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Fools Rush In: Steve Case, Jerry Levin, and the Unmaking of AOL Time Warner

Fools Rush In: Steve Case, Jerry Levin, and the Unmaking of AOL Time Warner

by Nina Munk

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Every era has its merger; every era has its story. For the New Media age it was an even bigger disaster: the AOL-Time Warner deal.

At the time AOL and Time Warner were considered a matchless combination of old media content and new media distribution. But very soon after the deal was announced things started to go bad—and then from bad to worse. Less


Every era has its merger; every era has its story. For the New Media age it was an even bigger disaster: the AOL-Time Warner deal.

At the time AOL and Time Warner were considered a matchless combination of old media content and new media distribution. But very soon after the deal was announced things started to go bad—and then from bad to worse. Less than four years after the deal was announced, every significant figure in the deal -save the politically astute Richard Parsons—has left the company, along with scores of others. Nearly a $100 billion was written off and a stock that once traded at $100 now trades near $10.

What happened? Where did it all go wrong? In this deeply sourced and deftly written book, Nina Munk gives us a window into the minds of two of the oddest men to ever run billion-dollar empires. Steve Case, the boy wonder who built AOL one free floppy disk at a time, was searching for a way out of the New Economy.  Meanwhile Jerry Levin, who'd made his reputation as a visionary when he put HBO on satellite distribution, was searching for a monumental deal. These two men, more interested in their place in history than their personal fortunes, each thought they were out-smarting the other.

Editorial Reviews

The Washington Post
Munk tells the story with dish and sparkle and does a great job of sketching the men who in early 2000 decided to merge America Online and Time Warner and thereby create the "first global media and communications company of the Internet century." … Munk's book deserves points for its breezy style and agile handling of the business issues. — Robert Bryce
Smart Money
A delightfully scathing account of the AOL/Time Warner merger Nina Munk’s voracious reporting style is perfectly fitted to the sprawling story and its scheming central cast: Levin, a backstabbing corporate climber given to quoting the Bible, Heraclitus and Camus; and AOL chief Steve Case, and emotionless visionary who preached the power of AOL to change people’s lives.
Fleming Meeks
Entertainment Weekly
If Enron’s demise was fueled by unmitigated greed, then the undoing of AOL Time Warner was powered by the egos and self-righteousness of its chiefs: Steve Case and Gerald Levin. Eminently enjoyable, Fools Rush In is a gossipy, in-depth look at a deal doomed from the start. Case and Levin wanted the megamerger to define their careers. Munk, a former writer for Fortune, admirably shows that they may have gotten their wish. Grade: A.
David Koeppel
Read Nina Munk's great book, Fools Rush In. This quick, absorbing read reveals that at one time the stars aligned and every crackpot non-businessman, self-promotional hype artist alive came together to form this merger. I found myself laughing out loud at what a bunch of jokers Steve Case, Bob Pittman and Jerry Levin were. You couldn't make up their kind of arrogance cum stupidity.
Jim Cramer
Fast Company
The holiday break allowed me to read at least one book: Nina Munk's superb Fools Rush In. The book is a fast read and a tour de force that explores the motivations and actions of all the key players in that sad drama.
John Byrne
The New York Times
Marrying exemplary reporting with lively, lucid writing, [Munk] makes a convincing -- nay, devastating -- case that Levin wrecked the legacy of Henry Luce, the founder of Time Inc., in the service of his ego. Levin wanted to redeem his weak performance at the company's helm with what he liked to call a transforming transaction. — Adam Liptak
Publishers Weekly
Munk's entry to the growing list of books about the AOL Time Warner merger provides a thorough recap of the debacle, with the author coming to her own conclusion on the causes behind the merger's failure. After more than 100 pages of the obligatory background on AOL and its chairman, Steve Case, and Time Warner and chairman Jerry Levin, Munk begins to make her argument that Case and Levin, who ran their companies with few checks and balances, bear the greatest responsibility for orchestrating a deal that had little chance to succeed. She presses her case by hitting hard on the fact that few Time Warner executives knew about the pending deal until hours before it was announced, and that even fewer executives supported the proposal. That due diligence for the $165-billion merger only took three days and that many of the merged company's top managers sold large chunks of stock (including Case who sold shares worth $100 million) shortly after the deal closed is further proof to Munk that the combination was not well thought out and that many managers had doubts about its success from the very beginning. For readers looking for a quick review of events surrounding the AOL Time Warner merger, Munk's book fits the bill, but for those who are already well versed on the subject, Munk (a contributing editor at Vanity Fair) adds little new information. (Jan.) Copyright 2003 Reed Business Information.
Library Journal
This account by Vanity Fair writer Munk is the latest chronicle describing the AOL Time Warner megamerger. Following Alec Klein's Stealing Time and Kara Swisher's There Must Be a Pony in Here Somewhere, this is unquestionably the best book on the subject to date. Munk has done a superb job of solidly researching the background, as well as thoroughly interviewing all the participants. In trying to find out what went wrong, the author points out that each company lacked any kind of internal system of checks and balances that could have helped put the brakes on the merger. The scenes just prior to the merger announcement on January 10, 2000, especially crackle with excitement and Machiavellian intrigue. Two villains clearly stand out here: AOL's Steve Case and Time Warner's Jerry Levin both deserve to be nominated to the corporate "Hall of Shame" for setting in motion the chain of events that led to a loss of over $200 billion in shareholder value and the near-demise of the company, now known as Time Warner. Perceptive and well written, Munk's account is highly recommended for all libraries.-Richard Drezen, Washington Post/New York City Bureau Copyright 2004 Reed Business Information.
“The best read...a sharp-edged narrative.”
Wall Street Journal
“A gossipy tragicomedy that surely has Time founder Henry Luce making like a DVD in his good methodist grave.”
Fast Company
“Superb... a tour de force that explores the motivations and actions of all the key players.”
Philadelphia Inquirer
“A mesmerizing tale of corporate intrigue.”
Financial Times
“The most detailed account yet. . . . a compelling, fast-paced narrative.”
New York Times Book Review
“Marrying exemplary reporting with lively, lucid writing, Munk makes a devastating case that Levin wrecked the legacy of Henry Luce.”

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Fools Rush In
Steve Case, Jerry Levin, and the Unmaking of AOL Time Warner

Chapter One

By all accounts, Henry Robinson Luce was endowed with moral certainty at birth. Born in 1898 to American missionaries in Tengchow, China, Harry, as he was known, was a precocious and serious-minded child. At the age of five, as a diversion, he delivered religious sermons to his playmates. Later, turning to journalism, which he referred to as a "calling," he wrote: "I believe that I can be of greatest service in journalistic work and can by that way come nearest to the heart of the world." His father had devoted his life to proselytizing; likewise, Harry Luce would set people on the highway to truth. Making money was not his goal, as the terms of Luce's will would later make clear: "Time Incorporated is now, and is expected to continue to be, principally a journalistic enterprise and, as such, an enterprise operated in the public interest as well as in the interest of its stockholders."

When he was fifteen Luce arrived in America to attend Hotchkiss School. From there he went on to Yale. He was an exceptionally gifted student: he wrote poetry; he became assistant managing editor of the Yale Daily News; he graduated summa cum laude; he was admitted to Phi Beta Kappa; and he was voted "Most Brilliant" in his class. Harry Luce was most likely to succeed.

In the early 1920s, while he was working as a reporter at the Baltimore News, Luce, together with a former classmate from Yale, Briton Hadden, decided to start a weekly magazine called Time. A summary of the world's most important news, it would run articles of no more than four hundred words, or seven inches of type; it would also deal "briefly with EVERY HAPPENING OF IMPORTANCE," as Luce and Hadden explained in their prospectus. Unlike the Literary Digest, an existing summary of the news, Time would have a clearly defined point of view: "The Digest, in giving both sides of a question, gives little or no hint as to which side it considers to be right. Time gives both sides, but clearly indicates which side it believes to have the stronger position."

In early 1923, having raised $85,675 from seventy-two investors, Luce and Hadden published their first issue of Time. Only twenty-eight pages long, the entire issue of volume 1, number 1, dated March 3, 1923, could be swallowed and digested in thirty minutes or less. "It was of course not for people who really wanted to be informed," sniffed W. A. Swanberg in his definitive 1972 biography of Luce. "It was for people willing to spend a half-hour to avoid being entirely un-informed."

Those who worked for Time were rewrite men whose job was to shrink and condense articles from The New York Times and New York World, transforming them into "Timestyle," the quirky prose for which Time became famous (or infamous). Together the men invented neologisms -- telescoped words like "socialite," "cinemaddict," and "guesstimate," for example. They also revived arcane terms such as "tycoon" (Japanese for "great ruler") and "pundit" (Hindi for "learned man"). Deeply in love with adjectival phrases ("To Swanscott came a lank, stern Senator, grey-haired, level-browed"), Luce and Hadden claimed they'd been influenced by Homer's Iliad with its inverted syntax and double-barreled epithets ("white-armed Hera" and "grey-eyed Athena" and "horse-breaking Trojans").

Time was pilloried by intellectuals. Parodying Timestyle for a 1936 profile in The New Yorker, Wolcott Gibbs wrote: "Backwards ran sentences until reeled the mind ... Where it will all end, knows God!"

In 1929, just as Time was becoming successful, Hadden died of a streptococcus infection, and Luce took over, borrowing money to buy Hadden's share of their company. He was thirty-one years old. Before long, Hadden would be a footnote in the history of Time Inc.

With a circulation approaching three hundred thousand, Time was now sufficiently profitable that Luce could afford to expand. Determined to spread his "fantastic faith in the industrial and commercial future of this country," Luce launched Fortune in 1930. Six years later, in late 1936, he introduced his most spectacular success, Life magazine. Its purpose: "To see life; to see the world; to eyewitness great events; to watch the faces of the poor and the gestures of the proud."

Within hours of its arrival at newsstands, Life was sold out all over the country. Struggling to find enough coated paper to meet the demand, Luce couldn't publish enough copies. Even he had never imagined Life would be so popular. After just four weeks, Life's circulation was 533,000; no magazine in American history had passed the half-million mark so quickly.

Sports Illustrated would come next. In contrast with Life, however, Sports Illustrated was not an immediate success. Launched in 1954, when spectator sports were looked down on as fodder for the working classes, Sports Illustrated was ahead of its time. But Luce was fully committed to his new magazine. Before long Sports Illustrated would broaden the appeal of spectator sports and change the way they were covered.

Long before Sports Illustrated had become profitable -- even before it was launched -- Luce had become a media baron. By the early 1940s, one in every five Americans was reading a Luce publication. Company revenues were $45 million. Emboldened by the success of his publications, Luce increasingly turned them into vehicles of political and moral propaganda. Money had never motivated Luce, but power did.

In 1941, decrying isolationism, Luce argued that it was time for America, the world's most powerful nation, to fulfill its duty to humanity. The twentieth century, he stated famously in an editorial written for Life, was "the American Century." Americans had to "accept wholeheartedly our duty and our opportunity as the most powerful and vital nation in the world and in consequence to exert upon the world the full impact of our influence, for such purposes as we see fit and by such means as we see fit."

Fools Rush In
Steve Case, Jerry Levin, and the Unmaking of AOL Time Warner
. Copyright © by Nina Munk. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.

Meet the Author

Nina Munk is a contributing editor at Vanity Fair. A former senior writer for Fortune, her work has appeared in the New York Times Magazine, The New Yorker, and Forbes. Born in Canada, she lives in New York City.

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