Now I began to worry about Al’s impending retirement. His fifty-fifth birthday was less than two years away, and he seemed more serious than ever about leaving. I told him I didn’t think IBM could spare him, and I tried everything I could think of to make him to change his mind. I even offered to step aside and let him run the company, telling him he had done so much to build IBM that I would be proud to serve under him for the rest of my career. Al knew I really meant it. If he’d agreed, I’d have announced that I was turning over the helm to Al Williams who was going to be chief executive and president, and that I was going to stay on as chairman. But Al didn’t want the job.
By some miracle hundreds of medium-size 360s were delivered on time in 1965. But that gave me no comfort, because behind the scenes I could see we were losing ground. The quality and performance of the early computers were below the standards we’d set, and we’d actually been skipping some of the most rigorous tests. For months we had the chief testing engineer come to the Monday morning meeting. I’d ask, “How are those machines performing?” and he’d say, “They’re not making it.” He’d set up his charts and show where we were going wrong. Production kept getting held up by shortages. At one point we ran out of little copper electrical contacts without which our mighty computers couldn’t function: our usual suppliers just couldn’t keep up with our factories. We solved that through old-fashioned IBM heroics—engineers flying around the country to all the suppliers they could find, scooping up copper contacts, and rushing them back to IBM. To make matters worse we were delivering the new machines without the crucial software; customers were forced to use temporary programs much more rudimentary than what we’d promised, which meant that they couldn’t get the full benefit of their new machines. Yet customers were still ordering 360s faster than we could build them. With billions of dollars of machines already in our backlog, we were telling people that they’d have to wait two or three years for computers they needed. A lot of customers were unhappy about that, and I was worried that the slightest additional delay in shipments would drive them into our competitors’ arms.
Meanwhile the friction between Dick and Vin got completely out of hand. Their jobs were supposed to be complementary, but instead of supporting each other they were running a race. Vin did a superb job at rallying the sales force and convincing customers to make the transition to the 360. But he was constantly asking my brother for changes and enhancements in the machines to make them sell better still. He’d say, “If we can’t have this feature, it’ll be very difficult to sell to the aircraft industry, and if we can’t have that feature, it’ll be very difficult to sell to department stores.” I’d told him to do that, of course, but if there hadn’t been this feeling of rivalry and resentment, I doubt he would have pushed so hard. Vin was an experienced production man and could see that the engineering staff was badly overloaded. Dick, for his part, had a go-for-broke attitude. He said yes too many times when he should have told Vin, “I am freezing the production specifications now. You’ll just have to sell the machines the way we build them.” Dick would instead just turn around and put even more pressure on the engineers.
That autumn everything looked black, black, black. Everybody was pessimistic about the program. We were clinging to our production schedule but morale was going down. Some sections of our factories had been working sixty-hour weeks for six months, and the employees were worn out. The stress on technicians in the field was steadily increasing as they tried to install more and more of the new machines. The engineers were in the worst shape of all. I remember going up to Poughkeepsie to check on the software problem. We had a huge building filled with programmers, and their manager was a fellow named Tom Gavis. He’d never been to college but he really knew programming. I went to his office and found him sitting at a desk with a rumpled cot next to it where he slept. I said, “Why can’t you get this programming out faster?”
He didn’t give a damn that I was chairman. He snarled, “Well, if you’d get the hell out of here and leave us alone, we would!” I made a hasty retreat.
Dick wasn’t doing too well under such tremendous pressure. Another of his problems, in addition to Vin, was Dick’s own subordinates, who were not serving him well. His top lieutenant was an imperturbable fellow who never failed to irritate me. We talked pretty forcefully at those Monday morning meetings, but this guy would come in week after week and report horrible production problems in a monotone. Sometimes I’d lose patience and explode at him, and when Dick intervened to protect his man, I’d explode at Dick too.
In mid October, Dick told us that a metallurgical problem at our new integrated circuit factory was going to cut production in half for the immediate future. The consequence was what we’d all feared: we were going to have to delay our computer shipments. “How far are we going to miss these deliveries?” I asked Dick. It wasn’t a week or two weeks; it was three months.
I panicked. Never in its history had IBM missed a shipment date by that far, and with so much riding on System/360 we couldn’t afford to now. When I realized I had no confidence that there wouldn’t be further delays, my thinking became very self-protective. I was fifty-one years old, I had nine years of fantastic success behind me, and I didn’t want my career to be wrecked by an announcement that the whole new product line was never going to fly at all. Under these circumstances, sparing my brother’s feelings was the last thing on my mind.
We mobilized the best people we had and ordered them to find out what was wrong on the manufacturing side of the house. Al and I teamed up. Red LaMotte had retired, but we asked him to come back in and give us his perspective. Those were terrible days, because the more we dug into it, the worse the situation looked—which is always what happens in a crisis.
Al, whose usual role was to counsel restraint and put problems into perspective, saw no reason for calm this time. He was frantic about IBM’s finances. We had always been a tower of financial stability, and we had figured the 360 delay wouldn’t have much impact on our revenues, at least in the short run, because we were cushioned by our enormous rental income. But Williams was nervous about something else: it was time to think about closing the books for 1965, and he didn’t know where all the money was. The particular headache was a balance-sheet item called work-in-process inventory. This figure was supposed to represent the millions of parts and thousands of machines currently under production in our factories. What we didn’t realize was that our accounting system was an anachronism, left over from the days when IBM had just a few plants and each was responsible for its own set of products. With the 360 the plants had become interdependent—about two thirds of all our factory shipments were unfinished goods that went on to other factories for more work. We had no system for keeping tabs on this inventory moving around the company. Al guessed that the amount in question might be $150 million—but the data he was getting were so vague as to be useless.
The man he assigned to the problem was John Opel, at that point a fast-rising young executive in the Data Products Division. “Find out what the damn inventory is,” Williams told him. Opel knew about manufacturing and had a reputation as a brilliant analyst. He polled all the plants but he couldn’t get the numbers to add up either. He’d give an estimate to Al only to find out within twenty-four hours that he’d not only missed, but missed by fifty million dollars. Opel finally got so frustrated that he insisted that each factory manager take a physical inventory—which means clerks with clipboards walking through the factories counting things. We’d never had to do that before. But that was how Opel finally discovered that the accounting system had gone completely out of whack. We had almost six hundred million dollars of work-in-process inventory, and none of the factory managers wanted to claim it. They were squabbling with Opel about who was responsible for what.
This state of affairs made Al frantic, because understating the inventory made it seem as though IBM had more cash on hand than we actually had. In reality the 360 had soaked up all our funds. In an
other few weeks we’d have needed emergency loans to meet the payroll. Here was Al, ready to retire after a long and distinguished career, and in the whole history of IBM we’d never had a problem like that—IBM had always been swimming in cash from the enormous flow of rental payments. We didn’t tell the public about our cash shortage, but it was the big reason we unexpectedly sold another $370 million of stock that spring.
Dick and I were hardly talking at all. The more problems we turned up, the quieter he became, just as he had in the old days when Dad and I argued. By now I knew that my plan for bringing him into the domestic company had been a horrible blunder, bad for Dick’s career and for our personal relationship. I thought I was giving Dick an opportunity in an area where he would be an outstanding success. Instead I had handed him a stacked deck. He couldn’t hold his own against the demands put on him by Learson. Dick knew how to rally the engineers when they were almost too exhausted to go on, but he had little experience in running a rapidly changing engineering and development operation, and it was hard for him to manage the day-to-day particulars of the business. I would have had the same problem, except that I’d always surrounded myself with competent detail men. The people working for Dick weren’t serving him well.
Everybody was scared. Al and I agreed that if the 360 program was ever to get off the ground, we had to put it under a single manager, a dictator, and we knew it had to be Learson. Over the years Vin had proven again and again that he knew how to take hold of a troubled project and bring it off. I agonized about the effect this would have on my brother. I called Dick into my office on a gray December afternoon. “I’ve got to tell you some things that are not very pleasant,” I said. “The future of the business depends on this 360. It looks bad now, and I’m going to have to take the whole project and put it under the person I believe is most competent to bring it out of the woods.” I told him it was going to be Vin, and that Dick would shift over to be chief of the corporate staff, with no line management responsibility. He was absolutely furious. “In other words,” he said, “control of this entire business goes to him, and I’m left with some crumbs.”
In the following months we began to feel our way out of the manufacturing crisis. The machines weren’t very good at the outset, but our service people kept them running in the field, and the more computers we built, the higher the quality became. Then the long-delayed software finally began to come and suddenly the rose was blossoming. At the end of 1966 we had over four billion dollars in revenues, something like seven or eight thousand systems installed—and a billion dollars in pre-tax profits.
The board of directors elected Vin Learson president of IBM on January 26, 1966. Al Williams, taking the first step into early retirement, moved up to head the board’s executive committee. We made Dick vice chairman, and he remained chairman of World Trade and a member of the executive committee. But for months afterward he came to the office only sporadically and kept to himself; his confidence seemed shaken. I felt nothing but shame and frustration at the way I’d treated him. There were so many other ways to have managed things. Perhaps the wisest course would have been to leave Dick in World Trade. He would have been known as the great IBM internationalist, and that, I think, would have been equal in honor to serving as chief executive for five or ten years. As it was, we remade the computer industry with the System/360, and objectively it was the greatest triumph of my business career. But whenever I look back on it, I think about the brother I injured, and the dream of my father’s that I could never make come right.
A little later that winter my mother died. She was eighty-two and had been ill for months, so we had a chance to get ready for her death. It was very hard on Dick. As her youngest child he had been closest to her, and her death came only a few weeks after his responsibility for manufacturing and engineering at IBM was taken away. I mourned her by retreating with Olive to Colorado, where I hand-wrote acknowledgments to literally hundreds of condolences from people inside and outside IBM all over the world. We stayed for almost two weeks, which wasn’t nearly enough time, but I couldn’t get away from work for any longer. While our management crisis had been resolved, we still had to make good on our commitment to deliver billions of dollars of new computers. The urgency of my work was as great as always—the difference now was that the joy I’d felt in running the company had disappeared. With Mother gone, Dick on the sidelines, and Al Williams working a reduced schedule in preparation for his retirement, I found myself more isolated than I ever imagined possible.
By promoting Learson, I’d kicked myself upstairs. I was still chief executive, of course, but I was out of the day-to-day operation of the business. All the other key executives, line and staff men alike, reported to Vin. There was no question that he deserved this job. The team he’d assembled for the System/360 project—people like Bob Evans, Fred Brooks, and Gene Amdahl—may have been the best collection of engineering-management talent in IBM history. In spite of his toughness as a boss, Vin had won their loyalty and respect. He called them “the boys,” and with the future of the company riding on the new computers, they got the job done.
It took me a long time to reconcile myself to having him as my number two, however. I resented the rough way he had treated my brother. But even in the best of circumstances, the difference in our temperaments would have made it hard for Vin and me to build a trusting relationship like the one I had with Al Williams. Al and I talked about everything together, from corporate strategy to child-rearing. We’d made many of IBM’s important decisions in relaxed discussions with our feet up on the coffee table. In contrast, Vin worked best by himself, and despite his great intelligence, decisiveness, and drive, he was not at all contemplative or methodical like Al. He ducked meetings whenever he could, put very little store in staff work, and favored executives like John Opel who knew how to take shortcuts across organizational lines. I’d worked with Vin for fifteen years and he had hated office procedures from the very beginning. Back in the early ’50s, when Al was treasurer and Vin was general sales manager, Al had learned this the hard way. In those days Vin was big on a kind of memo that Al called “floopers” because of the way they’d float over the transom and onto Al’s desk without his really noticing. By sending floopers Vin could always claim to have informed Al of whatever it was he was going to do. Then if Al challenged him he’d say, “You knew all about that. I told you in a memo on the twenty-eighth of October!”
“I never got such a memo!” Al would say, but he’d look in the pile on his desk and sure enough, there it would be. After Dad held Al responsible for several of Vin’s expenditures that Al hadn’t approved, Al finally told Vin he’d disavow any memo he sent that he hadn’t read and put his initial on.
While Al and I had been in and out of each other’s office constantly, Vin and I usually met only at sessions of the Management Review Committee four or five times each month. Each meeting was a tightly scheduled series of presentations by line executives and staff experts—budgets, pricing decisions, product strategies, and personnel policies all passed before us for review. It was a textbook example of the precision management style for which IBM was famous. Yet I ran those meetings in a way that would have surprised most business school professors, because it was anything but scientific. I used the committee to probe the business and to stir things up, much as Dad used to do by buzzing people into his office and arbitrarily assigning tasks. For example, if there was a story in the newspaper that morning about a physicist at Bell Labs winning the Nobel Prize, I might disrupt the agenda and demand to know why no IBM scientist had ever won. As Dad always had, I tried constantly to make the executives aim a little higher.
This practice had worked fine as long as Al was president. He functioned like the ideal ground controller when I went off on these flights: if I was headed in the wrong direction, he had an easy, comfortable way of straightening me out, but he also knew how to follow up when I had a point. With Vin as president, however, the atmosphere in the committee c
hanged. He was skeptical and impatient, less inclined to take a broad view. He was never exactly insubordinate, but he often seemed to think I was second-guessing decisions he had already made, or wasting time on concerns that had nothing to do with running IBM.
Vin, like Al, had too much self-discipline and good sense to enter a contest he couldn’t win, so he never challenged me directly at the company. Instead he fought it out with me on the high seas. My hobby was ocean racing, and the year I made him president Vin entered the Newport-to-Bermuda race, where I’d been competing for years. He didn’t have much deep-water experience, but he was a good sailor, expert in small-boat tactics. I told him jokingly at a Management Review Committee meeting that he’d better not win if he expected to stay at IBM, but Vin made it no secret that he intended to beat me and everybody else. He bought a boat called a Cal 40 with a radical new design, and enlisted its architect as a member of his crew. He studied the history of the race and found a navigator who had been on a winning boat three different times. When we raced to Bermuda that June, my Palawan placed twenty-fourth on corrected time—and his Thunderbird came in first.
That may have stung me more than I realized, because at the next Bermuda race two years later I inadvertently provoked a blow-up with Vin. By then yachts like his had become quite common, although they were still controversial. They were fast, and their owners found ways to make them faster each year, but there was a whole school of traditionalists like me who thought the new designs were risking seaworthiness and safety in the pursuit of speed. Two nights before the race was due to start, I took a walk along the docks in Newport with Olin Stephens, the dean of American yacht designers, who was also chairman of the International Ocean-Racing Rules Committee.
“You’re letting people modify their boats too radically,” I told him. There was a Cal 40 like Vin’s sitting out of the water nearby, so that you could see the silhouette of its unorthodox keel and rudder. I gestured toward it. “Look at that boat. It’s designed specifically to take advantage of the fine print in the rules.”
Father, Son & Co. Page 41
