From a Wall Street Journal review About the Book by Stephen Budiansky headlined “‘The Greatest Capitalist Who Ever Lived’ Review: Mr. IBM”:
Growing up the son of the highest-paid executive in America, who by the 1930s had made IBM a household name with its near-monopoly on punch-card tabulating equipment, Thomas Watson Jr. felt nothing but dread about his apparently inescapable destiny—taking over the family business.
Alternately indulged and harshly disciplined by his domineering father, he was paraded in jacket and tie at age 9 before dutifully applauding employees. In his teens, supplied with his own car, sailboat and a monthly allowance of $7,000 in today’s money, he predictably rebelled, getting into scraps at school, flunking out of a series of private academies and finally squeaking through Brown University, where he concentrated on girls, drinking and flying airplanes.
Suddenly, an opportunity presented itself to make his way “absolutely on my own,” Watson recalled. A business friend of his father’s was looking for a secretary to accompany him around the world, selling pavilion space at the upcoming 1939 New York World’s Fair. Leaping at the chance to escape from his father’s shadow—“my personal Independence Day,” he called it—Watson was halfway around the world when his boss confessed that his father had secretly managed the whole thing, paying his son’s salary and expenses. A “terrible blow to my pride,” the son said. A few months later he joined IBM as a sales trainee, remaining there the rest of his working life.
“The Greatest Capitalist Who Ever Lived,” a biography of Thomas Watson Jr. (1914-1993) by Ralph Watson McElvenny and Marc Wortman, is the story of that reluctant son’s successful transformation of IBM into the world’s foremost manufacturer of computers. It begins with his accession to the presidency in 1952, at age 38, and culminates in the 1960s with the launch of the System/360 series, which vaulted IBM into the position of most valuable publicly traded corporation in America.
There is lots of boardroom drama, family feuding and high-stakes technological gambles. Although the lead author is Watson’s grandson, the authors do not shy away from unflattering details about their subject’s personality and private life. But neither do they offer much insight into his character, or go beyond psychology and business-management clichés in describing the lessons he learned from his personal struggles (e.g., teamwork is important).
Despite trumpeting the authors’ access to the IBM archives and personal family papers, lengthy sections of the book draw entirely on Watson’s 1990 memoir, “Father, Son & Co.,” and do not dig deeper. His estrangement from a sister is briefly mentioned but never explained, and there is a cursory nod to his and his father’s devotion, unusual for corporate leaders of that day, to social justice and to support for the Democratic Party. But the reader is not left with much of an impression of personal growth or self-knowledge.
Perhaps Watson fails to emerge as a full-fledged character because he did not have much of a character. Like his father, Watson was given to terrifying rages that left employees shaken or in tears. He deliberately pitted individuals and divisions of the company against one another, and at home expected his wife and children to jump to his orders. Although once he buckled down to his responsibilities Watson undeniably worked hard to learn the business, he never shed his spoiled-rich-kid persona, dropping $50,000 on impulse on a painting or antique car, commissioning custom sailing yachts, buying a Learjet and a helicopter for his personal use, along with a secret hideaway with a private airstrip on an island in Maine where he could conveniently drop in for one of his (many) extramarital affairs.
The idea that Thomas Watson Jr. was “the greatest capitalist who ever lived” is both a bit fatuous and more than a little ironic, given the company’s longstanding dependence on government largess; IBM owed much of its early success in the 1920s, ’30s and ’40s to contracts with the Census Bureau and the Social Security Administration, major users of IBM tabulating equipment and its (very profitable) punch cards, of which the company sold billions a year to its equipment lessees.
As it moved into computers, the company lagged technologically behind its far more innovative early competitors, and nearly every one of IBM’s subsequent technological advances was directly funded by hefty government R&D and production contracts. The authors mention the pivotal role that the company’s work on the Air Force’s SAGE radar system played in its initial foray into electronic computing and its adoption of the new technology of magnetic-core memory.
Costing more than the Manhattan Project, the SAGE system of networked ground stations, designed to detect enemy aircraft and direct fighters to intercept them, provided 80% of the company’s computer revenues in the 1950s. But IBM had to be practically forced by the Air Force’s own engineers to employ the new memory, which would subsequently prove key to IBM’s success in the commercial computer business. (Core memory would be used in nearly all computers until superseded by semiconductor chips in the 1970s.)
A huge gap in the book is any mention of the even greater helping hand IBM received through its extensive work for the codebreakers of the National Security Agency. NSA contracts provided the company with millions of dollars in revenue starting in the mid-1950s, plus direct support for major breakthroughs in data processing and storage hardware, notably the semiconductor processors that delivered a 100-fold increase in speed over their vacuum-tube predecessors.
NSA’s leaders often expressed frustration at the way their contracts with IBM would inevitably morph into a product IBM could sell to its commercial customers. “As usual the agency has a firm hold on the IBM leash and is being dragged down the street,” an NSA engineer assigned to keep tabs on the company’s work for them reported. “If you want to control an R/D contract you should pick a company other than IBM.”
Watson’s bold decision to “bet the company” on the 360, a fully intercompatible series of computers that would replace IBM’s multiple product lines, provides the dramatic climax of “The Greatest Capitalist Who Ever Lived.” But the authors never really confront the question of how much of the 360’s success was due to Watson, rather than IBM’s pre-existing market dominance. The company’s lock on the business market for data services like payroll and accounting, going back to the punch-card era, and the leasing model that gave its huge sales and service force an inside track on customer needs, provided marketing advantages that let the company get away with technical missteps that would have killed its competitors.
The 360 was delivered years late, initially with a skeleton operating system that did a fraction of what had been promised, but the IBM name was enough to prevent customers from canceling in droves. The 360’s subsequent domination of the commercial computer market notwithstanding, it was the stodgy product of a stodgy company; in the 1960s and ’70s the exciting innovations in computing—Cray’s supercomputers, Xerox PARC’s graphic workstations, DEC’s tiny but astonishingly capable and versatile minicomputers, employing timesharing software for multiple simultaneous users—were happening elsewhere.
The corporate culture that had served IBM so well for so long could not make the leap to the new era; losing billions a year by the 1990s, the company announced its first layoffs in seven decades. Watson, then retired, would wake up in the night and cry. But IBM’s inability to innovate in a technologically competitive environment suggests a more apt description of Thomas Watson Jr. He was “The Luckiest Capitalist Who Ever Lived,” who owed more to being in the right place at the right time than to any singular gifts of leadership or innovation.
Stephen Budiansky is the author, most recently, of “Journey to the Edge of Reason: The Life of Kurt Gödel.”
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