WATSON, Thomas John, Jr.

(b. 8 January 1914 in Dayton, Ohio; d. 31 December 1993 in Greenwich, Connecticut), businessman whose foresight and decisiveness built International Business Machines (IBM) from a prosperous $700-million-per-year general business supplies and keypunch machine company into "Big Blue," a multibillion-dollar-per-year company that dominated the world market for computers.

Watson's father, Thomas John Watson, Sr., was the chief executive who built International Business Machines (IBM) into the dominant manufacturer of keypunch machines; his mother, Jeanette Mary Kittredge, was the daughter of an industrialist. Watson was the eldest of four children. Watson, Sr., always expected his son to follow him as president and chief executive officer (CEO) of IBM. Young Watson felt the pressure when he was very young and was intimidated by the thought of following in the footsteps of the father he revered. Even at age ten, he expressed doubts about his own abilities; he did poorly in school and often managed to get himself into trouble. He would eventually shed his childish irresponsibility to become a dynamic, brilliant leader.

Watson applied to enter Princeton University but was rejected for poor grades. A friend of the family got him admitted to Brown University, from which he graduated with a B.A. degree in 1937, after a college career more notable for parties than for studies. That same year Watson became IBM's sales representative to Wall Street and neighboring parts of Manhattan. In 1940 Watson joined the National Guard and was called up to the U.S. Army Air Corps in September of that year. He trained as a pilot and became a second lieutenant. On 15 December 1941 he married Olive Field Cawley; they had six children. Watson served in several areas of conflict during World War II, earning the United States Air Medal. He was one of the pilots chosen to pioneer the lend-lease ferry air route between Alaska and Russia and was made a lieutenant colonel in 1946.

Watson credited his military service with teaching him self-discipline. Even so, as he returned to IBM in January 1946, he was still very insecure about his ability to measure up to his father. Watson believed that his father never fully trusted him, even when he replaced him as IBM president in January 1952 and immediately began urging that the company enter the then very young electronic machines market.

During the Korean War, IBM developed the 701 Data Processing Machine (also known as the Defense Calculator) for the U.S. military, and in 1954 it offered a business version of the machine, the IBM 702, which pioneered the use of transistors instead of vacuum tubes for calculating. The senior Watson retired in May 1956, and Watson became CEO of IBM. Under his leadership, IBM undertook the SAGE (Semi-Automatic Ground Environment) project for the U.S. Air Force, which involved setting up radar stations across North America and linking them via computers; this was the beginning of real-time data processing. Although SAGE was not especially profitable, IBM was able to apply what it learned to SABRE (Semi-Automatic Business-Related Environment), which went online in 1964, serving airline companies by allowing them to build networks with travel agents that allowed the agents to confirm airline reservations almost instantly.

Watson considered himself a liberal Democrat and took some pleasure in annoying other business leaders by suggesting that corporations had social responsibilities. By 1960 he was concerned about the people his computers were putting out of work, but he thought that retraining laid-off workers was impractical and unrealistic for people in their forties and fifties who had worked at only one kind of job all their lives. This concern may have been one reason why he supported social welfare programs. He especially favored the ideas of John F. Kennedy, with whom he met often, even after Kennedy became president of the United States.

By 1961 there were slightly more than 6,000 computers in the United States; more than 4,000 of them were manufactured by IBM. Up until that time, computer manufacturers had built specific computer systems for specific clients. One of IBM's big selling points was the service that it provided for its machines and the software programs that were unique to its various clients. Watson thought there should be a better way to meet clients' needs; his company was beginning to be overwhelmed by the demands of meeting the differing requirements of various systems scattered across the country as well as the world. He settled on the idea behind System/360, the most revolutionary change in the designing and marketing of computers before the development of the Apple personal computer. The System/ 360 was to be standardized; it would come in the form of five sizes (eventually clients' needs increased the number to seven), would use hard disks for storing information, and would be internally compatible—Watson's key innovation. All peripherals, all data-storage units, all programs designed for one computer would work on all the other computers. This innovation spawned a vast industry of independent companies making peripherals and writing software that would be compatible with IBM computers.

The System/360 faced significant obstacles. One was that it took years to develop. The initial cost in development, job training, and factory building was more than $5 billion before any of the computers began bringing in money. Another obstacle was Watson's own deep depression after his friend John F. Kennedy was assassinated. He announced the development of the System/360 on 7 April 1964, before it was ready to go to market. That year he was suggested as a candidate for the vice presidential nomination on President Lyndon B. Johnson's Democratic ticket, but he declined. In 1965 IBM was one of the top ten manufacturing companies in the United States, but despite the company's success, Watson felt that his life was out of control. His effort to get System/360 into production was eating him up.

In 1967 Watson declared his support for Senator Robert Kennedy's potential bid to become president, expecting that that opportunity would come in 1972, after Johnson had served another term. When Kennedy announced that he was running for president in 1968, Watson was invited to run for his senatorial seat in New York, but by then he had lost whatever interest he had had in becoming a politician. When Kennedy, like his brother, was assassinated, Watson lost another good friend. He was asked by the Kennedy family to take Kennedy's place in the presidential race, but he declined.

During the 1960s IBM's revenues had risen by 30 percent per year, an achievement probably unequaled in U.S. business. In December 1968, Control Data, then developing what would be known as the Cray ultrafast computers, sued IBM for trust violations, contending that IBM was using its vast size to discourage companies from buying Crays from Control Data, a small company. At the time, companies were constantly suing IBM, and since Watson had decided that superfast computers like the Crays did not fit into IBM's view of building broadly compatible machines, the suit seemed just another nuisance.

Creating software for the System/360 had cost $500 million by 1966, making it more expensive than any other aspect of developing the system. By 1968, smaller companies with much smaller development teams were producing cheaper computer programs faster than IBM. IBM always had sold what Watson called "bundled" services: hardware, peripherals, software (or keypunch cards), and support services, such as repair services. With the System/360, computers were bundled with software as well as with all the services that IBM traditionally provided those who bought or leased its equipment. By 1969 IBM computers accounted for about 70 percent of all computers sold. On "Black Friday at IBM," the United States Justice Department, using Control Data's lawyers and research, filed an antitrust lawsuit against IBM, demanding that the $7.5 billion giant be broken up into seven different companies. In June 1969 IBM unbundled its products, selling each aspect of its computer products separately and allowing small specialty companies to compete.

IBM was being pressed hard by the Japanese manufacturers Fujitsu and NEC, and Watson feared that the ability of its individual divisions to compete against these giants would be lost if IBM was broken up. In any case, he foresaw IBM's market share shrinking as the market expanded. In this expectation Watson seems to have been correct; by 1980 IBM had vigorous competition from numerous U.S. companies. In 1972 IBM settled with Control Data out of court by giving Control Data IBM's computer services division. The Justice Department case lingered on until 1981, when it was abandoned.

Watson was inducted into the National Business Hall of Fame in 1976. He served as ambassador to the Soviet Union from 1979 to 1981. In its 31 August 1987 issue, Fortune magazine said, "If creating wealth for shareholders is the best measure of a businessman's success, Thomas J. Watson Jr. is the greatest capitalist who ever lived." He died of a stroke, and is buried at Sleepy Hollow Cemetery, in Sleepy Hollow, Westchester County, New York.

Watson's autobiography, Father, Son & Co.: My Life at IBM and Beyond (1990), is an outstanding account of his relationship with his father and how he and many others built the modern manufacturing giant IBM. Watson's A Business and Its Beliefs (1963) offers insight into his thinking when IBM was growing by as much as 30 percent in wealth per year. Robert Sobel, IBM: Colossus in Tradition (1980), discusses the changes in IBM made by Watson. Emerson W. Pugh, Memories That Shaped an Industry: Decisions Leading to IBM System/360 (1984), tells of the project initiated by Watson that reshaped the computer industry and laid the foundation for IBM PC compatibles. Obituaries are in the Los Angeles Times, New York Times, and Washington Post (all 1 Jan. 1994); the Chicago Tribune (2 Jan. 1994); and the (London) Times (3 Jan. 1994).

Kirk H. Beetz