The Third Wave ONE A WINDING PATH MY BROTHER Dan was just thirteen months older than me, and a year ahead in school. We shared a room growing up and, like most brothers, were fairly competitive. We hated to lose. That was especially hard for me, since Dan seemed to be good at just about everything he tried. He was the more natural athlete, and always at the top of his class. When I realized I couldn''t compete with him head-to-head, I tried to find interests apart from his. If he was going to play tennis, I decided, I was going to play basketball. But there was one interest we both shared that never felt like a competition.
I wanted to be an entrepreneur, I was sure of it, before I even really knew what that meant. And Dan genuinely wanted to help. I got immense satisfaction from coming up with an idea, and he would revel in trying to help me turn it into something real. We started our first business when I was ten years old. Dan was eleven, and brought to bear all of the wisdom of that extra year in our operation. We called ourselves Case Enterprises, and hoped that no one would notice that neither of us was old enough to drive. We billed ourselves as an international mail-order company. At one point we became the exclusive distributor in Hawaii for a Swiss watchmaker, though I can''t recall actually selling any watches.
Most of our efforts involved knocking on doors trying to sell greeting cards to our neighbors. Most of our customers were buying what we were selling just to be nice. But Dan didn''t care. He called it our comparative advantage. Said it was part of our brand. We actually talked like this; our parents, a lawyer and a teacher, had no idea where we got it from. They used to joke that when I went to my room, I was going to my office. Our early ventures may not have provided much in the way of cash, but they did provide a wealth of experience.
And the process of coming up with new business ideas, or new ways to sell, left a deep impression on me. When I left Hawaii to attend Williams College in Massachusetts in 1976, I kept looking for new business opportunities. I started six little businesses while at school, including delivering fruit baskets to students during exam week (paid for by parents, of course). I had a growing interest in the music business, and spent a lot of time in New York clubs like CBGB, trying to find new talent to bring to college campuses. I was diligent about going to class and doing my homework, but these side businesses were my real passion. That didn''t go over so well at Williams. At one point my advisor pulled me aside and suggested I was spending too much time on my entrepreneurial efforts, and would regret it. "Look at all the educational opportunities in front of you," I remember him saying.
"You should immerse yourself in them. Your business pursuits are distracting, and, frankly, they are ill-suited for campus life." He wasn''t alone in thinking that. I remember one of my fellow students attacking me in a school newspaper editorial. "I swore I would never go to a Steve Case party or buy a Steve Case record album," the article began. "It''s nothing personal, it''s just that I despise rampant laissez-faire capitalism on the college campus." * * * In my final year at Williams, I took an introductory computer class. I hated it--and almost flunked it.
This was still the era of punch cards, where you had to write a program and then take your cards to someone to run them. Several hours later, you''d get the results--which usually (at least for me) meant finding a mistake and starting the process all over again. The tedium, and the resulting low grade, almost prevented me from graduating. And yet the experience stuck with me. The punch cards were a nuisance, but if used the right way, they could be powerful. We were building very basic computational programs, rudimentary by contemporary standards. And yet even then, the potential was obvious. Computers were solving problems in seconds that would otherwise take days, even weeks.
Frustrating as it was, in retrospect, I think it was formative. It was the first time I really began to grasp the potential of computers. Still, if I hadn''t stumbled upon Toffler''s book that year, I''m not sure I ever would have pursued the path I did. With graduation approaching in the spring of 1980, all I could think about was breaking into the fledgling digital industry. I applied for a lot of jobs, always including, with my résumé, a cover letter breathlessly predicting the dawn of a digital age. There were few takers. Most of my letters went unanswered. On a few occasions I did get interviews, but I rarely got past the first one.
People seemed put off by my musings, worried that they were getting a nutty young kid who''d never be satisfied in a normal job. As the rejections piled up, I realized that my future would require my keeping my mouth shut--at least for a time. There was not much of a startup culture then, and of course no Internet, either. If I was going to get a job and learn any useful skills, I concluded, I''d have to join a big company. I eventually accepted a job at Procter & Gamble in the brand management department. It was a great place to land, all things considered. I could learn useful skills during the day while continuing to dream about the digital world at night. If Procter & Gamble knew one thing, it was how to make a product understandable to everyday people.
When radio serials were first introduced to the public, P&G saw an opportunity to advertise its home cleaning products to its key audience. So they began sponsoring programs, starting with Oxydol''s Own Ma Perkins back in 1933. They were known as soap operas. When the public jumped from radio to television in the 1950s, so did P&G. The people I worked with were experts in understanding consumer preferences, doggedly pursuing R&D, and seeking breakthroughs that could give their products an edge against the competition. And they were world-class marketers, often ahead of their time. P&G was also responsible for pioneering the concept of giving away free samples to encourage trial use. (I later borrowed that idea when we launched AOL''s trial program and blanketed the nation with free trial discs.
) * * * After a couple years of working at P&G in Cincinnati, I moved to Kansas to join Pizza Hut as Director of New Pizza Development. To this day, I''ve never had a better title. My motivation was twofold: First, I was offered a healthy increase in salary and responsibility, and second, I thought it would be helpful to understand how a more entrepreneurial company worked. Pizza Hut was founded in 1958 by two brothers, Dan and Frank Carney, while they were still students at Wichita State University. It had grown from a single location at the corner of Kellogg and Bluff to become the nation''s largest pizza chain, which it accomplished largely by enabling franchisees to innovate. This bottom-up approach to innovation differed from P&G''s top-down style, and I wanted to understand it. Originally, the job involved my working in the test kitchens in Wichita. But I advocated that we hit the road to find out what was happening throughout the country.
My view was that, though innovation was possible within our walls, most of the innovation was happening beyond them. I created and led an advance team, and we started roaming the U.S., looking for a great idea to incorporate into the new menu. The company would send me to places like Washington, DC, put me up in the Four Seasons in Georgetown, and then task me with eating the city''s best pizza. There are worse ways to live. I did learn rather quickly how difficult it was to take something out of a test kitchen and then execute it across five thousand restaurants where the chefs were teenagers with limited skills. A lot of our ideas that made sense in theory flopped in practice.
At the time, one of the concepts we were testing was home delivery. This was 1982, and though pizza was popular, delivery wasn''t yet universal. We were also working on ways to make pizza more convenient and more portable. We spent a lot of time trying to figure out if calzones or pocket pizzas could work as a carry-out option for people on the run. It''s funny to think, looking back on that year, that the things we were focused on--convenience and portability--would become such crucial parts of the company I would later help build. So would our desire to keep things simple and focus on the basics. I only lasted at Pizza Hut for a year. My obsession with Toffler hadn''t subsided; it had intensified.
I wanted to be part of his vision. I needed to find a way in. MY FIRST STARTUP I found my opportunity in 1982 when my brother told me about a startup called Control Video Corporation (CVC), which was trying to take the growing electronic gaming industry online. By now, Dan had moved on from CEO of Case Enterprises to up-and-coming investment banker in the Silicon Valley. Neither of us had lost that passion we first explored in childhood. I was still the ideas guy. He was still the one trying to figure out how to make it all work. When the firm he worked for, Hambrecht & Quist, was considering making an investment in CVC, Dan asked me to review the business plan and give him my impressions.
I was impressed, I told him. And interested in being a part of it. H&Q did end up investing, and within months, I became a part-time consultant at CVC''s.