The BusinessMakers Radio Show

Episode #448: Bob Metcalfe

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Russ: This is a special episode of The BusinessMakers Show because I'm in front of a live audience, the MIT Enterprise Forum [clapping and cheering] - a very live audience I might add. And I'm very pleased to have, as my guest, IT inventor and innovator extraordinaire, entrepreneur, inventor of Ethernet, founder of 3Com, actually partner emeritus at Polaris Venture Partners, the professor of innovation at the University of Texas and Murchison fellow of free enterprise, Mr. Bob Metcalfe. Bob, welcome to The BusinessMakers Show [clapping].

Bob: Thank you.

Russ: Okay, I wanna get into Ethernet, but what's so fascinating about it to me is that it sorta was born in a four- or five-year period when you were part of Xerox PARC, the Palo Alto Research Center, the place that had so much innovation - the mouse, the GUI that turned into Windows, the laser printer, and Ethernet and more. Tell us about the culture, about the ambiance. Why so much innovation out of one center

Bob: Well, it begins with a monopoly. Xerox at that time had a monopoly on the copier, and it decided to allocate 1.4 percent of revenue to basic research and created the Xerox research center in Palo Alto and chose some good people to run it, and they immediately began raiding research universities for professor types and their researchers to join. They built a beautiful building in sunny Palo Alto. They flew us first class everywhere, which was weird 'cause we all had beards and Birkenstocks, and we did transcendental meditation. I had a - I don't know what it was - but I had one of those things you said. What's that called?

Russ: Mantra.

Bob: A mantra.

Russ: Mantra.

Bob: Yes, we all had a mantra. I don't remember mine. And the conference room had beanbags in it, and there was only one meeting a week, and it was Tuesdays at noon, which was a bit awkward because you had to be there. That was the only required meeting, and, of course, a lot of us worked until we got tired, and then we went to sleep, and then we slept until we woke up - no alarm clocks. And then we would work, but then on Tuesday, we had to be there at 12:00, and that was a problem.

We had a general idea that we were working on the "paperless office of the future," which was ironic since we worked for a company whose job was producing paper [laughter], but don't worry. The first thing we did was invent the laser printer, and the building filled up with paper, so that didn't work out as planned.

Russ: All right. Well, did you know, though, that these game changers were happening all around you at the time?

Bob: Yes, I think we did.

Russ: Wow.

Bob: We had been generally recruited from the ARPA - Advanced Research Projects Agency of the Department of Defense research community, a bunch of research universities all sponsored by ARPA. A lot of us had known each other when we were there. I was getting my Ph.D. from Harvard, but I was doing my work at MIT. Oh, and my colleague at MIT went to help run the lab at Palo Alto, so that's how I got in.

And the lab was wisely located right next to Stanford, so immediately we all became part-time professors at Stanford. So PARC was part of the Stanford - there were some Berkeley people there, too.

Russ: Okay. So and this was about 1975?

Bob: Six.

Russ: Seven?

Bob: Well, I arrived at PARC in '72 and did Ethernet - that first memo's in '73.

Russ: Okay. So at the time when they ask you to do this, were they asking you just to kinda like help out in the office? Or was this actually challenging to you to come up with an invention that would turn into what it turned in?

Bob: Help out in the office?

Russ: Yeah. You were just connecting computers [laughter], like you were the IT guy. That's what IT guys do today.

Bob: Well, you're right. It is sort of routine IT today [laughter], but that was 40 years ago - May 22, 40 years ago, and the bandwidth that we all had at our desks then - we had computer terminals on our desks, and we had really fast ones - 300 bits per second [laughter], zipping in and out of our desk. Ethernet, the first one, ran at 2.94 megabits per second - 10,000 times faster, so I wouldn't characterize it as "helping out in the office." [Clapping and cheering]

Russ: Ultimately, you helped us out in all of our offices, though, obviously. Really cool, though. But what I found fascinating, too, about what you did, once you pulled this off, and you kind of owned this capability, you didn't just sorta let it sit. It seems like after Xerox PARC, you knew, "Wow, I need to champion this cause," and you became much more of a salesperson than any engineer or inventor that I've ever known, which, in my opinion, turned out to be why you became so successful. Do you agree with that?

Bob: I do agree with that. I wrote a paper. It appeared in Technology Review magazine in 1998. It's available on the Internet. You can Google it up. It's called the "Zen and the Art of Selling," in which I wrote this paper to MIT people, but other people can read it, too [laughter]. But it's basically a letter agreeing with what you just said, which is that sales is important, and that one of the almost fatal to me but fatal to many companies is the technical founders of a company looking down on salespeople and not appreciating what they do.

So what I argue is that salespeople are a different life form, but we are carbon based [laughter], and if you want your company to succeed, the suits and the nerds better get along. And if the suits and the nerds disrespect each other, that's the end of your company, generally speaking.

Russ: But do you meet with engineers sometimes and try to persuade them to be more like you were and taking responsibility for persuading the market to understand the advantages and by the product?

Bob: I just gave my annual - actually, it's twice per year - lecture to my - it's a lab course on that very topic. The homework is to read that paper that I wrote in '98 and the lecture is about selling. I encourage them to sell something every day just to get practice, and I give 'em the secrets. And by the way, if you wanna know the secrets, I can tell you [laughter].

Russ: We're ready. Tell us.

Bob: There's several. This is very exciting 'cause when I say this to these undergraduates, they just can't believe that it's so simple. The number-one deterrent to selling is the word "no." We're afraid of getting a "no." I wish I had known this in high school.

You know, one of my high school chums is here in the audience, Leon Friedman. There he is. Do you remember Lynn Seffe?

Leon: Yes, sir.

Bob: I found out at our reunion that she would've gone to the prom with me if I had asked her [laughter and clapping]. So you just gotta know you're gonna get a "no," and ask, and you gotta be ready for "no." And the way you deal with "no" is another word: why? "No? Why?" And then if you're lucky, you'll get a list of reasons why not. Those are, in the trade, called "objections," and then you need to work on the objections.

And then the ultimate - two more tricks. These are great: listening and promising. So listening, what did I say to the students? "God gave us," or Darwin - you get to choose, "gave us two ears and one mouth. Take the hint [laughter]." That's listening. You gotta listen to the customer.

And then finally, since selling is basically a credibility game, the way you build credibility is by making promises - at first, little ones, like, "I'll be there at 8:00." If you say you're gonna be there at 8:00, you better be there at 8:00. You can't stroll in at 8:15 because that's communicating to the customer that your credibility is low, but then you make bigger and bigger promises until finally the big promise of all, which is, "This product's gonna be great for you, and you should buy it." And then you get that other word that we're all looking for, and what word is that?

Russ: Yes.

Bob: Yes.

Russ: Yes. Really cool. Well, thank you for teaching us about that [laughter], but that is unusual, though, coming from an inventor and an engineer for sure. Do you find that you have an impact on students that you -?

Bob: Well, let me tell you how I came to this. It was June of '81 - no, '82 - and I was CEO of my company, and I had 0 revenue, and I was burning through my venture capital cash because my predictions about the adoption of Ethernet had been "optimistic" [laughter]. So my board of directors - who I handpicked, so how could I argue with them? - said, "It's time for you not being CEO anymore. We gotta get your partner, Bill," who's a very experienced guy. "He should run things now and try to save this company. And by the way, we'd like you to be head of sales and marketing." So I suddenly began to think sales and marketing was a really good idea.

So we had zero revenue, and as was hinted earlier, I managed to figure out how to do it well enough to get us to $1 million a month.

Russ: Okay. All right, so I'm curious, now. I studied your background quite a bit. I find this thing we just talked about one of the most fascinating things, but today, here we are, 2013. What's important to you today?

Bob: Well, I have a new career - being a professor. So what's important to me is figuring out how to be a good professor, and I'm telling you I don't know. There are some hints. Have you noticed how bureaucratic universities are?

Russ: Yes.

Bob: So you go from a startup world and a venture capital world into a university bureaucracy; it is stunning.

Russ: Right. Right. How do you deal with that?

Bob: I get peevish and obnoxious, and I lay down the law, and I threaten to quit, and I - just childish, I know. But on the other hand, we've got 51,000 students to play with there, and 8000 new ones come every September - August, so it's a mixed bag. There's the thrill of the students. You notice I didn't mention faculty there 'cause the faculty's the hard case. I'm a faculty member, but I'm not really a faculty member 'cause I don't feel like - 'cause I don't know how to be a professor, and they do. So that's my hardest challenge, I think, is relating the bureaucracy and the faculty, but the students, we get along fine.

Russ: So before I let you go, let's imagine you just kinda woke up and found yourself a college kid now, knowing what you know about the world. What would you do in 2013 if you were a 20- - 21-year-old planning for the future trying to replicate something like you accomplished? What would you do?

Bob: Well, you would choose to do what's fun, and that varies from person to person, and the thinking there is that in order to be any - oh, so my father used to say, "You can be whatever you want. You just have to be the best in the world." No pressure. By the way, that's why I have an electrical engineering degree from MIT. I intended to only get a management degree. My father said, "We didn't send you to MIT to get a management degree," [laughter] so I got my EE degree to keep him happy.

But the argument there is in order to be good at something, to be the best in the world, or just even passably good, you have to like it. It has to be fun. And if it's not fun, you can't be good at it and vice versa. So you should be choosing what you find to be fun, and that varies from individual to individual.

Russ: Okay. Bob, I really appreciate you sharing your story with us on The BusinessMakers Show.

Bob: Thank you.

Russ: You bet. That's Bob Metcalfe, inventor and entrepreneur extraordinary, and this The BusinessMakers Show heard on the radio and seen online at [clapping]. Thank you.