Bob Metcalfe, Ethernet inventor, 3Com Founder, pundit and publisher with InfoWorld, Venture Capital Partner with Polaris Partners and now Professor of Innovation at the University of Texas at Austin. Photo by John Davidson.

Publisher and Reporter with Silicon Hills News
Host of the Ideas to Invoices Podcast

Internet Pioneer Bob Metcalfe is celebrating his 71st birthday today.

Metcalfe is best known worldwide as the inventor of Ethernet.

“A lot of people think an idea comes all of a sudden, a Eureka moment,” Metcalfe said. “But in my experience, that’s very rare.”

In this Ideas to Invoices podcast, Metcalfe recounts how difficult it is to take a disruptive idea and launch it into the marketplace.

Metcalfe started his work on the Internet at MIT in January of 1970. And then he went to Xerox Palo Alto Research Park in 1972. He invented Ethernet on May 22, 1973.

Metcalfe also formulated Metcalfe’s Law, “which states that the value of a telecommunications network is proportional to the square of the number of connected users of the system.”

By his own count, Metcalfe has had five substantial careers. He founded 3Com, a manufacturer of computer networking equipment, in 1979 and served as an executive there. (3Com stands for Computers, Communications and Compatibility) Then, he worked as a journalist serving as pundit and publisher for InfoWorld. He left that career to become a venture capitalist and served as a venture capital partner with Polaris Partners in Boston. He is now professor of Innovation at the Cockrell School of Engineering at the University of Texas at Austin.

He’s also a graduate of MIT with two B.S. degrees in Electrical Engineering and Industrial Management. He has a Masters in Applied Mathematics and a PhD in Computer Science from Harvard.

Metcalfe went to school for 23 years and the last few years, he worked on the early version of the Internet, called the ARPAnet with the goal of connecting minicomputers across the country.

That problem evolved rapidly at Xerox PARC where Metcalfe went in 1972, the goal was to connect a computer on every desk. He was the networking guy and he had to get the Internet to extend into the building and connect to every desk, Metcalfe said. He was given the opportunity to invent something to connect those PCs together, he said.

To create Ethernet, Metcalfe took ideas from ARPAnet, primarily packet switching, the underlying technology of the Internet and an idea from the University of Hawaii: Aloha Network, a method for sharing: a communication channel, Metcalfe said.

“It was designed to extend the Internet into the building. It was designed to connect a PC to a printer,” Metcalfe said.

One day, Metcalfe had the world’s highest speed terminal in his office: a Texas Instruments Silent 700 and it ran at 300 bits per second. The next day, he had Ethernet running at 2.94 megabits per second, 10,000 times faster.

“And that’s when we started this cycle of build it and they will come,” Metcalfe said. “Because no one needed 2.94 megabits per second. But we made it available and look what happened: the Internet blossomed at much higher bandwidth than previously existed.”

Their main motive was to build their own tools, Metcalfe said. They didn’t want to carry diskettes from their computer to the printer. They wanted to hit command P on the computer and pick up the document at the printer, he said.

“That was one of the earliest uses of Ethernet: printing,” Metcalfe said.

Metcalfe left Xerox and founded 3Com on June 4th of 1979. He raised venture capital in February of 1981. 3Com shipped its first big product, Ethernet for the IBM personal computer, in September of 1982. The company went public on March 4,1984.

In 1999, 3Com had $5.7 billion in revenue and was sold after 30 years of independent operation to HP in 2010 for $2.7 billion.

DEC, Intel and Xerox agreed to cooperate to make Ethernet a standard Local Area Network, known a LAN. Two others, General Motors and IBM came to the IEEE with contending standards, Metcalfe said. The Institute of Electrical and Electronics Engineers, the organization known as IEEE, made all three standards: Ethernet was 802.3, General Motors’ Token Bus was 802.4 and 802.5 was IBM Token Ring, he said.

“And then we went to war in the marketplace,” Metcalfe said. “And by the way, there were a bunch of other nonstandard LANs like Arcnet and Wangnet. There were lots of local area networks then.”

In San Antonio, Datapoint Corp. had an early personal computer and a local area network, called Arcnet. Metcalfe traveled to San Antonio to meet with Victor Poor, vice president of engineering at Datapoint to invite the company to submit Arcnet as standard to IEEE. A few weeks later, Poor contacted Metcalfe and declined to submit Arcnet as an industry standard and instead keep it as proprietary.

“And that was the end of the Arcnet,” he said.

Datapoint ended in bankruptcy in 2000.

As for LAN standards, Ethernet eventually won, Metcalfe said. After 20 years, Ethernet finally killed the IBM Token Ring and all the contending standards, Metcalfe said.

Ethernet’s strategy was to be an open standard, Metcalfe said.

In the podcast, Metcalfe also reveals the secret to selling – an essential skill for every entrepreneur. The key is to shut up and listen, he said.

Metcalfe, an engineer by training, took 3Com Corp. from zero sales a month to $1 million a month. The company then hired a series of sales executives to take the company to the next levels.

“Sales is something you do every day and the better you are at it, the happier you are going to be,” Metcalfe said.

In Silicon Valley, there’s a term called Adult Supervision, in which a seasoned executive comes into a company to help the entrepreneur, Metcalfe said. Bill Krause was the adult supervision at 3Com. When he joined 3Com, Metcalfe went to Krause’s first meeting. He saw him writing furiously on a notepad during the weekly operations meeting. Metcalfe looked at the paper over Krause’s shoulder and saw that he had written “DNT” repeatedly. Afterward, Metcalfe asked Krause what that meant.
Krause explained it meant “Do Not Talk” and that he needed to remind himself not to interrupt and to listen. The key to running a successful meeting meant that people needed to talk and he needed to listen, Krause told Metcalfe.

Sales is a key skill in life, Metcalfe said. Among his first jobs, Metcalfe worked as a Cabana boy and earned more by catering to his customers. He also turned his package pickup job at Sears into a tips job and made more in tips than his hourly wage.

Most successful entrepreneurs should put 10,000 hours into something before founding a company, Metcalfe said. He references Author Malcolm Galdwell’s 10,000-hour rule explained in his book Outliers, in which a person who does 10,000 hours of something can become a leader in that field.

Metcalfe is also known to change careers every ten years. He moved to Austin in 2011 to work as professor of innovation at the University of Texas at Austin. His wife, Robyn Metcalfe, is a triathlete and long distance runner. She got tired of training in the snow during the Boston winters and they picked Austin for their new home. Robyn Metcalfe also runs Food+City at UT, which publishes a magazine, hosts events and holds an annual food supply chain contest. They have two grown children, Max and Julia.

Metcalfe jokes his next career will be as a stand-up comedian. In this podcast, he tells a USB funeral joke. Tune in to hear him tell it and for more tips on how to become a successful entrepreneur.

Editor’s note: Metcalfe was the third person interviewed for Silicon Hills News’ Ideas to Invoices podcast. The first few minutes of the interview are rough, because it was recorded at Galvanize, which was under construction. For more interviews with local entrepreneurs, please subscribe to the Ideas to Invoices podcast on iTunes.