IBM 701

Being the son of a company’s CEO is tricky. It’s also challenging to be a rising executive in a quarter billion dollar corporation. Now imagine you’re a rising executive and the CEO’s kid. To make matters more complicated, you and dear old dad are having a major disagreement about the future of the business he’s run for decades. This is the predicament 37-year-old Tom, Jr. found himself in.

Tom Watson Jr. earned his confidence in the Second World War where he served as a pilot in the army air corps. While there, he learned much about the rapidly changing field of electronics.

His old man, Thomas Watson, known to most as Mr. Watson, to a few as TJ, and to Tom simply as Dad, took the reigns of Computing-Tabulating-Recording Company in 1914. Charles Flint had amalgamated four companies, including Herman Hollerith’s punch card company, only a few years prior, but ran into unexpected obstacles while trying to juggle the separate businesses. He saw an opportunity when Mr. Watson inquired about job positions, hiring him first as general manager. Mr. Watson became president of the company within a year.

In 1924, Mr. Watson changed the company’s name to International Business Machines - IBM - and set his sights on providing information processing needs to his customers by refining and inventing new ways to use punch cards. He’d done a fantastic job of training one of the world’s best sales teams, something he learned while working at the National Cash Register Company under the eccentric John Patterson, NCR’s founder.

What set Mr. Watson apart, however, was that he had both sales talent and an understanding of technology. He set up a research department in Endicott, a small town in upstate New York. The facility housed inventors who were all working to improve the card processing equipment that was increasingly in demand by customers. The researchers he recruited were all cut from the same cloth as Thomas Edison and Charles Kettering, and they each were assigned a small support team. These research teams would often compete to see who could invent the best solution to a problem, and the company would adopt the best proposal.

This sales and innovation strategy led to IBM’s success for decades, but there was bad weather on the horizon, and Mr. Watson’s son Tom could see it.

Tom returned to IBM after the war and began reading about electronic calculation machines. The military’s ENIAC was working away on problems at Aberdeen Proving Ground. From the viewpoint of data processing, it was easy to dismiss the giant machine and its 20,000 vacuum tubes. But still, it caught Tom’s attention even though something worried him about how fast the machine ran. Compared to electrons, punch cards moved at a glacial pace.

Suddenly there were almost 20 different automatic calculators across the globe at places like Cambridge, Manchester, and Princeton. The National Bureau of Standards was building too. These machines were not the 20,000-tube monster that the ENIAC was. They were down to a tenth of that size and their “memory” capability meant that changing and storing applications was more accessible than ever. The computing landscape had rapidly shifted in only a few years.

The Univac’s announcement was too big of a red flag for Tom to ignore. The ENIAC had a 36-bit accumulator and was designed for doing ten decimal digit math. Its creators, Eckert and Mauchly, were now working on a machine to process commercial information. It could read IBM punch cards, put their data on a magnetic tape, and process the information at electronic speeds, the speed of light.

IBM’s inventors over at the Endicott development lab were hesitant to delve into electronics. They’d spend decades creating with metal. It was difficult to see the promise of electronics and envision what the future might look like.

(All too often, companies don’t know the business they’re in. If they did, the railroad companies would have gotten into trucking and the airline game because they’d have known that they were actually in the business of moving people and goods around the country.)

Tom successfully implemented change in a limited way. He hired MIT engineers to develop electronics in a development lab housed in a mansion overlooking the Hudson in Poughkeepsie, New York. He’d even managed to introduce a new product in 1946.

Looking for a complement to the card tabulating business, he devised an electronic multiplier box with 300 vacuum tubes called the IBM 603. Encouraged by its warm reception, Tom quickly followed with the IBM 604 that could add, subtract, multiply, and divide.

These boxes were nothing like a computer. They were punch card driven calculators controlled by plugboards. Operation and value cards would be read, and the answers punched into new fields on the card. Nonetheless, the IBM 603 and 604 project gave Tom’s electronics team a valuable understanding of how to build vacuum tube equipment in such a way that the tubes could be changed often.

As Tom searched for more ways to incorporated electronic computing into IBM, he had two things that gave him an advantage. First, he’d grown up with Mr. Watson and knew precisely how he thought. Second, with the outbreak of the Korean War, anything to do with the war effort could get funding.

Tom wisely sent two of his electronics researchers out to visit defense departments and the companies they hired with an eye toward gaining government support for the development of electronic calculating devices. The researchers returned with a sketch of a computer and the suggestion that IBM build a general purpose automatic calculator of their own.

Rather than seek government funding, they recommended IBM pay for the project so that they could own the resulting technology. The price was steep, very steep for the 1950s--three million dollars. That would cover the design and prototype. All in, it would cost three to four times that amount.

With a general understanding of what was being proposed, Tom asked that his team clean up the description and calculate what it would cost to rent. They took the cost of the vacuum tubes and multiplied it by 1.5 to settle on a price.

With a much clearer vision, the team went back out, visiting a few dozen companies. Tom was hoping for five orders, and the group returned with eleven.

He presented the proposal to his father, a staunch supporter of punch cards. Mt. Watson didn’t even like to refer to equipment like the Univac as “computers” because he didn’t think people should be confused with machines. A “computer,” after all, was a person who worked at a calculator all day doing calculations. “Computer” was a job title. So he preferred to call them “mechanical calculators.”

Tom, very wisely, called the machine the Defense Calculator. Mr. Watson approved the project without question.

Next week, the machine takes shape.