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THINK: The Amazing story of IBM by W Rodgers

October 4, 2018

Thomas John Watson Sr. (February 17, 1874 – June 19, 1956) was an American businessman. He served as the chairman and CEO of International Business Machines (IBM) He oversaw the company’s growth into an international force from 1914 to 1956. Watson developed IBM’s management style and corporate culture from John Henry Patterson’s training at NCR. He turned the company into a highly-effective selling organization, based largely on punched card tabulating machines. A leading self-made industrialist, he was one of the richest men of his time and was called the world’s greatest salesman when he died in 1956.

Having given up his first job—teaching—after just one day, Watson took a year’s course in accounting and business at the Miller School of Commerce in Elmira. He left the school in 1891, taking a job at $6 a week as bookkeeper for Clarence Risley’s Market in Painted Post. One year later he joined a traveling salesman, George Cornwell, peddling organs and pianos around the farms for William Bronson’s local hardware store, Watson’s first sales job. When Cornwell left, Watson continued alone, earning $10 per week. After two years of this life, he realized he would be earning $70 per week if he were on a commission. His indignation on making this discovery was such that he quit and moved from his familiar surroundings to the relative metropolis of Buffalo.

Watson then spent a very brief period selling sewing machines for Wheeler and Wilcox. According to Tom Watson, Jr., in his autobiography:

One day my dad went into a roadside saloon to celebrate a sale and had too much to drink. When the bar closed, he found that his entire rig—horse, buggy, and samples—had been stolen. Wheeler and Wilcox fired him and dunned him for the lost property. Word got around, of course, and it took Dad more than a year to find another steady job.

Watson would later enforce strict rules at IBM against alcohol consumption, even off the job.

Watson’s next job was peddling shares of the Buffalo Building and Loan Company for a huckster named C. B. Barron, a showman renowned for his disreputable conduct, which Watson, as a lifelong Methodist, deplored. Barron absconded with the commission and the loan funds. Next Watson opened a butcher shop in Buffalo, which soon failed, leaving Watson with no money, no investment, and no job

Watson had a newly acquired NCR cash register in his butcher shop, for which he had to arrange transfer of the installment payments to the new owner of the butcher shop. On visiting NCR, he met John J. Range and asked him for a job. Determined to join the company, he repeatedly called on Range until, after a number of abortive attempts, he finally was hired in November, 1896, as sales apprentice to Range.

Led by John Patterson, NCR was then one of the leading selling organizations, and John J. Range, its Buffalo branch manager, became almost a father figure for Watson and was a model for his sales and management style. Certainly in later years, in a 1952 interview, he claimed he learned more from Range than anyone else. But at first, he was a poor salesman, until Range took him personally in hand. Then he became the most successful salesman in the East, earning $100 per week.

Four years later, NCR assigned Watson to run the struggling NCR agency in Rochester, New York. As an agent, he got 35% commission and reported directly to Hugh Chalmers, the second-in-command at NCR. In four years Watson made Rochester effectively an NCR monopoly by using the technique of knocking the main competitor, Hallwood, out of business, sometimes resorting to sabotage of the competitor’s machines. As a reward he was called to the NCR head office in Dayton, Ohio.

In 1912, the company was found guilty of violating the Sherman Antitrust Act. Patterson, Watson, and 26 other NCR executives and managers were convicted for illegal anti-competitive sales practices and were sentenced to one year of imprisonment. Their convictions were unpopular with the public because of the efforts of Patterson and Watson to help those affected by the Dayton, Ohio floods of 1913, but efforts to have them pardoned by President Woodrow Wilson were unsuccessful. However, their convictions were overturned on appeal in 1915 on the grounds that important defence evidence should have been admitted.

Charles Ranlett Flint who had engineered the amalgamation (via stock acquisition) forming the Computing-Tabulating-Recording Company (CTR) found it difficult to manage the five companies. He hired Watson as general manager on May 1, 1914 when the five companies had about 1,300 employees. Eleven months later he was made president when court cases relating to his time at NCR were resolved. Within four years revenues had been doubled to $9 million. In 1924, he renamed CTR to International Business Machines. Watson built IBM into such a dominant company that the federal government filed a civil antitrust suit against it in 1952. IBM owned and leased to its customers more than 90 percent of all tabulating machines in the United States at the time. When Watson died in 1956, IBM’s revenues were $897 million, and the company had 72,500 employees.

Throughout his life, Watson maintained a deep interest in international relations, from both a diplomatic and a business perspective. He was known as President Roosevelt’s unofficial ambassador in New York and often entertained foreign statesmen. In 2001, a book called IBM and the Holocaust described how Mr. Watson provided the tabulating equipment Hitler used to round up the Jews. His Hollerith punch-card machines are in the Holocaust Museum today. The book describes IBM’s punch cards as “a card with standardized holes”, each representing a different trait of the individual. The card was fed into a “reader” and sorted. Punch cards identified Jews by name. Each one served as “a nineteenth-century bar code for human beings”. In 1937, he was elected president of the International Chamber of Commerce (ICC) and at that year’s biennial congress in Berlin stated the conference keynote to be “World Peace Through World Trade”. That phrase became the slogan of both the ICC and IBM.

Watson’s merger of diplomacy and business was not always lauded. During the 1930s, IBM’s German subsidiary was its most profitable foreign operation, and a 2001 book by Edwin Black, IBM and the Holocaust, proves that Watson’s pursuit of profit led him to personally approve and spearhead IBM’s strategic technological relationship with Nazi Germany. In particular, critics point to the Order of the German Eagle medal that Watson received at the Berlin ICC meeting in 1937, as evidence that he was being honored for the help that IBM’s German subsidiary Deutsche Hollerith-Maschinen Gesellschaft mbH and its punch card machines provided the Nazi regime, particularly in the tabulation of census data (i.e. location of Jews). Another study argues that Watson believed, perhaps naively, that the medal was in recognition of his years of labor on behalf of global commerce and international peace. Within a year of the Berlin congress though, where Watson’s hopes had run high, he found himself strongly protesting the German policy toward the Jews.

Because of his strong feelings about the issue, Watson wanted to return his German citation shortly after receiving it. When Secretary of State Hull advised him against that course of action, he gave up the idea until the spring of 1940. Then Hull refused advice, and Watson sent the medal back in June 1940. Dehomag’s management disapproved of Watson’s action and considered separating from IBM. This occurred when Germany declared war on the United States in December 1941, and the German shareholders took custody of the Dehomag operation. But during World War II, IBM subsidiaries in occupied Europe never stopped delivery of punch cards to Dehomag, and documents uncovered show that senior executives at IBM world headquarters in New York took great pains to maintain legal authority over Dehomag’s operations and assets through the personal intervention of IBM managers in neutral Switzerland, directed via personal communications and private letters.

During this same period, IBM became more deeply involved in the war effort for the U.S., focusing on producing large quantities of data processing equipment for the military and experimenting with analog computers. Watson, Sr. also developed the “1% doctrine” for war profits which mandated that IBM receive no more than 1% profit from the sales of military equipment to U.S. Government. Watson was one of the few CEOs to develop such a policy.

In 1941, Watson received the third highest salary and compensation package in the U.S., $517,221, on which he paid 69% in tax.

Watson had a personal interest in the progress of the war. His eldest son, Thomas J. Watson Jr., joined the United States Army Air Corps where he became a bomber pilot. He was soon hand-picked to become the assistant and personal pilot for General Follet Bradley, who was in charge of all Lend-Lease equipment supplied to the Soviet Union from the United States. Watson, Sr.’s youngest son, Arthur K. Watson, also joined the military during the conflict.

Watson worked with local leaders to create a college in the Binghamton area, where IBM was founded and had major plants. In 1946, IBM provided land and funding for Triple Cities College, an extension of Syracuse University. Later it became known as Harpur College, and eventually evolved into Binghamton University. Its School of Engineering and Applied Sciences is named the Thomas J. Watson School of Engineering and Applied Sciences. The IBM plant in the neighboring city of Endicott has since downsized drastically, however.

After World War II, Watson began work to further the extent of IBM’s influence abroad and in 1949, he created the IBM World Trade Corporation in order to oversee IBM’s foreign business.

In 1939, he received an honorary degree in Doctor of Commercial Science from Oglethorpe University.

In the 1940s, Watson was on the national executive board of the Boy Scouts of America and served for a time as international Scout commissioner. E. Urner Goodman recounts that the elderly Watson attended an international Scout commissioners’ meeting in Switzerland, where the IBM founder asked not to be put on a pedestal. Before the conference was over, Goodman relates, Watson “… sat by that campfire, in Scout uniform, ‘chewing the fat’ like the rest of the boys”. He received the Silver Buffalo Award in 1944. His son, Thomas Jr., later served as National president of the Boy Scouts of America from 1964 to 1968.

Watson was chairman of the Elmira College centennial committee in 1955 and donated Watson Hall, primarily a music and mathematics academic building.

He was posthumously inducted into the Junior Achievement U.S. Business Hall of Fame in 1990.

Watson began using “THINK” to motivate, or inspire, staff while at NCR and continued to use it at CTR. International Business Machines’s first U.S. trademark was for the name “THINK” filed as a U.S. trademark on June 6, 1935, with the description “periodical publications”. This trademark was filed fourteen years before the company filed for a U.S. trademark on the name IBM. A biographical article in 1940 noted that “This word is on the most conspicuous wall of every room in every IBM building. Each employee carries a THINK notebook in which to record inspirations. The company stationery, matches, scratch pads all bear the inscription, THINK. A monthly magazine called ‘Think’ is distributed to the employees.” THINK remains a part of IBM’s corporate culture; it was the inspiration behind naming IBM’s successful line of notebook computers, IBM ThinkPad. In 2007, IBM Mid America Employees Federal Credit Union changed its name to Think Mutual Bank.

Although at the time IBM resented the close look its company was given in these pages, later on a member of the Watson family said it was the best biography of the company’s founding genius, Thomas Watson.

Employees had to sing songs in praise of their leader.

He wouldn’t employ Roman Catholics, Jews, black people, trade unionists, drinkers or women until the men went off to World War 2. You had to be a churchgoer and regard IBM as your family and bring your wife to company social events.

Towards the end, there is an interesting discussion of vitalism versus AI.

1943: “I think there is a world market for maybe five computers,”

Nothing so conclusively proves a man’s ability to lead others as what he does from day to day to lead himself.

If you want to succeed, double your failure rate.

If you want to achieve excellence, you can get there today. As of this second, quit doing less than excellent work.

Follow the path of the unsafe, independent thinker. Expose your ideas to the danger of controversy. Speak your mind and fear less the label of “crackpot” than the stigma of conformity.

A man is known by the company he keeps. A company is known by the men it keeps.

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