James Rand Jr.

Historical Interlude: The Birth of the Computer Part 3, the Commercialization of the Computer

In the 1940s, the electronic digital computer was a new, largely unproven machine developed in response to specific needs like the code-breaking requirements of Bletchley Park or the ballistics calculations of the Aberdeen Proving Grounds.  Once these early computers proved their worth, projects like the Manchester Mark 1, EDVAC, and EDSAC implemented a stored program concept that allowed digital computers to become useful for a wide variety of scientific and business tasks.  In the early 1950s, several for-profit corporations built on this work to introduce mass-produced computers and offered them to businesses, universities, and government organizations around the world.  As previously discussed, Ferranti in the United Kingdom introduced the first such computer by taking the Manchester Mark 1 design, increasing the speed and storage capacity of the machine, and releasing it as the Ferranti Mark 1 in February 1952.  This would be one of the few times that the United Kingdom led the way in computing over the next several decades, however, as demand remained muted among the country’s conservative businesses, allowing companies in the larger U.S. market to grow rapidly and achieve world dominance in computing.

Note: This is the third of four posts in a series of “historical interludes” summarizing the evolution of computer technology between 1830 and 1960.   The information in this post is largely drawn from Computer: A History of the Information Machine by Martin Campbell-Kelly and William Aspray, The Maverick and His Machine: Thomas Watson, Sr. and the Making of IBM by Kevin Maney, A History of Modern Computing by Paul Ceruzzi, Computers and Commerce: A Study of Technology and Management at Eckert-Mauchly Computer Company, Engineering Research Associates, and Remington Rand, 1946-1957 by Arthur Norberg, and IBM’s Early Computers by Charles Bashe, Lyle Johnson, John Palmer, and Emerson Pugh.

UNIVAC

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The UNIVAC I, the first commercially available computer in the United States

For a brief period from 1943 to 1946, the Moore School in Philadelphia was the center of the computer world as John Mauchly and J. Presper Eckert developed ENIAC and initiated the EDVAC project.  Unlike the more accommodating MIT and Stanford, however, which nurtured the Route 128 tech corridor and Silicon Valley respectively by encouraging professors and students to apply technologies developed in academia to the private sector, the Moore School believed commercial interests had no place in an academic institution and decided to quash them entirely.  In early 1946 the entire staff of the school was ordered to sign release forms giving up the rights to all patent royalties from inventions pioneered at the school.  This was intolerable to both Eckert and Mauchly, who formally resigned on March 31, 1946 to pursue commercial opportunities.

While still at the Moore School, Mauchly met with several organizations that might be interested in the new EDVAC computer.  One of these was the Census Bureau, which once again needed to migrate to new technologies as tabulating machines were no longer sufficient to count the U.S. population in a timely manner.  After leaving the school, Eckert and Mauchly attended a series of meetings with the Census Bureau and the National Bureau of Standards (NBS) between March and May devoted to the possibility of replacing tabulating machines with computers.  After further study, the NBS entered into an agreement with Eckert and Mauchly on September 25, 1946, for them to develop a computer for the Census Bureau in return for $300,000, which Eckert and Mauchly naively believed would cover a large portion of their R&D cost.

Census contract aside, Eckert and Mauchly experienced great difficulty attempting to fund the world’s first for-profit electronic computer company.  Efforts to raise capital commenced in the summer of 1946, but Philadelphia-area investors were focused on the older industries of steel and electric power that had driven the region for decades.  In New York, there was funding available for going electronic concerns, but the concept of venture capital did not yet exist and no investment houses were willing to take a chance on a startup.  The duo were finally forced to turn to friends and family, who provided enough capital in combination with the Census contract for Eckert and Mauchly to establish a partnership called the Electric Control Company in October 1946, which later incorporated as the Eckert-Mauchly Computer Corporation (EMCC) in December 1948.

As work began on the EDVAC II computer at the new Philadelphia offices of the Electric Control Company, the founders continued to seek new contracts to alleviate chronic undercapitalization.  In early 1947 Prudential, a forward-thinking company that had a reputation as an early adopter of new technology, agreed to pay the duo $20,000 to serve as consultants, but refused to commit to ordering a computer until it was completed.  Market research film A.C. Nielsen placed an order in spring 1948 and Prudential changed its mind and followed suit late in the year, but both deals were for $150,000 as Eckert and Mauchly continued to underestimate the cost of building their computers.  To keep the company solvent, the duo completed a $100,000 deal with Northrop Aircraft in October 1947 for a smaller scientific computer called the Binary Automatic Computer (BINAC) for use in developing a new unmanned bomber.  Meanwhile, with contracts coming in Eckert and Mauchly realized that they needed a new name for their computer to avoid confusion with the EDVAC project at the Moore School and settled on UNIVAC, which stood for Universal Automatic Computer.

EMCC appeared to finally turn a corner in August 1948 when it received a $500,000 investment from the American Totalisator Company.  The automatic totalisator was a specialized counting machine originally invented by New Zealander George Julius in the early twentieth century to tally election votes and divide them properly among the candidates.  When the government rejected the device, he adapted it for use at the race track, where it could run a pari-mutual betting system by totaling all bets and assigning odds to each horse.  American Totalisator came to dominate this market after one of its founders, Henry Strauss, invented and patented an electro-mechanical totalisator first used in 1933.  Strauss realized that electronic computing was the logical next step in the totalisator field, so he convinced the company board to invest $500,000 in EMCC in return for a 40% stake in the company.  With the funding from American Totalisator, EMCC completed BINAC and delivered it to Northrop in September 1949.  Although it never worked properly, BINAC was the first commercially sold computer in the world.  Work continued on UNIVAC as well, but disaster struck on October 25, 1949, when Henry Strauss died in a plane crash.  With EMCC’s chief backer at American Totalisator gone, the company withdrew its support and demanded that its loans be repaid.  Eckert and Mauchly therefore began looking for a buyer for their company.

On February 15, 1950, office equipment giant Remington Rand purchased EMCC for $100,000 while also paying off the $438,000 owed to American Totalisator.  James Rand, Jr., the president of the company, had become enamored with the scientific advances achieved during World War II and was in the midst of a post-war expansion plan centered on high technology and electronic products.  In 1946, Rand constructed a new high-tech R&D lab in Norwalk, Connecticut, to explore products as varied as microfilm readers, xerographic copiers, and industrial television systems.  In late 1947, he hired Leslie Groves, the general who oversaw the Manhattan Project, to run the operation.  EMCC therefore fit perfectly into Rand’s plans.  Though Eckert and Mauchly were required to give up their ownership stakes and take salaries as regular employees of Remington Rand, Groves allowed them to remain in Philadelphia and generally let them run their own affairs without interference.

With Remignton Rand sorting out its financial problems, EMCC was finally able to complete its computer.  First accepted by the U.S. Census Bureau on March 31, 1951, the UNIVAC I contained 5,200 vacuum tubes and could perform 1,905 operations a second at a clock speed of 2.25 MHz.  Like the EDVAC and EDSAC, the UNIVAC I used delay line memory as its primary method of storing information, but it also pioneered the use of magnetic tape storage as a secondary memory, which was capable of storing up to a million characters.  The Census Bureau resisted attempts by Remington Rand to renegotiate the purchase price of the computer and spent only the $300,000 previously agreed upon, while both A.C. Nielsen and Prudential ultimately cancelled their orders when Remington Rand threatened to tie up delivery through a lawsuit to avoid selling the computers for $150,00 dollars; future customers were forced to pay a million dollars or more for a complete UNIVAC I.

By 1954, nineteen UNIVAC computers had been purchased and installed at such diverse organizations as the Pentagon, U.S. Steel, and General Electric.  Most of these organizations took advantage of the computer’s large tape storage capacity to employ the computer for data processing rather than calculations, where it competed with the tabulating machines that had brought IBM to prominence.

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The UNIVAC 1101, Remington Rand’s first scientific computer

To serve the scientific community, Remington Rand turned to another early computer startup, Engineering Research Associates (ERA).  ERA grew out of the code-breaking activities of the United States Navy during World War II, which were carried out primarily through an organization called the Communications Supplementary Activity – Washington (CSAW).  Like Bletchley Park in the United Kingdom, CSAW constructed a number of sophisticated electronic devices to aid in codebreaking, and the Navy wanted to maintain this technological capability after the war.  Military budget cuts made this impractical, however, so to avoid losing the assembly of talent at CSAW, the Navy helped establish ERA in St. Paul, Minnesota, in January 1946 as a private corporation.  The company was led by John Parker, a former Navy lieutenant who had become intimately involved in the airline industry in the late 1930s and 1940s while working for the D.C. investment firm Auchincloss, Parker, and Redpath, and drew most of its important technical personnel from CSAW.

Unlike EMCC, which focused on building a machine for corporate data processing, ERA devoted its activities to intelligence analysis work for the United States Navy.  Like Eckert and Mauchly, the founders of ERA realized the greatest impediment to building a useful electronic computing device was the lack of suitable storage technology, so in its first two years of existence, the company concentrated on solving this problem, ultimately settling on magnetic drum memory, a technology invented by Austrian Gustav Tauchek in 1932 in which a large metal cylinder is coated with a ferromagnetic magnetic material.  As the drum is rotated, stationary write heads can generate an electrical pulse to change the magnetic orientation on any part of the surface of the drum, while a read head can detect the orientation and recognize it in binary as either a “1” or a “0,” therefore making it suitable for computer memory.  A series of specialized cryptoanalytic machines followed with names like Goldberg and Demon, but these machines tended to become obsolete quickly since they were targeted at specific codes and were not programmable to take on new tasks.  Meanwhile, as both ERA and the Navy learned more about developments at the Moore School, they decided a general purpose computer would be a better method of addressing the Navy’s needs than specialized equipment and therefore initiated Task 13 in 1947 to build a stored program computer called Atlas.  Completed in December 1950, the Atlas contained 2,700 vacuum tubes and a drum memory that could hold just over 16,000 24-bit words.  The computer was delivered to the National Security Agency (NSA) for code-breaking operations, and the agency was so pleased with the computer that it accepted a second unit in 1953.  In December 1951, a modified version was made available as the ERA 1101 — a play on the original project name as “1101” is “13” in binary — but ERA did not furnish any manuals, so no businesses purchased the machine.

The same month ERA announced the 1101, it was purchased by Remington Rand.  ERA president John Parker realized that fully entering the commercial world would require a significant influx of capital that the company would be unlikely to raise.  Furthermore, the close relationship between ERA and the Navy had piqued the interest of government auditors and threatened the company’s ability to secure future government contracts.  Therefore, Parker saw the Remington Rand purchase as essential to ERA’s continued survival.  Remington Rand, meanwhile, gained a foothold in a new segment of the computer market.  The company began marketing an improved version of ERA’s first computer as the UNIVAC 1103 in October 1953 and ultimately installed roughly twenty of them, mostly within the military-industrial complex.

In 1952, the American public was introduced to the UNIVAC in dramatic fashion when Mauchly developed a program to predict the results of the general election between Dwight Eisenhower and Adlai Stevenson based on the returns from the previous two elections.  The results were to be aired publicly on CBS, but UNIVAC predicted a massive landslide for Eisenhower in opposition to Gallup polls that indicated a close race.  CBS refused to deliver the results, opting instead to state that the computer predicted a close victory for Eisenhower.  When it became clear that Eisenhower would actually win in a landslide, the network owned up to its deception and aired the true results, which were within just a few electoral votes of the actual total.  Before long, the term “UNIVAC” became a generic word for all computers in the same way “Kleenex” has become synonymous with tissue paper and “Xerox” with photocopying.  For a time, it appeared that Remington Rand would be the clear winner in the new field of electronic computers, but only until IBM finally hit its stride.

IBM Enters the Computer Industry

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Tom Watson, Sr. sits at the console of an IBM 701, the company’s first commercial computer

There is a story, oft-repeated, about Tom Watson, Sr. that claims he saw no value in computers.  According to this story, the aging president of IBM scoffed that there would never be a market for more than five computers and neglected to bring IBM into the new field.  Only after the debut of the UNIVAC I did IBM realize its mistake and hastily enter the computer market.  While there are elements of truth to this version of events, there is no truth to the claim that IBM was completely ignoring the computer market in the late 1940s.  Indeed, the company developed several electronic calculators and had no fewer than three computer projects underway when the UNIVAC I hit the market.

As previously discussed, IBM’s involvement with computers began when the company joined with Howard Aiken to develop the Automatic Sequence Controlled Calculator (ASCC).  That machine was first unveiled publicly on August 6, 1944, and Tom Watson traveled to Cambridge, Massachusetts, to speak at the dedication.  At the Boston train station, Watson was irked that no one from Harvard was there to welcome him.  Irritation turned to rage when he perused the Boston Post and saw that Harvard had not only issued a press release about the ASCC without consulting him, but also gave sole credit to Howard Aiken for inventing the machine.  When an angry and humiliated Watson returned to IBM, he ordered James Bryce and Clair Lake to develop a new machine that would make Aiken’s ASCC look like a toy.  Watson wanted to show the world that IBM could build computers without help from anyone else and to get revenge on the men he felt wronged him.

With IBM seriously engaged in war work, Bryce and Lake felt they would be unable to achieve the breakthroughs in the lab necessary to best Aiken in a reasonable time frame, so instead argued for a simpler goal of creating the world’s first automatic calculator.  To that end, an electronics enthusiast in the company named Haley Dickinson was ordered to convert the company’s electro-mechanical Model 601 Multiplying Punch into a tube-based machine.  Unveiled in September 1946 as the IBM 603 Electronic Multiplier, the machine contained only 300 vacuum tubes and no storage, but it could multiply ten times faster than existing tabulating machines and soon became a sensation.  Embarrassed by the limitations of the machine, however, Watson halted production at 100 units and ordered his engineers to develop an improved model.  Ralph Palmer, an electronics expert that joined IBM in 1932 and was recently returned from a stint in the Navy, was asked to form a new laboratory in Poughkeepsie, New York, dedicated solely to electronics.  Palmer’s group delivered the IBM 604 Electronic Calculating Punch in 1948, which contained 1,400 tubes and could be programmed to solve simple equations.  Over the next ten years, the company leased 5,600 604’s to customers, and Watson came to realize that the future of IBM’s business lay in electronics.

Meanwhile, as World War II neared its conclusion, Watson’s mandate to best Aiken’s ASCC gained momentum.  The man responsible for this project was Wallace Eckert (no relation to the ENIAC co-inventor), who as an astronomy professor at Columbia in the 1920s and 1930s had been one of the main beneficiaries of Watson’s relationship with the university in those years.  After directing the Nautical Almanac of the United States Naval Observatory during much of World War II, Eckert accepted an invitation from Watson in March 1945 to head a new division within IBM specifically concerned with the computational needs of the scientific community called the Pure Science Department.

Eckert remained at headquarters in New York while Frank Hamilton, who had been a project leader on the ASCC, took charge of defining the Aiken-beating machine’s capabilities in Endicott.  In summer 1945, Eckert made new hire Rex Seeber his personal representative to the project.  A Harvard graduate, Seeber had worked with Aiken, but fell out with him when he refused to implement the stored program concept in his forthcoming update of the ASCC.  Seeber’s knowledge of computer theory and electronics perfectly complemented Hamilton’s electrical engineering skills and resulted in the completion of the Selective Sequence Electronic Calculator (SSEC) in 1947.  The SSEC was the first machine in the world to successfully implement the stored program concept, although it is often classified as a calculator rather than a stored program computer due to its limited memory and reliance on paper tape for program control.  The majority of the calculator remained electromechanical, but the arithmetic unit, adapted from the 603, operated at electronic speeds.  Built with 21,400 relays and 12,500 vacuum tubes and assembled at a cost of $950,000, the SSEC was a strange hybrid that exerted no influence over the future of computing, but it did accomplish IBM’s objectives by operating 250 times faster than the Harvard ASCC while also gaining significant publicity for IBM’s computing endeavors by operating while on display to the public on the ground floor of the company’s corporate headquarters from 1948 to 1952.

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Tom Watson, Jr., son and successor of Tom Watson, Sr.

The success of the IBM 603 and 604 showed Watson that IBM needed to embrace electronics, but he remained cautious regarding electronic computing.  Indeed, when given the chance to bring Eckert and Mauchly into the IBM fold in mid-1946 after they left the Moore School, Watson ultimately turned them down not because he saw no value in their work but because he did not want to meet the price they demanded to buy out their business.  When he learned that the duo’s computer company was garnering interest from the National Bureau of Standards and Prudential in 1947, he told his engineers they should explore a competing design, but he was thinking in terms of a machine tailored to the needs of specific clients rather than a general-purpose computing device.  By now Watson was in his seventies and set in his ways, and while there is no evidence that he ever uttered the famous line about world demand reaching only five computers, he could simply not envision a world in which electronic computers replaced tabulating machines entirely.  As a result, the push for computing within the company came instead from his son and heir apparent, Tom Watson, Jr.

Thomas J. Watson, Jr. was born in Dayton, Ohio, in 1914, the same year his father accepted the general manager position at C-T-R.  His relationship with his father was strained for most of his life, as the elder Watson was prone to both controlling behavior and ferocious bursts of temper.  While incredibly bright, Watson suffered from anxiety and crippling depression as a child and felt incapable of living up to his father’s standards or of succeeding him at IBM one day, which he sensed was his father’s wish.  As a result, he rebelled and performed poorly in school, only gaining admittance to Brown University as a favor to his father.  After graduating with a degree in business in 1937, he became a salesman at IBM, but grew to hate working there due to the special treatment he received as the CEO’s son and the cult of personality that had grown up around his father.  Desperate for a way out, he joined the Air National Guard shortly before the United States entered World War II and became aide-de-camp to First Air Force Commander Major General Follett Bradley in 1942.  He had no intention of ever returning to IBM.

Working for General Bradley, Watson finally realized his own potential.  He became the general’s most trusted subordinate and gained experience managing teams undertaking difficult tasks.  With the encouragement of Bradley, his inner charisma surfaced for the first time, as did a remarkable ability to focus on and explain complex problems.  Near the end of the war, Bradley asked Watson about his plans for the future and was shocked when Watson said he might become a commercial pilot and would certainly never rejoin IBM.  Bradley stated that he always assumed Watson would return to run the company.  In that moment, Watson realized he was avoiding the company because he feared he would fail, but that his war experiences had prepared him to succeed his father.  On the first business day of 1946, he returned to the fold.

Tom Jr. was not promoted to a leadership position right away.  Instead, Tom Sr. appointed him personal assistant to Charley Kirk, the executive vice president of the company and Tom Sr.’s most trusted subordinate.  Kirk generously took Tom Jr. under his wing, but he also appeared to be first in line to take over the company upon Tom Sr.’s retirement, which Tom Jr. resented.  A potential power struggle was avoided when Kirk suffered a massive heart attack and died in 1947.  Tom Sr. did not feel his son was quite ready to assume the executive vice president position, but Tom Jr. did assume many of Kirk’s responsibilities while an older loyal Watson supporter named George Phillips took on the executive VP role on a short-term basis.  In 1952, Tom Sr. finally named Tom Jr. president of IBM.

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The IBM 650, IBM’s most successful early computer

Tom Jr. first learned of the advances being made in computing in 1946 when he and Kirk traveled to the Moore School to see the ENIAC.  He became a staunch supporter of electronics and computing from that day forward.  While there was no formal division of responsibilities drawn up between father and son, it was understood from the late forties until Tom Jr. succeeded his father as IBM CEO in 1956 that Tom Jr. would be given free reign to develop IBM’s electronics and computing businesses, while Tom Sr. concentrated on the traditional tabulating machine business.  In this capacity, Tom Jr. played a significant role in overcoming bias within IBM’s engineering, sales, and future demands divisions towards new technologies and brought IBM fully into the computer age.

By 1950, IBM had two computer projects in progress.  The first had been started in 1948 when Tom Watson, Sr. ordered his engineers to adapt the SSEC into something cheaper that could be mass produced and sold to IBM’s business customers.  With James Bryce incapacitated — he would die the next year — the responsibility of shaping the new machine fell to Wallace Eckert, Frank Hamilton, and John McPherson, an IBM vice president that had been instrumental in constructing two powerful relay calculators for the Aberdeen Proving Grounds during World War II.  The trio decided to create a machine focused on scientific and engineering applications, both because this was their primary area of expertise and because with the dawn of the Cold War the United States government was funding over a dozen scientific computing projects to maintain the technological edge it had built during World War II.  There was a real fear that if IBM did not stay relevant in this area, one of these projects could birth a company capable of challenging IBM’s dominant position in business machines.

Hamilton acted as the chief engineer on the project and chose to increase the system’s memory capacity by incorporating magnetic drum storage, thus leading to the machine’s designation as the Magnetic Drum Calculator (MDC). While the MDC began life as a calculator essentially pairing an IBM 603 with a magnetic drum, the realization that drum memory was expansive enough that a paper tape reader could be discarded entirely and instructions could be read and modified directly from the drum itself caused the project to morph into a full-fledged computer.  By early 1950, engineering work had commenced on the MDC, but development soon stalled as it became the focus of fights between multiple engineering teams as well as the sales and future demands departments over its specifications, target audience, and potential commercial performance.

While work continued on the MDC in Endicott, several IBM engineers in the electronics laboratory in Poughkeepsie initiated their own experiments related to computer technology.  In 1948, an engineer named Philip Fox began studying alternate solutions to vacuum tube memory that would allow for a stored-program computer.  Learning of the Williams Tube in 1948, he decided to focus his attention on CRT memory.  Fox created a machine called the Test Assembly on which he worked to improve on the reliability of existing CRT memory solutions.  Meanwhile, in early 1949, a new employee named Nathaniel Rochester who was dismayed that IBM did not already have a stored-program computer in production began researching the capabilities of magnetic tape as a storage medium.  These disparate threads came together in October 1949 when a decision was made to focus on the development of a tape machine to challenge the UNIVAC, which appeared poised to grab a share of IBM’s data processing business.  By March 1950,  Rochester and Werner Buchholz had completed a technical outline of the Tape Processing Machine (TPM), which would incorporate both CRT and tape memory.  As with the MDC, however, sales and future demands’ inability to clearly define a market for the computer hindered its development.

A breakthrough in the stalemate between sales and engineering finally occurred with the outbreak of the Korean War.  As he had when the United States entered World War II, Tom Watson, Sr. placed the full capabilities of the company at the disposal of the United States government.  The United States Air Force quickly responded that it wanted help developing a new electro-mechanical bombsight for the B-47 Bomber, but Tom Watson, Jr., who already believed IBM was not embracing electronics fast enough, felt working on electro-mechanical projects to be a giant step backwards for the company.  Instead, he proposed developing an electronic computer suitable for scientific computation by government organizations and contractors.

Initially, IBM considered adapting the TPM for its new scientific computer project, but quickly abandoned the idea.  To save on cost, the engineering team of the TPM had decided to design the computer to process numbers serially rather than in parallel, which was sufficient for data processing, but made the machine too slow to meet the computational needs of the government.  Therefore, in September 1950 Ralph Palmer’s engineers drew up preliminary plans for a floating-point decimal computer hooked up to an array of tape readers and other auxiliary devices that would be capable of well over 10,000 operations a second and of storing 2000 thirteen-digit words in Williams Tube memory.  Watson Jr. approved this project in January 1950 under the moniker “Defense Calculator.”  With a tight deadline of Spring 1952 in place for the Defense Calculator so it would be operational in time to contribute to the war effort, Palmer realized the engineering team, led by Nathaniel Rochester and Jerrier Haddad, could not afford to start from scratch on the design of the new computer, so they decided to base the architecture on von Neumann’s IAS Machine.

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The IBM 702, IBM’s first computer targeted at businesses

On April 29, 1952, Tom Watson, Sr. announced the existence of the Defense Calculator to IBM’s shareholders at the company’s annual meeting.  In December, the first completed model was installed at IBM headquarters in the berth occupied until then by the SSEC.  On April 7, 1953, the company staged a public unveiling of the Defense Calculator under the name IBM 701 Electronic Data Processing Machine four days after the first production model had been delivered to the Los Alamos National Laboratory in New Mexico.  By April 1955, when production ceased, IBM had completed nineteen installations of the 701 — mostly at government organizations and defense contractors like Boeing and Lockheed — at a rental cost of $15,000 a month.

The success of the 701 finally broke the computing logjam at IBM.  The TPM, which had been on the back burner as the Defense Calculator project gained steam, was redesigned for faster operation and announced in September 1953 as the IBM 702, although the first model was not installed until July 1955.  Unlike the 701, which borrowed the binary numeral system from the IAS Machine, the 702 used the decimal system as befit its descent from the 603 and 604 electronic calculators.  It also shipped with a newly developed high speed printer capable of outputting 1,000 lines per minute.  IBM positioned the 702 as a business machine to compete with the UNIVAC I and ultimately installed fourteen of them.  Meanwhile, IBM also reinstated the MDC project — which had stalled almost completely — in November 1952, which saw release in 1954 as the IBM 650.  While the drum memory used in the 650 was slower than the Williams Tube memory of the 701 and 702, it was also more reliable and cheaper, allowing IBM to lease the 650 at the relatively low cost of $3,250 a month.  As a result, it became IBM’s first breakout success in the computer field, with nearly 2,000 installed by the time the last one rolled off the assembly line in 1962.

IBM’s 700 series computers enjoyed several distinct advantages over the UNIVAC I and UNIVAC 1103 computers marketed by Remington Rand.  Technologically, Williams Tube memory was both more reliable and significantly faster than the mercury delay line memory and drum memory used in the UNIVAC machines, while the magnetic tape system developed by IBM was also superior to the one used by Remington Rand.  Furthermore, IBM designed its computers to be modular, making them far easier to ship and install than the monolithic UNIVAC system.  Finally, IBM had built one of the finest sales and product servicing organizations in the world, making it difficult for Remington Rand to compete for customers.  While UNIVAC models held a small 30 to 24 install base edge over the 700 series computers as late as August 1955, IBM continued to improve the 700 line through newly emerging technologies and just a year later moved into the lead with 66 700 series installations versus 46 UNIVAC installations.  Meanwhile, installations of the 650 far eclipsed any comparable model, giving IBM control of the low end of the computer market as well.  The company would remain the number one computer maker in the world throughout the mainframe era.

Historical Interlude: The Birth of the Computer Part 1, the Mechanical Age

Before continuing the history of video gaming with the activities of the Tech Model Railroad Club and the creation of the first truly landmark computer game, Spacewar!, it is time to pause and present the first of what I referred to in my introductory post as “historical interludes.”  In order to understand why the video game finally began to spread in the 1960s, it is important to understand the evolution of computer technology and the spread of computing resources.  As we shall see, the giant mainframes of the 1940s and 1950s were neither particularly interactive nor particularly accessible outside of a small elite, which generally prevented the creation of programs that provided feedback quickly and seamlessly enough to create an engaging play experience while also generally discouraging projects not intended to aid serious research or corporate data processing.  By the time work on Spacewar! began in 1961, however, it was possible to occasionally divert computers away from more scholarly pursuits and design a program interesting enough to hold the attention of players for hours at a time.  The next four posts will describe how computing technology reached that point.

Note: Unlike my regular posts, historical interlude posts will focus more on summarizing events and less on critiquing sources or stating exactly where every last fact came from.  They are meant to provide context for developments in video game history, and the information within them will usually be drawn from a small number of secondary sources and not be researched as thoroughly as the video game history posts.  Much of the material in this post is drawn from Computer: A History of the Information Machine by Martin Campbell-Kelly and William Aspray, The Maverick and His Machine: Thomas Watson, Sr. and the Making of IBM by Kevin Maney, and The Innovaters: How a Group of Hackers, Geniuses, and Geeks Created the Digital Revolution by Walter Isaacson.

Defining the Computer

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Human computers working at the NACA High Speed Flight Station in 1949

Before electronics, before calculating machines, even before the Industrial Revolution there were computers, but the term did not mean the same thing it does today.  Before World War II and the emergence of the first electronic digital computers, a computer was a person who performed calculations, generally for a specialized purpose.  As we shall see, most of the early computers were created specifically to perform calculations, so as they grew to function with less need for human intervention, they naturally came to be called “computers” themselves after the profession they quickly replaced.

The computer profession originated after the development of the first mathematical tables in the 16th and 17th centuries such as the logarithmic tables designed to perform complex mathematical operations solely through addition and subtraction and the trigonometric tables designed to simplify the calculation of angles for fields like surveying and astronomy.  Computers were the people who would perform the calculations necessary to produce these tables.  The first permanent table-making project was established in 1766 by Nevil Maskelyne to produce navigational tables that were updated and published annually in the Nautical Almanac, which is still issued today.

Maskelyne relied on freelance computers to perform his calculations, but with the dawning of the Industrial Revolution, a French mathematician named Gaspard de Prony established what was essentially a computing factory in 1791 modeled after the division of labor principles espoused by Adam Smith in the Wealth of Nations to compile accurate logarithmic and trigonometric tables to aid in performing a new survey of the entirety of France as part of a project to reform the property tax system.  De Prony relied on a small number of skilled mathematicians to define the mathematical formulas and a group of middle managers to organize the tables, so his computers needed only a knowledge of basic addition and subtraction to do their work, reducing the computer to an unskilled laborer.  As the Industrial Revolution progressed, unskilled workers in most fields moved from using simple tools to mechanical factory machinery to do their work, so it comes as no surprise that one enterprising individual would attempt to bring a mechanical tool to computing as well.

Charles Babbage and the Analytical Engine

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Charles Babbage, creator of the first computer design

Charles Babbage was born in 1791 in London.  The son of a banker, Babbage was a generally indifferent student who bounced between several academies and private tutors, but did gain a love of mathematics at an early age and attained sufficient marks to enter Trinity College, Cambridge, in 1810.  While Cambridge was the leading mathematics institution in England, the country as a whole had fallen behind the Continent in sophistication, and Babbage soon came to realize he knew more about math than his instructors.  In an attempt to rectify this situation, Babbage and a group of friends established the Analytical Society to reform the study of mathematics at the university.

After leaving Cambridge in 1814 with a degree in mathematics from Peterhouse, Babbage settled in London, where he quickly gained a reputation as an eminent mathematical philosopher but had difficulty finding steady employment.  He also made several trips to France beginning in 1819, which is where he learned of De Prony’s computer factory.  In 1820, he joined with John Herschel to establish the Astronomical Society and took work supervising the creation of star tables.  Frustrated by the tedious nature of fact-checking the calculations of the computers and preparing the tables for printing, Babbage decided to create a machine that would automate the task.

The Difference Engine would consist of columns of wheels and gears each of which represented a single decimal place.  Once the initial values were set for each column — which would be determined by setting a polynomial equation in column one and then using a series of derivatives to establish the value of the other columns — the machine would use Newton’s method of divided differences (hence its name) to perform addition and subtraction functions automatically, complete the tables, and then send them to a printing device.  Babbage presented his proposed machine to the Royal Society in 1822 and won government funding the next year by arguing that a maritime industrial nation required the most accurate navigational tables possible and that the Difference Engine would be both cheaper to operate and more accurate than an army of human computers.

The initial grant of £1,500 quickly proved insufficient for the task of creating the machine, however, which was at the very cutting edge of machine tool technology and therefore extremely difficult to fashion components for.   The government continued to fund the project for over a decade, however, ultimately providing £17,000.  By 1833, Babbage was able to construct a miniature version of the Difference Engine that lacked sufficient capacity to actually create tables but did prove the feasibility of the project.  The next year, however, he unwittingly sabotaged himself by proposing an even more grand device to the government, the Analytical Engine, thus undermining the government’s faith in Babbage’s ability to complete the original project and causing it to withdraw funding and support.  A fully working Difference Engine to Babbage’s specification would not be built until the late 1980s, by which time it was a historical curiosity rather than a useful machine.  In the meantime, Babbage turned his attention to the Analytical Engine, the first theorized device with the capabilities of a modern computer.

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A portion of Charles Babbage’s Analytical Engine, which remained unfinished at his death

The Difference Engine was merely a calculating machine that performed addition and subtraction, but the proposed Analytical Engine was a different beast.  Equipped with an arithmetical unit called the “mill” that exhibited many of the features of a modern central-processing unit (CPU), the machine would be capable of performing all four basic arithmetic operations.  It would also possess a memory, able to store 1,000 numbers of up to 40 digits each.  Most importantly, it would be program controlled, able to perform a wide variety of tasks based on instructions inputted into the machine.  These programs would be entered using punched cards, a recording medium first developed in 1725 by Basile Bouchon and Jean-Baptiste Falcon to automate textile looms that was greatly improved and popularized by Joseph Marie Jacquard in 1801 for the loom that bears his name.  Results could be outputted to a printer or a curve plotter.  By employing separate memory and computing elements and establishing a method of program control, Babbage outlined the first machine to include all the basic hallmarks of the modern computer.

Babbage sketched out the design of his Analytical Engine between 1834 and 1846.  He then halted work on the project for a decade before returning to the concept in 1856 and continuing to tinker with it right up until his death in 1871.  Unlike with the Difference Engine, however, he was never successful in securing funding from a British Government that remained unconvinced of the device’s utility — as well as unimpressed by Babbage’s inability to complete the first project it had commissioned from him — and thus failed to build a complete working unit.  His project did attract attention in certain circles, however.  Luigi Manabrea, a personal friend and mathematician who later became Prime Minister of Italy, invited Babbage to give a presentation on his Analytical Engine at the University of Turin in 1842 and subsequently published a transcription of the lecture in French.  This account was translated into English over a nine month period in 1842-43 by another friend of Babbage, Ada Lovelace, the daughter of the celebrated poet Lord Byron.

Ada Lovelace has been a controversial figure in computer history circles.  Born in 1815, she never knew her celebrated father, whom her mother fled shortly after Ada’s birth.  She possessed what appears to have been a decent mathematical mind, but suffered from mental instability and delusions of grandeur that caused her to perceive greater abilities than she actually possessed.  She became a friend and student of noted mathematician Mary Somerville, who was also a friend of Babbage.  It was through this connection that she began attending Babbage’s regular Saturday evening salons in 1834 and came to know the man.  She tried unsuccessfully to convince him to tutor her, but they remained friends and he was happy to show off his machines to her.  Lovelace became a fervent champion of the Analytical Engine and attempted to convince Babbage to make her his partner and publicist for the machine.  It was in this context that she not only took on the translation of the Turin lecture in 1842, but at Babbage’s suggestion also decided to appended her own description of how the Analytical Engine differed from the earlier Difference Engine alongside some sample calculations using the machine.

In a section entitled “Notes by the Translator,” which ended up being longer than the translation itself, Lovelace articulated several important general principles of computing, including the recognition that a computer could be programmed and reprogrammed to take on a variety of different tasks and that it could be set to tasks beyond basic math through the use of symbolic logic.  She also outlined a basic structure for programming on the Analytical Engine, becoming the first person to articulate common program elements such as recursive loops and subroutines.  Finally, she included a sample program to calculate a set of Bernoulli numbers using the Analytical Engine.  This last feat has led some people to label Lovelace the first computer programmer, though in truth it appears Babbage created most of this program himself.  Conversely, some people dismiss her contributions entirely, arguing that she was being fed all of her ideas directly by Babbage and had little personal understanding of how his machine worked.  The truth is probably somewhere in the middle.  While calling her the first programmer is probably too much of a stretch, as Babbage had already devised several potential programs himself by that point and contributed significantly to Lovelace’s as well, she still deserves recognition for being the first person to articulate several important elements of computer program structure.  Sadly, she had no chance to make any further mark on computer history, succumbing to uterine cancer in 1852 at the age of thirty-six.

Towards the Modern Office

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An Office in the B-Logo Business Systems Department in 1907, showcasing some of the mechanical equipment revolutionizing clerical work in the period.

Ultimately, the Analytical Engine proved too ambitious, and the ideas articulated by Babbage would have to wait for the dawn of the electronics era to become practical.  In the meantime, however, the Industrial Revolution resulted in great advances in office automation that would birth some of the most important companies of the early computer age.  Unlike the human computer industry and the innovative ideas of Babbage, however, the majority of these advances came not from Europe, but from the United States.

Several explanations have been advanced to explain why the US became the leader in office automation.  Certainly, the country industrialized later than the European powers, meaning businessmen were not burdened with outmoded theories and traditions that hindered innovations in the Old World.  Furthermore, the country had a long history of interest in manufacturing efficiency, dating back as far as Eli Whitney and his concept of using interchangeable parts in firearms in 1801 (Whitney’s role in the creation of interchangeable parts is usually exaggerated, as he was not the first person to propose the method and was never actually able to implement it himself, but he was responsible for introducing the concept to the US Congress and therefore still deserves some credit for its subsequent adoption in the United States).  By the 1880s, this fascination with efficiency had evolved into the “scientific management” principles of Frederick Taylor that aimed to identify best practices through rational, empirical study and employ standardization and training to eliminate waste and inefficiency on the production line.  Before long, these ideals had penetrated the domain of the white-collar worker through the concept of “office rationalization,” in which managers introduced new technologies and systems to maximize productivity in that setting as well.

The first major advance in the drive for office automation was the invention of a practical typewriter.  While several inventors created typing machines in the early nineteenth century, none of these designs gained any traction in the marketplace because using them was slower than writing out a document by hand.  In 1867, however, a retired newspaper editor named Christopher Latham Sholes was inspired by an article in Scientific American describing a mechanical typing device to create one of his own.  By the next year Sholes, with the help of amateur mechanic Carlos Glidden and printer Samuel Soule, had created a prototype for a typing machine using a keyboard and type-basket design that finally allowed typing at a decent speed.  After Soule left the project, Sholes sent typewritten notes to several financiers in an attempt to raise capital to refine the device and prepare for mass production.  A Pennsylvania businessman named James Densmore answered the call and provided the funding necessary to make important improvements such as replacing a frame to hold the paper with a rotating drum and changing the layout of the keyboard to the familiar QWERTY orientation — still used on computer keyboards to this day — to cut down on jamming by spacing out commonly used letters in the typing basket.

After several failed attempts to mass produce the typewriter through smaller companies in the early 1870s, Densmore was able to attract the interest of Philio Remington of the small-arms manufacturer E. Remington & Sons, which had been branching out into other fields such as sewing machines and fire engines in the aftermath of the U.S. Civil War.  First introduced by Remington in 1874, the typewriter sold slowly at first, but as office rationalization took hold in the 1880s, businesses started flocking to the machine.  By 1890 Remington had a virtual monopoly on the new industry and was producing 20,000 machines a year.  In addition to establishing the typewriter in the office, Remington also pioneered the idea of providing after-market service for office products, opening branch offices in major cities where people could not only buy typewriters, but also bring them in for repairs.

With typed loose-leaf pages replacing the traditional “letter book” for office correspondence, companies soon found it necessary to adopt new methods for storing and retrieving documents.  This led to the development of vertical filing using hanging folders stored in upright cabinets, which was first publicly demonstrated by Melville Dewey at the Chicago World’s Fair in 1893.  While vertical filing proved superior to the boxes and drawers previously employed in the workplace, however, it proved woefully inefficient once companies evolved from tracking hundreds of records to tens of thousands.  This time the solution came from James Rand, Sr., a clerk from Tonawanda, New York, who patented a visible index system in which colored signal strips and tabs would allow specific file folders to be found quickly and easily.  Based on this invention, the clerk established the Rand Ledger Company in 1898.  His son, James Rand, Jr., joined the business in 1908 and then split off from his father in 1915 after a dispute over advertising spending to market his own record retrieval system based around index cards called the Kardex System.  As the elder Rand neared retirement a decade later, his wife orchestrated a reconciliation between him and his son, and their companies merged to form the Rand Kardex Company in 1925.  Two years later, Rand Kardex merged with the Remington Typewriter Company to form Remington Rand,  which became the largest business machine company in the world.

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A Burroughs “adder-lister,” one of the first commercially successful mechanical calculators

A second important invention of the late nineteenth century was the first practical calculator.  Mechanical adding machines had existed as far back as the 17th century when Blaise Pascal completed his Pascaline in 1645 and Gottfriend Liebnitz invented the first calculator capable of performing all four basic functions, the Stepped Reckoner, in 1692, but the underlying technology remained fragile and unreliable and therefore unsuited to regular use despite continued refinements over the next century.  In 1820, the calculator was commercialized for the first time by Thomas de Colmar, but production of his Arithmometer lasted only until 1822.  After making several changes, Thomas began offering his machine to the public again in 1851, but while the Arithmometer gained a reputation for both sturdiness and accuracy, production never exceeded a few dozen a year over the next three decades as the calculator remained too slow and impractical for use in a business setting.

The main speed bottleneck of the early adding machines was that they all required the setting of dials and levers to use, making them far more cumbersome for bookkeepers than just doing the sums by hand.  The man who first solved this problem was Dorr Felt, a Chicago machinist who replaced the dials with keys similar to those found on a typewriter.  Felt’s Comptometer, completed in 1885, arranged keys labelled 0 to 9 across ten columns that each corresponded to a single digit of a number, allowing figures to be entered rapidly with just one hand.  In 1887, Felt formed the Felt & Tarrant Manufacturing Company with a local manufacturer named Robert Tarrant to mass produce the Comptometer, and by 1900 they were selling over a thousand a year.

While Felt remained important in the calculator business throughout the early twentieth century, he was ultimately eclipsed by another inventor.  William S. Burroughs, the son of a St. Louis mechanic, was employed as a clerk at a bank but suffered from health problems brought on by spending hours hunched over columns adding figures.  Like Felt, he decided to create a mechanical adding machine using keys to improve this process, but he also added another key advance to his “adder-lister,” the ability to print the numbers as they were entered so there would be a permanent record of every financial transaction.  In 1886, Burroughs established the American Arithmometer Company to market his adding machine, which was specifically targeted at banks and clearing houses and was selling at a rate of several hundred a year by 1895.  Burroughs died in 1898, but the company lived on and relocated to Detroit in 1904 after it outgrew its premises in St. Louis, changing its name to the Burroughs Adding Machine Company in honor of its founder.  At the time of the move, Burroughs was selling 4,500 machines a year.  Just four years later, that number had risen to 13,000.

John H. Patterson

John H. Patterson, founder of the National Cash Register Company (NCR)

The adding machine was one of two important money management devices invented in this period, with the other being the mechanical cash register.  This device was invented in 1879 by James Ritty, a Dayton saloon owner who feared his staff was stealing from him, and constructed by his brother, John.  Inspired by a tool that counted the revolutions of the propeller on a steamship, “Ritty’s Incorruptible Cashier” required the operator to enter each transaction using a keypad, displayed each total entered for all to see, and printed the results on a roll of paper, allowing the owner to compare the cash taken in to the recorded amounts.  Ritty attempted to interest other business owners in his machine, but proved unsuccessful and ultimately sold the business to Jacob Eckert of Cincinnati in 1881.  Eckert added a cash drawer to the machine and established the National Manufacturing Company, but he was barely more successful than the Rittys.  Therefore, in 1884 he sold out to John Patterson, who established the National Cash Register Company (NCR).

John Henry Patterson was born on a farm outside Dayton, Ohio, and entered the coal trade after graduating from Dartmouth College.  While serving as the general manager of the Southern Coal and Iron Company, Patterson was tasked with running the company store and became one of Ritty’s earliest cash register customers.  After being outmaneuvered in the coal trade, Patterson sold his business interests and used the proceeds to buy NCR.  A natural salesman, Patterson created and/or popularized nearly every important modern sales practice while running NCR.  He established sales territories and quotas for his salesmen, paid them a generous commission, and rewarded those who met their quotas with an annual sales convention.  He also instituted formal sales training and produced sales literature that included sample scripts, creating the first known canned sales pitch.  Like Remington, he established a network of dealerships that provided after market services to build customer loyalty, but he also advertised through direct mailings, another unusual practice.  Understanding that NCR could only stay on top of the business by continuing to innovate, Patterson also established an “innovations department” in 1888, one of the earliest permanent corporate research & development organizations in the world.  In an era when factory work was mostly still done in crowded “sweatshops,” Patterson constructed a glass-walled factory that let in ample light set amid beautifully landscaped grounds.

While Patterson seemed to genuinely care for the welfare of his workers, however, he also had a strong desire to control every aspect of their lives.  He manipulated subordinates constantly, hired and fired individuals for unfathomable reasons, instituted a strict physical fitness regimen that all employees were expected to follow, and established rules of conduct for everything from tipping waiters to buying neckties.  For all his faults, however, his innovative sales techniques created a juggernaut.  By 1900, the company was selling 25,000 cash registers a year, and by 1910 annual sales had risen to 100,000.  By 1928, six years after Patterson’s death, NCR was the second largest office-machine supplier in the world with annual sales of $50 million, just behind Remington Rand at $60 million and comfortably ahead of number three Burroughs at $32 million.  All three companies were well ahead of the number four company, a small firm called International Business Machines, or IBM.

Computing, Tabulating, and Recording

IBM, which eventually rose to dominance in the office machine and data processing industries, cannot be traced back to a single origin, for it began as a holding company that brought together several firms specializing in measuring and processing information.  There were three key people responsible for shaping the company in its early years: Herman Hollerith, Charles Flint, and Tom Watson, Sr.

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Herman Hollerith, whose tabulating machine laid the groundwork for the company that became IBM

Born in Buffalo, New York, in 1860, Herman Hollerith pursued an education as a mining engineer, culminating in a Ph.D from Columbia University in 1890.  One of Hollerith’s professors at Columbia also served as an adviser to the Bureau of the Census in Washington, introducing Hollerith to the largest data processing organization in the United States.  At the time, the Census Bureau was in crisis as traditional methods of processing census forms failed to keep pace with a growing population.  The 1880 census, processed entirely by hand using tally sheets, took the bureau seven years to complete.  With the population of the country continuing to expand rapidly, the 1890 census appeared poised to take even longer.  To attack this problem, the new superintendent of the census, Robert Porter, held a competition to find a faster and more efficient way to count the U.S. population.

Three finalists demonstrated solutions for Porter in 1889.  Two of them created systems using colored ink or cards to allow data to be sorted more efficiently, but these were still manual systems.  Hollerith on the other hand, inspired by the ticket punches used by train conductors, developed a system in which the statistical information was recorded on punched cards that were quickly tallied by a tabulating machine of his own design.  Cards were placed in this machine one at a time and pressed with an apparatus containing 288 retractable pins.  Any pin that encountered a hole in the card would complete an electrical circuit and advance one of forty tallies.  Using Hollerith’s machines, the Census Bureau was able to complete its work in just two and a half years.

As the 1890 census began to wind down, Hollerith re-purposed his tabulating system for use by businesses and incorporated the Tabulating Machine Company in December 1896.  He remained focused on the census, however, until President McKinley’s assassination in 1901 resulted in the appointment of a new superintendent that chose to go with a different company for 1910.  In the meantime, Hollerith refined his system by implementing a three-machine setup consisting of a keypunch to put the holes in the cards, a tabulator to tally figures, and a sorting machine to place the cards in sequence.  By 1911, Hollerith had roughly one hundred customers and the business was continuing to expand, but his health was failing, leading him to entertain an offer to sell from an influential financier named Charles Flint.

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Charles Rantlett Flint, the man who forged IBM

Charles Rantlett Flint was a self-made man born into a family of shipbuilders that started his first business at 18 on the docks of his hometown of Thomaston, Maine.  From there, he secured a job with a trader named William Grace by offering to work for free.  In 1872, Grace made Flint a partner in his new W.R. Grace & Co. shipping and trading firm, which still exists today as a chemical and construction materials conglomerate.  During this period, Flint acted as a commission agent in South America dealing in both arms and raw materials.  He also became keenly interested in new technologies such as the automobile, light bulb, and airplane.

In 1892, Flint leveraged his international trading contacts to pull together a number of rubber exporters into a trust called U.S. Rubber.  This began a period of intense monopoly building by Flint across a number of industries.  By 1901, Flint’s growing roster of trusts included the International Time Recording Company (ITR) of Endicott, New York, based around the recently invented time clock that allowed employers to easily track the hours worked by their employees, and the Computing Scale Company of America of Dayton, Ohio, based around scales that would both weigh items by the pound and compute their total cost.  While ITR proved modestly successful, however, the Computing Scale Company ended an abject failure.  In an attempt to salvage his poorly performing concern, Flint decided to define a new larger market of information recording machines for businesses and merge ITR and Computing Scale under the umbrella of a single holding company.  Feeling Hollerith’s company fit well into this scheme, Flint purchased it as well in 1911 and folded the three companies into the new Computing-Tabulating-Recording Company (C-T-R).  The holding company approach did not work, however, as C-T-R was an unwieldy organization consisting of three subsidiaries spread across five cities with managers that ignored each other at best and actively plotted against each other at worst.  Furthermore, the company was saddled with a large debt and its component parts could not leverage their positions in a trust to create superior integration or economies of scale because their products and customers were too different.  By 1914, C-T-R was worth only $3 million and carried a debt of $6.5 million.  Flint’s experiment had clearly failed, so he brought in a new general manager to turn the company around.  That man was Thomas Watson, Sr.

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Thomas Watson, Sr., the man who built IBM into a corporate giant

By the time Flint hired Watson for C-T-R, he already had a reputation as a stellar salesman, but was also tainted by a court case brought over monopolistic practices.  Born on a farm in south central New York State, Watson tried his hand as both a bookkeeper and a salesman with various outfits, but had trouble holding down steady employment.  After his latest venture failed in 1896, a butcher’s shop in Buffalo, Watson trudged down to the local NCR office to transfer the installment payments on the store’s cash register to the new owner.  While there, he struck up a conversation with a salesman named John Range and kept pestering him periodically until Range finally offered him a job.  Within nine months, Watson went from sales apprentice to full sales agent as he finally seemed to find his calling.  Four years later, he was transferred to the struggling NCR branch in Rochester, New York, which he managed to turn around.  This brought him to the attention of John Patterson in Dayton, who tapped Watson for a special assignment.

By 1903, when Patterson summoned Watson, NCR was experiencing fierce competition from a growing second-hand cash register market.  NCR cash registers were both durable and long-lasting, so enterprising businessmen had begun buying up used cash registers from stores that were upgrading or going out of business and then undercutting NCR’s prices on new machines.  For the controlling monopolist Patterson, this was unacceptable.  His solution was to create his own used cash register business that would buy old machines for higher prices than other outlets and sell them cheaper, making up the lost profits through funding directly from NCR.  Once the competition had been driven out of business, prices could be raised and the business would start turning a profit.  Patterson tapped Watson to control this business.  For legal reasons, Patterson kept the connection between NCR and the new Watson business a secret.

Between 1903 and 1908, Watson slowly expanded his used cash register business across the country, creating an excellent new profit-center for NCR.  His reward was a posting back at headquarters in Dayton as an assistant sales manager, where he soon became Patterson’s protégé and absorbed his innovative sales techniques.  By 1910, Watson had been promoted to sales manager, where his personable and less-controlling management style created a welcome contrast to Patterson and encouraged flexibility and creativity among the 900-strong NCR sales force, helping to double the company’s 1909 sales within two years.

As quickly as Watson rose at NCR, however, he fell even faster.  In 1912 the Taft administration, amid a general crusade against corporate trusts, brought criminal charges against Patterson, Watson, and other high-ranking NCR executives for violations of the Sherman Anti-Trust Act.  At the end of a three-month trial, Watson was found guilty along with Patterson and all but one of their co-defendants on February 13, 1913 and now faced the prospect of jail time.  Worse, the ordeal appears to have soured the ever-changeable Patterson on the executives indicted with him, as they were all chased out of the company within a year.  Watson himself departed NCR in November 1913 after 17 years of service.  Some accounts state that Watson was fired, but it appears that the separation was more by mutual agreement.  Either way, it was a humbled and disgraced Watson that Charles Flint tapped to save C-T-R in early 1914.  Things began looking up the next year, however, when an appeal resulted in an order for a new trial.  All the defendants save Watson settled with the government, which decided pursuing Watson alone was not worth the effort.  Thus cleared of all wrongdoing, Watson was elevated to the presidency of C-T-R.

Watson saved and reinvented C-T-R through a combination of Patterson’s techniques and his own charisma and personality.  He reinvigorated the sales force through quotas, generous commissions, and conventions much like Patterson.  A lover of the finer things in life, he insisted that C-T-R staff always be impeccably dressed and polite, shaping the popular image of the blue-suited IBM sales person that would last for decades.  He changed the company culture by emphasizing the importance of every individual in the corporation and building a sense of company pride and loyalty.  Finally, he was fortunate to take over at a time when the outbreak of World War I and a booming U.S. economy led to increased demand for tabulating machines both from businesses and the U.S. government.  Between 1914 and 1917, revenues doubled from $4.2 million to $8.3 million, and by 1920 they had reached $14 million.

What really set IBM apart, however, was the R&D operation Watson established based on the model of NCR’s innovations department.  At the time Watson arrived, C-T-R remained the leading seller of tabulating machines, but the competition was rapidly gaining market share on the back of superior products.  Hollerith, who remained as a consultant to C-T-R after Flint bought his company, showed little interest in developing new products, causing the company’s technology to fall further and further behind.  The company’s only other senior technical employee, Eugene Ford, occasionally came up with improvements, but he could not actually put them into practice without the approval of Hollerith, which was rarely forthcoming.  Watson moved Ford into a New York loft and ordered him to begin hiring additional engineers to develop new products.

Ford’s first hire, Clair Lake, developed the company’s first printing tabulator in the early 1920s, which gave the company a machine that could rival the competition in both technology and user friendliness.  Another early hire, Fred Carroll from NCR, developed the Carroll Press that allowed C-T-R to cheaply mass produce the punched cards used in the tabulating machines and therefore enjoy a huge profit margin on the product.  In the late 1920s, Lake created a new patentable punched-card design that would only work in IBM machines, which locked-in customers and made them unlikely to switch to a competing company and have to redo millions of cards.  Perhaps the most important hire was James Bryce, who joined the company in 1917, rose to chief engineer in 1922, and ended up with over four hundred patents to his name.

After a small hiccup in 1921-22 as the U.S. endured a small recession, C-T-R, which Watson renamed International Business Machines (IBM) in 1924, experienced rapid growth for the rest of the decade, reaching $20 million in revenue by 1928.  While this placed IBM behind Remington Rand, NCR, and Burroughs, the talented R&D group and highly effective sales force built by Watson left the company perfectly poised to rise to a dominant position in the 1930s and subsequently conquer the new computer market of the 1950s.