Father, Son & Co.

by Thomas J. Watson

  One of the things keeping Dad awake at night must have been the memory of the year 1921, when the U.S. economy contracted after World War I and CTR almost went bankrupt. I’m sure he also had unhappy visions of the hundreds and hundreds of accounting machines on rental to the U.S. armed forces. Most of this equipment would be turned back to IBM. Defense contractors who had built up for the war and now had to cut back couldn’t be counted on to keep all their machines either. So unless we could find armies of new customers, our warehouses were going to fill up with used machines earning no money, and our factories would have nothing to do.

  In the face of possible calamity, Dad’s impulse was always to hire more salesmen. That’s just what he proposed around the time I came back from the war. He was determined that IBM should have an office in every state capital, and everybody from Kirk on down was scrambling to expand the sales network as rapidly as possible. In the midst of this we got hit unexpectedly with an avalanche of orders for our products. The postwar recession never materialized. Instead, the U.S. economy boomed because of a huge pent-up demand for consumer goods that nobody had been able to buy during the war—cars, houses, appliances, and clothing. This in turn boosted supporting industries like banking, insurance, and retailing—our big customers. All of them suddenly had rapidly growing record-keeping and accounting needs. We quickly found ourselves in a race to keep up with demand. By the time I joined, Kirk was working sixteen-hour days.

  The first business trip I took with Kirk could well have changed the course of computer-industry history, if either of us had understood what was in front of our noses. It was a gray day in March, and we went to visit the ENIAC at the University of Pennsylvania. This was one of the first computers, a giant, primitive number-cruncher for solving scientific problems. It had just gone into operation, making a big name for its inventors, Presper Eckert and John Mauchly. They broke new ground by using electronic circuits instead of electromechanical relays like the ones in our tabulating machines. Dad was very big on supporting projects like ENIAC, more for prestige and philanthropic motives than commercial ones. During the war IBM and Harvard University had built a gigantic non-electronic computer called the MARK I. It consisted pretty much of two tons of IBM tabulating machines synchronized on a single axle, like looms in a textile mill. The MARK I got a lot of attention as “Harvard’s robot super-brain,” and was used successfully on top-secret war problems.

  Dad heard about Eckert and Mauchly late in the war, when the navy asked IBM to supply punch-card equipment to assist in getting data in and out of the ENIAC. That gave Kirk and me an entree. But going to see ENIAC was really Kirk’s idea. He was curious because there was so much publicity about ENIAC’S ability to make lightning-fast calculations. Another reason he wanted to have a look was that Eckert and Mauchly were talking about filing a patent, causing our lawyers to worry that IBM would have to pay big royalties if the idea of electronic computing ever went anywhere.

  I remember the ENIAC vividly. It was made up of what seemed like acres of vacuum tubes in metal racks. The air was very hot, and I asked Eckert, a trim, urbane man, why that was. He explained, “Because we are sharing this room with eighteen thousand radio tubes.” They hadn’t air-conditioned it. I asked what the machine was doing and Eckert said, “Computing ballistic trajectories.” To show us what he meant, he sat down with a pencil and paper and drew the curve an artillery shell follows through the air. He explained that to make maximum use of a gun, you had to be able to calculate where its shell would be at every fraction of a second of its flight. This required a tremendous amount of computation, and ENIAC was doing it in a very short time—less time, in fact, than it would take an actual shell to reach its target. That impressed me. Eckert went on to tell me that computers were the wave of the future. He didn’t quite call our punch-card machines dinosaurs, but he said he and Mauchly were going to take the ENIAC patents and go into business. As he talked I got the impression that they thought they were going to push IBM aside pretty quickly. I said, “It’s a great idea you have, but you’re going to run out of money. Building these things for customers is going to be very expensive.”

  The truth was that I reacted to ENIAC the way some people probably reacted to the Wright brothers’ airplane: it didn’t move me at all. I can’t imagine why I didn’t think, “Good God, that’s the future of the IBM company.” But frankly I couldn’t see this gigantic, costly, unreliable device as a piece of business equipment. Kirk felt the same way. On the train from Philadelphia back to New York, he said, “Well, that’s awfully unwieldy. We could never use anything like that.” We both agreed that, even though electronics innovations like radar were attracting a lot of popular attention, this ENIAC was an interesting experiment way off on the sidelines that couldn’t possibly affect us. I never stopped to think what would happen if the speed of electronic circuits could be harnessed for commercial use.

  Fortunately, this myopia was only temporary. A few weeks later my father and I were wandering around IBM headquarters. Dad always liked to nose around the offices when he had spare time; that afternoon I happened to be along. In a part of the building I’d never seen before we came upon a door labeled “Patent Development.” Inside was one of Dad’s engineers who had a high-speed punch-card machine hooked up to a box with black metal covers. It looked like a suitcase, only it was about four feet high. I said, “What is this doing?” And the engineer told me, “Multiplying with radio tubes.” The machine was tabulating a payroll, a common application for punch cards—wages times number of hours worked, less Social Security deductions, retirement, medical deductions, and so forth, and coming out to net pay for each worker. Then the engineer told me how fast the machine was working. It did its calculation in one tenth of the time it took the punch-card machine to punch out the answer and go on to the next card. The box spent nine tenths of its time waiting, because the electronics were so fast and the mechanics so slow. That impressed me as though somebody had hit me on the head with a hammer, because the multiplier looked like a relatively simple device. I left that room and said, “It’s fantastic, what that thing’s doing. It’s multiplying and coming out with totals, and doing it all with tubes. Dad, we should put this thing on the market! Even if we only sell eight or ten, we’ll be able to advertise the fact that we have the world’s first commercial electronic calculator.”

  That is how IBM got into electronics. In September we announced the machine with a full-page ad in the New York Times. We called it the IBM 603 Electronic Multiplier. Technically speaking it wasn’t a computer—it had no stored program and processed numbers only as they were fed in from punch cards. In fact, the 603 was mainly a gimmick—it could calculate at electronic speeds, but that was not very useful because the punch cards couldn’t keep up. But in spite of this, the thing caught on. We were hoping to rent out a handful, enough to justify the expense of the ad, but big customers were anxious to get their feet wet with electronics and we sold a hundred of them. Within a year we got past the gimmick stage. We figured out how to make electronic circuits not only multiply but divide—a job that was almost prohibitively expensive to do mechanically. At that point electronic calculators became truly useful, and our next machine, the IBM 604, sold by the thousands.

  Although Kirk and I were never friends, he impressed me in the first few months we worked together. He was not prepossessing looking—he was of average height, balding, pear shaped, with rumpled clothing and wire-rim glasses, and he was never without a cigarette. But the man was a perpetual-motion machine. In this great seething expansion of the company, I watched him organizing and hiring, promoting and moving armies of managers around. He understood manufacturing so well that when Dad wanted to praise the work of a factory manager he’d say, “That was a real Kirk job.” Kirk was also extremely popular with the salesmen and the customers. He was a talented piano player, and whenever we were in Endicott people would gather around him after hours at the IBM country club. Charley would sit sideways at the
keyboard, his cigarette dangling from his mouth, tapping his foot and banging out tunes for people to sing.

  I learned a lot from the man. For example, Dad used to encourage people to think of IBM as family and to come to him with their problems, but Kirk warned me never to get too involved in factory workers’ lives. All it took was one story to convince me he was right. He told how, when he was in charge at Endicott, he’d gotten a letter from the wife of an employee. She complained that her husband had installed his mistress right in their house. Kirk figured this wasn’t right and also not very IBMly, so he called the couple in. The husband said, “It’s really not like my wife says. The woman is just a friend and she was in need. I don’t sleep with her.” The wife said, “You certainly do! At dinner you have some kind of sleeping pill. You look back and forth and decide which one of us you want to spend the night with and then you put the pill in the other one’s coffee!” That was too much for Kirk. He concluded that the less he interfered in factory personnel cases, the better. “They’re a bottomless pit!” he told me. This was hardly the way Dad would have seen it, but all the same it was marvelous advice.

  The turning point in my relationship with Kirk came after we’d been working together about four months. In May 1946 he had an attack of appendicitis and missed six weeks of work. I was still operating from the corner of his desk, and by then I’d seen and heard enough to begin to have a little knowledge of the business. While Kirk was out, a great many matters came to me for decision, partly because I was his assistant and partly because my name was Watson. I think people found it easier to approach me than T.J., who was always unpredictable. They’d ask questions, I’d answer, and I’d see results. Being in that position was fun—it whetted my appetite for management. I began to love the decision-making process—the feeling of responsibility and the opportunity to see later whether a decision was right or wrong. It was thrilling to be in the middle of the technology business as it picked up speed in the postwar world.

  Kirk was surprised when he came back in June to find that I was right in the thick of things and a lot of decisions had been made. I wrote them all down for him, just as I had for my superiors in the Air Force, in a memo that was waiting for him when he came in: “We have done the following things in your absence for the following reasons.…” Dad, who’d been traveling much of the time, must have been impressed, because that month he had me elected vice president. This was no small thing—I was only thirty-two and IBM had only four other vice presidents and twelve officers in all. Dad’s staff immediately put my picture on banners for one of IBM’s frequent sales campaigns. Its motto was “Let’s Break All Precedent for Our New Vice President,” and it embarrassed the hell out of me. So when I went on the road to speak at sales offices, I started calling it the “Jump for Junior” campaign. That made everybody laugh and took some of the hot air out of the situation.

  I think Kirk and I began some serious reassessment of each other then. Kirk probably started worrying what was going to happen to his job. At the beginning I don’t think he’d seen me as a contender—after all, he knew my reputation from before the war. But now he realized that I could make decisions. It couldn’t have helped that in October, after the 603 came out and was a success, I was elected to the board of directors. All this put Kirk in the toughest spot imaginable. He knew Dad was a hard-driving character. He knew I was the son and the apple of Dad’s eye. And he knew that the more he taught me about the job, the less his chances were of coming out on top. And yet he elected to keep helping me. I think he must have figured, “The best thing I can do is to cooperate and hope that something will happen. Maybe he’ll fall on his face. Or maybe if the old man drops dead, I can get to the top by talking directly to the other directors.” He might have been right on that count. If Dad had died then, the board probably would have preferred to go with Kirk rather than take a risk on me.

  I was still his assistant, but now I had an office of my own next to his, and a secretary. I started wondering how long I might have to work with this man. He wasn’t very polished, and unlike my father he had no impulse to raise himself up culturally. It was hard for me to imagine him ever representing IBM to the outside world, which was a big part of Dad’s job. I’d watched Kirk give a few speeches around New York at places like the Advertising Club, and he was so awkward that I felt embarrassed for him and IBM. The more time we spent together, the more he got on my nerves.

  Part of my dislike of Kirk stemmed from competitiveness and jealousy of his relationship with my father. Kirk was not at all like Dad, and I couldn’t understand why they were so close. But there was more to it than that. I didn’t like the side of my father that Kirk brought out. What bothered me most was the shuffling of men and jobs. There were constant firings and transfers after the war, some of them heartrending. I thought IBM was starting to seem pretty damned ruthless in the way it moved people around. Part of this I put down to the difference between business and the military. When I was in the Air Force you had to get a couple of poor efficiency reports before they’d even transfer you. I missed that methodical way of reaching judgments about people, and I questioned whether business was really for me. But I realized that if those executive powers are used sparingly, and intelligently, a business could be the most efficient thing in the world, a heck of a lot more efficient than a government. The government has checks and balances, but a business is a dictatorship, and that is what makes it really move.

  The trouble at IBM was that the firings and demotions were getting out of hand. For many years Father’s normal practice had been to criticize someone he thought was not pulling his weight. He’d say, “I’ve just gone out to Kansas City and seen that man Blair. I don’t know. Blair impressed me as being a man who smokes a lot and whose clothing is not really neat. The office didn’t look too good either. I’m not sure Blair is a proper representative for IBM.” Now, what he hoped was that if Blair was a good man, someone would leap to his defense and say, “Mr. Watson, you’re wrong. Blair is one heck of a guy and is bringing in a lot of business.” Blair might even end up with a raise as a result. That’s how it had worked before the war. But when Kirk came in, so many of the old guard had resigned or retired that there were not a great many men around who would stand up to Dad. Instead, when he complained, more often than not Kirk would say, “Since you feel so strongly about Blair, I’ll get on the sleeper tonight. I can be in Kansas City to handle Blair tomorrow morning and be back here the following day.” “Handle” meant “fire,” and that really shocked me, because providing job security had been a hallmark of Dad’s management.

  In the midst of the growing tension between us, Kirk unintentionally put me through one of the worst nights of my life. We were working late and went out for dinner, and we started talking about the early days of IBM, when it was still called CTR—maybe there was some company anniversary coming up and we were discussing how to celebrate. I said something about how Charles Flint had brought Dad in as president and Kirk looked at me in a funny way. He put his cigarette down and slowly said, “There’s something you ought to know. When your father was hired he was only the general manager. The board wouldn’t let him be president.”

  “What do you mean?”

  “When your father was first hired, he was under a criminal indictment. The board knew he was a good executive, but they didn’t want to risk having him be president unless he cleared his name.”

  Kirk must have seen from my face that I was shocked. He spent twenty minutes explaining this episode in my father’s life that was apparently common knowledge but that I’d never heard mentioned. It had happened a couple of years before I was born. Dad and all the top management of the National Cash Register Company, including John Patterson himself, were put on trial in one of the first great antitrust cases. The charge was criminal conspiracy in restraint of trade and maintaining a monopoly. Patterson had pioneered the use of cash registers, and NCR still made almost all the cash registers in America. Patterson thoug
ht the antitrust laws of the 1890s had nothing to do with him. The market was his personal preserve, where competitors deserved to be hounded and destroyed.

  The federal trust-busters set out to make an example of the Cash. It was a sensational case, because Patterson and his men used tactics that were ruthless even by turn-of-the-century standards. Dad’s record in the company made him one of the most prominent figures in the case. The government claimed that in 1903 he had pretended to quit his job at the Cash so that he could set up a front operation, secretly owned by Patterson, that dealt in secondhand cash registers. The market for used machines was a particular sore spot with Patterson. He felt, in some sense, that every cash register ever built by NCR was his, and that nobody else had a right to sell NCR machines, new or used. So he put a million dollars at Dad’s disposal to knock out secondhand cash register dealers nationwide. Dad would go into a city, open his own secondhand store, put pressure on the other dealers by bidding up prices for used machines, and finally buy the competitors out. For this, Kirk told me, Dad had been convicted and sentenced to a year in prison. Patterson and the others were convicted as well. But the case was appealed and no one ever served time. After a few months the conviction got thrown out on a technicality and Patterson and the others settled by signing a consent decree to clean up their business practices. Dad, who insisted all along that he was innocent, refused to sign. But by that time he had left the Cash for other reasons, and the government never sought a second trial.