Thomas J. Watson Sr.

Former CEO of IBM

• Born: February 17, 1874
• Birthplace: Campbell, New York
• Died: June 20, 1956
• Place of death: New York, New York

Primary Company/Organization: IBM

Introduction

Thomas J. Watson Sr., was one of the first entrepreneurs in computing. He built International Business Machines, now IBM, from a maker of accounting equipment into the dominant corporation in business machines before transitioning the company to computers and inexorably moving into worldwide dominance. He gave the company its succinct motto: “Think.” His forty-two years at IBM also saw the company struggle to adapt as rapidly as smaller competitors. Hamstrung by its very success, the organization's massiveness made rapid change difficult. Still, he left a business that dominated the field the one against which others were forced to measure themselves.

Early Life

Thomas J. Watson was born into a family, descended from Scots, who came to the United States from Ireland during the potato famine of the mid-nineteenth century. The family business was lumber, and Thomas was exposed to business from an early age. His father wanted him to study law after he finished school, but he decided he would be a teacher instead. After spending a day as a teacher, however, he changed his mind, deciding to enter business. His father required him to attend business school, which he did, finishing business and accounting courses at the Elmira School of Commerce and then, at age eighteen, becoming bookkeeper and sales clerk in Clarence Risley's Market in Painted Post, New York, for $6.00 per week. The sedentary office life failed to hold his attention, so he went on the road selling sewing machines and pianos. While he held their horses, he studied the techniques employed by veteran salesmen and soon overcame his initial lack of skill at sales. When he quit, the boss offered to sell him the business. Instead he went to National Cash Register in Buffalo, New York. Rising through the ranks to general sales manager, he sought to motivate his sales force and introduced the motto “Think,” which would become the internationally recognized byword of IBM.

Life's Work

National Cash Register (NCR), or “The Cash,” exposed Watson to John Range, the manager who gave Watson the skills he needed to become not only a salesman but also a role model, a manager of other salesmen. The first lesson was harsh. Watson was not successful at selling cash registers, and Range not only told him to stop making excuses but also gave him a first-rate tongue lashing, followed by an exploration of what sales involved. Range took Watson on the road with him, letting Watson watch as Range sold a cash register at each attempt. Soon, twenty-five-year-old Watson was NCR's top salesman. He moved up to manager of the Rochester branch and lifted the sluggish branch from near the bottom to sixth from the top. When sales slumped as a result of market saturation and competition, Watson sabotaged competitors' machines. He set up shops next to secondhand shops, used NCR's cash advantage to undercut the competition, and drove the rivals out of business in what was unethical if not illegal practice.

Watson did so well that he secured a meeting with NCR founder John Henry Patterson. Patterson had brought NCR to its peak from nothing by making better machines and establishing a sales manual. His factory incorporated floor-to-ceiling glass windows, included landscaping, and was well ahead of its time. Patterson shared automaker Henry Ford's paternalistic idea that employees would be good producers if they were healthy, well fed, and well treated. Patterson bought Watson a car and a house, and Watson rose to NCR's executive level. Watson and Patterson were among the thirty NCR executives charged with and tried for unfair business practices, generating unfavorable publicity for NCR. Watson received a jail term of one year and a fine of $5,000. He appealed and lived several months in the shadow of the open case. In 1915, the appeals court reversed the verdict, and Watson was rid of the threat of jail.

At age forty, Watson famously argued with Patterson in a meeting; Watson saw electric cash registers as the wave of the future, and Patterson wanted to stick with mechanical cash registers. Patterson fired him on the spot. (Legend has it that he had Watson's desk carried out of the building and lit on fire, leading to the American colloquialism for being sacked.) In 1914, Watson joined the Computing Tabulating Recording Company (CTR), the company formed from Herman Hollerith's Tabulating Machine company, which had manufactured the punch card sorting and tabulating machines for the U.S. Census of 1890 but which by 1914 was close to failing and deep in debt. The company also manufactured time clocks, scales, and accounting machines

Incorporated in 1911, CTR had fewer than four hundred employees when Watson became president in May 1914. Watson improved Hollerith's tabulating machine, capitalizing on his experience at NCR making the knockoffs that looked like the opposition's product but with intentional design flaws guaranteeing them to fail and thus damaging the competitor's reputation. In 1915, he became president of CTR, and by 1917 the company was grossing $8 million, up from $4 million in 1914. In 1919, CTR marketed an electrically operated machine with an automatic card feeder and a built-in printer, and by 1920 CTR was grossing $14 million. In 1924, at age fifty, Watson became chief executive officer (CEO), merged CTR with IBM, and renamed the business as International Business Machines (IBM).

In 1929, only 2 percent of U.S. accounting business was done by machine. At the same time, Benjamin D. Wood of Columbia University was having problems marking thousands of test results by hand. He met with Watson and sold him on the idea that IBM could solve Wood's problem. Watson sent trucks full of tabulators, card punches, counters, sorters and the engineers and trainers to get Wood's staff up to speed. However, Wood was not satisfied, wanting more speed. He challenged Watson, holding the speed limit was that of light, and IBM engineers began working on the problem. Wood began working for IBM, the company's first Ph.D. When Columbia astronomer Wallace Eckert asked for IBM machines to help in lunar calculations, he persuaded Watson to set up the Thomas J. Watson Astronomical Computing Bureau at the university to provide the sequencing mechanism and mechanical multiplier that supported calculations—a primitive precursor to the electromechanical computer.

When Howard Aiken began his computer research in 1936, he knew that the 601 multipliers and sequencing mechanisms would not do, and he did not like Watson's paternalism and demanding style, but he asked for IBM's help, which Watson provided, first in the form of $1 million and ultimately $5 million. The Mark I computer debuted in 1944. In 1946, IBM put out the Selective Sequence Electronic Calculator (SSEC) after Watson ordered his engineers to work around the clock. The SSEC had 12,500 valves, 21,400 relays, and the ability to store eight 20-bit numbers in memory, 150 numbers on relays, and 20,000 numbers on 60 reels of punched tape. It had more power than the Electronic Numerical Integrator and Computer (ENIAC), the electronic computer that had debuted the preceding year, and was the first publicly available computer, well ahead of its competitors. It served for many years.

When J. Presper Eckert and John Mauchly asked IBM for help with their Universal Automatic Computer (UNIVAC), Watson rebuffed them and they went to Rand (by then, Sperry Rand) instead. However, Rand failed to capitalize on its advantage, and IBM made up for its initial error. IBM introduced 603 electronic calculators in 1946, but its first true electronic computer, the IBM 701, did not debut until 1952 (and still used punch cards). IBM leased twenty of these machines for $24,000 per month, and IBM was in the computer business.

Watson Sr., had become chairman of IBM's board in September, 1949. His son, Thomas J. Watson Jr., became IBM's president in January 1952 and CEO in May 1956. Another son, Arthur K. Watson, was president of IBM's international operations. Watson Sr., remained chairman until his death in 1956 at age eighty-two. Watson Sr., brought a loose collection of relatively small companies into a group that nearly monopolized the accounting machine industry but that eventually dominated the industry and successfully made the transition to computing. His style was not that of the smooth, efficient, and cold IBM stereotype; rather, he took an intensely personal, hands-on approach.

Watson inculcated in his employees the industrial “family” concept, with customers coming first, then employees, and finally owners. Customers needed new machines for new needs, and IBM found new needs for old machines. Customers deserved good value, workers were to be paid sufficiently, and owners were to reap the profits. Watson was unafraid to borrow money, and he used loans wisely in developing laboratories for creating new product lines: computers, machines that could simultaneously weigh and count items, translators, and scientific and other calculators. Also, under Watson Sr., IBM leased rather than sold. Rentals in the early 1950s brought in $100 million annually.

In 1952, the government sued IBM, alleging that the company owned 90 percent of the country's tabulating machines with a rental value of $250 million. IBM then began selling the machines, set up a separate service and parts divisions, and agreed to license its patents.

Personal Life

Thomas J. Watson Sr., was tall, dignified in appearance, ascetic, and impeccably groomed. He was a devotee of education, the arts (including opera), sailing, and horseback riding. He regarded his immense wealth as something he was obligated to spread through public service and philanthropy.

He was president of the Old Merchants Association and hosted New York City affairs for visiting dignitaries, including kings, presidents, and others. He served as president of the International Chamber of Commerce, provided a stage worth $25,000 to the United Nations, and developed the slogan “World Peace Through World Trade.” He was a trustee of Columbia University for twenty-three years, and his support helped build a laboratory and alumni activities. He received many awards and honorary degrees, was friends with Presidents Franklin D. Roosevelt and Dwight D. Eisenhower, and in 1947 received the Medal of Merit from Harry Truman, who appointed him special ambassador to the jubilee of Queen Wilhelmina of the Netherlands. The causes he supported included religious and nonsectearian organizations: He gave the Methodist Church $1 million in 1955, for example, and supported the Boy Scouts and the Masons.

When Watson died in 1956, he was survived by his wife Jeanette (née Jeanette M. Kittredge), two sons, two daughters, two sisters, and fifteen grandchildren. He had married Kittredge on April 17, 1913, in a wedding that was almost canceled because the date fell two weeks after his NCR antitrust conviction (for which he was later acquitted).

Bibliography

Belden, Thomas Graham, and Marva Robins Belden. The Lengthening Shadow: The Life of Thomas J. Watson. Boston: Little, Brown, 1962. Print. Still valuable and interesting, despite being half a century old.

Greulich, Peter E. The World's Greatest Salesman: An IBM Caretaker's Perspective; Looking Back. Austin: MBI Concepts, 2011. Print. Former IBM employee Greulich documents the founder's leadership of the early IBM.

Maney, Kevin. The Maverick and His Machine: Thomas Watson Sr., and the Making of IBM Hoboken: Wiley, 2003. Print. The definitive biography of Watson Sr.

“Thomas J. Watson Sr.” Bloomsbury Business Library: Business Thinkers and Management Giants. 2007. Business Source Complete. Web. 12 May 2012. An overview of the life and career.

Watson, Thomas J., and Peter Petre. Father, Son and Co.: My Life at IBM and Beyond. New York: Bantam, 2000. Print. The autobiography of the son with the biography of the father and the story of the company.

Watson, Thomas J. Jr. A Business and Its Beliefs: The Ideas That Helped Build IBM. New York: McGraw-Hill, 2003. Print. Originally published in 1962 and rereleased in this edition, a volume that is especially informative on the business values of the Watsons and IBM, by the man who led the company into the computer age.

Zientara, Marguerita. “History of Computing, Part 7: Thomas J. Watson Sr., the Businessman's Businessman.” Computerworld 21 Sept. 1981: n. pag. Print. A good introduction to the personal and professional Watson. Including some telling anecdotes.