The Third Wave

What happens when the Internet stops being something you log onto—and becomes the invisible infrastructure that powers everything around you? In The Third Wave, Steve Case, co-founder of AOL and one of the pioneers of the early Internet, argues that we’ve entered a new era of technological revolution. This isn’t just about apps or social media; it’s about integrating digital connectivity into every aspect of human life—from healthcare and education to food, transportation, and civic systems.

Case contends that understanding and adapting to this transition is critical for entrepreneurs, corporate leaders, and governments alike. In the First Wave, companies like AOL, Apple, and Cisco built the Internet’s infrastructure. The Second Wave, dominated by firms such as Google, Facebook, and Amazon, created software, apps, and social platforms that capitalized on that infrastructure. Now, in the Third Wave, the Internet is moving beyond screens. It’s embedded into our physical world, where smart devices, data, and connectivity redefine how industries function.

Why This Transition Matters

Case opens with an invitation to see technology not as an isolated sector but as a pervasive force now entering every domain. Unlike the First and Second Waves, this new age will demand collaboration among startups, corporations, and governments, since traditional industries like healthcare, education, and agriculture are heavily regulated and interdependent. Case argues that success in this new landscape requires a blend of technological innovation, policy savvy, and persistence.

He also adds a personal dimension: his own journey from a Hawaiian teenager reading Alvin Toffler’s The Third Wave in the 1970s to leading AOL through the early battles of bringing America online. By framing his experiences within Toffler’s futurist predictions, Case connects technological evolution to a broader societal arc—one that’s as much about inclusion and purpose as it is about profit.

From AOL to Universal Connectivity

AOL’s story serves as a metaphor for each stage of the digital revolution. In the 1980s, Case fought to make modems standard in home computers—a process of building infrastructure and convincing skeptics. By the 1990s, AOL was the world’s digital meeting place, with millions greeting the famous voice, “You’ve got mail.” Yet the collapse of AOL’s merger with Time Warner demonstrates the perils of underestimating cultural and structural misalignment—lessons Case urges modern entrepreneurs to heed in the Third Wave.

As connectivity becomes seamless, today’s founders face new barriers: regulation, entrenched industry incumbents, and rising distrust of tech elites. In this environment, innovation alone isn’t enough. Entrepreneurs must build credibility, form partnerships, and navigate complex policy landscapes to succeed. The playbook of the Second Wave—where small teams coded apps in dorm rooms—won’t work when disruption requires coordination with hospitals, schools, or governments.

Technology with Purpose

Case’s vision stretches beyond profit. He sees the Third Wave as a chance to redefine capitalism through impact investing—a movement merging profit with purpose. This ethos drives his organization, Revolution, to back companies like Sweetgreen and Revolution Foods, which use technology to make healthier living accessible. Just as the First Wave democratized information and the Second Wave democratized communication, the Third Wave can democratize opportunity itself—if inclusion becomes a core design principle rather than an afterthought.

Case is deeply concerned with geography and inequality. Venture capital still overwhelmingly flows to three states—California, New York, and Massachusetts—leaving “flyover country” behind. The Rise of the Rest movement he leads seeks to decentralize innovation, spotlighting startups in cities like Detroit, Nashville, and New Orleans. These entrepreneurs, he argues, are poised to tackle the real-world challenges that define the Third Wave: sustainable farming, equitable education, and accessible healthcare.

A Call to Entrepreneurs, Corporates, and Governments

In the book’s later chapters, Case turns pragmatic, offering playbooks for entrepreneurs (“The Three P’s”: Partnership, Policy, and Perseverance), for corporations facing self-disruption, and for policymakers struggling to keep pace. He warns that ignoring collaboration could allow other nations to overtake the U.S., as China and Europe ramp up support for innovation ecosystems.

Ultimately, The Third Wave is both memoir and manifesto. It’s an optimistic but urgent reminder that the next great leap in technology must not only be about speed and scale but also about vision and values. Case’s central message is clear: those who ride the Third Wave—entrepreneurs who blend partnership, purpose, and persistence—can shape a connected future where innovation uplifts everyone, not just the few.

Case divides Internet history into three distinct waves, each marked by its own paradigm and challenges. Understanding these waves helps you see how we arrived at today’s digital integration—and where opportunity still lies.

The First Wave: Building the Infrastructure

The First Wave began in the 1980s when pioneers like AOL, Apple, Microsoft, and Cisco built the hardware, software, and networks needed to make digital connection possible. This was the plumbing stage—the era of modems, floppy disks, and phone-line connections. Case recalls the struggle to convince PC manufacturers to include modems in their systems. For most executives, the Internet was an oddity, not a necessity.

His early company, Quantum Computer Services (later renamed AOL), emerged from the ashes of a failed venture called Control Video Corporation. Through partnerships with Commodore, Apple, and IBM, Case learned the art of persistence and the necessity of collaboration. Those early networks—expensive, slow, and clunky—laid the foundation for the wired world.

The Second Wave: Software and Mobile Connectivity

The Second Wave marked the age of software and services. This was the era of Google organizing information, Facebook connecting people, and Apple redefining personal devices with the iPhone. Entrepreneurs of this period could scale fast: a small team writing code could reach millions overnight through app stores. Regulation was minimal, costs were low, and the ethos of “move fast and break things” defined the culture.

This Second Wave democratized access, but also concentrated wealth. It fostered billion-dollar startups quickly—but often disconnected from physical reality, focusing on digital interactions over tangible impact. (As Nicholas Carr pointed out in The Shallows, such innovation risked narrowing human depth while widening reach.)

The Third Wave: Integration of Everything

Now, Case argues, we’ve entered the Third Wave—when the Internet disappears into the background and connects everything, from medical devices to tractors. He predicts that soon calling a product “Internet-enabled” will sound as dated as calling a lamp “electricity-enabled.”

The Internet of Things expands into the Internet of Everything, changing how we learn, work, commute, and even eat. But unlike the previous era, Third Wave innovators must engage with regulators, health providers, teachers, city planners—gatekeepers of complex systems. Entrepreneurship becomes not just about coding but about coalition-building. And the winners will be those who combine vision with partnership, integrity, and adaptability.

A central lesson from Case’s decades-long entrepreneurial journey is that success in the Third Wave requires mastery of what he calls the Three P’s: Partnership, Policy, and Perseverance.

1. Partnership: Going Together to Go Far

During AOL’s infancy, Case learned that partnerships weren’t optional—they were survival. His deals with Commodore, Tandy, and IBM gave AOL access to millions. In the Third Wave, that principle has returned with new urgency. Entrepreneurs can no longer rely solely on viral apps; they must forge alliances across sectors. Case cites Apple’s creation of the iPod as a masterclass in partnership—the company secured music licenses by convincing record labels to treat iTunes as a low-risk experiment. For unknown startups, credibility often comes from borrowed trust: recruiting advisors or investors with industry clout, as Case did in his AOL days.

2. Policy: Navigating Regulation, Not Ignoring It

Third Wave industries—education, health, finance, food—operate under dense regulation. Case argues that entrepreneurs who ignore policy do so at their peril. Government isn’t just a hurdle; it’s a player that defines the playing field. Savvy founders must understand agencies like the FDA or FAA and build policy fluency from the start. (This echoes Eric Ries’s The Lean Startup, which advocates iterative learning—not just from customers, but also from regulators.) Case stresses that managing “policy risk” is now as critical as managing product risk.

3. Perseverance: The Long Slog of Innovation

Case humorously notes that AOL was a “ten years in the making overnight success.” Entrepreneurs will need the same grit in the Third Wave, as progress will be slower and obstacles more bureaucratic. The genetics firm 23andMe’s struggle with the FDA exemplifies perseverance: temporarily banned from selling DNA kits, it survived by working with regulators instead of defying them, eventually returning stronger. Case’s message: the combination of idealism and endurance distinguishes game changers from quitters.

“When the wave is cresting, you’re either in the tube or in the sand.”

This surfer’s aphorism, learned by Case in Hawaii, becomes his metaphor for entrepreneurship: ride the momentum, adapt constantly, and avoid getting crushed by complacency.

Case argues that the era of profit-only capitalism is ending. The Third Wave demands that companies integrate purpose with profit—a philosophy known as impact investing. This movement redefines success to include social and environmental outcomes alongside financial returns.

He spotlights his wife Jean Case’s leadership of The Case Foundation as a laboratory for this model. Unlike traditional philanthropy, which gives away capital, impact investors deploy it strategically to create measurable change and sustainable businesses. The rise of “B Corporations” like Patagonia or Warby Parker exemplifies this ethos—firms legally allowed to prioritize mission alongside money.

Profit plus Purpose

Case recounts investing in Revolution Foods, founded by Kristin Groos Richmond and Kirsten Tobey, which provides healthy school lunches to underserved communities. Initially dismissed by investors skeptical of low margins, the company proved that doing good and doing well are compatible. Likewise, Sweetgreen has turned the fast-food model on its head by making nutritious eating profitable and scalable.

Globally, impact investing is approaching trillion-dollar territory as millennials—who increasingly demand ethical products and workplaces—reshape consumer behavior. Governments are also recognizing its power; the G8’s Social Impact Investment Taskforce legitimized it as a pillar of economic development.

A Bridge Between Philanthropy and Capitalism

Case concludes that the lines between giving, investing, and innovating will blur in the Third Wave. Entrepreneurs who design businesses to solve pressing problems—food insecurity, education inequality, clean energy—can access both venture capital and philanthropic funding. In effect, the Third Wave marks capitalism’s next evolution: one where value creation and social good become indistinguishable.

Why should innovation be confined to Silicon Valley? Case believes the future belongs to communities across America reinventing themselves as startup hubs. He calls this movement the Rise of the Rest.

After the 2016 election, Case pointed to a stark reality: while California receives half of all venture funding, thirty other states combined receive only a fraction. This inequity fuels resentment and wastes potential. Case’s solution isn’t political rhetoric—it’s buses. Literally. His Rise of the Rest bus tours crisscrossed the country, hosting pitch competitions in cities like Detroit, New Orleans, and Des Moines, each awarding $100,000 to local founders.

Local Roots, Global Impact

Case discovered that world-changing ideas aren’t limited to coastal elites. In Atlanta, Jewel Burks founded Partpic, an app that identifies mechanical parts through image recognition—technology later snapped up by Amazon. In New Orleans, ex-teacher Jen Medbery launched Kickboard, a data platform that helps educators understand student progress. These entrepreneurs succeeded because they understood local problems firsthand, not because they chased Silicon Valley trends.

Rebalancing Opportunity

Case envisions a decentralized startup ecosystem where industries grow where expertise already exists—healthcare in Nashville, agriculture in the Midwest, robotics in Pittsburgh. The Third Wave’s focus on physical and regulated sectors makes these regions vital. Moreover, lower living costs make startup capital stretch further. A $100,000 seed investment in Cincinnati can build far more than in San Francisco.

For Case, spreading entrepreneurship isn’t just economic development—it’s national healing. By empowering local innovators, America can reduce regional inequality and reclaim its pioneering spirit. Just as the First Wave connected people to the Internet, the Rise of the Rest reconnects entrepreneurs to their communities.

Large corporations, Case warns, cannot afford to treat innovation as optional. The Third Wave will swallow slow-moving giants. Yet corporations possess unique advantages—capital, talent, and customer reach—if they learn to disrupt themselves before startups do.

Self-Disruption as Survival

Case uses Kodak and Apple as stark contrasts. Kodak invented the digital camera in 1975 but buried it, fearing cannibalization. Apple, by contrast, willingly killed its own products—the iPod gave way to the iPhone, the MacBook to the iPad. The lesson: “If you don’t cannibalize yourself, someone else will.” The same goes for Amazon’s move from books to the Kindle, ensuring relevance before obsolescence.

Fostering Innovation Inside Giants

At most large firms, says Case, too many can veto ideas but too few can approve them. Leaders must create an environment that welcomes risk—echoing Peter Diamandis’s mantra that success comes from taking “more shots on goal.” Firms like GE and Johnson & Johnson already outspend Google on R&D, but innovation also requires cultural permission to fail. Encouraging internal entrepreneurship and external partnerships with startups—through corporate venture arms or acquisition—is key.

Case challenges Fortune 500 executives to develop “paranoia and curiosity” in equal measure. The companies that survive the Third Wave will be those that act more like startups—fast, collaborative, and unafraid to reimagine themselves.

For decades, Silicon Valley has seen government as an obstacle. Case flips this perspective: in the Third Wave, progress will depend on public-private partnership. Since industries like health, education, and energy are highly regulated, entrepreneurs must engage with government, not evade it.

The Forgotten History of Government Innovation

Case reminds readers that the Internet itself was born from publicly funded research. Agencies like DARPA, the National Science Foundation, and the NIH fostered breakthroughs from GPS to Google’s search algorithm (initially supported by a federal grant). In other words, without ‘bureaucrats,’ there would be no Silicon Valley.

Rebuilding Trust and Cooperation

Case describes his own experience working with Presidents Clinton and Obama on initiatives like Startup America and the JOBS Act, which legalized equity crowdfunding for small investors. These bipartisan successes prove that collaboration can work. But he warns that continued polarization—between “Bay Area libertarians” and “Beltway bureaucrats”—threatens American leadership. Legislators must modernize outdated rules on data privacy, freelancing, and immigration to keep the U.S. competitive.

Ultimately, government’s role in the Third Wave is twofold: to protect consumers and to empower innovation. Case envisions a “Third Wave czar” who coordinates policy across sectors. His plea is pragmatic: technology shapes society faster than laws can adapt, and only trust between inventors and institutions will ensure progress benefits everyone.

In the book’s passionate epilogue, Case argues that American entrepreneurship—once the world’s envy—is at a crossroads. Technological disruption has created prosperity for some but despair for many. The challenge now is to R.E.S.T.A.R.T. America: a seven-point plan to renew inclusive innovation.

R.E.S.T.A.R.T.: Rebuilding the Engine

• Reform – Simplify crowdfunding and modernize regulation to unleash startups.
• Educate – Teach entrepreneurship and creativity as core skills; promote programs like AmeriCorps and a proposed “StartupCorps.”
• Source – Encourage large firms to buy from local startups, seeding ecosystems.
• Tax – Offer incentives for investing in regional entrepreneurs and micro-funds in underserved areas.
• Attract – Embrace immigration reform to retain global talent and reenergize decline regions.
• Rethink – Redefine capitalism as “profit plus purpose,” emphasizing long-termism over short-term gains.
• Transform – Build interconnected, inclusive ecosystems in every city through collaboration between entrepreneurs, schools, and government.

Case ends on a hopeful note. Just as the First Wave got people online, the Third must get everyone growing again. The wave cannot be stopped—but it can be steered. By coupling innovation with inclusion, America can continue to lead not just in technology, but in opportunity.