One on One with Peter Drucker: IBM's Thomas Watson and the Birth of Computing

In 1930, Watson "began talking about something called data processing, and it made absolutely no sense!"

In the spring of 2001, I interviewed Peter Drucker at his home in California as I was working on a biography of Thomas Watson Sr., who built IBM. It was one of my most memorable interviews, and I still have my notes from it.

Drucker was 90 when I met him. (He died in 2005, at 95.) Watson had died in 1956. There weren’t a lot of people around in 2001 who had known and interacted with Watson. Drucker was one of them. He had talked to, followed and written about Watson as both a journalist and author, going back to the 1930s.

Drucker was born in Vienna, Austria, and started his career in Europe before moving to the U.S. Of course, he later became one of the most revered writers about management in history.

On the day I talked to Drucker, I drove to his house in Claremont, Calif., and rang the doorbell. Through the door I heard him say, “Coming.” He said it about four times before he got to the door and opened it.

I noted that he was wearing a brown herringbone jacket with a red checked shirt and red tie, with three pens in his shirt pocket. His hearing aids constantly whistled.

We sat in comfortable chairs in a sun room of what I described as a nice middle-class house, a pool visible outside the glass doors. We talked for…I’m not sure, but a long time. Drucker’s recall was amazing. I’d ask him about something from nearly 70 years before, and he’d tell me a story in detail. He struck me as warm, fun and a little mischievous. His input was invaluable to the book.

His comments are in the order they came up.

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I attended the first IBM management meeting after he was eased out in 1952. He was a great actor. Tears in everybody’s eyes including his. He was in his early 80s and still very vigorous.

The first time I saw him was maybe in Geneva or more likely Frankfurt, 1930 or ‘31, when he was chairman of the International Chamber of Commerce. I was a young newspaperman and I interviewed him and he was exceedingly nice to young people. Gracious and nice. Said the usual platitudes about peace. Then he began talking about something called data processing, and it made absolutely no sense! I took it back and told my editor and he said he’s a nut and threw the interview away.

As a salesman, he never sold, always got the other person to buy. He was fantastically good at establishing direct contact.

I was not at one of the biggest papers in Europe. Memory says there were three or four people in the press conference and because I spoke English, he had me stay behind and talked to me.

He was the greatest master of publicity. No one knew about IBM. But he had tremendous personal warmth.

Then there was the New York World’s Fair in the spring of 1939. I was the American correspondent for a group of English newspapers. I took my editors to the World’s Fair and the IBM Pavilion. By that time they had probably heard of IBM and the “THINK” jokes.

That pavilion was very impressive. My editor suggested I do a story. I spent an afternoon with Watson. IBM was a medium-size company then. So then I found out things like he didn’t fire anybody, and this was during the Depression. I asked him about having a bigger pavilion than AT&T or GM. How could he justify it? He named a figure of how much it cost and said if he had spent that on newspaper and radio advertising, he might have reached 1,000 people. How many saw the pavilion? 2.5 million!

I had some exposure earlier to IBM’s products. I worked for an investment bank as an assistant, and I had a desk in a big room with two inanimate objects. One was a cuckoo clock that I’d brought back from Austria. It annoyed everybody. The other was an enormous IBM banking machine – the one that almost destroyed the company. Nobody had any use for that volume of transactions in the depths of the Depression.

If the wage hour act (officially The Fair Labor Standards Act of 1938, which set a minimum wage and other rules, and forced employers to keep records of wages and hours worked) hadn’t come along, IBM would have disappeared. Watson didn’t know how close he’d come to collapse.

(Note: Once the act passed, the US government and every big business needed a way to track employees and wages, which in many cases meant stocking up on IBM tabulating machines. The surge in demand saved IBM during the Depression.)

After that, once or twice Watson called me up. In those years his relationship with the press was poor. The press was liberal and IBM was not unionized, which didn’t go down well. And he was an internationalist when The New Deal in 1938 and ‘39 was isolationist. I was one journalist he was willing to talk to.

I got to know Tom Watson Jr. in maybe 1947 or ‘48. I saw a lot of him – once every two months on specific assignments. I don’t think IBM realized before ‘49 that the (electronic) computer would be much of a business. Nobody did.

Watson (Sr.) was a publicity hound – a genius. When he changed the name to IBM in 1925 (from Computing-Tabulating-Recording Co.), the company was not international or much into business machines. I asked him about it. He said in 25 years that name would be familiar.

His innovations in retrospect are obvious. In 1914, he was one of the first to create a course for his salesmen. It was unimaginable then and not appreciated. If there had been a Harvard Business Review, it would’ve written about him as a nut, a crank.

Why he ran for president of the International Chamber of Commerce – it had no importance. Nobody wanted that job. But he used it. It gave him a title and a platform. And people remembered THINK – IBM became known for that before any product. His policies were eccentric and so they got publicity.

In those years, there was a class war climate. And he preached harmony of interest between the company and employees. That was subversive.

Amazingly well read and a curious man. Tom or Dick (Watson) told me he never traveled without two books.

His computer in basic concepts was ahead of the ENIAC. Nobody in 1946-’47 had a computer in the lobby and nobody looked at it. Then the old man put blinking lights and gears on it that did nothing (and set it up in the IBM headquarters lobby in New York). Then people lined up to see it. That was his genius – the image of a computer today.

Watson was quite convinced the (electronic) computer wasn’t for business. But he was a marketing man. He put salesmen in a channel and Univac did not. The computers IBM had were totally unsuitable for business. Tom Watson Jr. scrapped them and copied the Univac. The old man saw the business market. But he sent out strict orders not to encroach on punch cards.

IBM was saved by the antitrust suit. Junior’s book (Father, Son & Co.) slightly skews that – he says it allowed him to ease out Watson. But otherwise the old man’s insistence on saving the punch card would’ve killed IBM. It was his child.

I don’t think Watson would have been able to do what Junior did and write off IBM’s architecture.

Dick (Watson, Tom Watson Jr.’s younger brother) was the old man’s favorite, not Tom. Tom was a rebel. Dick was more pliable. I never had a high opinion of Dick. Tom Jr. was not a lovable man. He grew up in constant warfare with his father. Not a happy childhood.

Watson Jr. and Sr. realized the strengths of each other but couldn’t work with each other. They needed each other to fight with. Junior, if you met him, you’d never forget it. Dick…I don’t think he ever grew up.

Watson’s personnel policy came from a deep conviction that the company had to have respect for people. His demands of people were fiendish, but if you performed, you were a peer, respected. It was radical. There was no class war. That was Watson. He was old-fashioned.

I went through a factory in Endicott with him. Watson had respect for the men at the machines. He would ask their name and it was always “Mr. Smith.” He would ask to explain what he did and would say I learned something, thank you.

Watson was an outspoken New Dealer, so he was not a friend of businessmen. Businessmen to be a New Dealer was absolute heresy.

(About a book linking IBM machines to tracking prisoners in concentration camps:) I don’t think anyone can imagine those days. There’s little doubt American businesses in general tried to maintain their continental businesses until the outbreak of war.

The book does not realize that American companies in Germany were totally run and controlled by Germans. The main customers for IBM equipment in Europe were always governments. I doubt he would have known what the machines were used for. You might get sales reports every three months by mail. Telegrams were only for bad news. Telephones were hardly ever used.

Watson could never have run a big company. He ran IBM the way you’d run a small company – totally centralized, managed as a private fiefdom. He never spent 10 minutes thinking about organization and structure. He rolled up his sleeves and did it himself.

Office technology really begins with the Great Depression. Before that, it was pen and paper. The punch card was a tremendous innovation.

In 1929, 4% to 5% of the population had checks. Checks! Watson foresaw that we’d be a cashless society, so he designed bank machines. He never sold many. Too far ahead of his time.

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This is the second in a brief series. In February I published a set of comments from an interview with Olive Watson – Thomas Watson Sr.’s daughter-in-law and widow of Thomas Watson Jr.