The Fascinating Brain Behind 3Com and Ethernet
Key Lessons for Investors on their Journey to Success
In the field of technological innovation, there are many gripping stories.
Step into the world of Bob Metcalfe.
The founder of 3Com and the inventor of Ethernet.
This article reveals not only the public successes
but also the behind-the-scenes challenges he faced before 3Com went public.
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It is important for investors to understand 3COM's complex journey. Because there are many lessons to be learned from it.
This article highlights three things:
The importance of self-awareness
The role of selling
And the criticality of examining a company’s fundamentals beyond its surface achievements
This article goes further; it uncovers the story before the numbers.
Numbers are the direct results of actions and strategies, painting a clear, often unseen picture of a company's true journey.
The Inception of a Revolution
Bob’s story begins with a groundbreaking invention: Ethernet - while he was still an employee at Xerox.
Ethernet began as a solution to a simple problem: connecting computers within a local area network (LAN), allowing for the first time seamless and efficient data transfer between computers nearby, like in an office building.
What set Ethernet apart was its simplicity, reliability, and scalability.
Ethernet laid the foundation for the modern internet. It was not just a product of genius, but also of Metcalfe’s ability to see beyond Xerox’s limitations.
He early recognized the need to transform Ethernet into an industry standard, leading to the birth of 3Com.
However, Ethernet’s journey from a local network to a global networking standard wasn’t easy at all.
“I knew Ethernet was a game-changer, but convincing a corporation set in its ways was another matter.”
The Hidden Challenge
A key moment in Bob’s journey was his recognition of a significant personal shortcoming: a lack of selling skills.
This realization was not just an admission, but a turning point for the entire company. Despite being the brain behind Ethernet and 3Com, Bob initially had no clue how to sell his product. It was only shortly before 3Com went public that he tackled this gap in his skill set.
Metcalfe’s evolution in this area is particularly noteworthy. He didn’t just learn to sell; he mastered it in the nick of time.
It shows a vital lesson for innovators and entrepreneurs: the ability to sell is as crucial as the invention itself. Inventiveness creates the product, but selling prowess breathes life into it, turning it into a viable business.
Integrating my personal observation into this story, I witnessed a similar phenomenon in my last job. It’s more common than many realize. I saw several CEOs (especially in early-stage companies) who could not pinpoint the exact problem their product was solving.
This lack of clarity wasn’t just a minor oversight; it was the root of why they struggled to grow their company. They lacked the ability to translate their innovation into a solution that resonated with their customers. Metcalfe’s story is not an isolated incident but a reflection of a broader truth in the business world. The most successful leaders are those who not only innovate but also articulate the value of their innovation in the market, to bridge the gap between an idea and its practical impact.
Under the mentorship of Steve Jobs (yes) and through his relentless pursuit of self-improvement, Metcalfe honed his salesmanship. This development was not an overnight change, but a crucial strategic step that significantly contributed to 3Com’s success. As Bob himself realized, the art of (his) selling was the key that unlocked the commercial potential of his technical genius.
It’s a powerful reminder of the complex nature of success.
3Com’s Rise and Challenges
The history of 3Com was not a smooth one but was characterized by many hurdles. Ethernet was in competition with other network technologies, including today's giants AT&T and IBM, who were also trying to establish themselves as the industry standard.
Metcalfe’s leadership pulled the company through these challenges, growing from a consulting firm to a major player in the networking industry. However, Metcalfe’s reflections on his time at 3Com, including his decision to later step down for the company’s betterment, highlight the hard decisions entrepreneurs must often make.
Beyond the Boardroom
Metcalfe’s narrative extends beyond his professional accomplishments. He talks openly about the impact of wealth on his life and his relationship with it.
“We want to spend all the money before we die.”
His way of dealing with success, and his desire to give back - above all, by endowing professorships at MIT - shows how multi-faceted he was as a person.
Investor Insights
Bob Metcalfe’s journey with 3Com and the development of Ethernet serves as a great lesson for stock investors. His story underlines the hidden complexities behind a company’s success, reminding us that the full narrative is often out of public view, veiled by NDAs, or obscured in corporate secrecy.
Investors are thus left with a puzzle where crucial pieces are missing.
In a world filled with news and rumors, the true impact of publicized information on a company’s future is challenging to estimate.
Hence, the most reliable source of truth for an investor often lies in the hard numbers.
Metrics such as profit margins, sales growth, and market share offer tangible evidence of a company’s health and competitive standing. A declining profit margin, for example, might indicate waning competitiveness or a shrinking moat, essential insights for making informed investment decisions.
Conclusion
The core of Bob Metcalfe's story goes beyond his remarkable achievements in technology and entrepreneurship. It serves as a guide for investors in interpreting the success of a company.
While the human elements of innovation, strategic foresight, and leadership are undoubtedly significant, they are often hidden from public view and difficult to quantify.
In contrast, the real and unembellished story of a company is most reliably told through its financial performance and market behavior. These numbers reveal the underlying truth.
They provide a clear, unbiased view of a company’s trajectory, offering investors a solid foundation for their decisions. In the rapidly changing business world, where breakthroughs and setbacks happen behind a cover of secrecy, understanding and interpreting these financial stories is crucial for anyone looking to invest wisely and build lasting wealth.
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Michael
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Disclaimer:
The information in this article is my personal opinion. I’m not a certified investment professional. It is not consulting, nor does it constitute investment recommendations.
I do my research carefully and follow my personal investment strategy.
The stock market is a complex building with its own rules. There are no rules set in stone, like the rules of physics.
Therefore, use the contents of this newsletter at your own risk and do your own research as well. Investing in the stock market can lead to a total loss of the capital invested.
3com brings back the memory of Worldcom and my junior days. Whoa
Great lesson and writeup as selling sure is a big part of success.