Father, Son & Co.

by Thomas J. Watson

  Surprisingly, I made my best contacts in the business community not through Dad but through old Fred Nichol, Dad’s right-hand man before Charley Kirk stepped into the job. When Fred retired he had arranged for me to take his place in an organization called the American Society of Sales Executives. The ASSE was not well known but had tremendous influence on a lot of businesses, and once I realized this I started going to the meetings religiously. The membership consisted of senior men from thirty companies, chosen so that each was the sole representative of his industry. There was a steel guy and a fellow from Heinz and a drug guy and a clock guy, from the Hamilton Watch Company. There were men in real estate, life insurance, tobacco, and paint. The head of the Coca-Cola bottling company in Chattanooga belonged, and so did Pat Patterson of United Air Lines, H. W. Hoover of the vacuum cleaner company, King Woodbridge of Dictaphone, and Paul Hoffman from Studebaker, until Truman called on him to run the Marshall Plan. Twice a year these men would meet and tell all their business sins.

  The format was very simple. Each meeting started with an extended presentation—a member would get up and give a history of his company. This was done on a rotation system so that each company came up every five years or so. Then we’d go alphabetically through the entire group and each man would give a fifteen- or twenty-minute report on the state of his business. I learned more about managing salesmen than a hundred business schools could have taught me—tips for hiring, ways to set up incentives, mistakes to avoid, and so on.

  Many of the men were as old as Dad. I spent a lot of time listening to Al Fuller, the entrepreneur who founded the Fuller Brush Company. He told me how he’d started out driving a streetcar in Hartford. Each day by quitting time he’d have so much grime under his fingernails that he couldn’t get them clean. So he and his wife started experimenting with making brushes. Finally they invented a machine that could make a brush out of the bristles of a hog, held in place by twisted wires. On that foundation, and the new concept of door-to-door selling, they built a large business and a great fortune.

  The older men still ruled the roost at the ASSE but the younger generation was coming in, and I found a couple of men my own age who became lifelong friends. The first was Bob Galvin, who took Motorola from his father, the founder, when it was still a small manufacturer of car radios and made it into an electronics giant. Another friend was Charles Percy, who was then known as the boy wonder running Bell & Howell, and later became a U.S. senator. The thing I particularly loved about the ASSE was that other people saw me as distinct from my father and gave me a certain amount of respect accordingly. Everybody knew IBM was going like gangbusters, and when we talked about, say, a trend in employee benefits, somebody would always ask, “What have you done about that, Tom?” I’d sit up late into the night and shoot the bull with these men. I wanted to be able to sell IBM equipment to every business, so I tried to learn the wrinkles of each industry and the culture of each company. I’d go back to IBM full of new ideas, and never let on where my inspirations were coming from.

  Once I’d been around IBM for several years, Dad decided I was ready to join the Business Advisory Council, and he set it up so that I took over his seat in 1951. This was a tremendous public compliment, his way of broadcasting to the world his great confidence in me, but to tell the truth I learned more from going to the ASSE. The Business Advisory Council was a federal advisory group that dated from the New Deal, when Daniel Roper, Roosevelt’s first secretary of commerce, organized it to try to win the cooperation of top businessmen. In the 1950s there wasn’t very much for the council to do, but it had become the most prestigious forum for businessmen in America and represented a tremendous concentration of power.

  Dad arranged the invitation without my knowledge. At a banquet I found myself seated next to the business council chairman, John Collyer of B. F. Goodrich. He asked if I knew anything about the council and I said no. That must have seemed stupid, because later on I realized that everyone knew about the business council. But Collyer patiently explained what it was and asked if I would like to join. At least I knew enough to say I’d be flattered.

  It was a great privilege to belong, but for me it could also be agony. Each year the council met a couple of times at the Homestead, a luxurious hotel in Hot Springs, Virginia. These meetings always began with a black-tie dinner, and everyone brought his wife. Olive and I were the youngest people there. We’d sit in our room wondering what time it was appropriate to go down to cocktails, and poring over a little book they gave you, trying to memorize names and faces.

  I remember being put off by something I saw at the first dinner. One member was a powerful railroad man from out West, and during the cocktail hour he had a few drinks. Then, on his way into the dinner, walking across the ballroom with his little wife, he fell down flat on his face. Everybody gasped, but it turned out this was a trick he could do—arching his body slightly and turning his head so he wouldn’t kill himself when he fell. He got up and everybody roared and applauded. Then he did it again, and again. He was all covered with dust from the floor. It was a shock to see such slapstick from one of America’s business leaders.

  The majority of the people to whom we were introduced were somewhat cool to us. They knew we were Democrats for one thing, and big business was still as overwhelmingly Republican as it had been in Roosevelt’s day. Also, I wasn’t the head of IBM yet, and a lot of people must have thought Dad was jumping the gun by having me there. More than once I felt so out of place that I told Olive we should go back to New York. I did that knowing I could count on her to persuade me to stay, for IBM’s sake.

  My growing prominence began to get on Dad’s nerves. He wanted to make me the head of IBM, but he didn’t like sharing the limelight. So he was contradictory in his attitude toward me. When I wasn’t around, he’d tell people that I was a world beater and that without question I was going to run the company someday. But then Dad would see me accomplish something—he’d be in the audience when I gave a speech, or he’d read in the paper that I’d joined a charity board—and he wouldn’t say a word about it. When you got right down to it, Dad wasn’t always so comfortable with the idea that Tom Watson Jr. was making a name for himself. This was a side of Dad I had never known was there. During all my years as an aimless boy making poor grades in school, he’d given me nothing but love and support. As a young salesman I’d gotten so much help it was embarrassing. And as I went into the business community, Dad quietly saw to it that all kinds of doors were springing open. But when it came to power, real power of the kind he held over the lives of tens of thousands of people, my father made me fight him for every scrap.

  That’s why I got so upset in 1948 when it looked to me as if Dad was about to hand over half of IBM to my brother. I was now a vice president, but Dick had stayed in the army and then gone back to Yale, where he finished a bachelor’s degree with a major in international relations. He’d been at IBM less than a year and was just getting started as a salesman. I definitely thought of him as my junior in the company. But Dad was an old man in a hurry. He had dreams of his two boys running IBM together, and with his seventy-fifth birthday looming, he knew there might not be time to put Dick through the same tough apprenticeship I’d had. He needed to set Dick up in a way that would allow the two of us to work together and not fight too much, because someday there would be no one around to arbitrate.

  For years, before I had any successes of my own, the idea of Dick getting ahead really bothered me. Even though he was five years younger, I thought he was in many ways my superior. He’d gotten into Yale, and his grades were a hell of a lot better than mine had been in college. He was a better athlete. He had a natural command of languages and an easier way of relating to other people—he was much more gracious, a relaxed guy, very charming. He could sing and he could yodel and he was a real entertainer at parties. Seeing Dick do so well had made me feel like the black sheep. I thought people admired him because he lived up to what Dad wanted, and I didn’t
. But I began to resent Dick much less after my successes during the war. Now I had great ambition for myself, and also felt warmly toward him. He was my brother, and I wanted him to succeed too. My gripe was with Dad—it burned me up that he seemed to see us as total equals. I’d been at IBM three years before the war and almost three years since—they weren’t all happy years but I wanted credit for them—and here was Dick, who’d been in the company eight months, being handed the world on a silver platter.

  Dad’s idea was to give me the U.S.A. and Dick everything else. He made a place for Dick by taking our offices and factories on six continents and forming a subsidiary company. It was called IBM World Trade, and it was the great labor of my father’s old age. Looking back on it today, I’d say it was one of the most astonishing accomplishments in Dad’s long career. And just as Dad wanted, Dick took it and ran it flawlessly, making it everything Dad hoped it would be. But when Dad first thought it up, I fought him harder on it than I’d ever fought before. I bucked so hard that I damn near got disowned.

  Our foreign operations at the end of World War II were pretty thin. IBM had scores of offices and factories abroad—we were represented in seventy-eight countries. Unfortunately, that number was much more impressive than the profits generated. In 1939, for example, only about one eighth of IBM’s profits came from abroad, and of course the percentage fell during the war. The “foreign department,” as it was called, seemed pretty unimportant compared with our booming business in the U.S. But Dad thought otherwise. I can remember going to a meeting in the spring of 1946, where I watched him chew out Charley Kirk and George Phillips about the wretched state of our overseas business. He called it “nothing short of a disgrace,” which wasn’t really fair, because the lion’s share of foreign sales always came from Europe, which was in a shambles. At the end of the meeting Dad declared that we must set up the foreign department as a separate company and make it stand on its own. But he gave no specific orders, and everyone figured he was just blowing off steam.

  A couple of months later I came up with an idea that helped revive the European operation. The problem over there was not lack of demand; many of our customers had survived the war and were eager to get punch-card machines. But our offices found it almost impossible to deliver the right gear—they were crippled by shortages and by widespread import restrictions that made it impossible to bring in new machines. An inspiration came to me at home in the middle of the night. I woke up and said, “As-is machines!” The American armed forces had been turning in millions of dollars worth of punch-card equipment that was no longer needed. We took those machines—some with the mud of the battlefield still on them—and sent them to the European factories to be refurbished. At first people thought our employees would be insulted to be given used, dirty equipment to fix. But they loved it when they saw that with a few hours’ work and a new coat of paint, those machines were something they could sell.

  As far as Dad’s idea of setting up a world trade subsidiary was concerned, I gave it no more thought. But a year or two later, after Dick joined the company, it hit me that our international operations were reinvesting a large portion of their profits rather than turning the money over to IBM in New York. I discovered this because we needed the cash to keep growing in the U.S.—expanding a rental operation requires a lot of dollars. The then manager of the foreign department was a big, genial fellow named Joe Wilson. When I called him in to ask where the profits were going, he said Dad had ordered him to try to expand abroad as rapidly as we were doing in the U.S. I thought that was utter folly, but Dad ignored me. Before long I heard him talking again about splitting off the foreign department. He wanted it to have its own executives, its own board of directors, and much more autonomy to do the great things he expected. With an enormous leap of logic he said, “The United States has six percent of the world’s population, and the rest of the world has ninety-four percent: someday the World Trade Company is going to be larger than the U.S. company.”

  My friend Al Williams, for one, thought this was very profound, but I thought Dad was being simplistic and naive. We had endless opportunity and little risk in the U.S., it seemed to me, while it was hard to imagine us getting anywhere abroad. Latin America, for example, seemed like a bottomless pit. Many of those countries were running their economies in such a way that for us ever to make a dollar and get it home was going to be impossible. Meanwhile, even with the success of as-is machines, our business in Europe was far from healthy. Trade was still paralyzed, the Marshall Plan was only on the drawing board, and it was unclear when we’d ever be able to start manufacturing again.

  The solution my father came up with shows how resourceful he really was. He invented a way for IBM’s offices in Europe to have their own free trade across international borders. Within IBM, he created a kind of common market ten years before the real one existed—and unlike the Common Market, my father’s worked right from the start. Our European factories were not giant plants like Endicott or Poughkeepsie; the biggest one employed about two hundred people and the rest were more like shops. Dad made these little units dependent on one another. He came up with the simple rule that each factory had to make parts not only for the country in which it was situated, but also for export. So if you were making keypunch mechanisms in France, perhaps 60 percent of your output would be used in machines for the French market, but 40 percent had to be exported to assembly lines somewhere else—in Italy and Germany, say. By shipping those parts, you earned foreign-exchange credits—which you then could use to import parts of some other type that, for instance, a Dutch IBM plant might be making for you. Because tariff barriers were so high, we shipped finished machines only to the smaller countries where we had no plants, and few IBM machines were 100 percent manufactured in the country where they were finally assembled. This trading around allowed us to operate on a much larger scale, and far more efficiently, than any company that was bound to a single country.

  Dad’s second great innovation before turning World Trade over to Dick was to hire down-and-out aristocrats and use their connections to get our business rolling again. Dad had always been inclined toward highborn people, and by now he had the necessary prestige to attract them to IBM when they needed work. Even though the form of government had changed in most European countries, Dad understood that the aristocracy had selling power. Sometimes he’d find out he’d gotten a man who was dead from the neck up, but most of those he picked did very well. Baron Daubek of Rumania covered all of Eastern Europe. He had so much brass that he’d fly in behind the Iron Curtain and collect rentals from the guys who had taken our companies away. Another of our aristocrats was Baron Christian de Waldner, a French Huguenot who became known as “Mister IBM of France.” He was a frail-looking but tough man who built up IBM to be one of France’s largest companies. De Waldner would fight with anybody to get what he thought the company needed. He even convinced Dad that to succeed in France, IBM had to bend to local customs, going so far as to serve wine at lunch in the cafeteria.

  Dad didn’t advertise the fact that he was clearing the way for my brother until he took Dick around Europe with him in late 1948. It was Dad’s first visit to the Continent after the war. He traveled around for several months organizing his factories and renewing old ties, and he kept Dick with him the entire time, introducing him as his “assistant.” That made it pretty clear to everybody who IBM’s next great internationalist was going to be.

  I wish I’d thought back on my own experience of having sales pushed my way and realized how hard things must be for my brother. As the youngest in our family, he was low man on the totem pole. Not only did he have Dad over him, but he had me five years in front. To complicate things still further, there was our sister Jane, who was always Dad’s favorite. So Dick grew up in a very, very tough position. Maybe because of this, Dick’s relationship with Dad was different from mine. If Dad got mad at me, I’d get mad right back and we’d fight. My brother had just as strong a temper as I did, but
he seemed to believe that in order to get ahead, he had to take what T. J. dished out. Knuckling under was traumatic for Dick. He had asthma, and sometimes when my father lit into him he’d get so short of breath he’d need a shot of adrenaline to bring his breathing back to normal.

  I was amazed at how far Dick let Dad go. That tour they took of Europe, for example, was supposed to be my brother’s honeymoon. In June of 1948 he’d married a superb girl from Syracuse, New York, named Nancy Hemingway. They were going to sail to England, and of all the pushy things, Dad asked if he and Mother could go along. I think Dad may have felt his time was running out. Dick must have had misgivings about combining his honeymoon with a business trip, but he said yes. So off they sailed, the four of them together. Even then Dad didn’t let up. One night they were in Stockholm, staying at the Grand Hotel, and were scheduled to have dinner with the king of Sweden. When it was time to leave, Dad noticed that Nancy’s dress wasn’t floor length. He asked her, “Do you have a long dress?” and she explained nervously that she hadn’t brought one along. Dad lit into her and said, “You are going to disgrace me and my family,” and Nancy burst into tears. That was where Dick finally drew the line. He said, “Look, old man. You can tell me anything you want because I’m your son. But don’t talk to Nancy that way. She is my wife and has nothing to do with you.” That really knocked Dad back. He apologized, and they went, and Nancy dined with the king in her short dress.