September 6th 2003

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Articles from this issue:

COVER STORY: How to help democracy in Hong Kong

Australian Senate backs Hong Kong democrats against China

CANBERRA OBSERVED: Government stumbles over Manildra, Tuckey fiascos

STRAWS IN THE WIND: J'accuse / Shape of things to come

WATER: Murray River farmers face man-made 'permanent drought'

NATIONAL PARTY: Why John Anderson should stay

LETTERS: Sugar price

LETTERS: Rail the key to rural infrastructure

LETTERS: Amrozi death sentence

Ethanol, sugar and free trade

EDUCATION HISTORY: Social justice in education - self-interest disguised as altruism

FAMILY: Quick facts on marriage

BOOKS: GULAG : A HISTORY, by Anne Applebaum

BOOKS: The Maverick and his Machine: Thomas Watson Sr and the Making of IBM

Books promotion page

The Maverick and his Machine: Thomas Watson Sr and the Making of IBM

by Jeffry Babb

News Weekly, September 6, 2003
The Maverick and his Machine: Thomas Watson Sr and the Making of IBM
by Kevin Maney

Rec. price: $59.95 (hb)

Thomas Watson was the first celebrity businessman of the modern era. Before him, men such as J P Morgan and John D. Rockefeller were respected and feared - and they were far richer than Watson ever was. But Watson was the first celebrity chief executive officer - the Bill Gates of his day.

Thomas Watson was born to an impoverished farming family in 1874 in upstate New York.

Later, as far as wealth was concerned, Watson was never in the class of the robber barons of the Gilded Age. He was not poor - when he died in 1956, his fortune was estimated at US$80 million, but he was a manager rather than an owner.

The company that became synonymous with Watson was International Business Machines - IBM - one of the greatest and most influential companies of the modern age.

A few months short of his 40th birthday, it looked as if Watson's life in business was over. Named as part of an anti-trust suit against National Cash Register (NCR), Watson looked washed up. Out of a job and with no prospects - except for perhaps an impending jail sentence - he took over a failed trust called the Computing-Tabulating-Recording Company. Watson moulded it into a company that would dominate the information age.

Despite the fact that IBM was one of the most creative and innovative companies in America, Watson was not an engineer - he was primarily a salesman. He always loved his salesmen - "the men" - more than anything else, and they repaid his faith by making his company great. Watson never went to a university and tried to make up for it by collecting any amount of honorary degrees.

Indeed, his collection of honours and all sorts of baubles was one of his great weaknesses - the fact that he picked up an honour from Nazi Germany was used against him for many years.

The role of IBM in the Holocaust is still hotly debated. Watson never had much sympathy for the Nazis and was more a victim of his own excessive optimism and belief that trade would bring world peace.

Watson never owned more than about three percent of IBM. He owed his wealth to the fact that he had a profit sharing arrangement with the company. While being an institution of American capitalism and a self-made man, Watson was closest to Franklin Roosevelt and was a life-long New Deal Democrat (although he was later to enjoy the confidence of President Eisenhower).

His company was never unionised because he paid his workers far more than any union contract could offer.

Watson worked intensely and was both feared and loved. Maney writes:

"One daily task soaked up a large portion of Watson's schedule: ruthlessly manipulating his executives. Watson did so with skill and precision. Often, he applied extremes of kindness and cruelty. The touching kindness made executives love him; the cruelty inspired fear of crossing him."

IBM's corporate culture became a thing of legend. Watson did not drink and disapproved of those who did. He dressed formally in a blue suit and his employees followed. He devoted his life to the company, and expected others to do the same.

Watson made mistakes but never a fatal error, betting the company on occasion and winning every time - via a lot of foresight, and a lot of luck. During the Depression, when other companies shrank, IBM kept expanding.

The New Deal, and the Social Security system, which created immense demands for Watson's "electric brains", secured the company.

Although he was cost-conscious, Watson was generous to his employees and his old friends, often giving personal cheques to friends and distant relatives who had fallen on hard times. He was thoughtful and never forgot a birthday or special achievement.

Of Watson's own achievements, perhaps his greatest was turning information into an industry. He figured out how to sell information processing to companies, governments, universities and the military.

IBM became the industry standard, and allowed information to be shared across companies and industries - he turned a near monopoly into a company that never stopped trying to get better and continued to innovate.

Tom Watson Jr took over as his father grew old and tired, but by that time Watson Sr was nearing 80. Now, no member of the Watson family is associated with IBM, even at board level.

IBM lost direction after the end of the dominance of the mainframe computer, and lost US$8.1 billion in 1993.

The man who rescued IBM, Lou Gerstner, took the company back to its roots. But IBM would never dominate the information industry as it had done for its first 70 years.

This book is easy to read, and will repay attention by anyone interested in the role of modern business or the information age.

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