Biases And Consequences Of AOL/Time Warner Decision

Introduction

Cognitive biases are systematic errors in thinking that often make accurately weighing evidence, assessing probabilities, and making logical decisions difficult (Stillman, 2016). They can hinder objective contemplation of an issue by introducing influences into the decision-making process that are separate from the decision itself, and very often decision makers are unaware of their influence in decisions (Stillman, 2016). Such is the case with the infamous AOL/Time Warner merger and Eastman’s Kodak’s decision to not pursue a timely digital technology strategy. The following paper describes two of the worst decisions in history, the biases that contributed to them, and the consequences of those decisions.
AOL/Time Warner Merger

Merger discussions began between AOL’s CEO Mr. Steve Case and Tim Warner’s CEO Mr. Gerald Levin, in the Fall of 1999. Shortly, thereafter, a deal to deliver media products to millions of consumers via internet broadband valued at $350 billion was struck between Case and Levin during a dinner in early January 2000. (Arango, 2010).
Within a few months of the deal being closed, the dot-com bubble burst and the economy went into recession. Advertising dollars disappeared, and in 2002, AOL was forced to write-off of nearly $99 billion because much of their advertising revenue was generated by the

In an interview in 2010, Case describes the merger as “a good idea, but the execution of it wasn’t what it needed to be.” (Arango, 2010). In the same interview, Levin blamed the internet for the failed merger in his response: “I now, upon reflection believe that the transaction was undone by the Internet itself. I think it’s something that no one could have foreseen” and that with internet “all the old business plans are out the window” (Arango,