Master Of The Mainframe

By John Greenwald

As the eldest son of the president of International Business Machines, Thomas Watson Jr. grew up tortured by self-doubt. He suffered bouts of depression and once burst into tears over the thought that his formidable father wanted him to join IBM and eventually run what was already a significant company. "I can't do it," he wailed to his mother. "I can't go to work for IBM."

Yet 26 years later, Watson not only succeeded his father but also would eventually surpass him. IBM is now synonymous with computers, even though the company did not invent the device that would change our life, nor had it shipped a single computer before Tom Jr. took over.

But he boldly took IBM--and the world--into the computer age, and in the process developed a company whose awesome sales and service savvy and dark-suited culture stood for everything good and bad about corporate America. No wonder the Justice Department sought (unsuccessfully) to break it up.

Under Tom Jr., Big Blue put its logo on 70% of the world's computers and so thoroughly dominated the industry that even rivals like Univac--which built the first large commercial computer--were dismissed as merely part of "the Bunch." And while newcomers such as Compaq and Microsoft brought the company to its knees in the 1980s, the colossus that Watson inherited and reinvented in the 1950s and '60s stands strong again today, the sixth largest U.S. company.

Not a bad legacy for someone who spent his youth "convinced that I had something missing" inside. A perpetually failing student, "Terrible Tommy" Watson vented his frustration by pulling pranks and tangling with authority. He needed six years and three schools to get through high school, and managed to graduate from Brown University only through the forbearance of a sympathetic dean. The young playboy rated the pleasures of drinking and dancing far above those of learning.

Watson enrolled in IBM sales school after college and hated that as well. He devoted more time to indulging his passions for flying airplanes by day and partying by night than to calling on clients. Even so, Watson filled his entire sales quota for 1940 on the first day of that year--but only because the company had thrown the boss's son a big account to make him look good.

World War II liberated Tom Watson Jr. from his demons. His success in promoting the use of flight simulators earned him a job as aide and pilot for Major General Follett Bradley, the Army Air Forces' inspector general. Watson flew throughout Asia, Africa and the Pacific, displaying steel nerves and shrewd foresight and planning skills. He was set to fly for United Air Lines after the war when a chance conversation with Bradley changed his course. Informed of Watson's job plans, the general said, "Really? I always thought you'd go back and run the IBM company." A stunned Watson asked Bradley if he really thought his former aide up to the job. The general replied, "Of course."

The IBM that Watson went home to was an American icon. It was the outgrowth of a debt-ridden maker of scales, time clocks and accounting machines that his father took charge of in 1914--the year Tom Jr. was born. The elder Watson created a fanatically loyal work force at IBM--the company's name since 1924--hanging THINK signs everywhere, leading employee sing-alongs (corporate anthem: Hail to IBM) and dictating everything from office attire (white shirt, dark suit) to policies on smoking and drinking (forbidden on the job and strongly discouraged off it). IBM dominated the market for punch-card tabulators--forerunners of computers that performed such tasks as running payrolls and collating census data.

Back from the war, Tom Jr. saw IBM afresh and quickly realized that its future lay in computers, not a 19th century information technology like tabulators. Even the first primitive vacuum-tube machines could calculate 10 times as fast as IBM's tabulators. Many people, however, including Watson's father, couldn't believe the company's core products were headed for extinction. Nonetheless, Tom Jr., who became IBM president in 1952, never retreated. He recruited electronics experts and brought in luminaries like computer pioneer John von Neumann to teach the company's engineers and scientists. By 1963, IBM had grabbed an 8-to-1 lead in revenues over Sperry Rand, the manufacturer of Univac.

Watson, who shared his father's volcanic temper, was just warming up. Fearful of falling behind in the fast-changing industry, Watson promoted "scratchy, harsh" individuals and pressured them to think ahead. (When IBM engineers complained that transistors were unreliable, Watson handed out transistor radios and challenged the critics to wear them out.) He never backed away from conflict, not even what he called "savage, primal and unstoppable" fights with his father over issues like finance. He installed a "contention" system that encouraged IBM managers to challenge one another. Watson was paternal with rank-and-file employees, but he was murder on his lieutenants, in accordance with his dictum that "the higher the monkey climbs, the more he shows his ass."

With IBM clearly on top in the early '60s, Watson took one of the biggest gambles in corporate history. He proposed spending more than $5 billion--about three times IBM's revenues at the time--to develop a new line of computers that would make the company's existing machines obsolete. The goal was to replace specialized units with a family of compatible computers that could fill every data-processing need. Customers could start with small computers and move up as their demands increased, taking their old software along with them. This flexibility inspired the name System/360, after the 360 degrees in a circle.

The strategy nearly failed when software problems created delivery delays. Panic raced through IBM's top echelons as rivals closed in. A desperate Watson ousted his younger brother Dick as head of engineering and manufacturing for the System/360 project, derailing the younger man's career and filling Watson with shame.

Ultimately, System/360, which revolutionized the industry, proved to be wildly successful as well. IBM's base of installed computers jumped from 11,000 in early 1964 to 35,000 in 1970, and its revenues more than doubled, to $7.5 billion. At the same time, IBM's market value soared from about $14 billion to more than $36 billion.

A heart attack forced Watson to retire at age 57 in 1971, leaving him plenty of time for such adventures as retracing a flight across Siberia that he had made during the war. A lifelong Democrat (his father had been a Franklin Roosevelt confidant), Watson served for two years as Jimmy Carter's ambassador to Moscow.

But perhaps his proudest achievement was to emerge from the shadow of a legendary, relentlessly demanding father. In his first five years as chairman, the younger Watson observed the anniversary of his father's death in 1956 with a ritual. He quietly took stock of what IBM had accomplished since his father died, and then said to his wife, "That's another year I've made it in his absence."

Senior writer John Greenwald wrote his first cover story for TIME in 1982; the subject: IBM