troubling. I'm not sure what to make of it. I've not talked to him since he announced his candidacy.
Certainly, haven't supported his campaign. Perhaps some of it was he had views that I didn't fully understand when we were working together.
More likely at least some of those views, maybe a lot of those views have changed over the years, and there, I don't know how many of those views change because he just changed his mind, which certainly somebody's entitled to, or he just decided politically he had to change those views in order to have a shot at prevailing.
It's one of the reasons why I stay out of politics and focus on policy working together in a bipartisan way to pass policy around innovation, around entrepreneurship, hopefully around immigration. Politics is not my thing. I've been watching that with some surprise and as I said some disappointments.
That is about ten times the answer I thought you were going to give me. I thought you were going to say, "Okay. Guy, I don't want to comment." But okay. Thank you. I appreciate that.
All right. Here's my last question and listeners need to understand that Steve and I are both from Hawaii and we went to the bitters of rival high schools. He went to Punahou and I went to 'Iolani. My last question for you is do you ever wonder where you'd be today if you went to 'Iolani instead of Punahou?
Yeah. I'd be doing the remarkable podcast that was ... No. It's not like any of these rivalries because they're two great schools that are more similar. They are different, and I was proud to have been at Punahou, even served on the board for many years after I left Punahou. But 'Iolani was ...
They're both great schools. I admit that.
ʻIolani is a wonderful, wonderful school and I'm just glad your family was able to move to Hawaii and be part of that Hawaii story, and then you were able to move to California and be such a key player in the early days of the technology world, the early days of Apple and other companies, and appreciate the fact that you're still fighting the good fight, trying to help spread ideas and gave me the opportunity to talk about this new book because I'm super passionate about building on the experiences I've had over the last few decades.
What can I do to give back and what can I do to back the next generation of entrepreneurs in the process? Hopefully, help renew some communities that have felt left behind and hopefully even maybe, at least in a small way, help divide a country that needs to focus on reasons. It should be united, not just the reasons why it should be divided.
Thank you so much for doing this interview. I just want to repeat what I said at the top, which is what you did by giving me those options, years later when you really did not have to, was one of the most honorable things that have ever happened in my life. No shit. Not exaggerating. I think about that all the time. What an honorable person you are.
Oh, you're very kind guy. It's great having you help us at that moment of need when Apple pulled the rug out from under us and you helped reposition the company, which ultimately led to its success, which is a reminder and I had to talk about this in the book of how sometimes disasters create opportunities and just what looked like a near-death experience for our company when Apple pulled out actually ended up launching us into the stratosphere.
I would say that the fact that an ʻIolani grad and a Punahou grad can become such friends and work together shows that maybe the Democrats and Republicans and work it out, too.
There's hope for America, but we can work together despite being at rival high schools. There's hope for America. That's a good way to end this.
We'll see you on the road. When we fire up our Rise of the Rest bus, you should join us and visit all these cities in America that are building the new American stories.
When I was reading your book and you were mentioning all the experts on the bus, the first question that came to my mind was "Why didn't ask me? I would've said yes. I would've gone on that."
I just did ask you. Obviously, the reason I didn't is because you went to ʻIolani, but I'm now moving past that.
Okay. Let us both move past that. The next time you do this bus, I want to be on it. Okay?
All right. Look forward to ...
Thanks for tuning into this episode of Remarkable People.
I hope you enjoyed hearing from Steve Case as much as I did. A visionary, entrepreneur and investor, he played a significant role in shaping the tech industry as we know it.
His insights and experiences are truly inspiring and I'm grateful for the opportunity to have him on my show, not to mention the AOL stock that he gave me also.
Join us next time for more remarkable conversations with today's game changers.
I'm Guy Kawasaki, this is Remarkable People. My thanks to Jeff Sieh, Peg Fitzpatrick, Shannon Hernandez, Luis Magana, Alexis Nishimura, and the drop-in Queen of Santa Cruz County, Madisun Nuismer.
Until next time, mahalo and aloha.
Sign up to receive email updates
Enter your name and email address below and I'll send you periodic updates about the podcast.
Leave a Reply