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Chapter 1 - Introduction

1.0 Introduction

Entrepreneurial capitalism flourishes in the presence of economic opportunity, readily available venture capital, and the intrepid human spirit. Entrepreneurs inspire others to join them in the pursuit of their dreams. Ignoring the unforgiving odds stacked against them, they commit precious human capital and scarce venture capital to birthing new companies in the hopes of achieving success. A complex set of conditions and actions leads from a new idea to an excited entrepreneur recruiting others, raising venture capital and starting a new company; to hundreds of companies all competing to succeed and prosper; to a few large companies dominating multi-billion dollar markets; and then to virtually all once high-profile Initial Public Offerings disappearing or sliding into the realm of the living dead. When a company succeeds, the world may never be the same, for its products and services may change the way we live and work and even what it means to be human. This book observes entrepreneurial capitalism and the emergence of computer communications. It is a story of how isolated computers came to be interconnected into vast networks, creating the infrastructure necessary for the modern information economy.

How technologies become the engines of economic growth is poorly understood. Even so, experts tell us that the ability to raise the standard of living for all peoples without exhausting the capacity of Earth’s ecosystem rests with our abilities to convert sciences into technologies and then into jobs producing the requisite and sustainable products. As much sense as that linkage makes, few experience how it works in practice or know what can be done to make it function more effectively. Trusting the process to government has been replete with failure, and yet throwing our fates to the workings of market competition seems uncertain and a bumpy ride. Yet when asked the question “How can we best ensure economic growth?” most of us would answer: market competition. The economic history of computer communications from 1968 through 1988 allows us to observe the dynamics of how individuals and ideas gave rise to new products and corporations that compete in major new markets – not once, but three times. Data Communications, Networking and Internetworking reveal the complex economic web of government and markets as well as the joyful wonder of human beings

I was a partner with the investment bank Montgomery Securities in the mid-1980s. It was a time when futurists were envisioning the world exiting the industrial economy and entering the information economy. It was an exciting time as evidenced by the increased venture capital investing and the creation of thousands of new companies. My partners and I persuaded institutional investors to trust us with a percentage of their funds earmarked for venture capital. However, when it came time to invest, our review of countless business plans found most companies only incrementally innovating on what already existed; few were pursuing radical innovations. Why? When I reflected on a new order arriving and the lack of truly radical innovation, I felt confused. I decided to talk to experts in a field that I knew was rapidly changing and in which I had personal experience: computer communications. Soon the idea of writing a history of 1968 to 1988 emerged. During these two decades, revolutionary changes in the ways corporations used computers drove unprecedented needs for computer communications.

This is not a technical book. Any reader should be able to understand what differentiates one computer communication technology from the next. A technology will be defined simply as the embodiment of knowledge into product, a “black box,” if you will. Users see the black box from the outside and need to know little about how it is designed or built, they merely want to employ the product to their advantage. This history focuses on the nature of the inside of computer communication black boxes: products that enable computer products to interconnect and transmit data over networks. The “inside” of computer communication products consists of two parts: the hardware and software that effect reliable communication of digital data, bits (zeros or ones), and the protocols required to make sense of the bits being transmitted. Hardware and software innovations were directly linked to advances in semiconductor technology, and to mastering the reduction of entire products into semiconductor chips. In this book I will describe the innovation of numerous computer communication products. Communication protocols, specifically internetworking protocols, also will be of central interest. In 1968, networking protocols did not exist for there were no computer networks, only computer peripherals connected to dedicated computers. With the advent of computer networks, however, more complex protocols had to be created so data could be sent and received reliably by many computers. These protocols had to be evolved again when there were networks of computers interconnected to other networks of computers. The evolution from no protocols to networking then internetworking protocols will be a series of technology innovations closely observed. The two decades from 1968 to 1988 were exciting times in computer communications.