Father, Son & Co.

by Thomas J. Watson

  “That sounds about right,” he said. I had a lot to learn about how to be a reasonable husband, but I was finally getting the message that I couldn’t run my life like IBM.

  The Nixon recession ended and during Vin Learson’s short term as chief executive IBM had good results. By the time Frank Cary took over in January 1973, the company was growing rapidly again, and annual revenues were up near the ten-billion-dollar mark. I was preoccupied with recuperating, and as long as Vin was on top, I hardly felt as if I’d given up my power over the company; he made operating decisions pretty much as I would have. But when Cary came in I really had to contend with the fact that the Watson dynasty, after almost six decades, was over. Frank was fifty-two; therefore he was likely to be chief executive for eight years, and from my own experience I knew that is more than enough time for a boss to change a company forever.

  When Frank started his new job I asked him to spend a couple of days alone with me at my ski house in Vermont. I told him there were things I wanted to pass along that I thought he might not know in spite of his MBA. No textbook in the world can tell you how to be the chief executive of IBM, and the most important lessons had been drilled into my head by Dad. Not surprisingly, Frank seemed a little reluctant to go at first. I’m sure he expected a bunch of homilies; I’d sometimes felt the same way around my father. But then he agreed, and in the middle of March we flew up to Stowe. The ski season was over and nobody was at the lodge; it was the perfect place to get away.

  I had no fixed agenda; I simply gave him every bit of advice that came into my head. I told him a saying of Dad’s, about how the head of business should behave: “Act like a beggar, feel like a king,” the idea being that in your dealings with others you should be empathic and humble, yet utterly self-reliant and confident within. Frank Cary behaved that way instinctively, and this was my way of telling him he was doing the right thing.

  I told him the real test of his leadership would be whether he could keep IBM, as immense as it now was, from becoming cold and impersonal. I was concerned that he continue to make the small gestures that had been so important to me and Dad: sending flowers to wives, books on birthdays, handwritten notes to tell employees that you recognized and appreciated what they’d done. “These things aren’t luxuries, they’re good business,” I said. “IBM is a service company, and the more personal the tone, the more your employees and customers will respond.”

  We covered everything from the IBM dress code to the question of how to lobby Congress. Cultivating people is something a chief executive has to do, cultivating not only politicians but anyone of influence, including newspaper publishers and other businessmen. I told Frank that the most graceful and effective way to do this is in person, and that probably the worst way is to have a Washington office staffed with professional lobbyists.

  The one area where I thought Frank might be weak was representing IBM to the outside world. His success so far had been very much within the confines of the company, and I wanted him to realize he was now a public figure. I felt very strongly—and my father did too—that businessmen have a responsibility to do good in the community, not just stay in the office and coin money. Despite a few lonely nights spent on camping trips in the Palisades as head of the New York area Boy Scouts, I’d gotten great satisfaction from my public work. I told Frank that upholding this tradition of service was a key part of his job, and I told him how to approach it. “You’re a big shot now,” I said. “You’ll be asked to join everything. Pick two or three public organizations that you think really have meaning and take the time to work hard on these. You have to earn your position in the outside world, just like you earned your position at IBM.” But pretty soon it became obvious that Frank wasn’t interested in the national spotlight. Instead he joined the boards of a handful of powerful companies and became an important figure in the Business Roundtable and other insider groups. I was disappointed at first, but I knew Frank had a tough job to do, running IBM in not only my shadow but the old man’s, and I came to accept the fact that he was going to do it his own way. Trying to make himself famous was what any Watson would have done, but it wasn’t Frank Cary’s style, and the fact was that for eight years he ran IBM as well as it had ever been run.

  I woke in my bunk to the heavy sound of Palawan’s engine. My watch showed 4:00 A.M. but the portholes were bright with daylight. It was August 1974, and we were cruising the icy waters off the coast of Greenland, more than five hundred miles above the Arctic Circle. In my heavy pajamas and a coat I stepped on deck, where the temperature was just below 40 degrees with a light mist blowing from the northeast. Here and there I could make out the dim shapes of large icebergs, which are as common as clouds at that latitude, only harder to ignore. At the helm on this watch was Jimmy Madden, my friend from childhood who had sailed in the Arctic once as a college boy. Above, in the lookout ring at the crosstrees, was Nick Scheu, an eighteen-year-old sailing novice. I was glad he seemed alert. Yachts manned by amateurs almost never venture this far north. The waters of the Greenland coast are known for all sorts of ice, from icebergs more than a mile long to large, almost entirely submerged masses of “blue band ice” that are difficult to spot and that can send a thin-hulled vessel quickly to the bottom. Somewhere ahead lay Smith Sound and our destination, the deserted Eskimo settlement of Etah where Admiral Peary in 1909 began his eight-hundred-mile trek to discover the North Pole.

  This was the first major voyage of the boat I’d dreamed of—and then planned—in my bed at Greenwich Hospital. The new Palawan was a sturdy blue sixty-eight-foot ketch, not huge as yachts go, but the biggest boat I’d ever owned and exactly suited to the kind of voyaging I had in mind for my retirement. I’d designed her with the idea of being able to sail to remote corners of the earth, in reasonable safety and comfort, with enough friends to keep things interesting. The boat was simple enough for me to sail with the help of a single professional if Olive and I wanted privacy, yet capable of sustaining eight people at sea for sixty days and four thousand miles. When she was brand-new in 1973 I’d sailed her across the Atlantic from Bremen, where she was built, getting to know her quirks. Later that year we’d cruised around the Caribbean and along the coast of Maine. But those trips were mere preparation: I’d nearly died; I’d stepped down from IBM; and I was looking for an adventure that those recent events in my life wouldn’t totally overshadow. I wanted to make a journey to a seldom-traveled place with real risk. The plan was to take the Palawan as far north as possible, despite the warning of George B. Drake, a marine architect friend of Jimmy Madden’s who had been up the Greenland coast aboard a cargo ship the year before. When he heard we were planning this voyage he wrote Jimmy a letter that said:

  I do not recommend this trip on a yacht. We found heavy ice, and the weather deteriorates as you go north. Overcast most of the time, sudden squalls out of nowhere that last quite a while, and fog coming in at odd times, quite different from the fog we experience even off the coast of Maine. The motor vessel on which we sailed was a replacement for one that was lost, presumably by hitting an iceberg.… Our ship was on her second bow, as in spite of her having two radars she smacked an iceberg and folded in her original bow.

  Early in the summer we’d set out from Camden, Maine, cruising to Newfoundland and then to Greenland across the Davis Strait, taking a circuitous route to avoid ice near Labrador’s coast. The crew I’d assembled for this ambitious project was hardly what you’d expect for an arctic expedition: a mixture of young and old, men and women, with only two professional sailors, neither of whom had any arctic experience. The weather was frigid, overcast, and often foggy, and we charted our course mainly by radio navigation instead of the sun. After a cold week we had a spectacular landfall at Godthaab, Greenland’s capital. We were in dense fog as we drew near, and I thought we’d have to stop because there was no way to find the harbor entrance. But suddenly the fog blew away, revealing brilliant blue skies and a spectacular view of the town at the foot of low snow
y mountains, with the high peaks of the ice cap in the distance beyond. Greenland is five sixths covered by ice all year round, but in the region of Godthaab in summer there are lovely fields, wildflowers, and even a few small trees. During our layover in Godthaab, Olive and one of our friends flew up to join the crew; I also recruited an Eskimo ice pilot named Lars Jensen who had just graduated from shipmaster school. Lars was only twenty-eight years old, but he’d been at sea all his life. He was skeptical about joining the crew of a pleasure boat, and wouldn’t sign on until he’d sailed with us a couple of days, checking our seamanship and making sure we weren’t going to treat him as a servant.

  Lars turned out to be a wonderful crewmate. He didn’t talk much, but was extremely competent and had a wry sense of humor that helped in the tight spots. A few days after we left Godthaab I clumsily scraped Palawan’s centerboard on the bottom during a passage through a shallow strait. Lars was playing gin rummy down below, and I expected to see him come erupting out onto the deck in alarm, but there was no sign of him. Afterward one of the crew told me that as the sound of aluminum grating on rock was heard in the cabin, Lars simply flipped another card onto the table and proclaimed, “The dangerous waters of Greenland!”

  We gradually worked our way up the coast toward Disko Island, once a rendezvous for whalers, following the great arctic explorers whose adventures had intrigued me as a boy—men like John Cabot, Martin Frobisher, Jens Munk, and Henry Hudson, going all the way back to Eric the Red. The conditions we ran into were better than Jimmy’s naval architect friend had predicted, and on July 12 we crossed the Arctic Circle within sight of spectacular glaciers and fjords.

  A tragedy at home interrupted the voyage. Early on July 18, as we got ready to leave the tiny harbor of Egedesminde, a messenger came to the dock with a telegram from my secretary at IBM: my brother had had a serious fall in his house in New Canaan. There were no details about Dick’s condition; the telegram simply said, “YOU MUST COME HOME.”

  I knew when I read it that Dick was going to die. Though he was only fifty-five years old he’d been in poor health, and was recovering from a heart attack the year before. Olive and I were able to get a helicopter to fetch us from an airport one hundred fifty miles away, and we flew from there to Connecticut to stand by helplessly at the hospital. Dick died a week later without ever regaining consciousness. After his funeral Olive stayed behind to console Nancy, Dick’s wife, but I went directly back to the boat. I was in no state to be of help to anybody, and I was afraid to sit idle because I knew my brother’s death was going to haunt me. We had never fully healed our relationship after the System/360 crisis. I’d taken actions that had derailed Dick’s IBM career, and I blamed myself. Hard feelings had darkened our relationship for nine years, even though we were the sons of a man who taught his children never to let the sun set on a family argument. Now I saw the terrible wisdom of Dad’s belief. My brother had died, and my feelings were so tangled that I didn’t know how to mourn him. Being responsible for the Palawan and its crew in that harsh landscape helped me come to terms gradually with what had happened.

  By early August we were far north of where any pleasure boat had ever gone. I’d competed in so many ocean races that most seagoing conditions were familiar to me, but I’d never seen anything like what we now encountered. The sea was black and very still except for little patches rippled by wind. There were lots of birds—terns, ducks, and big sea birds like gannets. We cruised among icebergs that in the light of the midnight sun would turn a translucent blue. The calm was broken by the weird sound of what fishermen call “growlers,” room-sized chunks of submerged ice grinding against each other in the swell. Once in a while the Palawan would be rocked by a three- or four-foot wave that came from an iceberg rolling over many miles away. Our weather was mostly clear, and in the middle of the night crew members would sit in the cockpit looking at the sun, an orb low on the horizon, radiating eerie shades of red on the clouds above the black sea. There were always two people on watch, the rule being three hours on, six hours off, and there was a standing order to call me if anyone saw ice fields, or if the weather began to deteriorate. If we had gotten into trouble help would have been a long way off, and we surely would have been told that we shouldn’t have been there in the first place.

  The Etah settlement where Peary’s expedition began was 150 miles ahead, but Lars Jensen took a long look from the mast and saw that ice had completely choked the passage through Smith Sound. We decided to turn eastward, toward the tiny Eskimo village of Qanaq, perhaps the most northerly on earth, where he knew some of the residents. We inched our way along for twelve hours, with Palawan’s bow gently nudging aside giant ice cakes as the sky turned gray and it started to mist. Finally, about six miles southwest of Qanaq, with the huts of the town dimly in view, we ran into such heavy ice that the boat stopped. Lars kept saying, “I’ll get us in there, I’ll get us in,” but I thought about our unshielded propeller, only three feet below the surface, and our unreinforced hull, made of aluminum only a quarter-inch thick, and decided we should turn around.

  The ice was shifting, and for a while we could go neither forward nor back as the wind from the west became stronger and rain and sleet pelted us. If a westerly gale springs up along the Greenland coast it’s possible to be pinned in the ice or “beset,” as the old-timers say; the ice can pile up and easily crush a boat like ours. I had visions of various arctic explorers frozen in over a winter; visions of myself trying to explain to other yachtsmen what had happened to my beautiful new boat; visions of a helicopter having to come rescue us from Thule Air Force Base to the south; visions of dealing at close quarters with water temperatures of 33 degrees—all sorts of unpleasant visions of being considered not intrepid explorers but foolish troublemakers. We carefully backed into better water, and after three hours of work we were able to turn around and make our way out to sea. We’d come within about 770 miles of the Pole. We cruised southward toward the Thule air base and the following afternoon moored at the supply dock next to a large tanker. The guard on duty was amazed to see a yacht. “If I had a boat like that, I’d be in the Caribbean,” he said. Pretty soon the base commander and a couple of Danish officials showed up and welcomed us, which was a relief because I hadn’t been sure what kind of reception we’d get. Although I’d kept the Danish authorities aware of our run northward, I also never stayed anywhere long enough to give them a chance to tell us to turn back.

  The voyage accomplished what I’d hoped—it helped me to let go of IBM. Not that I’d ever seriously considered reversing my decision to retire, because as far as I was concerned that wasn’t an option: I’d had a heart attack, been told not to run the company anymore, and was never so stupid as to say, “Doctor, I must go back, they really need me.” So I was on my own and retirement was a disconcerting prospect, because I wasn’t sure I could live at peace with myself without IBM. I stayed active on a number of boards, including Time, Pan American, Bankers Trust, the Mayo Foundation, the Smithsonian Institution, and Caltech—so my calendar typically included a couple of high-level meetings per week. But I didn’t like just being a director; I felt terribly underutilized and had to fight off the impulse to try to dominate some of those meetings.

  The process of weaning myself from IBM took years. I stayed chairman of the executive committee until 1979 and at first I did a fair amount behind the scenes, counseling with other directors to make sure IBM was steady as we moved through Vin Learson’s brief tenure, and then helping Frank Cary get smoothly launched. When I turned sixty and formally retired in January 1974, I told Frank I would not come into the building for one hundred days. Having a former chief executive hanging around only undermines the new guy’s authority; my father had died, so he wasn’t around to interfere with me, and I had no intention of interfering with Cary. It was hard to do, but one hundred days passed and I didn’t show my face. Then I had to struggle to get used to being a retiree. Before my eyes IBM was evolving into an enterprise far diffe
rent from the one I had run. It was already 50 percent larger than when I’d stepped aside as chief executive, with revenues of eleven billion dollars in 1973, and Cary and his team were instituting major changes. They’d found that whenever we launched a new product our factories couldn’t build machines fast enough to satisfy the demand. The entire industry was accelerating, and Frank worried that IBM’s relatively stately pace of production left us vulnerable. We were still losing business to the plug-compatible manufacturers, who got better and better at zeroing in on customers who didn’t want to wait for IBM deliveries.

  But it wasn’t just the PCMs that Frank was worried about; it was the Japanese. By now they had used their manufacturing power to invade the U.S. markets for steel, automobiles, and consumer electronics, and everybody knew that the computer industry was next on their list. Frank had no intention of letting IBM go the way of U.S. Steel, so he made a plan to build vast new automated plants and beat Japan at its own game. The board agreed that this strategy was sound, but the cost of the factories was staggering. Even though I knew that technology was changing and that the U.S. was in a period of high inflation, I could hardly believe the bills that were coming through. I remember asking Frank over and over the same questions that my directors had always asked me: “Are you sure you need all this? Have you gotten competitive bids? We don’t want these factories to be lavish, you know.” The rebuilding took six years and ended up costing over ten billion dollars, but it enabled IBM to stave off Japan, which today controls a smaller fraction of the computer market than it otherwise would have.

  In spite of Frank’s success, he made a few decisions that caused me to wish I was still running the show. In particular I was alarmed when he and his eventual successor John Opel rapidly phased out the rental system, shifting billions of dollars worth of business to outright sales. They did this partly because the life span of the machines had gotten quite short and partly to free up capital that would otherwise have been tied up in rental machines. But it bothered me because rentals traditionally had been crucial to IBM’s success. Rental contracts wedded us to our customers, gave us a powerful incentive to keep service top-notch, and made IBM stable and essentially depressionproof. Once the stream of rental payments dried up, IBM became far more volatile and vulnerable to fluctuations in demand. I felt the same uneasiness Dad must have felt in the 1950s, when Williams and I insisted on increasing IBM’s debt. He’d gone along with us even though his instincts told him that debt was bad; the debate must have been a painful reminder to him that IBM was no longer entirely his business. It was painful for me to realize now that it was no longer mine.