The Third Wave: An Entrepreneur’s Vision of the Future - by Steve Case

The Third Wave: An Entrepreneur’s Vision of the Future – by Steve Case

How strongly I recommend it: 7/10
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Steve Case shows that we’re getting into the next industrial revolution, where the requisites to lead the market will be completely different as they are right now.


The Third Wave Entrepreneur Table

Today, the Second Wave is starting to give way to something new. Decades from now, when historians write the story of technological evolution, they will argue that the moment the Internet became a ubiquitous force in the world was when we started integrating it into everything we did. This moment is the beginning of the Third Wave.

The Third Wave is the era when the Internet stops belonging to Internet companies. It is the era in which products will require the Internet, even if the Internet doesn’t define them. It is the era when the term “Internet-enabled” will start to sound as ludicrous as the term “electricity-enabled,” as if either were notable differentiators. It is the era when the concept of the Internet of Things—of adding connected sensors to products—will be viewed as too limiting, because we’ll realize that what’s emerging is the much broader Internet of Everything.

The entrepreneurs of this era are going to challenge the biggest industries in the world, and those that most affect our daily lives. They will reimagine our healthcare system and retool our education system. They will create products and services that make our food safer and our commute to work easier.

Third Wave company creation stories are less likely to begin with dorm-inspired apps that go viral, as they often did in the Second Wave. Third Wave entrepreneurs will need to build partnerships across sectors in a way that Second Wave companies never had to. They will need to navigate a policy landscape that most Second Wave companies could ignore. And they will need to do it all in a space where the barriers to entry—even for a worthy idea—are far greater than anything experienced in the Second Wave.


At the time, one of the concepts we were testing was home delivery. This was 1982, and though pizza was popular, delivery wasn’t yet universal. We were also working on ways to make pizza more convenient and more portable. We spent a lot of time trying to figure out if calzones or pocket pizzas could work as a carry-out option for people on the run. It’s funny to think, looking back on that year, that the things we were focused on—convenience and portability—would become such crucial parts of the company I would later help build. So would our desire to keep things simple and focus on the basics.

Without Jim, we wouldn’t have had the ability to raise the capital to survive. And without Marc, we wouldn’t have been able to build the core technology of our product. I played the role of the strategist and hustler, coming up with the ideas, building partnerships, designing many of the consumer-facing aspects of the product, and handling our branding and message. It was the perfect combination of highly complementary skills. And we hoped it would make us a credible bet—particularly because we needed to raise some capital if we were going to pull off the pivot.

We were able to launch Quantum with just a million dollars of new capital, largely because we were able to leverage partnerships to minimize our marketing costs. We customized our pitch for each PC company, and we started small.


During the Second Wave, the surge in Internet usage, coupled with the rapid adoption of smartphones, led to an explosion in social media and the creation of a thriving app economy. Some of the most successful companies, such as Snapchat and Twitter, started with small engineering teams and became overnight sensations, requiring none of the partnerships and perseverance that had come to define the previous era.

But there are signs that this model is now peaking, that a new wave is about to break. And there is growing evidence that this new period will look quite different from the Second Wave—and quite similar to the First.

The Third Wave of the Internet will be defined not by the Internet of Things; it will be defined by the Internet of Everything. We are entering a new phase of technological evolution, a phase where the Internet will be fully integrated into every part of our lives—how we learn, how we heal, how we manage our finances, how we get around, how we work, even what we eat. As the Third Wave gains momentum, every industry leader in every economic sector is at risk of being disrupted. Think about what’s been happening in Silicon Valley over the past few decades and imagine what it will look like when we apply that same culture of innovation and scope of ambition to every part of our economy. That’s the Third Wave—and it’s not just coming; it’s here.

Of course, in the Third Wave, it won’t just be doctors who analyze your health data; it will be third-party apps designed to keep you healthy. Imagine the possibility of instant diagnosis, not by a doctor, but by a supercomputer like IBM’s Watson. These are the kinds of changes that will reverberate throughout the entire healthcare system. The CDC estimates that 200,000 people each year suffer preventable deaths from chronic disease. What if getting them to the hospital a day or even an hour earlier could save their lives? We can even quantify the value of those better outcomes: According to the consulting firm McKinsey, the value to the economy of this kind of monitoring could be as much as $1 trillion per year by 2025. And that’s before we even begin to look at the data in the aggregate. Once researchers have access to anonymous population-wide data, once that data can be analyzed, we’ll be able to see once-invisible patterns. That could change everything from how we track epidemics to how we characterize illnesses themselves, driving a genuine revolution in medicine.


More personal. More inpidualized. More data-driven. This is not just the mantra of the healthcare system’s future. It is the mantra of the entire Third Wave. And it applies to another system that is big, important, complicated, and broken: the American education system.

Third Wave organizations—both for-profit and nonprofit—will leverage technology to revolutionize the way we learn. During the First and Second Waves, technology in the classroom looked a lot like technology outside of it: students at computers, making PowerPoint decks, browsing the web, chatting with virtual pen pals on the other side of the world. Each of these tools has proved useful, but few of them were designed specifically for the classroom. During the Third Wave, that is beginning to change.

There are also emerging Internet platforms where course materials can be shared and reviewed. In 2015, the New York Times reported on a company called Teachers Pay Teachers, which provides an online marketplace where teachers can buy and sell lesson plans. One teacher profiled generated about $100,000 in revenue from a year’s worth of grammar, vocabulary, and literature exercises. “What started out as a hobby has turned into a business,” she told the Times. Teachers Pay Teachers CEO Alan Freed told the newspaper that twelve teachers on the site have become millionaires. “If you have a kid in school in America, they are interacting somewhere with Teachers Pay Teachers’ content,” said Freed.

The key will be replacing a culture of standardization with a culture of personalization. We don’t all learn the same way, or at the same pace—so why should we all be taught the same way?

People are often more worried about the risk of trying something new than about the risk of maintaining the status quo. And too often, the latter wins out. The Third Wave won’t solve this problem altogether, but it can help. It can answer questions we’ve never had answers for, explain patterns we never would have seen on our own, and solve problems we didn’t even know we had.

Ultimately, the reinvention of education will require a multifaceted approach. Of course, at the core is the material that is being learned—the content, if you will. But, as we saw in the early days of AOL, it’s a mistake to focus solely on content. In the First Wave, we learned that context and community were equally important. At AOL, context meant packaging and curating to help guide people through a seemingly endless array of options, and striking deals with media companies that had trusted brands in order to help attract a mainstream audience. And community meant creating ways for people to connect with the content, and with each other. Those same “3 C’s” that drove AOL’s success in the First Wave—content, context, and community—will likely power the education revolution in the Third Wave. Yes, you need teachers presenting content in the right way. But you can’t stop there. You also need respected brands (for example, top universities) offering credentials (degrees, or badges) that employers will value. And, you need to create communities around the content so that students can learn from each other, and then have a lifelong relationship with each other, forming a network that persists long after graduation. Education innovators were often too focused on technology in the First Wave, and too much on content in the Second Wave. The winners in the Third Wave will leverage technology and focus on great content, but also understand the importance of context and community. The integrated approaches they bring to market, largely in partnership with others, will likely usher in the revolution in learning that has been talked about for decades, but has yet to bear much fruit.



There’s an old African proverb I’ve come to appreciate: “If you want to go quickly, go alone. If you want to go far, go together.” As simple as this advice may sound, I think it’s one of the most important lessons in business. It’s particularly true for the Third Wave, where the success of a company will depend largely on the partnerships its leadership can forge—sometimes even with the very organizations they are trying to disrupt.

During the Third Wave, a great product will only get you so far. You typically won’t be able to build an audience by dropping your app in the App Store and waiting for users to sign up. That’s because most Third Wave industries have gatekeepers. There are key decision makers in school districts who will need to approve any products that have to do with classroom learning. The same is true in healthcare, transportation, finance, education, and food.

For the most part, success will hinge on an entrepreneur’s ability to form constructive, supportive partnerships with the organizations and inpiduals that can influence those decision makers and, eventually, with the decision makers themselves. These Third Wave companies won’t have the option of going it alone.

This maneuver was a tightrope walk for Apple. But it would have been even harder for any other company. When Jobs approached the music labels, he was doing so as a well-known and well-respected brand in his own right. He was coming to the table with ideas and resources and a strategy that was thoughtfully de-risked.

But if a young startup had come up with the same idea, what are the chances they would have gotten the meeting? And even if they had, what was the likelihood that record labels would sit across the table from an unknown quantity and have the confidence that any partnership was worth their while? This lack of credibility may be the single greatest challenge for Third Wave startups. It’s also one that can be overcome. What it requires is more partners. Different partners. Partners who can lend credibility and provide momentum and help create a sense of inevitability.

This was a particularly acute challenge in AOL’s early days as well. We had to build credibility—and create a sense of possibility—not just around our company but around the emerging industry itself. We had to convince potential partners, first, that the Internet would become a core part of everyday life and, second, that even though there were a lot of big companies, little AOL was the one to bet on. But we couldn’t do it alone, and we had to start small. Our first deal was with Commodore, and because we did that deal, we could do one with Tandy. And because of those two, we could do a deal with Apple. And because we had Apple, we could get IBM. And because we did deals with all of them, we had the credibility that enabled us to raise capital and gain traction in the market.

We would never have gotten funding if we had said, “We’re going to create this company on our own, and we’re going to market it on our own. We have no brand, we have no money, we have nothing but will.” That’s what our biggest competitor—Prodigy—was doing, but they had $1 billion in investment. We couldn’t compete against them alone. Our only chance was to stitch together enough alliances to create a sense of possibility—and, we hoped, inevitability.

Often, forging external partnerships depends on bolstering the internal team. A brilliant developer who comes up with a new way for hospitals to track patients isn’t likely to get an audience—or a fair hearing—from the medical community on her reputation alone. But that dynamic changes instantly if she shows up with her newest board member, the former CEO of the Cleveland Clinic. Now she has a foot in the door, and a serious shot at a partnership. If she manages to land the deal, she’s more likely to land the next one, creating a virtuous cycle of credibility. These endorsements can attract and assuage prospective investors. And credible investors will ratchet up the founder’s own credibility factor even more, opening the possibility of raising a new round with others.

We tried to do too much too soon and we failed to secure critical partnerships.

Partnerships in the Third Wave are the prerequisite for success. And that can create a Catch-22—where a company needs a partnership before it can get funded, but can’t secure a partnership without showing proof of concept (or, at least, proof of life). Getting over that hump will require persistence—and patience.

In the Third Wave, this same attitude could be devastating to a company’s prospects. In the Third Wave, disruption cannot be a mantra; it has to be a strategy. And while your product has to be great, your partnership skills may end up determining your success or failure.


Government will always play a role in Third Wave industries, and that means Third Wave entrepreneurs must have a fluent grasp on the policy issues they will encounter. New lending platforms require Securities and Exchange Commission (SEC) clearance. Personalized genetic testing requires approval from the Food and Drug Administration (FDA). Delivery devices can’t be flown without clearance from the Federal Aviation Administration (FAA). And the list goes on and on.

Third Wave entrepreneurs will need to engage with governments. The challenge, of course, is that few founders are policy wonks, and even fewer have the time (or desire) to become regulatory experts. They’ll have to hire them—or at least rely on them—from the beginning. A lot of companies won’t be able to get venture funding without demonstrating a credible go-to-market strategy, including how to manage regulatory issues. No matter how good an idea, a Third Wave company that lacks a clear strategy for policy is a dangerous gamble for investors. It’s not that success is impossible; but the odds make it a difficult bet.

We’ve watched the risk factors change as each wave evolved. In the First Wave, technology risk was the great concern—can you build it? In the Second Wave, market risk was paramount—if you build it, will the masses adopt it? In the Third Wave, policy risk will become more important—will you be able to navigate the rules and successfully bring your product or service to market?


And the Third Wave will require a high degree of adaptability. Your initial product may not survive its first contact with the marketplace. Or with regulators. Or, perhaps partners you seek to align with will demand some adjustments. You’ll have to keep adjusting, tweaking, pivoting.

The winners of the Third Wave will be those who chase big-impact ideas with a sense of urgency—but also methodically and diplomatically. Third Wave companies will have to find a perfect balance between two competing ideas. On the one hand, disruptive success depends in some ways on ignorance. It requires a fresh perspective and the ability to look at new paradigms without being burdened by legacy dogma. The founders of PayPal like to say that if any of them had actually worked in the credit card industry, they would have been too fearful to give their new business a try. In this sense, thinking like an incumbent is a disadvantage. Yet on the other hand, understanding the dynamics at play in the industry and having a clear view of potential partnerships and policy issues will increasingly be prerequisites for success—or at least for avoiding major roadblocks. Third Wave entrepreneurs must find a way, then, to bring both viewpoints to bear—the nuanced perspective of the defending incumbent and the relentlessly disruptive mind-set of an entrepreneur on the attack.


Business leaders said, in a 2015 survey by the Global Center for Digital Business Transformation, that nearly half of the top-ranked companies in their industries will be gone by 2020. But the Third Wave is not just a fait accompli that corporations must defend against; the best leadership teams will recognize it’s something they can take advantage of. As Peter Diamandis, founder of the XPRIZE nonprofit, put it, “It isn’t that entrepreneurs are smarter than companies, it’s that they are trying more crazy ideas, taking more shots on goal.” There will be some corporate leaders who will develop a strategy to take more shots on goal—to get in front of these opportunities rather than chasing them from behind.

The conventional wisdom may be that startups are the future, while established corporations are all relics of another world. But many of the world’s biggest companies are teeming with talent and resources, creating new and innovative products all the time. In 2014, for example, Johnson & Johnson spent more than Google on research and development. And though the most rapid growth in R&D is happening in the software and Internet industry, as of 2014, less than 10 percent of total corporate R&D came from tech companies. Most of the world’s biggest ideas are still hatching elsewhere.

Consider the self-driving car, a technology that has captured the imaginations of executives at Google and Uber, who are competing to develop a street-legal vehicle that will help us redefine our commutes. But the idea of a self-driving vehicle was not first born in the tech sector; it was born in the agricultural sector. Plenty of farmers were operating self-driving tractor technology before Google ever entered the space. Illinois-based John Deere was developing GPS navigation systems for its tractors more than twenty years ago—before Google was even founded.

John Deere executives may not have appreciated what they had, and they were likely not in a position to build a commercial self-driving car pision from scratch. But what if they had created a spin-off company to commercialize their self-driving technology, or licensed the technology to a partner? Perhaps John Deere, a nearly two-hundred-year-old company, could have become one of the leaders in Third Wave transportation.

In some industries, the most successful Third Wave companies may also end up being the most established. They’ll be the companies that took the Third Wave seriously enough to get ahead of it.

Incumbents often fail because they underestimate the speed at which the future is approaching. People at startups think about the future every day. Venture-scale investors are seeking companies with the potential to reach at least $100 million in revenue and go public. In the startup world, staggering sums of money are chasing some of the world’s biggest ideas. It’s only a matter of time before the right entrepreneur with the right idea connects with the right venture firm. The corporate mind-set is often to avoid mistakes, but in a world that changes rapidly, doing nothing can be the biggest mistake. Sometimes waiting for all of the facts can be riskier than taking a leap of faith.

Objects in the mirror are closer—far closer—than they appear. One of the biggest mistakes companies make is overlooking the impact of nascent technology. Too often corporate executives are too shortsighted to understand how technology that is disrupting a different industry might be adapted to do the same to their own. Uber might be disrupting taxi services today, for example, but as they move into the delivery business, will Uber disrupt FedEx or UPS tomorrow?

Second, corporate recruiters need to be working overtime hiring and retaining and celebrating and protecting the innovators within their walls. There is a mythology in the tech world that the best talent gravitates toward startups. But many of the smartest, most creative people in the world can be found working at some of its biggest, oldest companies.

The challenge for Fortune 500 CEOs is to leverage scale advantages, while injecting a tempo of speed and a culture of risk. At Facebook, engineers are encouraged to “move fast and break things,” not because Mark Zuckerberg is reckless, but because he understands that innovators need the space in which to take risks. At most large companies, innovators are often discouraged from even sharing their ideas. That’s self-destructive—and self-reinforcing—behavior.


What these transitions will ultimately require is companies willing to self-disrupt. As Steve Jobs once put it, “If you don’t cannibalize yourself, someone else will.” Yet the challenges of doing so are substantial for entrenched companies, and have been made famous by Harvard professor Clay Christensen in his book The Innovator’s Dilemma. As he writes, the greatest challenge for successful companies is focusing on customers’ current preferences while preparing for their future preferences. In a CBS interview, Jeff Bezos said it plainly: “Amazon will be disrupted one day. I don’t worry because I know it’s inevitable.”

The same kind of problem plagued Kodak. The conventional wisdom is that Kodak didn’t see digital coming. That’s just not true. In fact, the first digital camera was actually invented at Kodak in 1975 by Steven Sasson. The company was doing a lot of things right early, including a partnership with AOL. They knew that digital presented a threat to their core business in the long run, but executives were more concerned about the short run. According to New York Times reporter James Estrin, when Kodak executives asked when digital could compete with film, Sasson told them it could take twenty years. “When you’re talking to a bunch of corporate guys about 18 to 20 years in the future, when none of those guys will still be in the company, they don’t get too excited about it,” Sasson told Estrin. Sadly, Kodak filed for bankruptcy in 2012.


Big companies have more power than they think. They have scale, they have partners, they understand policy, and often they have global reach. These are all highly valuable assets in the Third Wave (much more so than in the Second), and they will give the world’s biggest corporations the chance to play offense with confidence. Take a lesson from the Wayne Gretzky playbook; he was a great hockey player because he didn’t focus on where the puck was, but where it was going.


Companies would be better positioned if they figured out how to better engage with entrepreneurs so that they can invest in them and own a piece of the action. Some legacy companies have developed internal venture funds, in part to have an early-warning radar system for emerging ideas, some of which may end up leading to profitable partnerships. Others have created a “SWAT” team of people whose only job is to be a connector with startups, serving as a concierge of sorts to help build bridges between executives and entrepreneurs. It’s a way of making sure that clever entrepreneurial ideas find their way to the right person in the company—and that the company has a chance to invest in a future it cannot build on its own.

Major corporations should see the Third Wave as both an extraordinary opportunity and an existential threat. The most successful executives will embrace it with speed and agility. They will break down silos within their company, drive collaboration across pisions, and look beyond their industry for partnerships. And it is from there that they will have the perfect view of once vaunted competitors collapsing under the disruptive forces of Third Wave entrepreneurship.


This dynamic has caused a brain drain of sorts in the United States. Entrepreneurs are cultivating the skills and creativity to come up with great ideas in the middle of the country. But then they are taking their ideas—the company behind it, the jobs that come with it, and the economic activity that surrounds it—and moving out of town.


Jessica’s journey to New Orleans might be hypothetical, but this future is not. And it’s an illustration of what I’ve referred to as “the rise of the rest.” Journalist Fareed Zakaria coined that phrase to describe the rise of new economies in places like China and India.

This geographic persity is vital to our future. According to the Kauffman Foundation, “New businesses account for nearly all net new job creation,” and “new companies less than one year old have created an average of 1.5 million jobs per year over the past three decades.” In other words, startups are the engine of our economy. The communities they form, the talent they recruit, the products they make, the jobs they create, and the lives they improve can all be leveraged to transform communities.

I also see the rise of the rest as an investment strategy. Some of the best ideas in the world are being hatched in cities that too few venture capitalists pay attention to. For the past several years, I’ve been getting out of my office, and onto a bus, to see what’s going on in the rest of the country. I’ve traveled to two dozen cities across as many states and seen communities and accelerators thriving in unlikely places. I’ve listened to pitches from companies few have ever heard of, with ideas I wish I’d had myself. I found Artiphon in Nashville, the maker of a tech-enabled musical instrument that went on to raise the most money in history for its category on Kickstarter and was named one of Timemagazine’s 25 Best Inventions of 2015. I found Shinola in Detroit. Founder Tom Kartsotis believed Detroit would be a comeback city, and he decided to grow Shinola in a Detroit building that once housed automobile innovation. Hundreds of former autoworkers have been retrained to craft beautiful watches, bicycles, handbags, and notebooks. And Shinola’s “Where American is Made” ethos is being brought to cities around the world, including New York, London, and Washington, DC. We wrote Shinola the largest check in my investment firm’s history. In fact, we’re on track to invest more than $1 billion in rise-of-the-rest cities, and that’s just the beginning.


Most of the industries that are targets for Third Wave entrepreneurs are already clustered throughout the country. And so for many Third Wave entrepreneurs, there is appeal to putting down roots where industry ecosystems already exist. During the Second Wave, the industry of focus was technology, and so Second Wave entrepreneurs understandably flocked to the place in the country where tech companies and investors had clustered. But during the Third Wave, though products will be tech-enabled, they won’t be tech-centric. They’ll use apps, but the product won’t be an app. And so the benefit derived from being surrounded by the tech world won’t be as high. Instead, being surrounded by experts in the industry you’re trying to disrupt may reap the biggest pidends.

And entrepreneurs pushing the limits of robotics technology may find a welcome home in Pittsburgh, the steel city and manufacturing powerhouse where Carnegie Mellon, a research university with arguably the world’s best robotics program, is located. Of course, many will still head to Silicon Valley, but less so than we’ve experienced in the past. Ultimately, entrepreneurs will want to be in the place where the highest concentration of related expertise is to be found.

Over the coming years, I expect to see lots of tech entrepreneurs and engineers who started in the Bay Area consider relocating in search of industry-specific expertise. And the Third Wave explosion of new kinds of startups won’t just be driven by these entrepreneurial carpetbaggers. We’ll also see industry veterans and local innovators start companies in the rise-of-the-rest regions where they already live, to solve the problems they know and understand.

The Second Wave had many inspiring stories of twenty-something computer coders creating multibillion-dollar companies. The Third Wave will have similar stories, but the founders are less likely to be twenty-something coders and more likely to be thirty-something farmers and factory workers and chefs and artists—people who saw a problem in their own spheres of expertise, then leveraged the skills of others to build great companies.

That was certainly true for Jewel Burks, the founder of Partpic and the winner of our rise-of-the-rest pitch competition in Atlanta. These competitions pit local entrepreneurs against one another for a $100,000 investment prize. Jewel was working in Atlanta for an industrial parts company and noticed that she was frequently receiving calls from upset customers who had mistakenly received the wrong part. Jewel realized that while these customers were looking for specific parts—a bolt for this, a rivet for that—a lot of people didn’t know the actual name or number of the part. So there was a lot of guesswork, and a lot of frustration when customers didn’t get what they needed.

Jewel had an idea. She called her friend Jason Crain, who worked at the music recognition company Shazam. Jewel and Jason came up with a concept for a product that would recognize parts not by description but by sight. Just snap a picture of the part you needed to replace, and the software would identify what the part was and send it on its way to you.

This kind of real-world solution might lead to a valuable Third Wave company, but it’s an idea few people with traditional startup backgrounds would ever have pursued. They wouldn’t have had the experience taking those phone calls, or understood the prevalence of the problem, or the scale of the opportunity.

Of course, while the Third Wave will play a big role in the rise of the rest, it is not the only factor driving it. There’s also a cultural element. Sure, California is a terrific place to live and work, but not everyone who goes out there wants to stay forever. If you’re a midwesterner, the opportunity to work for a startup in the state where you grew up could be a major selling point, the chance both to be in a place that fits your lifestyle and to give back to a community whose future you already have a stake in.

And there are related financial considerations, too. The rise-of-the-rest cities I’ve been visiting have a much lower cost of living. San Francisco is one of the most expensive cities in the world. So is New York. If you start a company in a city like Cincinnati, where the cost of living is lower, the overhead costs for your company will drop. A $100,000 seed investment might be enough of a spark to get a venture-scale business growing rapidly in Cincinnati. In San Francisco, that same $100,000 might only be enough to hire a part-time engineer and rent a few cubicles in a shared office space.


The moment’s significance, though, is not confined to economics. The rise of the rest will also bring persity—both of people and ideas—which is something our country needs. Silicon Valley has a well-documented persity problem. According to the New York Times,Facebook reported that only 4 percent of its employees in the United States were Hispanic in 2015, while only 2 percent were black. At Google, the numbers are similar, and have been for years.

The rise of the rest can mean persity of opportunity. It can mean breaking the cycle of money flowing to the same kinds of people for the same kinds of ideas. It can mean the growth of businesses focused on fixing the problems in America’s backyard, not just in San Francisco’s. And it can mean lowering the barrier to entry across the board for entrepreneurs, no matter their background or geography.

The rise of the rest isn’t just going to spread the rewards of the Third Wave around; it’s going to create more of them. We will see more people starting more companies to solve more problems and seize more opportunities—many of which will never land on Silicon Valley’s radar. And I believe the leaders behind these emerging companies will end up being the most perse group of CEOs America has ever produced.


At the same time, the people we did hire were self-selecting to be part of our company, which meant they probably believed in our mission more than someone in the Bay Area who jumps from startup to startup. That helped us build a stronger culture and a stronger team.

Throughout our history, innovation has come out of unlikely places. And it will again: Magic Leap, a virtual reality company in stealth mode, has already raised over $1 billion from investors including Google and Alibaba. Guess where they are located? Fort Lauderdale, Florida. This likely would not have been possible in the Second Wave, when cutting-edge tech companies were expected to be in Palo Alto (leveraging Stanford PhDs) or Boston (packed with MIT graduates).

The rise of the rest is beginning to happen, and the momentum will continue to build over the next decade.


One hundred years ago, the focus of most investors was largely on return. But over time, and after events like the Great Depression, there was a recognition that investors also needed to factor in risk. Today, the element of impact is being injected into the investment approach as well. Impact investing is a bridge between traditional business and philanthropy—and between financial return and social good. When someone invests in a new company, the hope is that he’ll eventually make that money back, and then some. When someone contributes to a nonprofit, on the other hand, there won’t be any financial return, only the expectation that something good will come from it. Impact investing provides the best of both worlds. You can generate a financial return while enabling a societal benefit—driving both profit and purpose.


Longtime believers in the maxim that to whom much is given, much is expected

But over time, we started having a different kind of conversation with organizations. They told us that, while they appreciated the money, our real value wasn’t in the checks we were writing but in the visibility and credibility we were providing. It was the people and networks we could connect people to that mattered. Over time, we realized that we could have a greater impact if we focused less on what we earned in the private sector and more on what we learned from our experience. We started leveraging the skills that had made us successful—building coalitions around causes we cared about; developing partnerships across sectors, among companies, nonprofits, and government. It sparked a different way of giving back.


 It doesn’t really matter what the plan is if you can’t get your people aligned around achieving the same objectives. As Jim Collins once wrote, “you not only need the right people on the bus, but you also need the right people in the right seats.”

In 2015, Fortune held its Global Forum in San Francisco, the very same event I had attended in Shanghai in 1999. The comments almost uniformly made the case that culture is critical. “Fifty percent of our business has changed in the last ten years,” said Joe Kaeser, CEO of Siemens. “The key to surviving is having an ownership culture. You have to get to people’s hearts. You have to get to people’s pride.”


I know that government can often be a problem for businesses. I get that. (Indeed, I have experienced that, many times.) I also understand that entrepreneurs are self-reliant, and not generally inclined to work with government. But the role government plays in shaping our society and our economy will make it a key force in the Third Wave.

After all, it will always be government that defines—either through action or inaction—the environment in which entrepreneurship operates. At its worst, government can be just like the caricature my classmates feared: a hindrance that creates maddening obstacles that hamstring young businesses. But at its best, government can create an environment where innovation and entrepreneurship can thrive, not by providing the certainty of success, but by mitigating risk and expanding the scale of opportunity.

Ultimately, it’s government that sets and enforces the rules. Lawmakers decide how easy it ought to be for companies to gain access to global talent and venture capital; how simple it ought to be to start a business and scale it up; how much federal money to invest in research and development, in the creation of new ideas that companies can commercialize. Government determines the ease with which commerce can cross borders and oceans. And often, with instruments like the tax code, government decides which investments to incent and which industries to jump-start.

Government’s role isn’t to commercialize new innovations; it’s to push technological advancement forward in areas that the markets won’t address on their own—to get ideas and innovations to a point where entrepreneurs with vision can turn them into viable products and businesses.


Government’s role in the Third Wave will be critical in two key ways: as a regulator and as a customer. The regulatory aspect will be especially complicated as government officials weigh all kinds of new and novel challenges. Internet of Things sensor and tracking technology will give companies unprecedented access to an extraordinary level of detail about our everyday lives: not just what food you purchase but your eating habits; not just how much energy you use but how cold you like it when you sleep at night.

When a company uses education data collected daily from a student improving her reading skills, we will cheer the benefits. But what happens to that data when she graduates from high school? Does she own it? Or control it? Will a dating app one day ask her to upload it for compatibility analysis? Will they sell it? These advances are not just small steps; they are giant leaps. And they bring with them countless questions for government regulators. How should companies be allowed to use this data? What should customers know about how that data is used? And does government have a role in answering that question?


Yet for many Third Wave companies, government won’t be thought of solely as a regulatory wild card. It will also be viewed as a major potential customer. Indeed, I would expect that in the coming decades, we will see dozens of companies reach unicorn status by making products principally to sell to governments around the world.


Budget cuts may have been enacted out of concerns over deficits, but decreasing our investment in research and development guarantees future deficits. According to Nobel Prize–winning economist Robert Solow, we owe more than half of our GDP growth over the last fifty years to scientific breakthroughs. Yet we’ve been reducing our ability to undertake cutting-edge research that gives rise to disruptive technologies. In shrinking our commitments to research and development, we are decreasing our long-term economic potential and squashing our ability to create tomorrow’s great innovations.


The Third Wave of the Internet is coming, the moment where the Internet transforms from something we interact with to something that interacts with everything around us. It will mean the rise of the Internet of Everything, where everything we do will be enabled by an Internet connection, much in the way it’s already enabled by electricity. This process will lead to the transformation of some of the industries that are vital to our daily lives, which will make the barriers to success higher, and the need to form partnerships much more central, as a way of building credibility, opening doors, and getting past industry gatekeepers. One such partner will likely be the government, which has an interest in regulating the industries most affected by the Third Wave. Don’t confuse your views of government with the role of government, which can be either an impediment to progress or a driver of it, and which cannot be ignored. Much Third Wave innovation will come from impact entrepreneurs focused on building “profit plus purpose” companies that have a measurable impact in the world. And this innovation will be geographically dispersed, as the rest of the country (and the world) rises up to complement the innovation now occurring largely in a few places, such as Silicon Valley. The challenges in the Third Wave will be vexing, and as Thomas Edison reminds us, “Vision without execution is hallucination.” But if we rally together, and execute with precision, we can remain the world’s most innovative and entrepreneurial nation.

And remember this: The Internet of Everything will affect every aspect of our lives, in increasingly seamless ways. Use this tool to your advantage.

Remember that companies will be addressing core societal needs and broad-scale change—and that many will be focused on impact and purpose, not just profit.

Remember that entrepreneurship will be regionalizing and globalizing, so you can start this adventure in your own backyard.

Remember that entrepreneurs as “soloists” will be replaced by orchestras playing a stronger, more credible tune. That if you want to go far in the Third Wave, you must go together.

Remember that the sectors that matter to people are regulated by the government, and so the great leaps of the Third Wave will require a respect for policy.

And remember, finally, that the Third Wave will happen in revolutionary, but also evolutionary, ways—more slowly than you may like, but more profoundly than you can imagine.

Whatever you choose, I hope you will pursue the disruptive ideas that will create the most value—not just for your company but for your country and the world. Because that old truism is right: The Stone Age didn’t end because we ran out of stone. It ended because we invented something better.

Remember that disruption has broadened. Your competitors won’t just emerge from the low end of your industry. Increasingly, they’llcome from other industries, too. Apple wasn’t in the music business, nor was Google in the mobile phone business—until suddenly they were. So build a network in and around your company—and look for opportunity in every direction.

The future belongs to those who endeavor to create it. That’s why we go into business—because we have a vision for the future that we want to see through. So don’t let temporary successes permanently blind your future ambitions.

You have the resources—human, capital, and otherwise—to take on ambitious projects. And so you must decide—is it better to use those resources to resist change or to drive it?

And remember this: In the Third Wave, partnerships will become more important. You’ll have more opportunities in the next decade than you did in the past decade. So don’t just play defense, play offense. Don’t just defend, attack. But don’t go it alone. As Helen Keller said, “Alone we can do so little. Together we can do so much.”


And that’s where you come in. It was my great fortune to help get America online. It’s up to you to get America—and the world—on track, to lead the Third Wave and beyond. To help us ride the bleeding edge of the next big thing. To be honest, I’m a little envious. You won’t find any experience more gratifying or exhilarating—especially now, as the Third Wave creates the possibility for such meaningful change.

This moment should speak to the innovator inside you. The one who refuses to accept the world as it is. It should invoke an urge to explore, to question, to push boundaries. It’s an urge I encourage you to heed, whether you’re a serial entrepreneur or a corporate executive debating whether to take the plunge.

There will be headaches and heartaches—I guarantee it. The naysayers will be out in full force. But these are the people who saw the first automobiles, in 1896, and jeered, “Get a horse!” They’re the ones who didn’t know how to pronounce the word “Internet” and never thought they’d need to. Your job—your only job—is to stay relentlessly focused on that voice in your head that tells you, “It can be done.” Or, as Nelson Mandela said in another context, “It always seems impossible until it’s done.”

Yes, the future is uncertain—and that’s what makes it so exciting. And yes, it will be hard—which is why it’s important to remember what Teddy Roosevelt said a century ago:

It is not the critic who counts. . . . The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.

So put down this book. Pick up your smartphone, your notepad—your blowtorch, if you’re feeling ambitious. Take action. Be fearless. You may stumble, but get back up. Keep going. Keep tinkering, perhaps late at night, after the children are in bed. Build something that makes you proud—but not satisfied enough to stop dreaming about what comes next. Enter the arena. Topple an empire and build your own from the ground up.

The world is waiting. Are you?