The rising titans of '98: Where are they now?

By Thomas Heath
Monday, November 30, 2009

A decade ago, they were considered the New Face of Washington Business, a group of nine up-and-coming entrepreneurs shaking up the establishment.

America Online mogul Steve Case and BET co-founder Bob Johnson went on to become household names. Katherine Clark and Jeong Kim built on their reputations as technology mavens. Others, such as Stephen Wolf, then chairman of US Airways, became corporate dons.

They were smart, skilled and at the right place at the right time. In the group photo from 1998, all nine wore jaunty smiles. You would, too, if you were that rich. But the past 11 years and the ensuing economic collapse have faded those smiles, turned hair gray, swelled some midsections and caused bank accounts to swoon.

STEVE CASE Life on a 'roller coaster'

In 1998, AOL co-founder Steve Case referred to his business life as a "roller coaster . . . when people are putting you on the cover of magazines and telling you how smart you are . . . you know that a year from now, they'll be saying how dumb you are."

The quote still fits, Case said.

"Nothing's changed in 10 years," he said. "When we started AOL in '85, it was a roller coaster as well. I saw that early on, in tech markets, things move quickly. And 10 years ago, the Internet was becoming more of a central thing and AOL was kind of king of the hill. The merger with Time Warner was intended to propel it to a new level of greatness, but for a variety of reasons, it didn't work out in the way that people intended."

Case, 51, left the AOL Time Warner board in 2005, after having become a lightning rod for engineering the $112 billion merger of AOL and Time Warner in 2001 that eventually wiped out tens of billions of dollars of value for Time Warner shareholders.

"Strategically it was a wise thing for both companies," Case said. "Diversification was smart for AOL shareholders. The synergy we hoped to have, the combination of two members of digital media, didn't happen as we had planned. That's a bit of a disappointment."

Since then, Case has had a hand in several local start-ups that aim to blow up traditional business models in credit cards (Revolution Money), movies (SnagFilms), health (BrainScope), transportation (Flexcar/Zipcar) and travel (Exclusive Resorts).

"They are all Internet consumer business where we are trying to disrupt traditional industries," said Case, who owned 2 percent of AOL in 1998 worth around $200 million. "It's been a little like the early days of AOL, when [we were] believing something new was happening when others were skeptical."

Revolution Money was recently purchased by American Express for $300 million, Case's biggest post-AOL success so far. But start-ups are always a crapshoot. Case said the important thing is that Washington is producing so many new companies out of the ferment left behind by others.

"In the last 10 years, [the Washington region] moved from major companies like AOL and MCI to a much more diversified ecosystem of start-up companies," he said. "And at least half of them are based in D.C., like LivingSocial, SnagFilms. Clearspring has a number of AOL people," Case said.

Case has not been alone on the roller coaster.

JOSEPH E. ROBERT JR. Embracing change

"In the last two years, I've lost more money than I ever thought possible," said Joseph E. Robert Jr., the high school troublemaker who built a billion-dollar fortune by specializing in complex financial transactions.

Robert does not say this with bitterness. He and the others have traveled through two booms and busts. They've rebuilt or remade businesses time and again. The current malaise is only the latest challenge.

"These characters, Robert Johnson, Steve Case, helped change the business environment," said James R. Bailey, who teaches leadership at the George Washington University School of Business. "They now have to operate in that environment, which demands different skill sets, different temperaments and different workforces. If they intend to be successful going forward, their skill sets are going to have to evolve."

Robert is no stranger to such adjustments. Over the years, he has changed his company, J.E. Robert Co., from a fee-driven business that liquidated assets for federal regulatory agencies to managing real estate and financial investments it has made on behalf of institutions and wealthy individuals. These days, it's essentially a private-equity firm in need of a transformation again.

The former boxer is 57 and has been battling brain cancer for almost a year. He hired a new chief executive this summer to help lead the company in the future. Robert said one of the most important lessons he learned in the past decade is how difficult it is to find good people.

"Hiring is like hitting a golf ball," Robert said. "You visualize it down the middle of the fairway, and then it slices off to the right. People mistakes at a senior level are extremely costly -- not just economically, but the negative impact on the organization overall can be profound and take some period of time to rectify."

His advice: Move fast.

"The more you delay, the costlier it is to the organization."

STEPHEN M. WOLF 'Full-time dabbler'

Stephen M. Wolf, 68, who helped get US Airways into an alliance with United Airlines, has become something of an elder statesman on the business scene. A "full-time dabbler" who sits on several corporate boards, he chairs R.R. Donnelley & Sons and Trilantic Capital Partners, sits on the boards of Philip Morris International and Chrysler Group, and is an honorary trustee of the Brookings Institution.

Wolf said the country must stop picking on business "and allow them to grow and create jobs." He really comes alive when discussing the "macro issues" he sees facing Americans: voracious consumerism and a lack of control over the federal government's finances.

"The escalation in the federal deficit is astounding," he said.

JEONG H. KIM A life of innovation

Like Wolf's, Jeong H. Kim's climb in the business establishment has been a relatively steady one. He arrived from Seoul when he was 14, studied electrical engineering at Johns Hopkins University on a scholarship and spent seven years as a submarine officer in the Navy.

He founded Yurie Systems, which he sold in 1998 to Lucent Technologies for $1 billion, turning Kim into one of Washington's wealthiest citizens and a part owner of the Washington Capitals hockey team. After teaching engineering at the University of Maryland, Kim became the 11th president of the research institution Bell Labs (now the research arm of Alcatel-Lucent) in 2005 with the mission of bringing his entrepreneurial spirit to build revolutionary technologies that would have an impact on the marketplace.

"At Bell Labs I get to work with the best researchers in the world inventing disruptive solutions that will benefit our company, our customers and society," Kim, 48, said in an e-mail. "In many cases, these solutions we invent will make use of technologies that don't even exist today."


Not everyone was eager to talk about their experiences. Jonathan J. Ledecky and Emanuel J. Friedman declined to be interviewed.

Ledecky, whose flagship was U.S. Office Products, which rolled about 200 family-owned office products companies into a giant, $4 billion firm, tried to buy the Washington Nationals but lost to Theodore N. Lerner.

Friedman, former chief executive of Friedman, Billings, Ramsey Group, the Arlington investment bank, left FRB in 2005 to start his own investment firm. Friedman's EJF Capital is making money by figuring out the value of the assets in the complex securities that were issued around mortgages over the past few years.

Another of the nine, John W. Sidgmore, whose UUNet was acquired by WorldCom in 1996, died from acute pancreatitis in 2003. At the time, he was trying to revive WorldCom after an accounting scandal led to the ouster of chief executive Bernard J. Ebbers.

ROBERT L. JOHNSON Going against the grain

Robert L. Johnson, chairman and chief executive of RLJ Cos., has been one of the most active entrepreneurs anywhere since he sold Black Entertainment Television to Viacom in 2001 for $3 billion.

With a load of cash in hand, Johnson created RLJ as a holding company that invests in diverse sectors of business including private equity, automobile dealerships and community banking.

Conglomerates were the business rage three decades ago but have become less popular as business theory preaches specialization and concentration over diversification. But Johnson, 63, said the skill set is essentially the same, whether you are running a single business or a bunch.

"It's the same skills, except that you've got to be willing to put a lot of confidence in the individual manager of an asset. You've got to be willing to let people run their particular shop based on their expertise, and that while they are under one umbrella, they are companies with separate [profit and loss statements]."

It's a balancing act that requires deference and meddling.

"Instead of quarterback, I'm more the coach," said Johnson, who now lives in Florida after decades in Washington. "The hardest part now is the rapid speed with which business issues come at you. Things change dramatically that cause you to do business differently than 10 years ago, such as currency issues, lending, access to capital, consumer behavior."

Looking ahead, Johnson said he is bullish on health care because "costs and usage are going to continue to go up."

Johnson said he bought the Charlotte Bobcats professional basketball team because "you can afford it and it gives you psychological benefits." But he said his smartest decision was getting into the hotel business, where his real estate fund is the second-largest owner of Marriott hotels and has successfully returned profits to investors.

And his biggest flub?

"We made a film called 'Who's Your Caddy?' We lost money. I learned that it's better if you come up with the idea for the movie and somebody else pays you to produce it. Take your money on the back end."

KATHERINE K. CLARK A broader perspective

Katherine K. Clark, 52, sold Landmark Systems, the software company she founded in 1983, in 2002. She and her husband bought a 56-foot sailboat and headed for the South Pacific, where Clark had an epiphany of sorts.

"One thing you learn by spending concentrated time outside the U.S. is that the world does not revolve around the United States," said Clark, who stayed retired for seven years. She returned to the business world six months ago when she became chief executive of Smarthinking, an online tutoring business.

Clark said her fortune has taken a hit like everyone else's, "but relatively speaking, it's not that bad."

"I hate to say this, but I sense there has not been a huge change in the time that I have been away," Clark said. "No upheavals, new industries or a dot-com revolution. It's just a good, healthy, stable business environment. And right now, this region is doing better than almost any in the country."

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