by Edwin Black
Watson was equally appreciated and admired by Fascists, especially in Germany. In its struggle with the democratic governments and popular movements that opposed Germany’s anti-Semitic drive, Nazis greatly valued their unexpected and influential ally. To them, it was a subtle green light of quiet approval because Watson seemed, in the Nazi mentality, to speak for more than one American firm—he seemed to represent President Franklin D. Roosevelt and indeed America itself.
The man who began his career as a turn-of-the-century horse-and-buggy peddler had graduated to become America’s number one private international statesman. Watson used charitable donations to telescope his own importance. The roll call of honorary appointments of power and prestige was long and enviable. He was the chairman of the Carnegie Endowment for Peace, trustee of New York University, and chairman of the American section of the International Chamber of Commerce—and the lengthy gilded list proceeded from there. In fact, in the very days before the Reich awarded Dehomag the census contract, American newspapers prominently reported that Watson had been both nominated unopposed as a director of the Federal Reserve Bank and appointed trustee of Columbia University.70
His access to Secretary of State Cordell Hull, and more importantly to President Franklin D. Roosevelt, was unparalleled. While the Hoover Justice Department was at the height of its anti-trust investigation of IBM in 1932, Watson donated large sums to the Roosevelt campaign. Roosevelt’s election over Hoover was a landslide. Watson now had entree to the White House itself.71
Watson carefully curried favor with Roosevelt by publicly supporting some of his more controversial policies. Soon, Watson was sending policy suggestions to the President. The two men began to correspond regularly. Watson was so proud of the letters, some of them mere presidential tokens, he would carry them around in a pocket, showing them off when the moment would permit.72
Soon, Roosevelt came to rely on Watson for advice. White House staffers would occasionally ask for Watson’s schedule in case the President needed to contact him quickly. Watson visited Hyde Park for tea several times and even stayed overnight at the White House. Eventually, Roosevelt offered to appoint Watson Secretary of Commerce or Ambassador to England. But Watson declined to leave IBM.73
Instead, Watson’s son remembers, “he served unofficially as Roosevelt’s representative in New York.” If a foreign dignitary arrived, the White House might ask Watson to stage an honorary luncheon. “All Father had to do was press a button,” his son remembers. “He had a whole department that did nothing but set up company dinners and other functions… all at IBM expense.” Indeed, Roosevelt once remarked, “I handle ’em in Washington and Tom handles ’em in New York.”74
Watson leveraged his position with the Administration to develop extensive contacts with Secretary of State Cordell Hull, numerous ambassadors and consuls, and the State Department in general. Cloaked in officialdom, Watson never failed to undertake the often months-long process of formally soliciting official greetings to private functions from Roosevelt, Hull, or other Administration luminaries. These letters, often gratuitous, broadcast arcs of power to those observing overseas, especially in a Reich that believed in bigger-than-life personages.
No wonder Nazi Germany considered Watson a very powerful friend. Indeed, when in October 1933 Dehomag encountered unexpectedly high customs duties on IBM machinery it hoped to import as part of its new expanded portfolio, Heidinger wrote a thinly veiled threat to Reich Customs bureaucrats. “The president of our American co-associate, the International Business Machines… Mr. Watson, is one of the most prominent American personalities,” asserted Heidinger. “Among other things, he is one of the well-known 25 intimate counselors of President Roosevelt, president of the New York Chamber of Commerce… he also holds many, many other positions of honor in the United States. In keeping with his friendliness for Germany, proven at all times, he has up to now done everything possible which appeared to be to the interest of Germany. I am quite sure that Mr. Watson would never understand… a country to raise supplementary customs… on his machines.” Heidinger added, “I do not know what the attitude of the above-named would be if the customs increase were permitted. I am recommending,” Heidinger concluded, “that the above facts be placed to the knowledge of the two gentlemen [customs officers] examining the situation.”75
Watson did everything he could to reinforce in Germany his image of special American potency and friendship. The German consul in New York was a houseguest at Watson’s home, and Watson insisted on arranging for him complimentary country club privileges at the IBM Country Club. His socializing with the German Ambassador was equally robust, making certain that special invitations for luncheons and dinners were regularly circulated to German diplomats, and punctual acceptance or gracious regrets were sent in response to theirs.76
So a happy medium was found between Watson’s desire to maintain deniability in IBM’s lucrative relations with Germany and his personal desire to hobnob with Third Reich VIPs. But, the demands of the growing business in Germany would not be free of Watson’s famous micro-management. Too much was at stake.
Watson would travel to Germany regularly during the thirties for firsthand information about the situation in the Nazi Reich. These visits would be augmented by his personal New York representatives who would monitor Dehomag on-site for months at a time. Verbatim translations of Dehomag’s voluminous memos, correspondence, even routine bureaucratic forms and applications, were continuously transmitted to IBM in New York for review and comment.
Watson had created the IBM Europe office, headquartering it in Paris and then Geneva, to function as the eyes and ears of the New York office in Europe. When Watson’s personal representatives were not in Germany, continuous supervision of Dehomag was effected by executives in the Swiss branch of IBM, and often the Paris office. More than just routine oversight of the German operation, the Swiss office of IBM would become the all- important nexus for instructions, profit funneling, and continent-wide coordination in support of Dehomag’s technologic activities throughout Europe. The combination of Watson’s micro-management from afar and persistent Swiss examination gave IBM an ever-present hour-to-hour grasp of the small est operational details at Dehomag, from miniscule bank discrepancies amounting to just a few dollars to the most vital issues facing the subsidiary’s relations with the Nazi regime.
From the very first moments and continuing throughout the twelve-year existence of the Third Reich, IBM placed its technology at the disposal of Hitler’s program of Jewish destruction and territorial domination. IBM did not invent Germany’s anti-Semitism, but when it volunteered solutions, the company virtually braided with Nazism. Like any technologic evolution, each new solution powered a new level of sinister expectation and cruel capability.
When Germany wanted to identify the Jews by name, IBM showed them how. When Germany wanted to use that information to launch programs of social expulsion and expropriation, IBM provided the technologic wherewithal. When the trains needed to run on time, from city to city or between concentration camps, IBM offered that solution as well. Ultimately, there was no solution IBM would not devise for a Reich willing to pay for services rendered. One solution led to another. No solution was out of the question.
As the clock ticked, as the punch cards clicked, as Jews in Germany saw their existence vaporizing, others saw their corporate fortunes rise. Even as German Jewry hid in their homes and wept in despair, even as the world quietly trembled in fear, there was singing. Exhilarated, mesmerized, the faithful would sing, and sing loudly to their Leaders—on both sides of the Atlantic.
Some uniforms were brown. Some were blue.
IV. THE IBM — NAZI ALLIANCE
WILLY HEIDINGER HATED THOMAS WATSON. BITTER AND defiant, Heidinger saw Watson as the incarnation of the financial calamity that had befallen Germany after the Great War. Heidinger had possessed the vision in 1910 to introduce Hollerith’s contraption into Germany. He founded a company, Dehomag, to bring
data processing to his country. But for the monetary manipulations that arose after World War I, the Diktat of the Versailles Treaty, and the wild ensuing hyperinflation of the twenties, Heidinger would still own that company.1
Back in 1922, worthless German currency was devalued by the hour. Heidinger was unable to remit some $104,000 in royalties to CTR, the IBM predecessor company, because it amounted to trillions of inflated Reichsmarks that were impossible to obtain. Wat son seized upon Germany’s inflation crisis to take possession of Dehomag. During contentious negotiations, Watson first offered to demur on the royalty debt in exchange for 51 percent of the company. Heidinger felt it was better to own nearly half of a going concern than all of a bankrupt one. So he agreed to yield half of Dehomag. But then Watson abruptly upped the demand from 51 per cent of Dehomag to 90 percent. Heidinger felt “cornered” by his own private Diktat. Under Watson’s new terms, Heidinger would own 10 percent—or nothing. Watson had outmaneuvered Heidinger.2
It was more than a decade earlier. But Heidinger never forgot it. He spent the rest of his career biting back.
Watson, on the other hand, was a steel-nerved businessman. He saw the Dehomag takeover of 1922 as just another opportunity to swoop up a lucrative business for virtually nothing. What could be more natural? Hating a business contact was of no use to a man like Watson. Heidinger merely represented a factor to control in the pursuit of profits.
But Heidinger was woven from too much feisty fabric. His austere face pulled tight over high cheekbones beneath a worried brow framed the very picture of contentiousness. “I would be the last to submit to domination,” Heidinger wrote to IBM’s Nazi oversight panel in recalling his dislike for Watson. “I do not, as a matter of principle, let anyone tell me to do anything.”3
Warlike in his business demeanor, Heidinger enjoyed corporate combat and tenacious lawsuits. He could litigate a narrow commercial issue for years and obstruct a crucial company program at the eleventh hour unless he received his due. Like Hollerith himself, Heidinger was willing to battle colleagues as well as adversaries. An IBM assessment of Heidinger termed him a “hardened survivor” whose “life… was not a serene one.” The description added, “He throve on fights.”4
More than just volatile and unpredictable, no one at IBM trusted Heidinger. Company executives constantly suspected him of chiseling IBM for small and large sums, and thwarting their routine audits to identify the amounts. “Mr. Heidinger is a very selfish man,” wrote one IBM auditor who in spring 1934 tried to verify Dehomag’s tax information. At about that time, another IBM auditor in Paris reported back to the New York office, “Just in order to avoid any misunderstanding, we wish to advise that we are not aware of what is taking place… insofar as the recording of the inventories and the closing of the books is concerned.” The company’s staid blue-suited accountants learned to be reluctant in approaching Heidinger less they incur his volcanic temper. In that vein, another auditor, also writing in spring 1934, complained, “it is practically impossible to do anything by correspondence, due to the fear of unduly exciting our German friends.”5
Even before Hitler seized power, IBM had profited enormously from Dehomag. By 1927, profits had returned more than 400 percent of IBM’s purchase price.6 Now, as part of the Third Reich’s industrial team, Dehomag’s future was catapulting. Nazi demands for a universe of punch card applications promised horizonless profits. Merged IBM entities, a Europe-wide territory, and a new factory presaged a magnificent new Dehomag whose fortune would rise along with the fortune of the Third Reich. Yet who would prosper? Would it be the German people? the Aryan race? Heidinger personally? No. It would be Watson and IBM. Heidinger roiled at the prospect.
Normally, Watson would not tolerate even a spark of rebellious management, let alone continuous insolent defiance. It was indeed a measure of Dehomag’s indispensable importance to IBM’s long-range global goals that the micro-managing, egocentric Watson would endure clash after clash with his own executives in Germany. Likewise, Heidinger was resourceful and energetic enough to walk away from any distasteful foreign enterprise and pursue his own commercial dominion. In truth, the two men desperately needed each other.
Watson needed Heidinger’s connections to the NSDAP to turn Nazi plans into IBM profits. And he needed Heidinger’s cooperation if those profits were to discreetly detour around the Reich payment moratorium. One method was requiring its own German subsidiary to pay IBM “royalties.” Revenues could then be deemed a “necessary expense” to Dehomag rather than a profit to the parent company. Dehomag monies could occasionally be transmitted to IBM in this form. As IBM’s European manager reassured New York executives in a 1934 letter, Dehomag Manager Herman Rottke promised to “pull every wire and use every effort to continue [royalty] payments.”7
For Heidinger’s part, he needed Watson to arm the statistical soldiers of the Third Reich for the coming war against European Jewry and territorial conquest. For now, the machines would still be imported from the United States. But even after the new factory was rushed into operation, allowing Hollerith machines to be manufactured in Berlin, the precious punch cards themselves, painstakingly produced to an exacting specification, could still be ordered from only one source: IBM in the United States.
Both men would vault their tempers and stratagems across the Atlantic as Heidinger labored to expand Dehomag’s commercial cooperation with the Third Reich, and Watson struggled to retain all the profits, often cutting Heidinger out.
To achieve his goals, each man had to cooperate in an international campaign of corporate schizophrenia designed to achieve maximum deniability for both Dehomag and IBM. The storyline depended upon the circumstance and the listener. Dehomag could be portrayed as the American-controlled, almost wholly-owned subsidiary of IBM with token German shareholders and on-site German managers. Or Dehomag could be a loyal German, staunchly Aryan company baptized in the blood of Nazi ideology wielding the power of its American investment for the greater glory of Hitler’s Reich. Indeed, Heidinger and Watson both were willing to wave either banner as needed. Both stories were true. Watson had seen to that.
Dehomag’s Aryan facade was carefully constructed. In newly Nazified Germany, many good and decent businessmen looked the other way, dread-ing the day stern-faced men sporting swastika armbands knocked on the door demanding anti-Semitic loyalty oaths, subscriptions of financial support, and ultimately invasive Party control via kommissars. At the same time, some could not wait to join the movement. Dehomag was among those who could not wait. IBM was among those who did not mind.
Early on, Heidinger sought out the sponsorship of the Nazi Party hierarchy. He wanted Dehomag draped in the authority not only of the government but the Nazi Party itself. However, before the NSDAP would ally with Dehomag, the powerful Political and Economics Division demanded, in December 1933, that the company answer some pointed questions. The Party’s probe was designed to detect just who controlled the corporation, whether the firm was German enough, Nazi enough, and strategic enough to receive the Party’s seal of approval.8
Heidinger proffered incisive, if dubious, written replies. “My company is an entirely independent organization which has acquired patent rights from their American owners,” he insisted, and is merely bound to pay “royalties.” But, argued Heidinger, “any worries as to whether or not excessive amounts of German funds are being exported are thoroughly unjustified,” especially since most of the royalties remained in blocked German bank accounts until released by the government.9
One Party question inquired why Dehomag could not sell any wholly German-built office equipment instead of American products. Heidinger explained that the Reich could not achieve its goals without Hollerith tabulators. “[A]side from ours, no other punched card machinery is manufactured in Germany,” asserted Heidinger, adding, “Our machines cannot possibly displace other machines, because the work they are called upon to perform cannot be accomplished by the other machines.”10
Heidinger co
ncluded his written comments by reminding the Party examiners that Dehomag had been “entrusted… with the compilation of statistics for the Prussian census.” He added knowingly, with that air of ominous lack of specificity so common in those days, “Moreover, negotiations are now pending in Berlin, their object being an agreement between my company and the SA [Storm Troopers] high command in that city for the compilation of certain necessary statistics.”11 Nothing more need be said. Dehomag was approved.
Verbatim translations of the NSDAP’s questions and Heidinger’s answers—along with the German originals—were delivered to the New York office within several business days for review by Watson and other IBM executives.12
New York agreed with a sub-rosa approach if it could garner the Nazi Party affiliation needed to secure more government contracts. IBM willingly diminished its own identity as part of the effort. New York executives were advised of a Dehomag request: “in the future, on all machines shipped to them [Dehomag], the following designations are to be omitted: 1) International Business Machines, 2) International.” A 1934 memo from IBM’s Paris managers didn’t even want IBM billed for small German registration fees, explaining, “we all should be very careful in exploiting or advertising the name of IBM Corp. in Germany.”13 Watson himself would continue his high visibility, but would be portrayed during his frequent visits not as a foreign controller of Dehomag as much as a supporter of IBM technology in Nazi Germany.
Heidinger’s assertions of allegiance to Nazi ethics and independence from foreign influence were certainly acceptable to IBM in New York—so long as everyone in the company understood the truth: Watson remained in charge. To ensure that Watson in fact retained full control of Dehomag’s activities, IBM NY insisted on several provisions.
