Power, Meet Money

Power, Meet Money

Power, Meet Money

Jan. 21 2000 9:30 PM

Power, Meet Money

Why the Washington establishment ignored AOL.


{{Slate's Political Roundup#73099}}

The first time I saw AOL boss Steve Case was at the 1998 White House Correspondents Dinner, the annual sniff-and-scratch status party for D.C. media. Case was standing on the patio sipping a drink when a mob of reporters bull-rushed past him and descended on Paula Jones. Case watched this spectacle, expressionless. The moment crystalized the (non)relationship between Old Establishment Washington and New Washington: My indifference is greater than yours.


At this spring's correspondents dinner, reporters will be swarming around Case. In buying Time Warner, Case has made himself the biggest media mogul D.C. has known. A Case deputy, Ted Leonsis, has become a local celebrity by purchasing the Washington Capitals hockey team. Leonsis and his two self-made zillionaire business partners will soon own the NBA's Washington Wizards as well. (Leonsis recruited Michael Jordan to run the Wizards.) Daniel Snyder, another new money tyro, just bought the city's most precious institution, the Washington Redskins. And D.C. has suddenly noticed that a 34-year-old named Michael Saylor has made more than $2 billion running a tech company called MicroStrategy.

These are just a handful of the thousands of people old Washington has never noticed, who live in Virginia exurbs old Washington could not find on a map (Herndon? Sterling? Merrifield?), who work for businesses old Washington cannot understand ("data mining"?), and who have made enough money to do whatever they want (which seems not to include socializing in or with Georgetown). D.C.'s elite of politicians, lawyers, lobbyists, and journalists has woken up and realized—half-thrilled, half-horrified—that it is no longer the center of Washington.

Until a year or so ago, Old Washington and New Washington (which isn't even Washington, it's Northern Virginia) shared nothing but mutual disregard. Tech companies have been congregating in Northern Virginia (and, to a lesser extent, suburban Maryland) for three decades. Most were defense contractors--quiet, bureaucratic firms that churned punch cards for the Pentagon and had no social cachet. Telecom and satellite firms such as MCI set up in D.C. in the '70s and '80s. They were mostly lawyers who came to the capital to be near regulators. No one noticed as they wove seamlessly into the city's lawyer-lobbyist fabric. The Internet companies that have emerged in the past five years are different: They are run by entrepreneurs, not lawyers, and they aren't near D.C. because they need the blessings of the government.

The Washington Post established D.C.'s attitudes toward the new suburban techies. It didn't notice them. AOL did not make the Post's front page until 1995 and made it only infrequently until 1998. "The Reliable Source," the Post's gossip column, mentioned AOL only once before July 1999—a 1998 item about Case's wedding. Insofar as the Post did notice, it was usually to point out AOL's (very real) business problems: a plunging stock price, irritated customers, "harsh economic realities." The Post passed on chances to invest in AOL in 1993, 1994, and 1995, Leonsis told me with relish.

David Plotz David Plotz

David Plotz is the CEO of Atlas Obscura and host of the Slate Political Gabfest.

Kara Swisher, who covered AOL for the Post in the mid-'90s and wrote the definitive book about the company, aol.com, says the Post was "anti-AOL" because the paper fixated on national politics. "All they cared about was who was going to be the Department of the Interior's undersecretary for trees. Meanwhile, 20 miles away, these guys are becoming billionaires and affecting average citizens more than any of these political people ever will."


T he rest of elite D.C. followed the Post's lead. Washington is a salary town, not an equity one. Elite Washingtonians can earn a lot—lawyers and lobbyists clear $1 million or more a year—but don't amass huge fortunes. "Money has never been any criterion for success in Washington, because power is the criterion," says Sally Quinn, the authority on establishment D.C.'s sociology. Rich folks who have Washington cachet, such as former Treasury Secretary Robert Rubin, acquire it by virtue of their power, not their wealth. Homegrown fortunes have never impressed the establishment. Real-estate moguls, the only folks who made real money in D.C. until recently, were shut out of power Washington—except for sports team owners Jack Kent Cooke and Abe Pollin.

Establishment Washington also overlooked the nerd millionaires because the cultural clues are all different. In Washington, important people of both sexes still wear dark suits of conservative cut. In cyberland, you can't tell a senior vice president from a janitor, at least not by his clothing. Nor is Washington charmed by the preening quirkiness of the tech culture. "We were weird. We had guys putting up chandeliers in their offices or lifting weights or watching General Hospital. This was not the D.C. model," says Mario Morino, the founder of Legent and godfather of the Virginia technology industry.

The Virginians reciprocated Washington's indifference. Most of the hot new companies are outside the Beltway, 20 miles or more from the White House. The techies labor like dogs on their suburban campuses, live near work, and spend what social time they have with each other. They couldn't be less interested in Capitol Hill's machinations. They buy boats, play the stock market, fiddle with software and gadgets. They buy mansions in Great Falls and Reston, not townhouses in Kalorama, and rarely go into the city. "They are Internet citizens. They could be 20 miles from Washington or 2,000 miles," says Gary Arlen, who runs a local technology-research firm. They are here almost by accident. AOL is in Virginia because founder Jim Kimsey is a Washingtonian, and he resisted efforts to relocate the company to Silicon Valley.

Most of the tech executives are uninterested in politics (though Case is an exception). "They don't see a need for Washington. They can't imagine being a part of it. It is slow-moving. There is compromise. It does not involve the purity of starting a company," says Bill Regardie, editor of the Washington business magazine Regardie's Power.