IBM and the Holocaust

by Edwin Black

  Within months, Watson was the territory’s leading salesman, outearning Range himself, eventually becoming among the best Cash salesmen along the East Coast. His commissions reached as high as $100 per week. Patterson took notice, transferring Watson and his impressive skills to the undesirable Rochester office, one of the worst performing of The Cash’s 160 branch offices. Watson worked his magic immediately. On his very first day, while tying his horse to the hitching post in front of the National Cash Register office, Watson encountered the angry saloonkeeper next door. The irate neighbor complained that The Cash enjoyed a dismal reputation and the prior sales agent was often too drunk to perform his job. Within minutes, Watson had somehow convinced the disenchanted man to buy a new cash register. Watson sold a second cash register while riding out to another complaining prospect.42

  Patterson realized that Watson was good enough to go beyond simple sales. He was good enough to destroy the main competition in Rochester, the Hallwood Company, which also marketed a cash register. Adopting the brutal, anything-goes techniques of Patterson and Range, and adding a few devi-ous tricks of his own, Watson began the systematic annihilation of Hallwood, its sales, and its customer base. Tactics included lurking near the Hallwood office to spy on its salesmen and customers. Watson would report the prospective clients so “intimidation squads” could pounce. The squads would threaten the prospect with tall tales of patent infringement suits by NCR against Hallwood, falsely claiming such suits would eventually include anyone who purchased Hallwood machines. The frightened customer would then be offered an NCR machine at a discount.43

  Watson never missed an opening. A Hallwood salesman whom Watson had befriended one day mentioned that he was calling on a prospect the next day. In the morning, the Hallwood salesman arrived at the merchant’s location just as Watson’s horse and buggy was riding off, the sale in hand. Watson had risen at dawn and driven twenty miles to steal the account. Watson enjoyed the triumph so thoroughly, he bragged about the incident for years to come. Within a few years, Watson had virtually driven Hallwood out of Rochester. Later, Watson bragged that he had made Rochester “one of the best organized and cleanest territories.”44

  Patterson liked Watson’s style. The unscrupulous NCR president had learned to use frivolous libel and patent suits to drive his competition into submission. Watson could add a whole new dimension to the war against anyone other than Patterson who dared buy or sell cash registers—even second-hand NCR cash registers. John Patterson believed that cash registers were his God-granted domain and no one else’s. Watson would be the instrument of his hegemony.45

  In 1903, Watson was called to Patterson’s office and instructed to destroy second-hand dealers across the country. Although he had become a star in the Rochester office, Watson was still relatively unknown elsewhere. Patterson planted him in New York City, handed him a million-dollar budget, and asked him to create a fake business called Watson’s Cash Register and Second Hand Exchange. His mission was to join the community of second-hand dealers, learn their business, set up shop nearby, dramatically undersell, quietly steal their accounts, intimidate their customers, and otherwise disrupt their viability. Watson’s fake company never needed to make a profit—only spend money to decimate unsuspecting dealers of used registers. Eventually, they would either be driven out of business or sell out to Watson with a draconian non-compete clause. Funneled money from NCR was used for operations since Watson had no capital of his own.46

  The mission was so secretive even the NCR sales force in Manhattan believed that Watson had simply defected from the Rochester office to set up his own shop. He reported directly to Patterson and his staff. It took years, but the enemy—second-hand dealers—was ruthlessly conquered.47

  The victim list was long. Fred Brainin’s second-hand business was on 14th Street in Manhattan—Watson bought him out with a proviso that Brainin would stay out of cash registers. Silas Lacey of Philadelphia merged into Watson’s new front. The East Coast was easy. So Watson moved on to a real challenge: Chicago.48

  One of the biggest Chicago dealers was Amos Thomas, located on Ran-dolph Street in the Loop, just a few steps from the Elevated. Watson’s fake company moved in across the street. Thomas remembered, “Watson… tried to get me to put a price on my business. He wanted to control the second-hand business. I told him I would not sell.” But Watson and his cohorts, which now included his old supervisor John Range, would come by three or four times each day to press the man.49

  Still, Thomas would not sell. So Watson opened a second competing store near Thomas. NCR had secretly acquired control of American Cash Register Company, the successor to Hallwood. Watson’s second front, called American Second Hand Cash Register Company, only squeezed Thomas further. Weakened, Thomas finally offered a buy-out price of $20,000. But that was just too high for Watson.50

  By now, it was clear to Thomas that Watson was fronting for Patterson’s NCR. The Cash didn’t care if Thomas knew or not. To prove it, they invited Thomas to NCR headquarters in Dayton, Ohio, where he was first treated to a splendid dinner and then “handled” by a Patterson executive. Unless Thomas sold out for a “reasonable price,” Thomas was told, NCR would rent yet another store near his and continue to undersell until his trade was entirely wrecked. Buckling under, Thomas at last agreed to sell for $15,875 plus $500 in cash. A battered and broken Thomas pleaded with Watson, as the new owner of his company, to be kind to a long-time devoted employee. Amos Thomas had been conquered.51

  Patterson’s school for scoundrels was unparalleled in American business history. A Watson aide once testified that Patterson would scream for merciless destruction of all competitors. “Kill them!… crush them,” Patterson would yell at sales conferences. The vanquished included Cuckoo, Globe, Hallwood, Metropolitan, Simplex, Toledo, Union, and scores of other struggling cash register companies.52

  NCR salesmen wore dark suits, the corporation innovated a One Hundred Point Club for agents who met their quota, and The Cash stressed “clean living” as a virtue for commercial success. One day during a pep rally to the troops, Watson scrawled the word THINK on a piece of paper. Patterson saw the note and ordered THINK signs distributed throughout the company. Watson embraced many of Patterson’s regimenting techniques as indispensable doctrine for good sales. What he learned at NCR would stay with him forever.53

  NCR’s war tactics were limitless. Bribes, knock-off machines at preda-tory prices, threats of litigation, and even smashed store windows were alleged. The federal government finally stepped in. On February 22, 1912, Patterson, Watson, and several dozen other Cash executives were indicted for criminal conspiracy to restrain trade and construct a monopoly. Prosecutors called the conduct the most uncivilized business behavior ever seen and likened Watson and company to “Mexican bandits.”54

  A year later, in 1913, all defendants were found guilty by an Ohio jury. Damning evidence, supplied by Watson colleagues and even Watson’s own signed letters of instructions, were irrefutable. Most of the men, including Watson, received a one-year jail sentence. Many of the convicted wept and asked for leniency. But not Watson. He declared that he was proud of what he had accomplished.55

  Then came the floods. The late winter and early spring in Dayton, Ohio, had been brutal. Excessive rainfall swamped the city. The Mad and Miami rivers began overflowing. In late March 1913, a tornado tore through the area, turning Dayton into a disaster scene, with much of the area under water. Some 90,000 people suddenly became homeless. Communications were cut. But Watson and others at NCR controlled one of the few telegraph lines still on high ground.56

  The Cash pounced. NCR organized an immense emergency relief effort. The company’s assembly line was retrofitted to produce a flotilla of rudimen-tary rowboats—one every seven minutes. Bottled water and paper cups were distributed to flood victims along with hay cots for sleeping. NCR facilities were converted into an infirmary. Five babies were born there in one day. From New York, Watson organized a relief train of me
dical supplies, food, and more water. Where roadbed and rail switches were washed away, Watson ordered them instantly repaired. When NCR relief trains encountered irreparable tracks, just a few miles from Dayton, Watson recruited men to carry supplies in on their backs until the goods reached Dayton—all to cheering crowds.57

  Patterson, Watson, and the other NCR men became national heroes overnight. A press room was established on NCR premises. Petitions were sent to President Woodrow Wilson asking for a pardon. Considering public sentiment, prosecutors offered consent decrees in lieu of jail time. Most of the defendants eagerly signed. Watson, however, refused, maintaining he saw nothing wrong in his conduct. Eventually, Watson’s attorneys successfully overturned the conviction on a technicality. The government declined to re-prosecute.58

  But then the unpredictable and maniacal Patterson rewarded Watson’s years as a loyal sales warrior by suddenly subjecting him to public humiliation in front of a company assembly. Just as Watson was speaking to a festive gathering of Cash executives, Patterson histrionically interrupted him to praise another salesman. Everyone recognized the signs. Shortly thereafter, Watson was summarily fired.59

  For seventeen years, NCR had been Watson’s life—the fast cars and even faster commissions, the command and control of industrial subterfuge, the sense of belonging. It was now over. Shocked, Watson simply turned his back on his exciting lifestyle at The Cash. “Nearly everything I know about building a business comes from Mr. Patterson,” Watson would admit. Now he added this vow: “I am going out to build a business bigger than John Patterson has.”60

  What was bigger than National Cash Register, one of America’s largest corporations? Why stop at the American shoreline? Watson contacted the one man who could take him global, Charles Flint of CTR.

  * * *

  WHEN THOMAS WATSON walked into Charles Flint’s Fifth Avenue suite, their respective reputations surrounded them like force fields. Watson’s was national. Flint’s was international. Watson had manipulated mere men. Flint had catered to the destiny of nations. Yet, the two did not instantly bond.

  Flint was shorter and much older than Watson, although filled with just as much energy. After all, Flint had soared amongst the clouds in a Wright Brothers plane and driven automobiles, sailed the fastest boat on many a river or lake, and seen the world—all while Watson was still traversing back roads on horseback. Yet, during their first meeting, Watson was almost disappointed in the legendary financier’s presence. But it was Flint’s ideas that spoke louder than his physical stature.61

  As a nineteenth-century international economic adventurer, Flint believed that the accretion of money was its own nurturing reward, and that the business world functioned much as the animal kingdom: survival of the fittest. Watson found nothing unacceptable in Flint’s philosophy. Heading up CTR could be the chance Watson knew he deserved to be his own boss and make all the decisions. CTR’s diverse line was better than cash registers because the dominant product was Hollerith’s tabulator and card sorter. The two men could work together to make CTR great—that is, if Watson’s management deal was structured right.62

  But from Flint’s point of view, he was hardly ready to stroll across the street to CTR’s headquarters and install Watson. The supersalesman before him still walked under the shadow of a criminal conviction, which at that point had not yet been overturned. Although under appeal, it could cast the company in a bad light. During one of several board meetings to consider hiring Watson, at least one CTR director bellowed at Flint, “What are you trying to do? Ruin this business? Who is going to run this business while he serves his term in jail?”63

  It was a process, one that Watson was determined to win, and so he spoke frankly to the reluctant directors. First, he sold himself—like any adroit salesman—and then worked around their collective worries about his conspiracy conviction. Visions of products and profits proliferating worldwide, million-dollar growth projections, ever-increasing dividends—these were the rewards the directors embraced as most important. CTR bought in. Watson was offered “a gentleman’s salary” of $25,000 per year, plus more than 1,200 shares of the firm. But Watson wanted better. He wanted a slice of the profits. His commissionable days at NCR had whetted his craving for more of the same. Much more.64

  “In other words,” said Flint, “you want part of the ice you cut.” Indeed. Watson negotiated a commission of 5 percent of all CTR after-tax, after-dividend profits. However, in light of Watson’s conviction, he would not join the firm as president, but rather as general manager. It didn’t matter. Watson would call the shots. May 1, 1914, was his first day at CTR. Hollerith’s company, now Flint’s company, would never be the same. It would soon become Watson’s company.65

  Copying many of NCR’s sales development and promotion techniques, Watson built an organization that even Patterson would have marveled at. Just as Patterson had organized the One Hundred Point Club for salesmen hitting their quota, Watson began a festive Hundred Percent Club. Patterson had demanded starched white shirts and dark suits at NCR. Watson insisted CTR employees dress in an identical uniform. And Watson borrowed his own NCR innovation, the term THINK, which at CTR was impressed onto as many surfaces as could be found, from the wall above Watson’s desk to the bottom of company stationery. These Patterson cum Watson touches were easy to implement since several key Watson aides were old cronies from the NCR scandal days.66

  But Watson understood much more about human motivation than Patterson had ever allowed to creep into NCR. Watson wanted to inspire men to greater results, not brutalize them toward mere quotas. His way would imbue a sense of belonging, not a climate of fear. As a general understood his troops, Watson well understood the value of the workingmen below to the executive men above. Moreover, any limitation in his general manager title was soon overcome. In 1915, his conviction was overturned and within forty-eight hours the board approved his ascent to the presidency of CTR.67

  For the first years, Watson worked quietly out of his sparse office at CTR, cementing the firm’s financial, labor, and technical position. He did his best to outmaneuver and neutralize the competitor tabulating machines. Patent wars were fought, engineering campaigns commenced, research undertaken, and major clients either conquered or re-conquered. When needed, Watson arranged bank loans to see the company through lean times and help it grow.68

  Hollerith, although no longer in control, remained as an active consultant with the company, but found Watson’s style completely alien. Years before, while still at NCR, Watson had ordered a Hollerith machine, but Hollerith declined to send one, fearing Watson would copy it for Patterson. Now that they were in the same firm, the two frequently butted heads on a range of issues, from commercialization to technical research. Unlike Hollerith, who was willing to do battle with customers over some barely discernible personal principle, Watson wanted to win customers over for the money. Money was his principle. Flint’s chairman, George Fairchild, was also a towering force at CTR to be reckoned with. Watson navigated around both Hollerith and Fairchild. Without Flint’s continuous backing, Watson could not have managed. Nonetheless, without his unique winning style, Watson could not have persevered.69

  Watson became more than a good manager, more than just an impressive executive, more than merely a concerned employer, he became central to the company itself. His ubiquitous lectures and pep talks were delivered with such uplifting passion, they soon transcended to liturgical inspiration. Watson embodied more than the boss. He was the Leader. He even had a song.

  Clad in their uniforms of dark blue suits and glistening white shirts, the inspirited sales warriors of CTR would sing:

  Mister Watson is the man we’re working for,

  He’s the Leader of the C-T-R,

  He’s the fairest, squarest man we know;

  Sincere and true.

  He has shown us how to play the game.

  And how to make the dough.70

  Watson was elevating to a higher plane. Newspaper articl
es began to focus on him personally as much as the company. His pervasive presence and dazzling capitalistic imperatives became a virtual religion to CTR employees. Paternalistic and authoritarian, Watson demanded absolute loyalty and ceaseless devotion from everyone. In exchange, he allowed CTR to become an extended family to all who obeyed.71

  In 1922, Patterson died. Many have said his death was an emotional turning point for Watson, who felt his every move was no longer being compared to the cruel and ruthless cash register magnate. Some two years later, CTR Chairman Fairchild also died. By this time, Hollerith had resigned in ennui from the CTR board of directors and completely faded away in poor health. Watson became the company’s chief executive and uncontested reigning authority.72

  Now CTR would be completely transformed in Watson’s image. A new name was needed. In Watson’s mind, “CTR” said nothing about the company. The minor products, such as cheese slicers and key-activated time clocks, had long been abandoned or marginalized. The company was producing vital business machines for a world market. Someone had suggested a name for a new company newsletter: International Business Machines.73

  International Business Machines—Watson realized that the name described more than a newsletter. It was the personification of what Watson and his enterprise were all about. He renamed the company. His intensely determined credo was best verbalized by his promise to all: “IBM is more than a business—it is a great worldwide institution that is going on forever.”74