The trust that outgrew its name
On June 16, 1911, a Wall Street financier named Charles Ranlett Flint filed papers in New York State to merge four companies that had no obvious business being together. The first made time-recording clocks for factory floors. The second made butcher-shop scales. The third made more time clocks. The fourth — the one that would eventually swallow the rest — made Hollerith punch card tabulators for the United States Census. Flint named his creation the Computing-Tabulating-Recording Company, a name that told you everything about his priorities and nothing about what he had actually made.
Journalists called Flint the “Father of Trusts.” He had already assembled US Rubber and sold arms to both sides of the Russo-Japanese War. CTR was a more modest operation: 1,300 employees in Endicott, New York; Dayton, Ohio; and Toronto, leasing equipment to payroll departments and government agencies and charging per punch card consumed — a recurring-revenue model that predated the term by a century (IBM).
Herman Hollerith took $1.2 million from Flint for his Tabulating Machine Company (Wikipedia) and stayed on as a consulting engineer, watching from a distance as his invention was absorbed into something he hadn’t quite designed. He retired in 1921. The company would go on to become the largest technology corporation on earth; he never saw it.
The man who actually built that company arrived three years later. Thomas J. Watson came aboard as general manager on May 1, 1914 — an unusual hire, given that he had been fired from his previous job and was under federal indictment for violating the Sherman Antitrust Act (Wikipedia). His conviction dated to 1913 and was overturned on appeal in 1915. Flint apparently regarded an antitrust conviction as something between an inconvenience and a credential.
Watson had learned to sell at NCR under the legendarily demanding John Henry Patterson, and he brought everything from that education except the name: the sales conventions, the dress code, and the single-word motto he posted on office walls and notebooks and eventually on matchbooks. The word was THINK. Revenues doubled within four years.
On February 14, 1924, Watson formally renamed the company International Business Machines Corporation. “International Business Machines” had been in use for CTR’s Canadian subsidiary since 1917 — Watson had been quietly testing the name, the way you test a claim before you make it loudly. The new name was aspirational to the point of grandiosity. The company that made it official that Valentine’s Day leased punch card equipment to railroads and insurance companies. It did not yet make computers.
What Watson understood — what the CTR merger and the rename and the THINK signs all pointed at — was that information processing was a business, not a sideline. Hollerith’s punch cards had already proven that you could reduce a census to patterns on cardboard. Watson saw that every bank, every government agency, every insurer faced the same problem, and that the market for machines to manage it had no obvious ceiling. He named the company as though the ceiling had already been removed.
When Watson died in June 1956, IBM’s revenues were $897 million. He had named the company for what it would become, not for what it was.
Sources
- Computing-Tabulating-Recording Company — Wikipedia — founding date, the four companies merged, Charles Flint’s role, Hollerith’s sale and retirement.
- Thomas J. Watson — Wikipedia — Watson’s NCR background, antitrust conviction, hiring date, the THINK motto.
- The origins of IBM — IBM — CTR’s structure, leasing model, and the 1924 renaming.