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June 3, 2009
AOL Is Free Again
The day Time Warner announced it was spinning off AOL, a former colleague of mine at AOL (I was a VP there from 1998 to 2002) Twittered, “After nearly a decade of pain and confusion AOL is free again.” The tweet expressed the joy of many former and current AOLers over finally being free from the destructive corporate oversight of Time Warner.
Time Warner CEO Jeff Bewkes, in an appearance at a Sanford Bernstein Conference in New York, was upbeat on AOL’s prospects under new CEO Tim Armstrong, who he hired to replace the inept Randy Falco. “Tim is really very good, and we think the team is going to be very successful. AOL’s working very well and has a renewed sense of optimism and energy. All of which doesn’t change the fact that Time Warner was crazy to do the merger with AOL back in 2001,” Bewkes reportedly said.
Bewkes’ statement about the “crazy” merger is a revealing insight into the dark underside of what most business observers consider to be the most disastrous corporate merger in history.
In an e-mail earlier this year, the same former colleague who Twittered about AOL being free again, pulled back the curtain on the dark underside of the merger. He wrote that Time Warner had destroyed AOL on purpose.
At the time it was almost impossible for me to contemplate the notion that Time Warner would purposely destroy AOL. Why on earth would rational executives do that?
But as I thought about it, I realized what a profound insight this was. We have learned from the research by behavioral economists, who have advanced the revelations of Tversky and Kahneman, and that shows people do not make rational decisions and that the notion of “economic man” – a rational, self-interested decision maker – is false. We make decisions based on emotions, or what John Maynard Keynes called animal spirits and without any understanding of the effects of randomness on events.
No rational executive would make the decisions Time Warner top management made in hiring Jon Miller and Randy Falco and allowing them to make a series of disastrous mistakes. These were not rational decisions; they were emotional.
The emotions involved were primarily rage and revenge. The emotions were probably under the surface – no one could consciously admit them. Nevertheless, the rage of the Time Warner people at being bought by AOL was barely controlled at the time – yes, AOL bought TW; it was not a merger. The rage came about because AOL was considered a lucky upstart and the AOL executives who came to Time Warner were inevitably seen as arrogant, brash carpetbaggers, even, over time, as terrorists.
When the AOL Time Warner stock plummeted after the merger, Time Warner people saw the value of their stock and, thus, their nest eggs tank, which added to their rage. They probably said to themselves, “I hate these people and I’m not as rich as I used to be. I’ll show them.” The first indication of this rage and revenge was the failure of Time Warner Cable to cooperate with AOL in putting together a meaningful broadband access package for AOL members. It was passive, vengeful resistance and the beginning of the long decline.
AOL bought Time Warner in January, 2000. We know what happened in September of 2001 and in March of 2003, which led to the moral lapses in Abu Ghraib. It was a time when torture was seen as a legitimate response to rage and a desire for revenge, and that mentality prevailed in the White House and in some executive suites.
Rage at Time Warner percolated under the surface and would bubble up as emotional but highly destructive decisions – firing the popular Mike Kelly, hiring Falco and Grant, and firing Curt Vibranz. Time Warner tortured AOL and destroyed morale, forced good people to leave, and rewarded and promoted people based on politics instead of performance, which is typical of Time Warner.
Time Warner executives, especially Jeff Bewkes, destroyed AOL on purpose because of rage and to get revenge. When they had wiped out over $150 billion in value, they finally said, “We showed them, didn’t we,” and hired the right person to clean up after the train wreck they caused.
Tim Armstrong has the clean-up job, but I’m confident that he took it only on the condition that AOL would be spun off and away from the Evil Empire that is ruled by the Dark Side of human nature – rage, revenge, fear, and political intrigue.
Yes, AOL is free again, but so, unfairly, are the people who tortured it.
Posted by Charles Warner at June 3, 2009 1:58 PM
Comments
Bruce Braun ![[TypeKey Profile Page]](http://www.mediacurmudgeon.com/nav-commenters.gif)
at June 8, 2009 2:25 PM writes:
Interesting take, Chris. One thing we can take to the bank is the expectation that the guys running these companies will and do hire senior people just like themselves with the same dearth of values, ethics and immoral business practices. What the majority of big company CEO's today have in common is no fear of failure, because there is no penalty for failing.
When CEO's and their senior executives (make that cronies) are hired with no-cut, play-me-or-play-me contracts, the only penalty is damage to their oversized egos. How can we expect them to act responsibly when they are showered with riches, hire "Chief's of Staff" with a fawning trade press that kisses their asses? These guys act like they are business heads of state.
Thinking of the best interests of the minions below deck, is only a consideration if it has the potential of diminishing the size of their bonuses.
How many people lost their jobs at AOL because of Colburn's scummy deals that cost the company hundreds of millions in fines and legal fees due to fraud investigations?
Miller and Falco never broke statutory laws. They did however, thru indifference and incompetence put thousands out of work and did inestimable damage to the lives of those impacted families.
When you bomb cites from 30,000 feet, destroying cities and lives is impersonal. For big company CEO's, they do the same thing while sipping expensive wine in their G-5's.
Media Curmudgeon at June 7, 2009 10:10 AM writes:
Chris Warner writes:
"You leave your flank exposed on this one. I am not a media expert, but as a layperson, see wide open lanes for retaliation in your one sided assault. AOL/Time Warner was a bad marriage, based on an enticing courtship. What looked so intoxicating to insiders in the emotionally charged, sky is the limit late nineties, made almost no sense to us outsiders. We sensed the relationship was a bad match and could not work for long.
AOL bought TimeWarner, then TimeWarner spun off AOL? Who was/is the stud dude and who was/is the trophy bride? Human emotion does not make sense. AOL was the biggest company in the history of the world, not based on bricks and mortar, but on the potential of the internet to generate revenue. Why? Because, more than anything else, we love to communicate. As we are finding out, the business model fails, because we want it for free.
Like any merger, it takes two to tango. You list name of people that I do not know, many of whom could have made better decisions. You make it sound as though they came in after the wedding. In 1998, Steve Case and Bob Pittman were the buzz. Where are they in your criticism? My sense is they are sitting on the sidelines, fat and happy they took advantage of the bubble of artificial exuberance, washed their hands clean of the mess, and left thousands of employees behind to live with their mess.
Part of me is jealous of people like them who pump up the hype, and in a cloud of dust, ride off into the sunset with a nest egg. However, what the rage of 9 11 and the awful hangover since shows us is that too much greed is not good. The free market model is unsustainable without adult supervision. Shame on all those who look at other peoples money as theirs for the taking. Conquest does not make sense unless it is followed by a lifetime of stewardship. I can only hope that the few greedy b@#$%&*s that are hoarding the trillions of dollars they skimmed off the top will find it in their hearts to open their wallets and start spending to restore hope in a global economy where companies can compete with confidence.
I don't know Bewkes or Armstrong, but hopefully whoever has their hand on the tiller is thinking of the best interest of the minions below deck as much as the pickle dish. Or is it a platinum parachute?"
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