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Thomas Watson

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2019-09-01

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2019-09-01

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1. “The only vision Watson communicated to CATR in those first few months was that the company was going to become a glorious institution. This is what I mean. He's starting He is laying the foundation of his cult right here. We're going to be a glorious institution. We're going to be great. This is actually like the positive aspect of a colt. Without the manipulation part, but telling people and convincing them and being optimistic, I think is really, really smart. Considering CTR's condition, that pronouncement was enough to convince a lot of CTR employees that the new boss was a nut. Many who had been with CTR saw our company declined, not one of greatness. So it's a big problem. You're taking over a company. Everybody thinks it sucks. Even if it does suck, you have to convince them that in the future it won't. The restraint showed Watson at his best. A charismatic, forceful leader who, because of circumstance, chose to apply patience and savvy. Watson's force of personality, though, would not stay in reserve for long.”

   2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “Because they feel the market's not going to accurately assess their true value and that they'd rather prove what their value is. So in here, Watson does a great deal. He's getting 5%. Think about that. I don't know how long this goes on, but it definitely happened several years into, because IBM comes this massive company during World War II. And he's getting 5% of the profits. So he makes a lot of money. Now, unfortunately, his net worth is never, I mean, it's still really good, but at that time once the shares get diluted, he owned like 1% to 2% of IBM. So he made a lot of money. Obviously, he's paying income tax on that money, but his net worth was never commensurate with the amount of money he made because he had such a small ownership. Okay, so I think this is a great idea. Watson didn't storm him in with a vision, meaning now he's running the company. He certainly did not proclaim that he saw tabulating machines as CTR's path to greatness.”

   2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “So they do a deal. He's going to bring him in as a partner. And then I left myself as never cap your upside. This is actually really smart. Makes Watson eventually. This agreement right here is going to make Watson, there's a list. Like it's an early like Forbes 400, except it's not a net worth. It's on actual income. And Watson becomes the highest paid CEO in America for several years. That helps him become super famous. So it says, Watson, we get 5% of CTR's profits. It gave Watson great financial upside. So I think that's just a rule in life. Never capture upside. I've never had a job or any kind of environment where I had a capped upside. I was lucky enough. My first job, I got at 15. I worked at a car wash. And a few months later, I got promoted to become a detailer. And when you're a detailer, you get paid hourly. You get paid tips. Plus, you get paid commission on not only the jobs you do, but if you”

   2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “So Flint is going to partner up with Watson, even though Watson has a jail sentence hanging over his head. I already told you this point, but it's worth repeating a few pages later. He considered starting a business but didn't have enough capital. The antitrust verdict guaranteed that Watson would find hard to borrow money or lure investors. So I left myself as listen, think about the point in Watson's life that was the beginning of IPM. No money, convicted criminal in a looming jail sentence.”

   2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “So, what does that mean? IBM was not called IBM. Watson names that later. It is called one of the worst company names in history. Computing. So he merged three or four companies together, including those Hollerth machines I mentioned earlier. And he calls the company computing, tabulating, recording company, or CTR for short. It didn't work. CTR started life blow to a debt. It achieved no economies of scale and no market advantages of a trust. Flint desperately needed someone to come in and save his experiment. That's when Watson walked through Flint's door.”

   2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “Worse, he still had a jail term hanging over his head. What company was going to hire a top executive who might soon go to prison? Watson started making trips to New York to see what jobs he could find. So think about that. Like it's hard enough starting a company. Imagine starting a company when you're 40. You don't have too much money. You could be potentially in jail for a year. And your wife is about to give birth to your first child. I mean, the amount of stress had to be extreme. So he winds up meeting this guy, Charles Flint. Charles Flint is going to be the co-founder. He's essentially the founder of what becomes IBM. Watson becomes co-founder after Charles starts the company first, right? I want to spend some time talking about Charles Flint because I haven't found another book on him. And Charles Flint has an unbelievable life story. And I can't believe I can't find a biography about him. Because if I did, I would do that immediately. So let me just tell you.”

   2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “So the appeal, they wind up winning on appeal. I forgot the exact reason why. And I didn't include it in the highlights of show, but just know that he's not going to go to jail. Actually, he doesn't, at this point what I'm about to read, he doesn't know he's not going to go to jail. So he gets, Patterson has, like I said before, he's like Scientologist vibes to me, this, like, at least in the documentary I'm referencing where David Miscavige that manipulates every round on Patterson is doing the same thing. And he doesn't like the attention that Watson was getting. And he winds up firing him, kicking him out of the company, which is kind of crazy. So let me just tell you about Watson's time. This is what it talks about how it destroyed me. He has to start over at 40. He says he had been at NCR for 17 years. This is the terrible situation he found himself in before founding IBM. So this is important. At the age of 40, Watson lost a job and felt the need to leave the city he had adopted at his home while his wife was about two months shy of delivering their first child.”

   2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “If Watson had never been brought to trial, he wouldn't have become the kind of leader who could build IBM. Another interesting personality trait about Watson is, so they're convicted criminals, then they take it to appeal. And while they're appealing it, they're offered a, if I'm not mistaken, I might have the timeframe wrong, but they're offered a plea agreement. Say, hey, just admit wrongdoing, and then, you know, you're not, I think they might have got probation. They weren't going to go to jail. Every single other person but Watson took that deal. He's like, nope, not taking it, not taking it, not taking it. Like, I'm not like, it was so important to him to not admit wrongdoing, even though he was definitely guilty. He was 100% guilty. But again, he had, you know, everybody talks about Steve Jobs reality structure field. Watson had that too. To an extreme. And unfortunately, he applied it to his family.”

   2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “So, not only is Patterson indicted, but Watson's one of the 30 people. And this destroyed him. It says, the shock of the reality of a jury proclaiming him guilty because they wind up losing a case, of being labeled a criminal had a profound and lasting impact. If there was a single moment when Tom Watson changed when he decided that a squeaky clean image and reputation were paramount in business and in life, this was that moment. He was portrayed as a villain, I don't ever think he recovered from that. That's actually the writer. I don't know if you call him a friend, but he definitely knew Watson. That was Peter Drucker, who you might know because I've referenced one of the best quotes upon entrepreneurship come from Peter Drucker. He says entrepreneurship is not an art or a science. It's a practice. That Watson didn't recover was to his benefit. The trial and verdict forced him to realize that there were also bigger things than his job and his advancement. It also gave him something to prove that he wasn't a self-centered crook.”

   2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “Okay, so now I'm going to skip several years ahead. Now, the reason I wanted to tell you about that part because the fact that he took his job so seriously, the fact that he was so successful at it led him to the opportunity to run that fake company. So we're going to fast forward to him running the fake company for a while. We're going to be 1912 when he actually gets indicted. Now this is important to understand because he has to go through the stress and the struggles to IBM would not have existed, at least not in the incarnation it was when Watson ran it without this. And I think it's extremely important to understand that there was like a fuel to him. And so let me just read some of these highlights to you. So there's a newspaper article on February 22nd, 1912. It says that lead headline, NCR men indicted by the federal grand jury, 30 officials and employees of the National Cash Register Company were indicted on charges of criminal violation of the Sherman antitrust law.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “So, as you can imagine, Watson is super motivated because he's not been having success. Every single thing he's doing is one failure after another. He has no money. He doesn't want to live life like that. So it says Watson like range and soaked up everything Range could tell him about selling. Nine months after joining NCR, Watson moved up to full sales agent in Buffalo. Four years later, excuse me, NCR assigned Watson to run its struggling Rochester, New York office. Watson only 27 turned the branch around and made it one of NCR's best.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “A man named CB Barron until Watson eventually figured out Barron was more of a huckster, so he's selling fake shares. Next, Watson opened a butcher shop. The shop ran out of cash and Watson had to sell it. I'm spending a lot of time here just so you understand, like he was not born with any skills, not really educated, didn't really have successful 40. That doesn't matter. It didn't stop him from being able to create and run a wonderful business. So I think, you know, I like to dispel this myth that if you don't figure things out, you're lucky. I'm not saying like wait to your holder to try to try to do it. If you know what you do and you have success when you're early. And I've talked to a lot of people listening to the podcast through email. And there's a lot of like, I'm super impressed by a lot of, I call them kids. I don't mean that in derogatory because when I was 19 or 20, I didn't certainly didn't feel like a kid. But, you know, as you get older, your definition of the youth, everybody looks...”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “Watson's superstitious. So this is actually an important experience in his life. So he'd sell sewing machines during the day that at the end of the day he'd end most of his days at a local saloon. One evening, Watson stopped in a bar and stayed until closing. When he came out, his horse and wagon and the showing machines on it had been stolen. Watson reported his loss to his boss and was promptly fired. Watson concluded that alcohol could never be mixed with business. So this is important because I don't know if he drinks for the rest of his life. In fact, He has such control over, remember what I referenced Patterson wanting control over not only the work that his employees do, but their entire lives, Watson would look down upon and basically preach the idea that you're not to drink. If you work at IBM, you are not to drink, even off hours. And it's because of this unfortunate experience that he had early on. Watson tried selling shares in a building and loan company.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “He winds up. Then he gets another, his first job as a salesman. So another thing to understand, Watson, is he's a co-founder of IBM. He essentially runs it because IBM is basically a one-person company, especially because the other co-founder dies. And I'll tell you a little bit more about him. But Watson thought of himself as a salesman. He thought salespeople were the most, like that's his first few jobs. That's why he had success. That's who he managed for most of his career. And so this is him getting his first sales jobs after the job at the general store. And he was selling sewing machines and musical instruments in the back of a wagon. I mean, that's insane. So it sent Watson to call on potential customers. This is Watson's first salesman job. The work frustrated him. He made little money. Watson quit and moved to Buffalo to try selling sewing machines. He had some success at here, but he has experience early on.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “In rural New York. Watson's father never knew success. He combined farming and lumbering but fell victim to bad luck and his lack of business savvy. The depression of 1873 to 1879 kept the family struggling all through Watson's youth. And this is a really important sentence here. This Watson didn't seem to have any outstanding talents. He found little value at school, so he winds up leaving school early. I don't even know. Maybe like the equivalent of like a high school education, maybe a little less than that. So he winds up looking for work and he gets a job keeping the books at a general store. This is in 1891.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “By gracious, I would like to find out how you know how to do that. So essentially, Ames has a better way to monitor the performance of the sales people that he's put in charge of managing. Ames walked Watson to the accounting department and showed him they're called Hollerith machines after the person that invented him, which tabulated information using holes punched in cards. This just opened my eyes, Watson. So Watson said. So he realized, oh, I thought I was doing a good job. And then I was exposed to somebody that's actually doing a way better job. So at this point, let me step back in the story. I want to tell you a little bit more about his early life because it is rather inspiring the fact that he grew up really poor, dies really wealthy, and didn't really start his own company until he was 40 years old. So he's born in 1874. Watson lived nowhere near anything that could be called a city. He lives in this family farm out.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “Revenue last year, but this is how he discovered this machine that in a few years from now he builds a company that would actually monopolize. So he meets with a friend of his that works at Eastman Kodak. Kodak, George Eastman, the founder of Kodak, I actually have a book on him. He'll eventually appear on a future founders episode. But watts this meeting with his friend named Ames. And he says, Ames had the same kind of jobs as Watson, a sales manager, but he just worked at Kodak. Ames told Watson that he had a new system that could monitor the performance of each salesman. So this is Watson talking. He says he had a chart on the wall. He said, here is Hambley, this guy, the sales guy in Kansas City. And he did so-and-so. And on such and such day, he was in St. Louis, and he went through this. And he was talking about sales numbers here. And my head began to swim around because I thought, in fact, to tell you the truth, I thought I was just about as good a sales manager as Ames. I said, Bill, that's his first name.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “though in hindsight this company was like a shirt like a fake company he took it really really seriously and he studied from not only from patterson and other people that came before him but other people that had similar jobs to him and so in studying them trying to do his job better he actually accidentally discovers the machine that IBM would come to monopolize because just like Patterson built a monopoly and a trust IBM early IBM was that they're they're they controlled like 90% of the accounting and tabulating market and this is an era before computers so they were electromechanical machines they were not computers that's not the like you think of the IBM you know maybe 30 40 years ago they got computers now they do all kinds of different stuff it's rather remarkable that the company still I just looked up they do like 80 billion”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “And the detective or the same person. So he's like Einhorn is Finkel, Finkel's Einhorn. When I'm reading about Patterson and Watson, I kept saying that over and over again. Patterson is Watson. Watson is Patterson. So I just read that paragraph to you about Patterson. Now I'm going to read the exact same paragraph, but read it with Watson. And it is still true. Watson ran IBM like a Napoleonic dictator. He was a tyrant. He wanted total control of IBM and of the lives of everyone who worked there. He fired men without reason and promoted them equally without reason. He was a master manipulator. Everything that was said that the author is saying about Patterson is definitely true about Watson. This was actually interesting because I learned a new word this week. Let me pull it up so I'm not going to be able to pronounce it. I was listening to a podcast about an author who wrote a”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “And the inner circle of Watson, once he gets to IBM, and then he develops the culture of her, you know, he ran the business from time he was 40 to almost 85. It's the same thing. It's the exact same thing. It's really kind of spooky. So this is a little bit more about Patterson's personality. He says, Patterson ran NCR like a Napoleonic dictator. He was a tyrant. He wanted total control of NCR and the lives of everyone who worked there. He fired men without reason and propped them equally without reason, promoted them equally without reason. He was a master of manipulation. So one of my favorite, this is going to date me, one of my favorite movies, funniest movies when I was a kid. I don't know. I was probably like 10 years old when it came out was Jim Carrey's Ace Ventura, a pet detective. And he has this funny scene where he's realizing the person he's trying to capture.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “So it says, if Patterson sermonized that it was right that NCR had an obligation to rid the business of interlopers at whatever cost, Watson would have seen no reason to argue. Watson had grown up poor and had failed in his early attempts at business. He wanted to escape his past. He looked up to Patterson like a religious figure.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

22. “City used cash register businesses were devastated. Okay, so then I want to tell you a little bit more about this Patterson. And the note I left myself is Patterson created a cult. And what I didn't know at this point in the book that becomes extremely obvious once the book is finished. Patterson created a cult. Watson did too. Early IBM.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

23. “Essentially, he patterned his life after. He took some of Patterson has some good ideas about running business and a lot of terrible ones. And Watson borrowed both the good ideas and unfortunately the terrible ones. So it says in the late 1890s, Patterson realized that NCR was creating its own competition. NCR was so good at making cash registers that the machines tended to last for years. Independent dealers started buying used cash registers from establishments that either went out of business or purchased newer models. The dealers then buff them up and sold them more often than not to someone who otherwise would have bought a new NCR machine. So this occurring to a dictator personality like Patterson was completely unacceptable to him. So it says for nearly five years, Watson ran the used operation and ran it well. It was an extraordinary success. He's young. I think he's like 20 like 27 at the time, right around there in city after...”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

24. “That's why he says his life starts at 40 and he's almost destroyed. And I'll tell you more about that in a minute. So it says he went undercover while it's called the Watson Secondhand Cash Register Company, a phony entity set up and funded by NCR. NCR wanted the secrecy so it could slip into the used business, meaning used cash register business, quietly and ruining it from within. Watson's rather a highly skilled operator though this fake company actually grew into a successful profit generating company and it was all a ruse. The profits were an unintended consequence. The business's real purpose was to destroy the competition. So what does that mean? Well in the late 1980s NCR is run by this guy named Patterson and Patterson is extremely important to the life story of Watson as well and I'm going to tell you more about him but he was basically like a cult leader and a dictator and somebody that Watson essentially like almost like an older brother father figure that Watson”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source

25. “Thomas Watson began his life at age 40. After Dayton, Ohio nearly ruined him. In Dayton, Watson experienced fantastic success and near destruction. All of it had to happen for IBM to exist at all, and for Watson to take his place among history's great business figures.”

    2019-09-01 · Founders · #87 Thomas Watson (IBM) · IDENTIFIED FROM THE TRANSCRIPT · source