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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.