The Tim Ferriss Show - #297: Bob Metcalfe — The Man (and Lessons) Behind Ethernet, Metcalfe’s Law, and More

Episode Date: February 14, 2018

Bob Metcalfe (@BobMetcalfe) is an MIT-Harvard-trained engineer-entrepreneur who became an Internet pioneer in 1970, invented Ethernet in 1973, and founded 3Com Corporation in 1979. About 1.2B Ethernet ports were shipped last year — 400M wired and 800M wireless (Wi-Fi).3Com went public in 1984, peaked at $5.7B in annual sales in 1999, and after 30 years became part of HP last year. Bob was a publisher-pundit for IDG-InfoWorld for about 10 years and a venture capitalist for about 10 years with Polaris Venture Partners, where he continues as a Venture Partner.Bob is a member of the National Academy of Engineering and a recipient of the National Medal of Technology.In this conversation, we talk about everything from how he toasts when drinking with friends, how he learned to recruit and fire, what he does to scale businesses, different approaches to talent evaluation, critical decisions and mistakes made, how he has gotten through dark times, and much more. Please enjoy!This episode is brought to you by WeWork. I haven’t had an office in almost two decades, but working from home and coffee shops isn’t always what it’s cracked up to be. When I moved to Austin, one of the first things I did was get a space at WeWork, and I could not be happier. It’s dog friendly and serves the best cold-brew coffee on tap I’ve ever had!WeWork is a global network of work spaces where companies and people grow together — in fact, more than ten percent of Fortune 500 companies use WeWork. The idea is simple: you focus on your business, and WeWork takes care of the rest — front desk service, utilities, refreshments, and more. WeWork now has more than 200 locations all over the world, so chances are good there’s one near you. Check out we.co/tim to become a part of the global WeWork community!This podcast is also brought to you by Peloton, which has become a staple of my daily routine. I picked up this bike after seeing the success of my friend Kevin Rose, and I’ve been enjoying it more than I ever imagined. Peloton is an indoor cycling bike that brings live studio classes right to your home. No worrying about fitting classes into your busy schedule or making it to a studio with a crazy commute.New classes are added every day, and this includes options led by elite NYC instructors in your own living room. You can even live stream studio classes taught by the world’s best instructors, or find your favorite class on demand.Peloton is offering listeners to this show a special offer. Visit onepeloton.com and enter the code TIM at checkout to receive $100 off accessories with your Peloton bike purchase. This is a great way to get in your workouts, or an incredible gift. Again, that’s onepeloton.com and enter the code TIM.***If you enjoy the podcast, would you please consider leaving a short review on Apple Podcasts/iTunes? It takes less than 60 seconds, and it really makes a difference in helping to convince hard-to-get guests. I also love reading the reviews!For show notes and past guests, please visit tim.blog/podcast.Sign up for Tim’s email newsletter (“5-Bullet Friday”) at tim.blog/friday.For transcripts of episodes, go to tim.blog/transcripts.Interested in sponsoring the podcast? Please fill out the form at tim.blog/sponsor.Discover Tim’s books: tim.blog/books.Follow Tim:Twitter: twitter.com/tferriss Instagram: instagram.com/timferrissFacebook: facebook.com/timferriss YouTube: youtube.com/timferrissPast guests on The Tim Ferriss Show include Jerry Seinfeld, Hugh Jackman, Dr. Jane Goodall, LeBron James, Kevin Hart, Doris Kearns Goodwin, Jamie Foxx, Matthew McConaughey, Esther Perel, Elizabeth Gilbert, Terry Crews, Sia, Yuval Noah Harari, Malcolm Gladwell, Madeleine Albright, Cheryl Strayed, Jim Collins, Mary Karr, Maria Popova, Sam Harris, Michael Phelps, Bob Iger, Edward Norton, Arnold Schwarzenegger, Neil Strauss, Ken Burns, Maria Sharapova, Marc Andreessen, Neil Gaiman, Neil de Grasse Tyson, Jocko Willink, Daniel Ek, Kelly Slater, Dr. Peter Attia, Seth Godin, Howard Marks, Dr. Brené Brown, Eric Schmidt, Michael Lewis, Joe Gebbia, Michael Pollan, Dr. Jordan Peterson, Vince Vaughn, Brian Koppelman, Ramit Sethi, Dax Shepard, Tony Robbins, Jim Dethmer, Dan Harris, Ray Dalio, Naval Ravikant, Vitalik Buterin, Elizabeth Lesser, Amanda Palmer, Katie Haun, Sir Richard Branson, Chuck Palahniuk, Arianna Huffington, Reid Hoffman, Bill Burr, Whitney Cummings, Rick Rubin, Dr. Vivek Murthy, Darren Aronofsky, and many more.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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we have a serial entrepreneur, Bob Metcalf, at Bob Metcalf on Twitter. That's Bob, M-E-T-C-A-L-F-E. Bob is an MIT Harvard-trained engineer and entrepreneur who became an internet pioneer in 1970, invented Ethernet in 1973, and founded 3Com Corporation in 1979. Roughly 1.2 billion Ethernet ports were shipped last year, 400 million wired and 800 million wireless Wi-Fi. 3Com went public in 1984, peaked at 5.7 billion in annual sales in 1999, and after 30 years became part of HP, and that was last year. Bob was a publisher pundit for IDG InfoWorld for about 10 years and a venture capitalist for approximately 10 years with Polaris Venture Partners, where he continues as a venture capitalist for approximately 10 years with Polaris Venture Partners, where he continues as a venture partner. Bob is a member of the National Academy of Engineering and a recipient

of the National Medal of Technology. We talk about just about everything from how he cheers, in other words, when he does a salutation, when people are drinking wine or whiskey or whatever it might be. We talk about the early days. We talk about how he learned to hire and fire, the right things, the wrong things to do, scaling businesses, different types of approaches to evaluating talent, the critical decisions he made, the mistakes in some cases that he has made, how he's gotten himself out of very dark periods. And from start to finish, a really fascinating journey of a conversation that I tremendously enjoyed. So I'll leave it at that. Without further ado, that's I think how you say it.

Without further ado, what the hell am I trying to say here? Without further ado, there we go. I was trying to make it French. Without further ado, please enjoy this wide-ranging conversation with Bob Metcalf. Bob, welcome to the show. Thank you. I am really thrilled to connect and so happy to have you here, especially given that I suppose I'm now technically, I don't know if I should call myself an Austinite, but I live in Austin.

Well, nice of you to move here. It makes this interview so much more convenient. It does make it more convenient. Is Austinite one of those self-descriptions that you have to wait a certain period of time to earn? Or as soon as someone lives here, can they call themselves that? I think back to Long Island. We both have some history with Long Island. And where I grew up on eastern Long Island, if you were to call yourself a bonnaker, that has a very specific association with families that have been around for a long time.

Does Austinite have that or not so much? You know, I don't know about it. I consider myself an Austinite because I live in Austin, but maybe I'm being presumptuous there. You've been here how long now? Seven years and a month. Seven years and a month. And I say that makes me a native, but then they look at you. I actually prefer to think of myself as a Texan rather than an Austinite. Technically, I don't live in the city of Austin, even though that's my mailing address. I overlook the city of Austin. I think we'll come back to Austin, given your teaching.

But what I thought we might start with is, for many people, something they probably don't associate you with, and that is tennis. So I actually, for the first time in my life, had proper tennis instruction last summer. I really wanted to. I've always wanted to learn tennis, but I associated that growing up as a townie on Long Island with the city people. That just wasn't something that the townies did. And I secretly pined after learning how to play tennis. And it seems like the sport has had an impact on your life. And if I understand correctly, you've learned so much from the game

that you considered writing a book about it. Is that just an internet misquote? I didn't write the book. But you considered it. I thought about it. Yeah, because I've learned so much. And I think about tennis. I don't play much of it anymore.

I intend to get back, but I have to lose 50 pounds. My playing weight was 50 pounds lighter than this. And so I've been out there. I almost hurt myself. Last time I went out, one of my specialties in tennis is chasing the ball down on a clay court. And so I got up ahead of steam on one of these balls. I got over my head and ran it down and returned it and then realized I was running at the fence at full speed, carrying an extra 50 pounds and went bam, right into it. So I think I'm going to go back to tennis after losing some weight. Well, I'll extend the offer to help if you like, just having spent so much time in that world. But tennis, why does tennis appeal to you or what have you learned or observed in the game of tennis

that can apply elsewhere? Lots of things, but the first word that comes to mind is how to compete compete competition and what it takes to win i like to win and i've become more i became more competitive we i played competitive in tournament tennis this was a long time ago before i never turned in fact i preserved my amateur status. Twice I won a $100 prize and I turned it down. To preserve amateur status. To preserve my amateur status, which I effectively did. Another way to preserve your amateur status is to lose.

So I got to the finals of the New England B Championship and lost in the finals. And I got to the... 1972 was ranked sixth in New England with my doubles partner in doubles. And we secured that position by losing in the semifinals of the New England Hardcourt Championship. So that's an effective way of staying out here. What makes a good competitor in tennis or otherwise?

It could be specific to tennis. But when you say you learn to compete, what does the before and after look like once someone has learned to compete? Lots of differences. But the one I hang on is that some people, when they miss a shot, they'll throw their racket or smash it on the ground and stomp around and that positions them to do even worse on the next point. So one of the things I focused on was if I make a mistake, I don't throw my racket, I don't smash it, I don't get upset, I try to correct and improve. And I think that makes a big difference.

My doubles partner actually would take his racket and smash it on the tennis post. Now in those days, you'd carry two or three rackets. So he would smash it. They were wooden rackets, by the way. So when you smashed it, it was quite dramatic. But I never smashed a racket because I tried to channel my energy. And that made me a more effective competitor. How old were you at the time at your peak of competition, roughly?

My peak would be 1972. Let's see. That's arithmetic now. We're talking end of high school? No, no, that's the end of college. That's four years after my PhD. My PhD I got the same year. Oh, you got it.

Yeah, so I was 20 something. Were you developing at that time the ability to compete or not be emotionally reactive in other areas of your life or was it mostly siloed to tennis? I guess what I wonder is did you enjoy competing in other aspects of your life simultaneously? No that that came later. I think my competition was channeled in tennis. I played a lot of tennis. Every weekend at a tournament practice during the week,

I played varsity tennis at MIT. I was captain of the MIT tennis team. So I played a lot there, three or four hours a day. And I loved to win, and I beat a lot of people. Everybody I ever beat always told me they were having a bad day. Could be true. I mean, it's plausible. I played public

court tennis. I learned I played tennis at Bayshore school system on asphalt. And when I say asphalt, I don't mean hard courts. I mean like the kind they make roads out of. Our courts on asphalt. And when I say asphalt, I don't mean hard courts. I mean like the kind they make roads out of. Then our courts were asphalt. And my coach used to say, Van Ostrand was his name, you only have to win the last point. And so the goal is to get the ball back one more time than anybody else. And so I tended to outlast people on the points. Did you get the competitive drive, was that drive organically just through your life experiences,

or was that learned from parents or other influences? I wouldn't say my parents were very competitive, so I think I may have picked it up playing tennis. And we're going to jump around quite a bit because that's just the nature of how I tend to talk to my friends. And I know we're just getting to know each other, but my conversations tend to be somewhat memento-like in reference to the movie that is extremely hard to follow.

Does it mean we're leaving tennis already? Well, we don't have to. We don't have to leave tennis. Is there anything you'd like to add related to tennis? Well, my don't have to. We don't have to leave tennis. Is there anything you'd like to add related to tennis? Well, my specialty was doubles. And I love to play with a partner and have teamwork and have specialties. And that was another way of winning because you can optimize the two players. One's good at hitting hard. One's good at chasing the ball down. One's good at the second serve. And you just play the strengths of the two players. That was a part I really liked the best. So that sixth ranking in New England in 1972 was my highest ranking ever,

and it was achieved with Brookfield, Skip Brookfield, who knocked the hell out of the ball, but it usually went out. See, in tennis you learn to hit the ball harder and harder and harder, but it's more important for it to be in. Right. And Skip never had that, but he could knock the hell out of the ball. How much time did you spend developing your strengths versus fixing your weaknesses? Or how did you think about how to allocate your time and energy to those two things, if you did.

Well, one of the things I learned in tennis is the value of getting a coach. So I would, and I was blessed with coaches in both high school and college who knew how to teach. You can win a tennis, but you can also teach tennis, and those are not the same thing. And I had great coaches. But they would point out weaknesses. So I guess my answer to your question is I focused on fixing things that were wrong with my game to bring the whole thing. And I had great coaches. But they would point out weaknesses. So I guess my answer to your question is I focused on fixing things

that were wrong with my game to bring the whole thing up to an acceptable level. Because your opponent will find your weakness and play it. So you have to be sure not to have too many of those. I suspect we'll probably come back to this just thematically. We're going to come back to a lot of these points, probably in the realm of business, maybe elsewhere. But I would love to hop ahead. I think I'm getting the date right.

May 22, 1973. That's an important date in my history. It's an important date. Could you explain why that's an important date for people? On May 22, 1973, I was sitting in my office at Xerox Palo Alto Research Center in Palo Alto, California, and I had been given the job of, for the first time in the history of the world, networking a building full of personal computers, because there weren't any personal computers in 1973 to speak of. And I was lucky enough to get that job. And so leading up to that May 22nd day,

some ideation and travel and so on. But on that day, I sat down at my IBM Selectric typewriter and typed the memo outlining how Ethernet would work. So that's the Ethernet memo. And did you refer to it at that time as Ethernet? That was the memo in which Ethernet was named. How did you refer to it at that time as Ethernet? That was the memo in which Ethernet was named. How did you choose that name? Well, in building the network, we chose to use a thick, a half-inch thick coaxial cable to carry, shared among all the attached PCs, to carry the packets back and forth among the PCs. But we chose the coax for very particular reasons, and we anticipated maybe if we did it again,

we would choose a different medium, twisted pair or optical fibers or radio, for example. So we didn't call it coax net. We called it a generic thing, and there was this word ether floating around. The ether was once thought to carry light from the sun to the earth. The luminiferous ether. Luminiferous. Light bearing.

And then around 1900 it was shown there was no ether. The light got here without a medium. So the word ether fell into disuse. And it was there for us. So omnipresent, this cable would go everywhere, completely passive. It wasn't powered. It just sat there. And it was a medium for the propagation of electromagnetic waves, our data packets. So hence, ethernet. That's how it happened. For people who are not familiar, what did Ethernet represent in terms of change and innovation? What was the significance in your words or the words of others of Ethernet? So Ethernet is the plumbing of the internet. Its job is to carry packets physically around the world on these interconnected Ethernets.

So think of it as the plumbing. And what you generally think of is all the guys above it who have all the fun, you know, Google and Facebook and all those people. They're up there, but everything they do eventually becomes launching packets around the network. So we're up there. But everything they do eventually becomes launching packets around the network. So we're the plumbing. I had in my office at Xerox the most modern computer terminal in the world, the Texas Instruments Silent 700. And it could type

characters on a piece of paper at 30 characters per second. And those characters arrived over a thick cable that carried the bits at 300 bits per second. Remember that number, 300? When Dave Boggs and I built the first Ethernet, it ran at 2.94 megabits per second, roughly 10,000 times faster. So in one day, we went from 300 bits per second to roughly 3 megabits per second, roughly 10,000 times faster. So in one day, we went from 300 bits per second to roughly 3 megabits per second. So that is the principal change. We began to think of bandwidth not as a scarce commodity, but in abundance, because we had 10,000 times more than we'd had before. When did your interest in networks develop?

I don't know if ARPANET came in early in that interest in networking or later, but how did you become interested in what would ultimately become Ethernet? I mean, what were the seeds that led you down that path? in what would ultimately become Ethernet? I mean, what were the seeds that led you down that path? Well, I had at MIT between 64 and 69 was a computer science student, but there was no computer science then, so I was an electrical engineer and a management student at the same time. And then I went to grad school, and I made a mistake, and I went to Harvard grad. And I made a mistake. And I went to Harvard

grad school, which was terrible. I lasted a week before I was back working at MIT again. Hold on. Why was that? Because I'm an engineer, and Harvard doesn't like engineers. Oh, I see. To this day. Right. Got it. By the way, you would think that by now, 50 years later, I would have lost this bitterness toward Harvard. But I haven't.

It's still here. And that's a long story, which you could ask me about later because it has some fun parts. I will ask you later. The roots of my animosity toward Harvard University. But the, where was I going with that? I was asking you about the seeds oh yes so when you're a grad student so i showed up at harvard in the fall of 69 and i needed to find an advisor and a topic to get my phd two or three or four or five years 10 15 years later and uh And the big, hot computer science research project was ARPANET. It had just been started. And so being opportunistic, I said, OK, I'm going to do something. So that's how I ended

up in networking, was just because that's what grad students do. They do whatever's funded. And ARPANET was funded. Could you explain for folks what ARPANET is or was? Well, ARPANET is the internet, only it's an early version of the internet. And there's a lot of debate about that. The Advanced Research Projects Agency of the Department of Defense used to buy computers for each of its research universities so they could do their computer research. And they got tired of buying one for every campus. So they said, we should do resource sharing. And what that meant was from any campus, you'd be able to use all the other computers at other ARPA sites. So the first app was called resource sharing,

and it meant being able to log in from a terminal in one university and run programs and process your data at another university. And that app was not the killer app. It turned out within a year, email became the killer app. But it started out as resource sharing. So as a grad student, see, I proposed, I had just finished learning digital electronics at MIT as an electrical engineer. So I'm up at Harvard, and I could see that Harvard needed to connect its computer to this packet switch. ARPA dropped off a packet switch at each of its major universities and connected them with high-speed modems. And then you had to connect your computer to the packet switch. So fresh from MIT digital school, I volunteered at Harvard to build the hardware to connect Harvard's computer to the packet switch.

And Harvard, this is the beginning of my answer, Harvard said, no, that's too important work to leave to a graduate student. Ooh, singer. So I turned around, went down the street to MIT, and they gave me a job doing exactly the same thing. So they paid me. By the way, I was paid more than my Harvard advisor,

which is a whole other story. And that annoyed him. I can imagine. So I built this device to connect an imp, that's the packet switch of the internet, to the local computer at MIT, a PDB-10. And I built it. And I asked MIT, and they said, you can build another one and give it to Harvard if you want. And Harvard wouldn't accept it because it was too important for a graduate student. So I built that hardware. Now, that hardware could be described as carrying bits one at a time down a long wire,

which is my essential skill. And I had actually practiced some of that at MIT prior, not for networking, but building digital electronics. So I sort of developed a specialty in sending bits one at a time down a long wire. And this device did that. Then when I went to Xerox, right after my PhD, I went to Xerox Research, and the first thing I did there

was build another one of these devices to connect the Xerox computers into the Internet. And then it was in that moment that we started developing what are called personal computers. There's so many different avenues we could go down here, but I'd like to help people with a definition because I do find the plumbing of what we now think of as the Internet and the web fascinating,

and it's helpful to understand some of the terms. So you've mentioned packet a few times. Can you explain to people what a packet is in the context that you're using it? Okay, so you've got to start with bits, ones and zeros. And all computing is done, roughly speaking, with ones and zeros. No, not all computing is done with ones and zeros. And then you take those ones and zeros and you put them into groups, which you could call those bytes, or you could call them fields if they're bigger.

So you string a bunch of fields of bits together, and then if you put on the front of it a field which is the address of a place, so you'd like these bits to go, then you have the makings of a packet. So a packet is a bunch of bits with an address in the front, and you give that to a packet switch, and it sends it off toward this destination. So a packet is a bunch of bits heading in a certain direction with an address on them. Thank you. By the way, there's usually two addresses, a destination address and a source address.

But actually, there's four addresses, because there's the destination and the source in the local environment, and then there's the ultimate destination and source. That's an Internet Protocol address as opposed to an Ethernet address. Ethernet Protocol is IP of the TCP IP? That's right, TCP IP, transmission control protocol, Internet protocol, TCP IP. And the IP is our Internet packets, and they have four addresses. They have the Ethernet address, which says where to go locally, like right over there, in order to get closer and closer and closer

to the big address, which is the ultimate destination of the packet. Thank you. When does Metcalfe's Law enter the picture? Or what has become... You like to jump around, don't you? I do. I do like to jump around. We can go wherever you like. Let's do Metcalfe's law for a while. So in 1979, I founded a company called 3Com to deliver the fundamental, deliver the plumbing, to build out the plumbing of the internet, which is just now spreading. What Ethernet did was allow the internet to go into a building and visit all the desks. Prior to that, Internet just came to the building and stopped in the computer room, just allowed it to go.

And it led, so most machines are on Ethernet, they're not on the Internet directly. So my company started selling Ethernet cards about this big, and they would plug into your PC, and they'll allow a cable to come to your PC and put it on the Ethernet, which then put it on the Internet. And one of the problems my company had in 1981

were there were no personal computers. It was hard to sell, and we were running out of money. We had venture capital. So we made up this idea of a trial, a kit, a three-node network for $3,000. You get three cards. You can plug them into your three IBM PCs, which were just beginning then. And then you'd hook them together with a cable. And then we had a diskette full of software, and the software allowed you to share a printer. So you'd connect a printer to one of the three PCs,

and then the other two PCs could share it. Or you could put a disk on one of the PCs, and then the other two PCs could share it. And then there was software that allowed you to send an email from any one of the three PCs to any one of the other two. And this kit was a $3,000 kit. My company sold it, and people bought it because it was novel and interesting. And it worked.

That is, people found it. We're heading toward Metcalfe's Law. I'm in no rush. It's coming up. We have as much time as we need. So people bought this trial kit, and they put their three PCs together, and they shared the printer and shared the disk and exchanged the emails. Of course, how useful is email among three nodes?

And they told us that the product did what it said, but it was not useful. So I then went in a trance. I was head of sales and marketing at the company at that time. By then, I ran over to Stanford. Xerox had donated some early PCs called Altos. We had donated them to Stanford. And I went over there, and I had access to the computer room there, and I made up a slide. And the slide basically said that the cost of your network goes up linearly. As you buy one of my cards, the network gets bigger and bigger, and the cost goes up linearly, say $1,000 a card. It was like that. But the number of possible connections went up

as n squared. That is, each node could talk to the other n, the other n. And when you added another node, it could also talk to the other n, which could also talk to it. And if you do the math, the number of possible connections goes up roughly as n squared. So I made this slide showing the linear and then showing the quadratic passing the linear, as it always does, overtakes it at some point. And I call that the critical mass point. And I said, oh, and then I drew this out, took a picture with a camera, because we didn't have PowerPoint. So I took a picture with the camera, developed it into 35 millimeter slides, and handed six slides out to my sales force, which had six people in it. And we made the following argument. The reason your network is not useful is that it's too small. And what's the remedy to that?

Buy more of our product. And they did. And it proved true that your networks turned useful. And we went public in March of 1984. Now, it's been asked many times, especially by engineers who are suspicious of sales and marketing people, whether that slide was a lie. Was I lying by saying if you made the network bigger, it would be more useful? And the answer is no, I was not lying. And I'm fond of saying it's because I had a time machine. The Xerox Research Center was a time machine. And I took it out 10 years into the future,

filled Xerox with PCs and LANs and laser printers and internet routing boxes, and it was good. And everyone could see that it was good. So when I wrote that slide that night, I was not lying. I was predicting, based on 10 years of experience, what would happen. And it proved true, and my company went successfully public. Ten years later, that slide, which said that the value of a network grows as the square of the number of connections or users, by a man named George Gilder, he called it Metcalfe's Law. So since 1995, I've been enjoying and defending Metcalfe's Law. So since 1995, I've been enjoying and defending Metcalfe's Law. I have several follow-up questions. The first is, why did you name the company 3Com? Oh, that's easy. In 1979, on June 4th, when the company was founded.

What I wanted to accomplish with this company was to connect computers together. And what we had discovered in building the ARPANET is that every vendor of computers had their own programming languages and operating systems and computer protocols for communication. So the purpose of my company was to provide computer communication compatibility. Com, com, com. 3Com. 3Com. Yeah. So that's where I got the name. And you mentioned in passing the general aversion, to put it lightly, that engineers have with respect to sales and marketing. How did you decide to start a company? Were you already entrepreneurial and had tried various things? What was the impetus behind starting the company? And not to say that

being entrepreneurial is automatically sales and marketing, but it's certainly a component, generally speaking. How did you decide to pursue or create 3Com? So my parents were not entrepreneurial. They never went to college. Actually, my father did start a company once. It was called BAM Electronics. Bailey, Abrahamson, and Metcalf Electronics. And it lasted a year, and its purpose was to fix TVs.

TVs were new then, and they would break. And the way you fixed them is to replace tubes. So he had a company to replace tubes. But eventually, Metcalf believed that he was the hardest working of the three. And Bailey thought he was the hardest working of the three. And Abrahamson thought he was the, so the company blew apart in a year. But that's as close as my family got to entrepreneurship. But then I went to MIT. And when I arrived there in 64, MIT was at the heart of what would later be called Silicon Valley

on the East Coast. So Route 128 was. So suddenly I'm surrounded by entrepreneurs and role models. And so I guess that was the beginning of it. And I was involved in starting three companies at MIT as an undergraduate and then a little bit in grad school. And then I moved from 128 to Palo Alto, which was beginning to be Silicon Valley. So you could say I moved Silicon Valley from there. Or I was doing it the same year, anyway. And there I suddenly surrounded...

I met Steve Jobs, I met Bill Hewlett and Dave Packard and Bob Noyce and all of them. And there is one impression that you walk away with when you meet those people, when you meet people like that. And the impression is, if this person can start a company, then I can. Well, they become human.

Yeah, they become human. You can see the limitation. They're human beings. And if they can do it, you can do it. And the question is how to figure it out. How did you end up the head of sales and marketing? And how did you get good at sales and marketing? Or how do you think about it?

I know those are a lot of questions wrapped into one. Well, I was an engineer at Xerox. And they had a charm school. That is, the company was so big, they had their own university in Virginia. And you could go there if you want as part of your development. You said Charm School, right? We called it Charm School. And I went and I took a course called Xerox Selling Skills.

And by the way, there were 35 people in the class and 34 of them were blonde women. Why did you decide to take the course? There weren't that many choices. Aside from 34 blonde women. That wasn't a fact. It wasn't until I arrived. I realized I had hit pay dirt there. There was another course called Managing Tasks Through People. I took that one too. But then time passed. I started my company. I was chairman, CEO, president. And we raised 3Com Corporation in 1979. In 1980, we were initially consulting for revenue. And then we started selling a book that we developed. Then we're getting ready to have products and we've raised venture capital.

And one of the things that you do is then you recruit adult supervision, term of art. Still happens quite a bit now. Well, it's important. Or it's foisted upon you, depending on how the board is composed. Well, you're lucky if they foisted on you. Yeah, no, no. I'm not saying I have no position here. Anyway, I didn't learn this from Steve Jobs,

but I later saw that Steve knew this, which is you need adult supervision. A lot of people think Steve was the CEO of Apple. Well, he wasn't the CEO of Apple until 1996. He founded the company in 1976, so it took him 20 years to make CEO. Well, I was a CEO, but I saw that I needed adult supervision. So we recruited Bill Krause from HP. And that was a good decision. Bill joined the company when there were 12 of us, and we kicked him

upstairs to chairman when there were 12,000 of us. So he did good. Yeah, that's how he did. He's good. But when he arrived, he then became the CEO, and we were starting to spend that venture capital. And the board of directors asked. I was kind of annoyed. I recruited Bill, but I didn't recruit him to be CEO. But then it became obvious to the board that he should be CEO. And the board then said, Bob, we want you to be head of sales and marketing.

That's how I got the job. And I was a VP of sales and marketing. I was also the only member of that function. There were no salesmen. There was no marketing. It was just me. So I started learning really quickly. And did you have the skills, the toolkit to do that job partially because of the class that you took at Charm School? Did it help? Or was that something? That helped enormously. But keep in mind, our revenue was zero. So the kind of selling that was required was personal selling.

And having invented the technology, I was in a good position to do personal selling because I could get an appointment with anybody. So I invented this. I'd like to come talk to you about it. And so I could get appointments that a normal salesperson couldn't get. And I took us from zero to a million a month in revenue. But then... Just you alone?

No, I recruited one, two, three. Eventually it was six regional managers, but initially three. And you'd be surprised how many more orders you get when you actually go out and ask for them. And so revenue started upward from zero. But when it hit around a million, and this touches on one of my favorite metaphors, I redlined, and we needed to shift gears because selling is very complicated.

So, you know, sales competition, territory management, channels of distribution, contracts. It's complicated. So Mike Calaburco was recruited to be, from HP, to be our new head of sales and marketing. And he took us from a million a month to five million a month. And then he redlined. So he succeeded and then redlined. And then we replaced him with Chuck Kempton. And Chuck took us from five, I'm losing track of the numbers here, but five million to 25 million a month. And then he redlined. And then we got Bob Finocchio to take over there and he took us into the billions. So what we were doing was shifting gears. And you have to do a lot of that when you're growing a

startup. You have to be sure the, see, the company is growing more rapidly than the people. You have to pay attention to which people have been left behind by your accelerating company. And then you need to, in some cases, shift gears. Does that relate to operating ranges? Yes. Could you explain what that refers to, what operating ranges refer to? Well, people have, if you look at different sizes of companies, people have skills related to size, scale. So, for example, my specialty is when chaos reigns

and the company doesn't quite exist yet, and that seemed to be where I performed the best. But then there's people like John Scully, a buddy of mine, who knows how to run a multibillion-dollar company. We do not know the same stuff. We have a different temperament. So his operating range is up in the billions per year, and my operating range is zero to a million or zero a month.

That's what I mean by operating ranges. Some of it is the details of the... For example, when you're running a multi-billion dollar company, you have different divisions for different products. You have different channels of distribution, and there's many layers of management, and you have different skills. Like when you're an engineer, you build things. When you're an engineering manager, you manage people who build things,

which is different from building them. And then when you're a manager of managers of engineers, even that's a different task. And so different people, some people have very broad operating ranges and some people have very narrow ones. And what did you find to be the most effective approach for informing someone that they needed to be replaced. So you have these various players with different operating ranges, and you mentioned four or five names at different

stages needed to be replaced with someone else. What did you find to be the best or most effective way to make those transitions? Well, what we're talking about is management. So it's up to management to make the very subtle decisions about if you have a salesperson who's underperforming in a region, is it because the salesperson isn't right? Or did you set their quota too high? Or is that market not really as big as you thought? And thinking that through and deciding is called management.

Then eventually, sometimes, that person really needs to be replaced. So one thing I learned about that is never fire anybody alone. Never fire anyone alone. No, you should bring help. So you usually bring the head of human resources to help you. Because funny things happen when you let people go. By the way, in all these cases, we offered the person the option to take another job at the company. But that didn't work.

I remember Chuck stormed out the door. He wasn't going to put up with that. Because he disagreed with our management assessment that he was the problem. And we offered him a regional thing. He disagreed with our management assessment that he was the problem. Right. And we offered him a regional thing. I forget what it was, but he wasn't having it, and he stormed out. In the case of Mike Halaburka, when we replaced him as national sales manager, he took over the western region and prospered.

So you have different outcomes, but you should never do it alone. So you never fire alone. And is that just for moral support? Or how does that help? Well, some people get very upset when you fire them. Right. I'm sure. I'm sure I would.

I've been fired. I wasn't too happy about it. I'm smarter than you. I always quit just before they're going to fire me. That's not smart from a compensation point of view, by the way. It's quit just before they're going to fire me. That's not smart from a compensation point of view, by the way. It's much better to be fired than to quit. Right, you get your severance.

You get your severance package, right. No, it's just better to have more than two people in the room to keep things calm. It's not personal, it's business. And here's some alternatives. So don't do it alone. And the other thing I learned is about halfway through the interview, you both realize it's the right thing. And you don't want to do a job that you're not doing well.

You want to go find one that you can do well. So this is getting that message, and then you make the adjustment. Some do and some don't. Some get very upset. I remember Marlene, we needed salespeople and she was our marketing person. And so I took her for a walk. We used to do this around the parking lot. See, the building had a parking lot around it. And this is before I learned about don't do it alone. So she and I went on this long walk around the building. We probably did it 10 times. And I explained to her that I needed her to be a salesperson and to cover the Northern California region. And we didn't need the marketing she was doing.

But she saw herself as a marketing person. So she argued with me 10 times around the building and eventually quit. I mean, that day she quit because she wasn't going to take the sales job. And she went off and started another company and made millions of dollars. And so that would be evidence that she needed a different kind of job. And she found it and everything went well.

Anyway, you don't want to fire people. It's no fun. No, and I was going to, we came to this a little earlier than I anticipated because of the operating ranges. I have questions about hiring coming up right after this. But are there any particular opening lines or any language that you found very helpful

in having those difficult meetings? Because I've worked with many startups, and I've largely stepped out of that type of work as of about two years ago. But every founder or CEO certainly at some point sooner or later will have a conversation like this, or need to have, or should have a conversation like this. Should need to have, or should have a conversation like this. Should and will. Yeah, should and will. Is there any language or any guidelines that you've given founders for making that, for

becoming better at that, or not screwing it up terribly when you have those meetings? I think I will annoy a bunch of human resource executives with my answer to that. That's okay. One of them is not to give too many reasons. In fact, zero reasons is the best, which is we've concluded that you're no longer working out in this position and we'd like you to take that position or leave the company, whichever. When you start to give reasons, then you begin a debate. And it's never ending. And as a venture capitalist, this was a rule of mine, which is to avoid giving reasons. Because as soon as you give a reason, you

have a pen pal and you're in a discussion forever. So the thrust of it is the general management decision. It's not personal that this job and you are not meant for each other, so you're not performing well in it. We want to get you to a job that you'll do better at. The company needs everyone to be doing a good job, and you're not in this position, so we'd like you to move or leave sometimes as a recommendation. So spending a lot of time on reasons and debating and sort of sharing.

No, the decision, oh, making clear the decision is a done deal. We're not here to debate this with you. This has been concluded. So making that clear at the beginning is helpful. Otherwise, the employee begins to become a debater and becomes emotional and gets into the details. Getting into the details is not productive, generally. So don't give a lot of reasons.

Make sure it's clear it's a done deal and get some help to do it. Bring help with you. Good advice. But you spoke a language, and I picked up a point. You asked me about hiring. Yeah, that was going to be the next set of questions. But I'll let you run with it, and then I can ask my questions.

Well, hiring is the wrong word. Right. So this is exactly what I wanted to ask you about. So please continue. And I learned this early. Hiring, it's a small bit of language, and people debate the semantics of the words. But my grandmother fought organized crime on the docks of Brooklyn, New York. And she would supervise the hiring of stevedores

by the longshoremen. What are stevedores? Stevedores are the people who move the cargo around on the docks. I'm sorry. I may have this backwards. The stevedores hired the longshoremen to move the stuff around on the dock.

Now we have containers. In those days, they moved individual televisions around. But she supervised hiring. And hiring, the picture I have of hiring is there's a bunch of people dying to have this job. And you interview them and evaluate them. And you deign to pick one of them to take the job. And they're so grateful to have the job.

And all the others are waiting for the next one. And that's hiring. And that is the wrong mindset for growing your company. And the word I substitute is recruiting. You're after people who have other options. And they're the best. And you have to sell them on the proposition of joining your company. You're not hiring them.

You're recruiting them. So I seize up when I hear the word hiring applied to growing your company. You need to recruit the very best people. What is the playbook for being a good recruiter? Or are there specific, just like in the case of firing? I guess there are many, I guess there are many facets to successfully recruiting. How have you in the past picked your candidates or your targets so to speak and then what does it look like to recruit successfully? Well I'll tell you my secret. Bill Kraus, he's our adult supervision, recruited him from HP. And Bill came into my office and said,

I'd like to hire Debra Engel to be our VP of human resources. And I said, Bill, we only have 35 people in this company. We can't afford a vice president of human resources. What are you, crazy? And Bill said, no, I'm not crazy. I know what I'm doing, and you're going to go along with me on this, and we're going to get Debra in here to be HR. So we got Debra to be HR, and she knew how to recruit people. So she ran a process. She helped us all run a process. I can describe some of the aspects of that process,

but that's how I learned how to recruit, is I listened to Bill Krause and allowed very early in the history of our company to get a superly qualified HR person who knew how to do everything because she had done it for years. So one rule of recruiting is you should have three candidates, any one of which you think could do the job before you choose one.

If your company is rapidly growing, you trick them and you hire all three. You choose the one that's going to be for this job and then you find other jobs for the other two because they're great and that's a side issue. So when you're rapidly growing and you invest all this time in a three-candidate process, you've got to look at the other. After you choose one, the other two are pretty good, so you want to not just throw them away. Find a place for them.

These are people you're recruiting. They already have jobs. And then I got tricked. Early in my recruiting days, we were recruiting the salespeople, so we got a professional salesperson recruiter. See, an engineer doesn't know what a good salesperson looks like,

so you need a recruiting team that knows what a good salesperson looks like if you're recruiting a salespeople, and they sent me in to interview this guy, a very senior sales guy, and I came back, and I said, I love this guy. He's super. And then they said, well, what do you know about him? What'd you learn about him? I thought about it. I said, nothing, actually. I did all the talking. This guy had tricked me into doing all the talking. And I really like myself. So it really, I thought he was super.

So one of the things that you have to do is not be snookered, especially if you're recruiting salespeople who are good at this. Yeah. By definition, if you're recruiting, as you mentioned, these people have jobs, they have other opportunities. How did you differentiate if you ended up coming in as a closer or watching people close the deal? How did you differentiate 3Com? How did you make it more attractive than all the other opportunities it might have had in front of them. Well, it got easier and easier over time, but at the very beginning it was very hard because no one really knew what networking was or what the Internet was or what a personal computer was. So that was part of our sales proposition.

And so a lot of hiring, oh, did I say hire just then? You did. Yeah, I corrected myself. So we made, I made some recruiting mistakes early. And one of the reasons, too, I was driven to, because I couldn't get anyone to come join the company because they didn't believe that it would amount to much or that networking was important or something.

But over time, as the Internet emerged and as networking became more important, it became easier and easier to sell the vision of a worldwide internet that people wanted to participate in building but it is hard at the beginning because you have very you have to be really persuasive like steve jobs who is who i'll keep mentioning because he's a buddy a mentor of mine he was successful because he was enormously persuasive so he could persuade people to do stuff that others couldn't persuade them to do. You walked into his reality distortion field and you'd believe anything. So part of the knack is learning how to be persuasive about your company

and why people should join it. And then there's the compensation subject. And I remember this event, it stuck with me. I was recruiting this kid as a, well not so much a kid, as a senior engineering manager reporting to the vice president. And I offered him a stock option. And I asked him if the offer was attractive to him. And he said, you know Bob, I don't understand stock options or anything, so I'm counting on you, he says to me. I'm counting on you that when we go public, people won't think that you took advantage of me. But this offer had been prepared by Deborah Engel, according to an airtight HR apostle. I was confident this was a fair offer to him. And when we went public, he got a house, which was the rule of thumb.

Not the VP of engineering, but the directors of engineering should all get a house out of it. He got his house, so my conscience is clear. And you have to be persuasive about the company piece that you mentioned. In practice, what did that look like for you guys? I mean, you turn it, I'm just making things up, but I know this is an approach that some people use. Do you make the company about more than the company? It's about a movement.

It's about this seismic shift that you can be on the forefront of. What are the ingredients or what were the ingredients in practice that made the company, made you persuasive in presenting the company? Well, all that you just said is part of the pitch, but the core of it is credibility. That is, are they going to believe you when you say all those things that you just said? So it's how do you get credibility? And I view it as a spiraling thing.

You have to start with little bits of credibility and then spiral up to little bigger ones. And the technique for that is promises. Now, you've heard people say you need to keep your promises. My advice is slightly different. You need to make promises and then keep them. But making promises is a way of spiraling up the credibility. So in a sales situation, and recruiting is a sales situation, you've got to start with little bits of credibility, showing up on time, just being sure that what you say is true, don't exaggerate much. And then eventually you believe you've spiraled up to the level of credibility

where you can ask the question, are you going to join or not? And that's a test of how successfully you've spiraled up your credibility in that case. Are there other ways to build the credibility that were important ingredients aside from the making and keeping of promises, building from the small to the large? Well, the other is to use the team with which, in the case of recruiting, this person's going to work. It's that team that's recruiting the person, not you.

Because these are the people that he or she is going to work with. And so they're the most important factor in their evaluation of whether they want to work with these people or not. So you have to push down the recruiting to the people who are going to work with this person. What did the recruiting process look like in the sense that you're simultaneously recruiting, finding candidates you hope to recruit and vetting in the sense that you're going to, in some cases, end up in a room with a salesperson who's very, very, very good at selling themselves, but they may not be very good at selling a product. And I'm curious to know if there were any aspects of the hiring process that you feel were particularly important. And I'll just

to mention one thing that I do not have much experience hiring. I have some, but not a ton. And I was chatting with a friend, Kyle Maynard, who had been taught himself from a very successful CEO, and there are many different approaches to hiring, that when the co-workers or the prospective colleagues would interview a prospect, he would have them on a number of factors rate them from 1 to 10, but they couldn't use a 7, because 7 is a somewhat lukewarm, non-committal number, versus a binary 6, which is barely passing, so that's a no, or an eight, which is much more committal.

And I thought to myself, wow, that's quite clever. And so I've been applying that in many different situations in my life, not just hiring, but were there any particular rules or approaches that you have used or seen used that you believe to be very helpful for ensuring you're getting the right candidate? Obvious answer, reference checking. You must check references. But you have to be pretty creative. Often people will give you a list of references.

And you need to call all of those people and check. You'd be surprised how many times there's a surprise there. But then you have to use backdoor references that is people that were not recommended. Right. And you need to be very careful and listen carefully to your references when you're checking them.

And that matters. If you take shortcuts and you assume that the references that they gave would be positive, that's a slippery slope right you'd be surprised how many times people will give a reference who dings them it is surprising it's it's sort of like fundraising too you should check with the you're about to refer your customer or your vc to someone you should check with them. By the way, may I use you as a reference?

Yes. Will you say good things about us? Yes. Oh, good. Thank you. I really appreciate it. Important follow-up question. But when you call somebody cold and say, oh, who are you? Oh, you're Tom. Oh, yeah. Oh, my favorite thing is the good meeting thing. When you're a venture capitalist, this is a slightly different situation, but you're a venture capitalist and you're evaluating a company, and they say, we've had a good meeting with Procter & Gamble. Really? That's great. And who would they meet with?

They give you the name and phone number, and then you call the person, and they don't remember the name of the company or anything. They remember nothing. That's just forgetting to call the guy at Procter & Gamble and say, I'd like to use you as a reference. And if so, will you say good things about me? The answer is no, you don't give him as a reference. But checking references is all important.

But you have to do it deeply. You can't do it superficially. Well, creatively too, right? Because as you mentioned, at least in some cases, I know references are worried about liability if they say something negative that impacts the higher ability of someone. That's why you have to listen carefully. Listen carefully. Because they send you the signals under the cloak of that fear. you can get. They'll say, I can confirm that Fred worked here between April 17th, 1989,

and October of the next year. And if that's all they're willing to say, you should take that as a bad reference. I was chatting with one founder I worked with at a point. And one of his approaches was to, he would leave a voicemail and also send an email to the reference. And it would say, if so-and-so is a nine or 10 out of 10, or if you would recommend them nine or 10 out of 10, then please call me back or respond to my email. If not, you don't need to reply.

And so it gave them plausible deniability. They could say, I never got it. But nonetheless, he was able to gather information without being explicitly told information, which I thought was quite clever. I wish I knew that. There's so many different ways I want to go. You've mentioned Steve Jobs a few times. And we were sitting across from the table before we started recording, and you were on your laptop, and I was doing a second review of my notes, and I laughed at one point. And you said, are you laughing at something?

You said, are you laughing at me or at something else? And I know we were just joking around. So it was a quote. It might be a misquote, but since you mentioned Jobs, I'd love to touch on that. And the quote, I guess this is from CNBC about a year ago. So Steve Jobs came to our wedding, says Metcalf, and what's wrong with having Steve Jobs at your wedding? No one remembers anything about the wedding except the

fact that Steve Jobs was there. So that's what I was laughing at. If you in fact said that, even if you didn't, it's pretty funny. I did in fact say that, and it is in fact true. So A, can you describe what it was like having Steve Jobs at your wedding? And then B, since I believe you said, or at least based on my recollection that he was something of a mentor, what you learned from him? What were some of the things you took away from spending time with him? Any and all thoughts. Well, he called me out of the blue when I was sitting in my apartment in Boston, Massachusetts. I had two apartments, one in Boston and one in Palo Alto in 1979. And I was consulting and I was going back and forth.

And one lonely, dark evening in June of 79, a few days after I started my company, the guy named Steve from a company named Apple called me at night out of the blue. I'd never heard of Steve and I'd never heard of Apple. He was in a city I hadn't heard of. I had never heard of Cupertino because that's way south of Palo Alto. I never got down to Cupertino. Or maybe I went past it on the way to San Jose. I'm not sure. And he was interested in, he knew I was a networking guy, and he had these PCs, and he was interested in networking them. And would I come down and meet with him, which I did. And we went to a sort of organic hippie restaurant on Stevens Creek Boulevard,

and he pitched me on joining Apple. But I told him I just started my company like last week. And not only that, Steve, I have a proposal for how to network your PCs together. And here it is. I've called it Orchard. See, Orchard, Apple. That was so clever. Anyway, that went right by Steve.

He had no interest whatsoever in that. But then a good thing happened. He wasn't pissed that I turned him down. He helped me build my company. It was helpful. He lived in Woodside. My wife and I were living, my soon-to-be wife and I were living in Palo Alto. We later moved to Woodside, by the way.

And there's a little white church there in Woodside, California. And it turned out to be two or three blocks from Steve's house. So he was invited, of course. But then he actually showed up, which no one expected, with his then-girlfriend and was a perfectly fine wedding attendee. And no one remembers anything else. Well, I suppose at least they remember your wedding was associated with Steve Jobs. I suppose a lot of weddings just have no data point, no visual whatsoever to make them memorable. So there's at least that. Well, we had double dated with Steve before that. What was that like? Well, we have a vivid recollection. We went to the symphony one night up in San Francisco,

and we're driving back along 280, and there's a big hill coming up Daly City. And the car we were in, I forget what car it was, but it got a flat. And so he pulled over on this hilly road with Daly City over here to the left. And it became clear to me what was about to happen. Steve stood with the two women chatting them up while I changed the tire. So I was the engineer.

He was the leader and the spokesperson. I think I learned... So Steve could be a jerk. I've always viewed that as a package deal. It came with the rest of him. It was inseparable. He had to be a jerk because his standards were so high. That's what I learned from him, is to have high standards

and not put up with mediocre things. In the course of doing that, you piss people off, and then they think you're a jerk, and I think that's how it happens. He was scary. I mean, he was superly persuasive. He and Gates had the same feature. They could make you feel like you were an idiot, and you would suffer for the rest of your life if you didn't agree with them. That kind of intimidating... Both of them have this feature.

And he had it. But I had learned a lesson that protected me from him. Have I mentioned that I worked at the Xerox Palo Alto Research Center, which was packed with really brilliant people, including Butler Lamson, who is another mentor of mine at Xerox. And I learned from Butler that you are not obligated to change your mind just because you lose an argument. Because Butler could win any argument, but he wasn't always right. And I learned to step back and think about it a little more, and maybe he wasn't always right. Yes. And I learned to step back and think about it a little more,

and maybe he wasn't right. You're not obligated to change your mind just because you lost the argument. And then you run into Steve Jobs, and boy, is that a protective. Because he could win any argument too. Right. But you had to get away from his, out of his reality distortion field, which is an R-squared field. You can back out of it about distortion field, which is an R-squared field. You can back

out of it about 15 or 20 feet, per se. And then you could think about what he said. And mostly what he was saying was defending high standards. Is there anything else that you would say you learned or observed from Steve Jobs that stuck with you? I mean, the high standards goes a long way. Just that alone obviously covers a ton of ground, I would think. Well, he called me one day. I'm fond of telling this story. And he said, Pixar is debuting Toy Story at Danza College.

And I'd love for you to come. And I'll send a limo to your house, pick you up. And I'm this network plumber so 3com had this must have been in when was Toy Story debut 90 something yeah it was 90 I want to say this is this is a bit of a stab in the dark but uh I want to say it's like 95 96 that might have been when they IPO'd Pixar was the first stock I ever bought, so I'm pegging it around. So around then. Around then, nice. So 3Com was substantial, and I was a minor tycoon.

And so he sent the limited to my house, and we went down to Danza College, and we saw the movie, and he had a red carpet, like a Hollywood red carpet. And he shrewdly hired photographers with huge flash attachments, who would then take our pictures and make us feel important. So it was really cool. And then I'm coming out of the movie and there's Steve at a sort of an outgoing receiving line. And I told him this film was

just fabulous and I really enjoyed it and how great he must feel. And then I said, but I want to remind you, Steve, that every pixel of that movie was carried by ethernet. And Steve smiled. And so this is another thing I learned from him. And he said, thank you. And I've been living off thank you for ever since. So he was capable of gratitude, and he was really good at it. Because I remember that moment today. I'm saying, he paused, you know? So I would be in doubt about what he was going to say. And he said, thank you. And I think that was the purpose in inviting me to the opening,

was to thank me for lugging his bits around so he could make that movie. What a great story. So we were talking about pixels, bits, as promised early on and reiterated, to bounce around, to live up to my reputation that I don't have to defend. Network effects. You are a network expert in many different respects are there particular misconceptions or misunderstanding of network effects

that that people have network people talk about network effects a lot and in certainly in many company pitches you hear it it's a it's it's It's a phrase that is used very, very widely. Is it often misused? If so, what are people missing? This may not be a good question, but I'd love to ask. No, it's a good question. There is one principle of misuse. People mix up word-of-mouth testimonials with the network effect.

So I really like this product. I think you should use it too. Well, that's a good thing, but it's not the network effect. The network effect is when it's in my interest for you to use this. That's a different effect. It's much stronger than word-of-mouth testimonials. That's a different effect. It's much stronger than word of mouth testimonials. That's the one misuse. So Metcalfe's law, which is about the, it's a quantification of the network effect. It says the value grows as the square of the number of users, which is pretty powerful.

By the way, it's technically not exponential. Even though the 2 is in the exponent, we call that quadratic, not exponential. But in any case, I'll take exponential. And the trouble with it, the principal complaint is that as n goes to infinity, the value goes to infinity. And everyone has a hunch that that's not really true about networks, that they don't go to infinity with n. And so I looked at that. I wrote a paper a couple of years ago looking at that feature. And of course, one of the constraints I brought to this paper is that I would defend my law. I would not revise it. So just to be clear, this was not an honest investigation. But I figured out how to solve this problem without changing my law. That's a good day. Yeah.

And then I did some math. But the trick is that n doesn't go to infinity. So therefore, the value doesn't go to infinity. So that's how I fixed it. And n over time. So I did a model, called it the netoid, which modeled adoption rates as a function of time. And you know what an adoption curve looks like. It looks like this, and it looks like this. And so this Nettoid function was a way of saying,

well, you can't grow the network bigger than the universe, and there's only 7 billion people here, and there's only 3 billion users of Facebook. These are all caps on the value of the network and then I took the first ten years of Facebook and mapped it on to Metcalfe's law using this adoption figure and by the way Facebook's about halfway there about half a people half the people in the world use Facebook so they're on the on this adoption curve they're right in the world use Facebook. So on this adoption curve, they're right in the middle of the steepest part. But as they get close to everybody being on Facebook,

well, then their growth will taper off. And then the value will not go to infinity. The value will also. So I published that paper in a peer-reviewed journal. So I'm happy to say. So I have some defense of my law. So that's the network effect. When was that published?

December 2015 or 16 in IEEE Computer Magazine, which is peer-reviewed. You know I was about to jump all over you, but now I'll stand out. But I like to say Facebook is the Metcalfe's Law Company. It's the, which reminds me of the early days of Facebook. I went to visit Zuck and Cheryl when their place, it was still on California Avenue in Palo Alto before they moved to Menlo Park.

And I got an appointment with the two of them. And my mission was to discuss with them the impact of Metcalfe's Law and what they thought of Metcalfe's Law and how it bore on the growth on the growth of their company and had all sorts of questions so I show up at the head of California Avenue it's up off El Camino and it dead ends and there's a building over here and it was right over here seething with activity and I'm sitting in lobby, cooling my heels in the lobby for an hour. And then a woman comes out and says, I'm sorry, Zuck can't see you today,

but Cheryl can see you, so please come in. And I met Cheryl Sandberg, Zuck's adult supervision. And I began my little pitch to begin the discussion, and then I realized within 10 seconds that Sheryl Sandberg had never heard of Metcalfe's Law. So that was going to be weak, but she summoned one of her Stanford PhD mathematicians to join the meeting, and he had never heard of Metcalfe's Law. So the whole meeting just ended a complete collapse.

Anyway, I still believe Facebook is a Metcalfe's Law. So the whole meeting just ended a complete collapse. Anyway, I still believe Facebook is a Metcalfe's Law company that well leverages the network effect. And not just positive word of mouth, but utility. It's in the interest of each user to sign up other people because it makes their use of the network better. And that creates this very strong network effect. Is there a, well, let me back into this. So as an investor, you've spent plenty of time in the role of venture capitalist.

You've heard, no doubt, many, many pitches that in some respect use network effect as a claim for defensibility. We will have this network effect and it will create this competitive moat of sorts. They'll be very hard to replicate. At least that's something I've run into a lot. Is there an easy way, maybe not easy, simple either, to differentiate network effects that create defensibility or improve defensibility versus those that don't? Or if it's defined the way that you're defining it properly, maybe that's always the case. I just don't know. So I figured I would ask. Is there any way to distinguish those two? Well, Metcalfe's Law says that the value grows as, meaning is proportional to the number squared.

But it doesn't say what the constants of proportionality are. And those can be changed. So when Facebook adds a feature, you expect that curve, whatever that curve was before, my theory would say, is still quadratic, but it's been moved

because the services delivered are enhanced. While writing this paper, I discovered a sociologist, I'm blanking on his name now, but for decades he studied people and he determined that you can have 150 friends. And he was using that term, friends, in whatever it was, 50s, 60s, so on. What was his name? We can put it in the show notes too i don't get it but in any case senior moment but it was 150 on your factual recall i hate to even consider what kind of moments i'm always having all right so there it was i encounter it you can have the human

cognitive processing system can tolerate you can take care of 150 friends that's like like a constant of the universe so i call up facebook and i say well how many connection friend friends connections do you have and um and how many friends do you have and then you just divide one into the other and i'll be damn it, it was 140. Wow. And remember, Facebook is rapidly growing now, so who knows what's going to happen. Now, that was a surprising answer to me, both because you would think that now, with the tools of Facebook, we can tolerate more friends

than in the days of the campfire, but that number was still close to 150. I actually go back and try it again. Total number of connections divided by the total number of people, which is the average number of friends per person, was about the same as the sociologist had predicted. That is really surprising. This is the first time I've heard it,

but one would expect it to be anything but the same number because I suppose one could make the argument that you might on some level expect many, many thin connections without much communication on a platform like Facebook, but that the number of active threads of communication would be even fewer because the volume of communication, the ease of communication. Oh, so it would be a lower number.

That's right, potentially. Because when you're at the campfire, it's like, all right, you see Joe, your neighbor farmer when you walk a mile down the street and bump into someone from his family. But otherwise, Joe has no communication with you. Whereas if you're on Facebook, any one of your preferred nodes can message you incessantly. So it's really interesting that it's so close to that 150 number. Well, another reason it should be lower is that Facebook is growing still, and especially then. So a lot of those networks of friends are brand new,

and they haven't finished growing out yet. So that would be another reason. And it was 140, not 150, so it was a little bit below. But yours is another reason. But the reason it should be higher is that we now have tools. Like it's my practice to wish people a happy birthday, and there's a tool in Facebook that prompts you when your friend's birthdays are. And I type in many happy returns, exclamation point, every single time.

Many happy returns. Yeah. I wish there was a tool where I could just press a button and it would automatically say many happy returns. But right now I type it each time. And I think that's more authentic for me to type each time. I think it seems much more authentic. But you see how I can say happy birthday to many more people than before because I have a computer helping me, reminding me and delivering it. And so I'm still betting that this new number will be bigger than that sociologist assessed. So many happy returns is your go-to birthday greeting in this case.

Do you have a go-to salutation when you cheers with someone or you're at a party and people want to make some type of announcement? It's not the right word. I guess salutation? I'm blanking on the proper English word for this. But do you have any go-to or go-tos in that type of situation? I do. What are they? It's also the beginning and ending of every email that I send. All right. Ahoy. Ahoy. And I have three reasons. And you only need one reason, by the way, but I have three reasons why I love Ahoy. First of all, according to 23andMe, I am mostly a Viking.

And Ahoy is the ancient Viking war cry. So to be true to my heritage, I must say Ahoy. The second reason is I have a fleet of boats in Maine. They're tiny little boats. They're not Russian oligarch yachts my big boat is 32 feet long and when you're at sea ahoy is a way of greeting someone on the ocean which you can see is not too far from a Viking war cry

but the third reason is really killer when Alexander Graham Bell invented the telephone, the question arose, what do you say when you pick up the telephone? You have to say something or they won't know you're there. And Bell proposed that the word be ahoy. And I believe it was Edison who convinced everyone to use hello instead of ahoy. And I have, in a previous life, won the Alexander Graham Bell Medal. So in loyalty to Bell, I say ahoy. Ahoy. And I like to say it three times, actually.

So you raise the glass and you say ahoy, ahoy, ahoy? Ahoy, ahoy, yep. I like it. So I run a summer camp. Average age of the attendees is 60ish. And we have toasts. And we're encouraged. We encourage really elaborate toasts. And they're much longer than that. But they're much of the same sentiment. That is a round adventure and fellowship. So what is this? How did this camp come to be?

About 20 years ago. I have this island off the coast of Maine. It's a beautiful place. It's empty. And I began to share it with friends. I would invite them to come out. We'd get in my boat, go out there and pitch tents. And there's a little camp there.

A camp in Maine is a little cottage without electricity. We've been building up. There's about nearly 20 or 30 of the big boys show up. More and more, they come by boat. I have many moorings. I have a little cove. There were nine moorings last year, but I'm going to have 11 moorings this year because the big boys sometimes come by boat and that's kind of, then they can sleep on their boats and then I don't have to pitch a tent for them.

And then we have adventures and tell stories and toasts. We do toasts now that you mention it. Do you have any, do any stick in your mind in particular? Do you have any memorable toasts or alternate toasts that you like to give? I'm not nearly the most creative, but some of them are poems, just long poems. So it's an opportunity to...

Occasionally somebody dies. Not at the camp, but we acknowledge... Well, not yet at the camp. And so my version... that's when I use, I have an E.E. Cummings poem that I've memorized that I use as my toast in that case to remember them. Is it a long poem? No, it's not very long at all. Would you like me to recite it? I would love for you to recite it. Buffalo Bill's defunct, who used to ride a watery, smooth, silver stallion and shoot clay pigeons, one, two, three, four, five, just like that.

Jesus, he was a handsome man. But what I want to know is, how do you like your blue-eyed boy, Mr. Death? Wow. And occasionally somebody dies, and that's my way of lamenting their departure. And I have blue eyes. So that's sort of a personal connection. Yeah. How do you like your blue-eyed boy, Mr. Death?

It's very, makes me think of the expression memento mori, remembering that you were going to die in Latin. And what Renaissance, or some Renaissance, as I recall, that painters used to do, is put an invisible to the layman's eye, for all intents and purposes, a skull in their painting in some location that they knew was there, that they would notice every time they looked at the painting to remind themselves of their own mortality and the fact that their time was finite and limited. Have you seen these skulls? I have.

They have to be pointed out to you, I suppose. Yeah, I have. They have to be pointed out to you, I suppose. Yeah, I have. And in fact, this was not placed here for this. Now, it's a little obvious, but I've never explained to anyone. Oh, there it is. So I put a skull in the bottom of my About the Author photo without any explanation so that whenever I would look in this book, I would see that. And that's memento mori? That is memento mori. There are many ways to do it.

But it's good practice. So I would imagine, as you said, you have a personal connection to that. So every time someone passes, ending on a line with blue eyes certainly serves as a, I would imagine, a very powerful reminder. So I'm going to shift gears a little bit, or a lot, as is my want,

and make sure I didn't miss anything critical in these notes, which I don't believe I did. And I'd love to ask you a number of questions that I ask many guests I have on this show. The first is about books. Now, we had a little bit of conversation before this that may lead us,

even if the answer is I don't have any, that will take us in and of itself in an interesting direction. Are there any books that you have gifted, frequently gifted to other people or recommended to other people? There's one in particular. It's called Atlas Shrugged. Atlas Shrugged. All right. Which is my favorite book. Why is that your favorite book? Well, I read it for the first time right after it was written. I was, I think, in eighth grade or so, at an impressionable age. And I fell in love with Dagny Taggart, and I always wanted to be Howard Rourke. And there was something, there were some feelings I had at the time that it said were okay. Gave me permission to feel a certain way about myself. And it was related

to competitiveness and winning and how this and it touched on the invisible hand of free enterprise and capitalism and that whole package I bought into lock, stock and barrel. So I've been giving out

Atlas Shrugs since the 60s. Ever since. Yeah. And I understand that that labels me a kook of some kind, but I don't really care much about that anymore. It's my favorite book. I will say if you're a kook, then you're in good company. The last book I worked on, Tribe of Mentors,

with something like 140 interviews with top performers from at least 20 different fields, there were four or five books that popped up frequently, and Atlas Shrugged was one of them. The second on my list, since you asked, I don't think you did, but anyway, is The Selfish Gene. The Selfish Gene, Richard Dawkins. I'm just an arch Darwinian person. I love that book. It just seemed to explain everything. Just trace it all back to the math of natural selection and mutation and so on. So The Selfish

Gene is another one that I recommend highly frequently. I read them a long time ago. Have you always been involved with boats? Why do you have a fleet of boats? Well, on Long Island, we had a 14-foot runabout with a 10-horsepower motor, which I used every summer while growing up. So that would be it. My fleet is in Maine. So we go to Maine in the summer. And we have an island camp 10 miles out of the ocean. And the big boat is a lobster yacht, 32-foot lobster boat thing with a little teak on it that we use to... When you say teak, is that the wood or is that a feature of the boat?

I don't know. It's wood. It's wood, all right. So teak is a yachty wood. And the boat is a working boat hull, a lobster boat. But it's teaked out. So it's called a lobster. It's not called a lobster boat.

It's called a lobster yacht. I see. Right. It has a head. It has bunks, which are things that you don't have in a lobster boat. I see. That's the big, that's the flagship of the fleet. And then I have a 15-foot runabout with a plastic runabout.

We call her Tupperware, that's her name. And she has a 50-horsepower engine, so she moves right along. And then we have a 12-and-a-half-foot wooden sailboat called Flash. And her principal use is to circumnavigate islands near our island. So you leave our island and go around Hurricane Island or just circumnavigation of small islands in the Penobscot Bay of Maine. And then we have a bevy of dinghies

and stand-up paddle boards and kayaks, which we keep generally out in the island camp. So we ply the waters of the North Atlantic like my Scandinavian forebears. That sounds amazing. I have a friend who, whenever he is feeling, dear friend, well, actually I shouldn't say whenever. He spends three to four weeks on the water per year and has done that with his family for some time. And he uses it as an opportunity to reset.

And this will get to the question. But he uses it also as a means of resetting on an annual basis and reassessing his priorities and gaining clarity. What do you ever feel overwhelmed? This could be past tense too. Overwhelmed or scattered in those circumstances, if that has ever happened, what have you found to help for you? I frequently suffer from that feeling, being overrun. And it's generally because I overcommit. And I haven't learned after all these years how not to overcommit. I forget that you commit to something now and then it gets to be really big later

when everything else is getting big at the same time. But the remedy is to make a list and prioritize and just focus on the top item of the list and get it done. And the, so prioritize and concentrate on that and then just ignore everything else, sometimes to your detriment, because sometimes things need taken care of. But that's my way out is to concentrate on one thing. What are your values or priorities that you use to rank order or to select those top items, if that makes sense? Or maybe an example, because people prioritize using different means of weighting the things on a given list. I mean, you've had quite a few tremendous successes. I'd just love to hear you

expand on that if anything comes to mind. Well, there's two dimensions. And you've heard all this because you especially have heard all this. But the two of the dimensions are urgency and importance. And so things find their way onto the list by virtue of one or the other, some combination of urgency and importance. And the thing I learned a long time ago is to take the list and break it into three pieces, the stuff you must absolutely do as soon as possible. Then there's the stuff that you do if you get to, and then there's the stuff that you just forget that list and throw it out.

So what I used to do, actually when I was growing three come in the very early days like the day of founding it was my practice to do a to-do list every day and i would when the next day came i would turn the page and i would transcribe all the things that were left on this list onto the new page. And failing to copy things that had not been done onto the new page was a big breakthrough for me. When it began to be okay for me to not transcribe something that had not been done, my life got a lot better. So there's just some things that get on your to-do list. You just have to suffer the consequences of ignoring them. That's a big deal.

But playing this game between urgency and importance is a perennial problem. Oh, yeah. I think Eisenhower used to, as I'm trying to remember, the Eisenhower Matrix used to also think of things in these two dimensions and would try to pay attention or block out time, schedule time, to pay attention to the important but not urgent quadrant, which is prone to getting lost in the shuffle. So I've had a personal assistant since somewhere in the 70s. And then when I came here to the University of Texas, I have an endowed chair, and there's enough money in the chair for me to have an assistant. And so I got an assistant seven years ago. And I would come, and I was hoping to have a new life

as a professor and find out what that's about. And I would come to work every day, and my day would be full of meetings that my assistant had arranged. So after two years of this, I outplaced my assistant, found him another job. And now I don't have a personal assistant. So any appointments, I make. And you'd be surprised how few appointments I have. Because my assistant would carry, you know, Bob should meet with these people, so therefore I'm going to schedule the meeting. But I have a different evaluation criteria for should. And so I have many fewer meetings.

That's another way of pawing through the urgent and the important, is to not delegate that, but to take it upon yourself, because you can take responsibility for ignoring really important things and people and so on. Right at the moment, I have 12,000 unread emails in my inbox. That's a lot. You know the algorithm. You go and you start with the newest one. Right.

And you start working back older and older and older and older and older. And you go as far as you can before you run out of time. And then the next day, there's a whole bunch of new ones have arrived. And so sometimes you never get. And that's how you accumulate 12,000 unread emails. Yes, I'm unfortunately in a very similar position. Why don't you write a book on how to solve that problem? I think it's mostly running away and changing your email address. I've somewhat been convinced, and I remember I was told at one point by Robert Scoble, who's known in many technology circles. He said, I've realized in analyzing my email that for every response I send out,

I get 1.75 email in return. So how you make that work seems to boil down to fewer responses. By the way, Scoble's a genius, so I do whatever he says. But it's true. If you answer an email, you're guaranteed to get an answer

to your answer. So don't answer it. If you're open to it, I would love to talk about challenging times. And I have no time in mind in particular. But a lot of folks, and we only have a few questions left. I'm having fun. So just a few questions. I'm having more fun than you are. Perfect. That makes me, well, this is tough because then it reinforces the fun that I'm having. So I'm not sure. Now maybe I'm having more fun. No, I'm having more fun than you are. It's common, I think, for people listening to podcasts or reading a magazine profile to, at times, become very intimidated by figures they consider very successful. And they may assume that these people are hitting home runs every time they step up to bat. Are there any particular tough times or moments

that you'd be willing to share? And furthermore, what helped to get back on your feet or to regain your footing? I have no trouble with this. I have many of them. You accumulate them as time passes on. And I'm fond of saying, you know, one of my favorite songs is New Kid in Town

by the Eagles and J.D. Souther because I've been a has-been a few times. I know how to be a has-been because I've had some practice. But I'm fond of saying, I may be a has-been but it's better than being a never was. But the story that comes to mind, I alluded to it earlier, relating to my bitterness toward Harvard University, which I should get over with, and I understand

it's a childish petulance. So here I am working at MIT toward my degree at Harvard. And I submit a draft of my thesis intending to graduate in 1972, June. And my thesis advisor encouraged this thought. So I went on a job talk tour, and I got nine job offers. And it was easy to get job offers because I was a networking guy, and networking was hot. So universities thought that if they hired me, it would be easier to get grants from ARPA.

So I understand. It wasn't me. It was the networking thing. But then I turned down eight of the nine offers and accepted the one at the Xerox Palo Alto Research Center, which was a hard choice. They offered me more money. I didn't have to teach. I didn't have to raise money. I could just enjoy Palo Alto. And I was a big Beach Boys fan, so I was sure that was related. And I notified my parents, whose life's dream was that their son would go to college. And here he was getting a Harvard PhD. And I was inviting them to the Harvard Yard for the event. And my then-wife, may she rest in peace, resigned her job at MIT as an administrator there,

and she got a job at Stanford. It was all set up. And my oral defense of my thesis was two weeks before graduation. And I went in there. And you give your pitch. And then you leave the room. And then they talk to each other. And then you come back. They invite you back in. And then they shake your hand and congratulate you on being a PhD. Only that's not what happened. I walked back in there and they told me that my thesis was deficient and that I was not going to get my PhD. So I called Xerox, who had hired me on a job talk, PhD job talk. And Bob Taylor there, may he rest in peace, said, oh, why don't you come out anyway

and you can finish your thesis here. Oh, wow, super. The hard call was to my parents, which is, you know, don't come to Harvard Yard because it's not happening. So that was a horrible, horrible, see, that's my New York accent there, horrible, horrible, horrible thing to happen. And that was only the tenth thing that caused me to hate Harvard. It was a pretty big one. So that was pretty gruesome because everyone finds out about it and then you failed. And there's a good chance you'll never get your PhD if you fail your defense. I lucked out. I invented Ethernet. And in the course of inventing Ethernet, I wrote a chapter of my thesis that satisfied Harvard that my thesis was sufficiently novel that I could graduate.

So how's that one? Does that answer your question? There's many more. No, it's very good. It's a very good first half. And the reason I say first half is that I'd love to hear if it threw you off balance, let's just say right after the phone call with your parents and these various things, what type of state were you in and how did you, mean because the ethernet came later i don't know exactly how much later but between then and the invention of ethernet let's just say in the with a year or so yeah so the subsequent handful of weeks and months if you were in a funk and i don't want to speak for you but

how did you what what helped to get to write yourself? The Xerox Palo Alto Research Center. So when I moved there, it was heaven on earth. And I was grateful to them for accepting me even without my dissertation. And then they were helpful in being sure that I finished it. But the excitement of moving to California, you know, a New York boy goes to California. I really was a big Beach Boys fan. What I didn't realize is how far the ocean is from Palo Alto

and how cold and miserable it is when you get there. So the Beach Boys were southern California, and it didn't quite register with me. But moving to California was a big deal, and it was fun, and I enjoyed doing it. And San Francisco, as you know, is a fantastic city. And I was moving there shortly after the Summer of Love. I moved there in 72.

So it wasn't a hard, deep funk, because I had all this exciting new stuff going on. Now, if Xerox had said, no, you stay in Boston, and maybe we'll consider taking you if you ever finish your dissertation, that would have been hard to recover from. Different scenario. You said you had lots of them. I'd love to hear one more, if you're open to it.

Let's see. Maybe if there is one where you really had to kind of find your way out, if anything comes to mind. So here I was, the founder, chairman, CEO of 3Com Corporation. We had raised $1.1 million dollars of venture capital in 1980 when was that, 81 and we were burning through it and Ethernet

which I had predicted would help this company generate revenue was delayed in its take off I was wrong, in retrospect I was wrong by 6 months as to how quickly Ethernet would get picked up and our revenues would start growing. But it did look pretty bleak at the time. Cash is going like this and the pickup is not occurring. And then we had a board meeting, and I'm chairman, and I call the board meeting together, and one of my board members says, we've had a rump session without you,

and we've concluded that we now want Bill to take over as CEO. Now, I had prepared for this moment, because in the time before 3Com, I lived on Sand Hill Road. I met my wife on Sand Hill Road. I met my wife on Sand Hill Road. I founded my company on Sand Hill Road. And as you may know, Sand Hill Road is where all the VCs are. So I had plenty of time to meet them all. And I learned the three things, in their opinion, that caused companies to fail. One was the uncontrollable ego of the founder.

Whoa, well, they had me nailed. Two is a lack of focus, and three was a lack of money, which is self-serving advice. So when I came to present my business plan in 1980 to those same people, I handled those three cases preemptively up front. One of the things I said is, this company succeeding is more important to me than running it. That's a good line. And I believed it.

And it was attractive to the investors. This notion of the founder running things is quite controversial. So here I am in the meeting where they're informing me that I'm not going to be CEO anymore. I'm going to be chairman. I own most of the company by that time still. But I wasn't going to be CEO. My buddy, Bill, who's a perfectly fine guy, is about to be CEO.

So that was an interesting meeting. And what the founder is supposed to do following that meeting is slam the door behind him and storm out the door and go start another company or do something crazy. But I didn't do that. You didn't break your tennis racket. I did not. Oh, good observation.

Yes, I did not break my tennis racket. Now, this company's success is more important to me than running it. I said that to these people, and they're now taking me up on that. And this board was a board that I had tricked into being. This is a first-rate board. I had three of the top venture capitalists, Dick Kramlich and Wally Davis and, oh, darn, a third guy whose name I can remember in a few minutes. So I had handpicked this board. I had recruited them carefully. So can I disagree with them?

Especially after I told them that it was more important I be successful. And that was the meeting in which they said, we'd like you to be head of sales and marketing because we need somebody to get out there and tell people about the product. And you know how to do that, so go do that." And plus I knew that Bill was a sales and marketing expert, so he was going to be able to help me. So I accepted that. It took me about a week to stop being sort of rejected and depressed and wondering whether

I was going to leave or not and slam the door. And I didn't slam the door, so I suddenly started being head of sales and marketing and walked Marlene around the building to try to convince her to be a salesperson and found a recruiter to recruit the sales force and quickly learned how to sell. What time of day was that board meeting? Do you remember? Was it in the afternoon, late, early evening? Wouldn't be at night. No, it was during the day. What did you do after leaving that board meeting? What did the rest of the day

look like, if you remember, for you? I'm sure I had to explain it to my wife, Robin, when I got home. But I don't remember that. Was there anything that... What advice would you give to... It doesn't necessarily have to be founders. It could be anyone who receives news that they are no longer going to be X or be with

person Y, or it could be any number of situations, but who faces, who ends up facing news like that, what would your advice to them be? To realize this fact, that it is very difficult to be self-aware. Self-awareness is hard stuff. And you see it on the campus at the University of Texas. If those people had mirrors, they wouldn't look like that. They don't see how the world views them. So in my role, I couldn't figure out what Bill knew that I didn't know

that would make him qualified to be CEO, but not me. I couldn't see the deficiency, but my board could see it. And the board's job is to be sure that the CEO is the right person. So they were doing their job, and I had recruited them to do that job. So I wasn't seeing something that the board saw. And by the way, that judgment was vindicated. Bill did fabulously in that job. What deficiency did they see that you didn't see? I think it's a temperament thing. So Bill is an airtight, to-do kind of person,

does things, writes things down, does them very strong. He's also a big delegator. Back to a fault, the rest of us used to joke we would have these meetings and everyone would end up with action items except Bill. And so then it became our objective to get something on his to-do list. And by the way, if you got something on his to-do list, it got done. So that was his temperament,

sort of disciplined, more so than me. And yeah, the first operations meeting, the next week, every Monday we had an ops meeting where the team, and I had run that meeting for two or three years. And this was the first time Bill was going to run the meeting. And he had a yellow pad and a pen or pencil, I forget which. And he was writing as we had the meeting.

So I got curious because this was part of, I've got to figure out what this guy knows that I don't know. So I got up and walked around behind him which if you're chairman of the board and founder of the company and you own most of it, you're allowed to do that. But otherwise I would not do that. And I went behind him and I looked at what he was writing on his pad and he was doodling. And what he had written a hundred times was D-N-T. So after the meeting i took him aside and said bill i you know i'm curious what does dnt mean and he said and this was a big learning uh bob i find i talk too much and uh the way I keep myself from talking is I write, do not talk.

Wow. Now, everyone thinks that I'm writing down what they're saying, which means what they're saying is important. So that's why I write anything. But the thing I most need to know is to be reminded to keep my mouth shut because these people are, you know, be responsible for running the company. So that was a big learning. That's sort of the beginning of one of my secret weapons, something that I'm very, very good at. And I sort of learned it a lot that day, and it's listening.

And I think it's the secret to most success is just listening. And Bill taught me that. He was listening to what those people were saying. He wasn't planning his little speech. Right. You know how you sit there and you plan your speech while this other idiot is talking. And then they're done. You forget what they said.

And then you just say what you were planning to say. Right. A real character defect. D&T. D&T. Do not talk. So I got used to this idea of being the... Actually, that's why I didn't storm out the door.

If they had just made Bill CEO, period, I might have stormed out the door. But they gave me a job. They said, now we want you to be head of sales and marketing. So that was the... I think that's what saved me from doing something stupid. Also an approach that you used a lot later in offering people alternatives.

Say, you can either leave the company or take this other role in which we think you're going to prosper. Right. Anyway, so those are two. We've now touched on two negative events, but there are many, many others. No, that's a really fantastic example with a lot of learning, consequently, or subsequent to that. Well, having given you two low points in my life, of which there are many others, let me give you a high point. All right. A couple of decades ago, I was informed that I was going to be given the National Medal of Technology. And my parents were still alive.

And I brought them with me to the White House. They went into the White House, which is really fantastic. And I got this medal, George Bush, and I put it around my mother's neck. I had this picture of my dad, and these are very simple people, they went to college. I don't think they liked George Bush, I don't know.

But it was the culmination of the American dream. That's the phrase I use, culmination of the American dream. Because these folks had their whole life wanted their kid to go to college and make something of himself. And here I was getting the... So I consider this my mom's medal of technology. So that was a big high point. That's a big high point. So by the way, you may know there is some hostility

between scientists and engineers. Yeah. It's a false dichotomy, really. And this was a... I'm a member of the National Academy of Engineering, not the National Academy of Sciences, that sets up this episode. In the bus, going to the culmination of the American dream,

I'm sitting next to a man who's about to receive the National Academy of Science, the National Medal of Science. And I start saying to him, this is so cool, and the party last night was great, and now we're going to see the White House, and my parents are there, and everything. Isn't that great? And we're going to see the white house and my parents are there and everything isn't that great and this guy says to me it is pretty nice but it's not as good as stockholm oh my god what a comment uh i didn't punch him out. Yeah, I mean, now, just for people who might not make the association,

that's a Nobel Prize reference. That's right. That's where you get that. So he was telling me that he had received the Nobel Prize, and that was sort of a notch above the prizes we were getting that day. That's called raining on somebody's parade. That's a big dick response. Maybe it's the Long Island coming up. Wow wow it's a hell of a bus ride uh what a wonderful what a wonderful day that must have

been how did your how did your parents respond well they walked around like this you know looking at everything the portraits on the walls, and the military guys. There's a lot of beautiful, uniformed military people there. My parents were very impressed and befriended them, so they hung out with the military. My father lost an eye when he was a kid, so he wasn't able to serve with his three brothers in the Pacific during World War II. Both my mother and father had a tragedy in their life that prevented them from going

to college, which I think is why they had a special reason that I should go to college. And their attitude to the military, very supportive and positive to the military, because three of my father's brothers had served in World War II. So that was part of their reaction, was to look at these beautiful military people. You know, the White House picks these beautiful specimens of military, you know, fit and handsome and more beautiful or whatever the right adjective is.

So they hung around them. I remember that vividly. And the military, they're short. My mother's 5'2", my father was 5'9". So they're little tiny people. And they were being escorted around by these huge Marines from the various rooms of the White House. I remember that.

Anyway, it was a culmination of the American dream. Well, let's tie up here. I would say I'll ask you two last questions. Anyway, it was a combination of the American dream. Let's tie up here. I would say I'll ask you two last questions. One is, any parting thoughts, suggestions, asks of the audience to people listening to this and watching this? Anything at all. Could be a question, a suggestion, a request.

And then where people can find you online, say hello, learn what you're up to, and so on. So any parting thoughts or comments, questions, asks of any type. Well, I'm a big believer in the American dream. And I think we need to keep it alive. And it's at issue every day as to whether the dream of freedom and achievement, capitalism, Ayn Rand, you know, that whole thing. I believe in it and I think people should respect it and pursue it. So starting companies is sort of the ultimate version of that. I mean, that's the plumbing of free enterprise,

is starting companies to solve human problems. And so that's why I spend my time helping people start companies. That last modifier on the starting companies, too, is important, to solve human problems or to solve problems. I think that's a really critical piece to underscore. Well, I think it gets underscored too much. You do? Yes.

All right. Please say more. There's a kind of snobbery or virtue signaling that goes on. Right. The explicit proclamation. So what's booming in my field, which is my current field, which is the care and feeding of the startup ecosystem in Texas, or in the US, or Austin, whichever, there are these things called impact or social entrepreneurship. And I hasten to explain that, oh, that must mean what I do

is anti-social entrepreneurship. And you guys solve human problems, whereas what do we do? We do it, what do we do that for? We're money-grubbing for-profit people. Right. Yeah. So I don't respond well to that insult. I don't think profit is a four-letter word.

I'm right about that, too. No, I don't mean to apply that either. I just think that there are companies... Let's just say you could never make an announcement or wear it as a badge of honor, as words on your sleeve or anything like that. The only point I was trying to make is that I don't think for-profit is at all a four-letter word, and I think it's often absolutely, if not always, essential to create something that is self-sustaining,

that can scale and serve the greatest number of people or have the greatest impact, but that a capable engineer or entrepreneur, certainly it doesn't have to be an engineer who wants to build a company, can choose many forms that company can take, the product or service that can produce. So at the beginning of your company you can declare its motto is, do no evil. Yeah, that's a tricky one. That's a tricky one. the beginning of your company, you can declare its motto is, do no evil. Yeah, that's a tricky one. That's a tricky one. It's a little odd. It's almost like protesting too much. We're going to do no evil. Whatever we is is not evil. Suffice to say, the American dream, the importance of that, and the part of the fuel for that, at least in the sense of the free enterprise that supports much of it, being building companies.

That's important. Well, I like making a list of companies, you know, General Motors, Google, Apple, Procter & Gamble. I put it on this big screen, and I asked my students, which ones are the startups? And they picked the obvious ones, Microsoft, Apple. They can remember them being startups. They said, well, General Electric was a startup. Edison founded that company to solve a human problem years ago.

It's just an old startup. IBM is a 100-year-old startup. They're all startups. And that's how the free enterprise system works. You create companies to solve problems. You find a need and you fill it. And that's... So I claim...

So there are billions of people who use my invention to have access to the Internet. I think that's a good thing. I think connecting people together stimulates prosperity and democracy and all those good things. But I did it in a for-profit, venture-backed, Silicon Valley, went public kind of way. So it annoys me a little when the virtual signaling comes from the social entrepreneurs who claim that they're the ones solving human problems and not all the other companies who feed everybody and fly them around the world and build their houses. That doesn't count. So excuse me for being a little annoyed.

You can be annoyed. Perfectly valid response, I think, to many things. Well, for those people listening and watching who would love to learn more about what you're up to and your thinking and to perhaps say hello on the web. Where are good places to find you? So I tweet a lot. And I'm at sign Bob Metcalf with an E. The E is all important. I probably tweet 10 or 20 times a day.

And I can control my number of followers. I figured this out. When I want it to go up, I tweet about startups. And when I want it to go up, I tweet about startups. And when I wanted to go down, I tweet about politics. So I have 22,000 followers. And I'm curating my echo chamber. So I block people every day. Anyone annoys me a little bit, I just block them. And so I'm staying there at around 22,000 now. But if I wanted to go up, I know how to do that. How you do it is virtue signaling. Well, you may have heard to call after this podcast. I'm sure many people will visit. Well, Bob, thank you so much for taking the time today. This was really fun for me. I really

enjoyed the conversation. Thank you very much. And for everybody who is listening, for everybody who is watching, everything we talked about, the books, the organizations, and much more will be in the show notes, as well as Bob's Twitter account, way up at the top. So if you'd like to dig further into these resources, you can just go to tim.blog forward slash podcast to find the links and show notes on this episode as well as every other. And until next time, thank you for listening and thank you for watching. Thanks, Bob. Thanks. Hey guys, this is Tim again. Just a few more things before you take off. Number one, this is Five Bullet Friday. Do you want to get a short email from me? Would you enjoy getting a short

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will get the very next one. And if you sign up, I hope you enjoy it. This episode is brought to you by Peloton. And I'd heard about Peloton over and over again, but I ended up getting a Peloton bike in the whole system after I saw my buddy Kevin Rose. I've known him forever. Some of you know. And he showed up at my gate at my house a while back, and he looked fantastic.

And I asked him, I said, dude, you look great. What the hell have you been up to? Because he's always doing a weird diet or another, but it only lasts like a week or two. So he always regresses to the mean after like 75 beers. And he said, I've been doing Peloton five days a week. Now that caught my attention because Kevin does nothing five days a week. And you know, I love you, Kevin. But it really piqued my curiosity, ended up getting a system, and it's become an integral part of my week. I love it, and I really didn't expect to love it at all, because I find cycling really boring, usually. But Peloton is an indoor cycling bike that brings live studio classes

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and everyone seems to have their favorite instructor or you can select by music duration and so on. Each Peloton bike includes a 22-inch HD touchscreen, performance tracking metrics. I think that, along with the real-time leaderboard, are the main reasons that this caught my attention when cycling never had caught my attention before. It's really pretty stunning what they've done with the user interface to keep your attention. The belt drive is quiet, and it's smaller than you would expect. So it can fit in a living room or an office. I actually have it in a large closet, believe it or not,

and it fits with no problem. So Peloton is offering all of you guys, listeners of the Tim Ferriss Show, a special offer. And it is actually special. Visit OnePeloton, that's O-N-E-p-e-l-o-t-o-n one peloton.com and enter the code TIM all caps T-I-M at checkout to receive $100 off accessories with your peloton bike purchase now you might say accessories wait I don't need fancy towels or whatever other supplemental bits and pieces no the shoes you shoes you need, you need the clip in shoes,

and those are in the accessory category. So this $100 off is a very legit $100 off. So if you want to get in your workouts, if you want a convenient and really entertaining way to do high intensity interval training or anything else, or you just want to get a fantastic gift for someone, check out Peloton. OnePeloton.com and enter the code Tim. Again, that's O-N-E-P-E-L-O-T-O-N.com and enter the code Tim at checkout to receive $100 off any accessories, including the shoes that you will want to get. Check it out. OnePiloton.com, code Tim. This episode is brought to you by WeWork. I love WeWork. I haven't had an office in many, many, many, many, many years since 2000 or so when I had my last real job, I suppose, in quotation marks. But when I moved from San Francisco to Austin not long ago, I decided,

you know what? I'm tired of working at home. I'm tired of working in coffee shops. So one of the very first things I did was to get a space at WeWork. I could not be happier with this change in my life. WeWork is a global network of workspaces where companies and people grow together. The idea is really simple. You focus on your business and WeWork takes care of all the rest, including front desk service, utilities, refreshments, and more. I also often have that shipped from Amazon and elsewhere to my office at WeWork. Here in Austin, I've been completely blown away by the members-only events, special offers, and perhaps the best cold brew coffee on tap that I've ever had.

It's been amazing. It's been a real, real change in my life and improved my quality of life. And there are also dog-friendly WeWork locations all over the place. How fun is that? WeWork caters to everyone from entrepreneurs and freelancers to startups and even large enterprises, including GE, Salesforce, Microsoft, MasterCard, Samsung, Spotify, Pinterest, and Red Bull, among many others. In fact, more than 10% of Fortune 500 companies currently use WeWork, and it's a rapidly growing group. In other words,

it's not just solopreneurs and ground-level startups that use WeWork, but everything from that to the big companies who are seeing very huge benefits as well. WeWork believes that creating spaces where people can connect and create meaning together, right? After all, if you are someone who has built a business modeled on the principles of the 4-Hour Workweek or elsewhere, it can be a lonely road sometimes. Even though you're digitally connected, it can feel very, very isolating. So in these spaces, you can connect with real humans. And all the while, you space more efficiently and cost effectively, which makes you and your business better equipped to face the challenges of today and tomorrow.

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