On Monday, January 10, 2000, America Online announced that it was buying Time Warner for $163 billion. The news was crazy, incredible. The biggest merger ever, it was, according to the media, an "awesome megadeal" and "a fusion of guts and glory." It was "the deal of the century" and "a mega-marriage of earth and cyberspace." An Internet upstart, AOL was buying the world's most powerful media and entertainment company. "A company that isn't old enough to buy beer," marveled the Wall Street Journal, "has essentially swallowed an ancien régime media conglomerate that took most of a century to construct."
Two years later, after the smoke had cleared, $200 billion of shareholder value had vanished into cyberspace. On the trail of possible fraud, the SEC and the Justice Department started investigating AOL Time Warner's accounting practices. Meanwhile, a civil war had broken out inside the company, complete with backstabbing and personal betrayals. Before long, almost every major player was out of the company, discredited, and humiliated. Jerry Levin, Time Warner's "resident genius," lost his job, lost his reputation, and, in the view of some people, simply "lost it." Steve Case, the visionary leader of AOL, was forced out of the company he had created. Gone too was the telegenic wonder-boy Bob Pittman, and his gang of fast-talking salesmen. As for Ted Turner, he resigned from his post as vice-chairman of AOL Time Warner in early 2003, bitter, wiser, and $8.5 billion poorer.
Fools Rush In is the definitive account of one of the greatest fiascos in the history of corporate America. In a narrative fraught with drama, Nina Munk reveals the overweening ambition and moral posturing that brought down the Deal of the Century. With painstaking reporting and the remarkable eye for detail she's known for, Munk lays out, step by step, the anatomy of a debacle. Irreverent, witty, and iconoclastic, she sees through it all brilliantly.
"As in all great Greek tragedies, you knew the plot before it played out," one perceptive insider told Munk on the subject of the AOL Time Warner deal; "you knew who'd be sacrificed at the altar." Here's what we discover in Fools Rush In: In their single-minded quest for power, Steve Case and Jerry Levin were at each other's throats even before the deal was announced. Bob Pittman was regarded as a "windup CEO" by Case, and viewed as a hustler by just about everyone at Time Warner. Ted Turner underestimated Jerry Levin's ruthlessness badly. And Levin himself, convinced he was creating a great legacy comparable to that of Time Inc.'s founder, Henry Luce, refused to acknowledge the obvious: that, with a remarkable sense of timing, Steve Case had used grossly inflated Internet paper to buy Time Warner.
Excerpt
Chapter One
By all accounts, Henry Robinson Luce was endowed with moral certainty at birth. Born in 1898 to American missionaries inTengchow, China, Harry, as he was known, was a precocious andserious-minded child. At the age of five, as a diversion, he deliveredreligious sermons to his playmates. Later, turning to journalism,which he referred to as a "calling," he wrote: "I believe that I can be ofgreatest service in journalistic work and can by that way come nearestto the heart of the world." His father had devoted his life to proselytizing;likewise, Harry Luce would set people on the highway totruth. Making money was not his goal, as the terms of Luce's willwould later make clear: "Time Incorporated is now, and is expected tocontinue to be, principally a journalistic enterprise and, as such, an enterpriseoperated in the public interest as well as in the interest of itsstockholders."
When he was fifteen Luce arrived in America to attendHotchkiss School. From there he went on to Yale. He was an exceptionallygifted student: he wrote poetry; he became assistant managingeditor of the Yale Daily News; he graduated summa cum laude; hewas admitted to Phi Beta Kappa; and he was voted "Most Brilliant" inhis 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. Asummary of the world's most important news, it would run articles ofno more than four hundred words, or seven inches of type; it wouldalso deal "briefly with EVERY HAPPENING OF IMPORTANCE,"as Luce and Hadden explained in their prospectus. Unlike the LiteraryDigest, an existing summary of the news, Time would have aclearly defined point of view: "The Digest, in giving both sides of aquestion, 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 tohave 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-eightpages long, the entire issue of volume 1, number 1, dated March3, 1923, could be swallowed and digested in thirty minutes or less. "Itwas of course not for people who really wanted to be informed,"sniffed W. A. Swanberg in his definitive 1972 biography of Luce. "Itwas 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 toshrink and condense articles from The New York Times and New YorkWorld, transforming them into "Timestyle," the quirky prose forwhich Time became famous (or infamous). Together the men inventedneologisms - telescoped words like "socialite," "cinemaddict,"and "guesstimate," for example. They also revived arcane termssuch as "tycoon" (Japanese for "great ruler") and "pundit" (Hindifor "learned man"). Deeply in love with adjectival phrases ("ToSwanscott came a lank, stern Senator, grey-haired, level-browed"),Luce and Hadden claimed they'd been influenced by Homer's Iliadwith its inverted syntax and double-barreled epithets ("white-armedHera" and "grey-eyed Athena" and "horse-breaking Trojans").
Time was pilloried by intellectuals. Parodying Timestyle for a1936 profile in The New Yorker, Wolcott Gibbs wrote: "Backwards ran sentences until reeled the mind ... Where it will all end, knowsGod!"
In 1929, just as Time was becoming successful, Hadden died of astreptococcus infection, and Luce took over, borrowing money to buyHadden's share of their company. He was thirty-one years old. Beforelong, Hadden would be a footnote in the history of Time Inc.
With a circulation approaching three hundred thousand, Timewas now sufficiently profitable that Luce could afford to expand. Determinedto spread his "fantastic faith in the industrial and commercialfuture of this country," Luce launched Fortune in 1930. Six yearslater, in late 1936, he introduced his most spectacular success, Lifemagazine. Its purpose: "To see life; to see the world; to eyewitnessgreat events; to watch the faces of the poor and the gestures of theproud."
Within hours of its arrival at newsstands, Life was sold out allover the country. Struggling to find enough coated paper to meet thedemand, Luce couldn't publish enough copies. Even he had neverimagined Life would be so popular. After just four weeks, Life's circulationwas 533,000; no magazine in American history had passed thehalf-million mark so quickly.
Sports Illustrated would come next. In contrast with Life, however,Sports Illustrated was not an immediate success. Launched in1954, when spectator sports were looked down on as fodder for theworking classes, Sports Illustrated was ahead of its time. But Luce wasfully committed to his new magazine. Before long Sports Illustratedwould broaden the appeal of spectator sports and change the way theywere covered.
Long before Sports Illustrated had become profitable - even before it was launched - Luce had become a media baron. By theearly 1940s, one in every five Americans was reading a Luce publication. Company revenues were $45 million. Emboldened by the successof his publications, Luce increasingly turned them into vehicles ofpolitical and moral propaganda. Money had never motivated Luce,but power did.
In 1941, decrying isolationism, Luce argued that it was time forAmerica, the world's most powerful nation, to fulfill its duty to humanity.The twentieth century, he stated famously in an editorialwritten for Life, was "the American Century." Americans had to "acceptwholeheartedly our duty and our opportunity as the most powerfuland vital nation in the world and in consequence to exert upon theworld the full impact of our influence, for such purposes as we see fitand by such means as we see fit."
(Continues...)
Excerpted from Fools Rush inby Munk, Nina Excerpted by permission.
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