The dynastic war that saved IBM

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Thomas J Watson Jr seemed to be destined for failure. Born in 1914, he was an angry and often depressed young boy. Neighbours called him “Terrible Tommy.” He barely gained his high school diploma after attending three different schools. His father, Watson Sr, the head of IBM, was a domineering man who subjected his son to a classic combination of emotional distance and cruelty. Watson Jr responded by becoming a rebel and wastrel.

“He played with fire, shot animals in the nearby swamps and pilfered things from neighbors’ houses,” Ralph Watson McElvenny and Marc Wortman write in The Greatest Capitalist Who Ever Lived, a compelling new biography of Watson Jr. Yet Junior ended up in charge of IBM, besting his more obedient younger brother, Dick Watson, for control of his father’s empire.
 

This is far from the first book about IBM. It also isn’t the first book about Watson Sr and Jr (In 1990, Junior wrote  Father, Son & Co., a best-selling memoir that confirmed how much father and son detested each other, at least according to the son.) But this is probably the most theatrical book about IBM ever published. McElvenny, who happens to be Watson Jr’s eldest grandson, is privy to “personal and corporate papers” and, as the endnotes mysteriously specify, many “family sources.” Together with Wortman, a military historian, he spins the Watsons into near-Shakespearean figures, as if Succession were set in the era of Mad Men.
 

The Greatest Capitalist Who Ever Lived is about the challenges of corporate and family succession, an essential topic given that IBM itself was the father figure to most of the computing and tech industry. Watson Sr, “the old man,” was a type familiar to our times: The tech titan who runs a large company as an extension of himself.
 

While today’s tech founders can be imposing characters, Watson Sr went above and beyond in his propagation of a personality cult. Mark Zuckerberg may have blown $21 billion (and counting) on virtual reality, but he has not yet insisted that Facebook offices be adorned with his portraits and most important slogans. Nor does anyone, as far as I know, currently force their employees to regularly sing songs glorifying the greatness of their leader: “Thomas Watson is our inspiration,/Head and soul of our splendid IBM/We are pledged to him in every nation,/Our President and most beloved man.”
 

Given how Watson Sr ran things, by the 1950s, IBM faced not only a question of leadership succession but also a problem of technological succession. “Resistance to electronics was baked into the IBM culture,” the authors explain; the firm was an empire built on mechanically sorted punch cards that held data in patterns of holes punched into pieces of stock paper.

Watson Jr’s intense antipathy toward his father ended up saving IBM. Just before the United States entered World War II, Junior gained self-confidence by joining the Army Air Corps and flying a B-24. When he eventually returned to IBM, he became the internal champion of transitioning the firm to electronic computing. He was perhaps the only person who could oppose his father in a company built on yes men.
 

While the book’s title calls him “the greatest capitalist,” it might more accurately, if less ringingly, call him “the greatest manager,” for Watson Jr was much better at delegating and using his employees’ talents. In his battle with his father, Junior also had the unexpected assistance of the Justice Department’s antitrust division, which has often played a role in American corporate succession. The Justice Department both hurt IBM’s old business model by loosening its grip on the punch card machines that were about to become obsolete, and indirectly helped IBM’s new one by forcing AT&T, in the 1950s, to stay out of computing — neutering IBM’s largest and most dangerous potential competitor.
 

The more that computing took off, the more power Junior accumulated, and somewhere in the fighting over how to respond to the antitrust lawsuit, Watson Sr. effectively conceded control of the company to Watson Jr He told his son that he loved him, resigned as CEO in 1956 and died soon after.
 

Looking back, IBM’s own relatively graceful — indeed gentlemanly — departure from leadership of the computing industry greatly aided the American tech industry by giving a new generation a chance. Watson Jr (under pressure from antitrust officials) agreed to open up software markets for IBM machines, and, in the early 1980s, McElvenny and Wortman explain, IBM (still under antitrust scrutiny) let “tiny Microsoft” keep the licensing rights for the operating system that Microsoft had made for IBM’s line of personal computers: MS-DOS. Such concessions allowed other firms into computing and, while IBM remains a very valuable company, it is not an impediment to innovation.
 

Corporate America, as much as political America, needs ways to let new generations of leaders and firms have their day in the sun. Sometimes a big antitrust lawsuit can serve as the nudge. The history of nations and companies suggests that it is one thing to have a great ruler — even someone “most beloved” — but lasting success depends on making room for succession.

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The reviewer is the author, most recently, of The Curse of Bigness: Antitrust in the New Gilded Age. ©2023 The New York Times News Service