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.

Comments

[plebeianswillrevolt]

AOL... the joke is on them.

The 800 pound gorilla that was charging is $19.80 a month for service from 1998 to 2004 when they slammed a rate increase to $21.90 per month on 18 million subscribers.......... anybody remember that? The same year that Time Warner bought them in the second stupidest business move since AIG wrote 5 trillion in credit default swap guarantees.

AOL lost 12 million subscribers that same year and came begging back with a reduced service plan for $2.90 a month. I still laugh at this since I was a Time Warner employee and even though we all lost our jobs and our 401k's it is nice to read about some frontier justice once in a while.

[Ian Massey]

let's be clear: Time Warner did not buy AOL. AOL bought Time Warner. Outright.

[CharlesWarner]

That's what I wrote, and that's one of the things that I think created the rage at Time Warner,

[renatam]

Thank you, Charlie. Heartbreaking story about a macro war between traditional media (and their bankers, lawyers, agencies in Manhattan) against the INTERNET (post Microsoft's efforts to KILL Netscape). Very poignant tale, which really needs to be studied more carefully.

American business needs to get a hold of itself. We cannot afford more debacles and have a prayer at recovery - and we need Boards who do their jobs as stewards of shareholder value.

[blaqntelligence]

Does this mean when I call customer service I will get someone I can understand?

[CharlesWarner]

I hope so. At CraigsList, Craig Newmark is not the CEO; he calls himself chief customer service representative. Maybe Armstrong will start taking customer service calls.