The History of IBM: Part 1

a new technology. I feel like I've heard that somewhere before. Yeah, probably in a recent podcast, because we quoted that song not long ago. Yes, it buggles the mind. It does buggle the man. Uh. Today though, we're talking about, uh, something entirely well, not something entirely different, but something a little uh, I don't know. We are gonna we're concentrating.

We're concentrated today on a particular company. And this is going to be a multi part podcast because the come and he has such a long history that we can't sum it up in one episode. It's just it's too much information, um, and it would just mean that if we were to try and push it all into thirty minutes, you really wouldn't learn anything. Right. As a matter of fact, we had we had a request for this at one point, I believe, Yeah, I think so. We've had a few

people ask us about this. I don't have any specifics to point to, because we've received quite a few over the history of our podcast. So we are going to talk today about IBM. Yes, Big Blue International Business Machines. Yes, and it's it's got an incredibly long history. Let me just ask you, Chris, just curious just when when you hear the the letters IBM, what's the first thing you

think of? Um, Well, I probably think of the current computers, mainly because well, just to be honest, um, those of us in the editorial department at how stuff Works dot com, a lot of us still have IBM laptops, which are the machines that they gave us. And specifically, which is kind of funny because this actually comes after, uh, the company made an agreement with the Chinese computer manufacturer Lenovo,

so their IBM branded but they're actually Lenovo machines. But yeah, I mean, that's probably just because it's there every day. I think of that, but I also think of, um a number of things, main frames. I think of the IBM S electric typewriter that I can't wait to talk about that. Um So, yeah, I mean, for me, it's the first thing I think of, is, uh, the IBM two eighties six that my family had when I was

a kid. We started off with other computers, which I've talked about in the past, but the computer that my dad got that ended up being the workhorse was an IBM two eighties six. We did eventually upgrade to a three eight six and for eighty six further down the line, but that two eight six kind of was what I cut my teeth on once I got on the Apple two e No, no, no, no, you're not supposed to chew on them. Well, I realized that, But I was

a late bloomer anyway. Where the personal computer age is very late in IBM's history because the company is very, very old. Yeah, it sort of depends on whom you ask how old it is, because IBM actually sort of gives their their age tracks or age back a little differently than other people might write. UM. And I found that out. Actually checked out a book from the library called Building IBM, Shaping an Industry and its Technology by Emerson W. Pu Um, and he actually tracks uh, the

founding of IBM past where IBM does. He goes back to an inventor named Herman Hollowrath. Yes, yes, Herman Hollowrath. He created a tabulating machine, didn't he. Yes, he did. Um. He actually got his his first patent application in on in September four. That's not that when he started the company, but that's when he started working on tabulating machines. Now there are other people who were doing other related work too,

because IBM actually was founded by the combination of three companies. Yeah, technically kind of a fourth company. Uh. The three companies specifically were, UM, let's see, it was the the Tabulating Machine Company, which was incorporated in eighteen ninety six, So you've got that one. You've got the Computing Scale Company, which was incorporated in eighteen nine one, and the International

Time Recording Company organized in nineteen hundred. And then there was also the Bundy Manufacturing Company, which was incorporated in eighteen eighty nine. Now a lot of the Bundy UH properties had been incorporated into International Time Recording Company already, so you're already talking about companies have been undergoing mergers and acquisitions. Um. You had people like Julius E. Petrot who in five security patent for a device that he

called a computing scale. That was what created the foundation for the Computing Scale company. UH. You had Herman Hollerwrath who had the tabulation and punch card machines that he created. William L. Bundy, who was of course the founder of the Bundy Manufacturing Company, came up with a time recording device. He was actually a jeweler, and this guy came up with a time recording device that allowed employees to track their time based upon using special keys. That would put

a special key into this machine. Turned the key, it would stamp the time that they clocked in, and then they would turn the key. At the end of the day, it would stamp the time they clocked out, and it helped keep track of how many hours they worked. Then you also had Dr Alexander day d e Y and he created a similar time time keeping device, but it didn't use keys. Instead, you put the names of the employees on this machine and there was a mechanical pointer.

You had aimed the pointer at the employee's name. You put a punch card in, push a button and it would then stamp the employee's sheet which was inside the machine. UH. With the time that they clocked in and clocked out. So you had all these differ in companies. And remember this is this is the age where we're really starting to get into mechanical devices. So most of these devices

are mechanical in nature. There are actual physical gears and pistons things like that that are making stuff happen inside these machines. But it's not it's I'm sorry, no, go ahead, I was gonna say it's it's actually, in a way, not any of these guys who created IBM. No, it took someone from outside this group to really form it together.

Which the fun and the funny part is we've got all these inventors, but we're really talking about, or at least I am talking about a businessman, yes, who saw an opportunity to combine the companies and make some money by, you know, making a building a merger between them. And

his name was Charles R. Flint. Yes, So here we got a guy who looks at these companies, these individual companies that are all making various kinds of mechanical devices, and he says, hey, hang on a second, we could combine these because a lot of these are are creating devices specifically geared toward businesses. And if we were to combine these, we could combine the manufacturing power and the business power of these and and market it toward businesses.

We could create an enormous corporation. Now, I just have to convince the guys that this is a good idea. So he starts going to all these different companies and he submits merger proposals, and eventually the companies agreed to this, and they formed the Computing Tabulating Recording Corporation or CTR on June six, nineteen eleven. I gotta say, these guys have a flare for an innovative name. Yes, the Computing

Tabulating Recording Corporation. It was called computing because of the computer scale we were talking about, which was not a computer computer. It was a scale that could very accurately measure weights computing scale. Yes. And then the tabulating being the tabulating from Holly Erath, and the recording being the

time recording devices that we talked about earlier. Yes, pews Book actually said that the scale that they had come up with would give you the information up front, so you didn't really have to do as much work with it, so it would actually do the calculating for you will give you an idea of what was going on, which was, you know at the time, was was pretty innovative. Yes, so we've got this major corporation forming in nineteen eleven.

But here's a problem. Who heads up this new corporation. Now, Flint was pretty savvy, as was the board of directors for CTR. They knew that they could not necessarily just hire or promote someone from within one of those companies to be the head of the new corporation, because if they did, there's the danger that that person would favor

one division over all the others. So if you were to promote someone up from the tabulating machine company, for example, that person might concentrate on that division of the new mega company and ignore the others, and then your business venture fails. So they had to find someone from outside this this merger to head up the new company. I know who you're gonna say, but I I would also like to add before we go on to this person, um that apparently, from what I understand, not everyone was

thrilled with the way the merger was working out. Apparently hollerth Uh and Flint didn't necessarily get along all that well, as a matter of fact, apparently Hollowrath was you know, one of the rare business people where he was very egalitarian. Um. He when he sold you know, the interest in his company to Flint, he insisted that everyone get a fair share of the money and apparently was very well liked

within his own company before uh he did that. And apparently, um And I imagine that that would be something to to take into account when you are trying to make this decision on who you want to run the company, because you know, if you've got people who are already having you know, personality problems personality conflicts with the people at the top, then you're you're certainly going to be aware of that and and and try to avoid that

conflict because otherwise you could scuttle the company. But I think you're talking about the person you wanted to mention next with someone who was brought in as a general manager. Yes, yes, from from the National Cash Register Corporation and CR. Yeah. That person was Thomas J. Watson, Sr. And he was hired on May fourth, nineteen fourteen, And that is the

date that IBM uses as its founding. It considers Watson's arrival at at the company and remember it's not called IBM yet, it's still CTR, but it considers his arrival to be the birth of IBM. And part of that reason is because Watson really instilled in the company an entire array of marketing UM principles and philosophies that he he had developed over the years, and that became IBM sort of foundation for the way that they do business. Now, let's give a little background on Watson. Watson was a

bit of a character too. In fact, he had he was not exactly spotless in his history. UM Watson when he graduated college, originally he wanted to be a teacher, but reportedly that job lasted all of one day before he quit. He then concentrated on becoming a salesman, and in fact was a traveling salesman selling. As I recall pianos and organs to people in rural areas, it made me think of the music man. It was. Essentially Watson

was was Professor Harold Hill. He was actually selling stuff instead of trying trying to and then getting out well technically Hill was selling stuff too, He just was making promises that people could use it when he didn't intend to do it. He wanted to skip town as soon as the stuff came in. Spoiler alert for ayone who has not seen a musing that I almost got you to split water too. That was great. So Watson then went on to UH. He started he opened up a

butcher's shop. He ended up eventually selling the butcher's shop, but one thing he had to do was he had an NCR cash register in that butcher's shop that was not completely paid for, so he had to kind of act as a liaison between the new owner of the butcher shop and NCR to kind of settle these payments.

He started to bug the people at NCR for a job, and eventually they broke down and and apprenticed him to someone at NCR as a salesman, and over time Watson was able to make a name for himself as a salesman and later as a manager. He actually became known for running competitors out of business in certain markets. He would go into a market and find out ways to to be able to UH to beat any competitor who

that was also selling a mechanical cash register machine. So, for example, he would go into a market and undercut all the compere editors and sell cash registers at a loss just to bankrupt his uh, his competitors so that he could have a monopoly on the market. This eventually led to an antitrust lawsuit against him because he was monopolizing. Well, the first trial ended with a guilty verdict and a five thousand dollar fine and I think two years since

in jail something like that. Anyway, it was, it was it was unusual for a jail sentence to go along with this kind of a charge, but Watson ended up getting one. He appealed that and during the appeals process, the government decided he won the right to appeal. The government decided that it was not worth the time and money to pursue a second trial, so he the charges were dismissed. But yeah, so Watson was he was kind

of a cutthroat businessman as well. So during his days at NCR he did something that ended up being very important to ibm s philosophy. It was in a meeting in December in nineteen eleven. Do you know where I'm going with this? All right? It's a motto that IBM uses. Yeah, So there's Watson in this meeting with n c R and he says, this is a quote. The trouble with every one of us is that we don't think enough. We don't get paid for working with our feet, we

get paid for working with our heads. Thought has been the father of every advance since time began. I didn't think has cost the world millions of dollars. And then he wrote the word think in all capital letters in blue crayon on an easel Blue Think Big Things for IBM, as it turns out. Yeah, so it's kind of funny that IBM can trace one of its central mottos to another company because this was before Watson came over. So then Watson does come over to the company and begins

to lead it. He joined in nineteen fourteen, and the company really starts to take off. You know, You've got all these different divisions that are concentrating on specific elements of their business, and uh, they just start really cranking out some interesting products, all for businesses, by the way, right right, Well, let's put this, let's put it in perspective. So in nineteen according to IBM, when Thomas J. Watson Sr. Joined the company, it had one thousand, three hundred forty

six employees and nine million dollars in revenue. Um, the gross income from sales, service and rentals was about four million dollars. Uh. And as a matter of fact, one hundred years of CTR stock UH would set you back about three thousand dollars. Yes, so they would make four million dollars in a year. But out of that their earnings were around a million. Right, So so you make four million and after costs you you ranke in a million dollars. Um. Yeah, I said, Actually it said nine.

Well I'm looking at two different IBM documents. One is nine million in revenues and the other says, uh, four million from gross in come. Yeah, that's what I had, the four million engrossing had so um. You know, yeah, it sounds like a little today, keeping in mind that it's that's quite substantial. Yeah, nine fourteen. Come on, And if it sounds weird to say rentals, hollow if actually when he did his tabulating machine, would actually rent the

equipment out. Um, So he did not sell people machines. So at the time, you know this kind of equipment, uh, the sophisticated mechanical computer equipment. Actually, he was one of the first people to use electrical um tabulating devices. Yeah, we're getting into the electro mechanical era here. So yeah, but I mean you didn't you didn't buy that necessarily, you would rent that from someone. And we're actually you

might wonder what these tabulating devices were used for. Well, they were often I mean they were used to classify information in a way that could be sorted and categorized in various ways relatively quickly, you know, much more quickly than humans could. In fact, it was originally used for

the Census. He worked for hollow Reth worked for the Census in eighteen eight I believe, and he actually his boss was saying, it would be really nice we could come up with a machine to cut down on all this work, because this is a real pain in the neck. So we did. Yeah, and this this invention plays a much darker role in a few years, and we'll touch on that because it is an important element of IBM's history.

But I think that's why Pugh started with Hollywrith was because that is the most computer alike of all the things, of all the the original businesses that CTR was involved with. Yeah. So, so just a couple of highlights in the early years of Watson's uh um, what am I gonna call it? Watson being the president general manager of of ctr U. They have the company's implementation of electric synchronization for the

control and regulation of complete time and programming systems. Yep, and that's that's true, um, now that you pointed out, I mean, they introduced the first electric synchronized time clock system UM, which again is very computer like, just a component that's part of that. And I'd just like to add one sort of foreshadowing date. A couple of years before that, in nineteen seventeen, UH, CTR decided to enter Canada, UH and decided instead of using CTR they would use

a different name. They decided to call themselves International Business Machines. Yeah, so in nineteen seventeen and nineteen eighteen they registered that name in New York, but did not use it at that time. So uh yeah. And in nineteen twenty they introduced the lock Autograph Recorder, which was the first complete school time control system. They also launched the electric accounting machines,

so that's kind of a predecessor to the calculator. Ah. And they acquired a company called the ticket O Graph Company of Chicago in nineteen twenty one, and they also started buying up more patents IBM to this day has more than a thousand patents. They had more than a thousand in the seventies, but yes, far more than a thousand, so, and some of those were developed in house and some

of them they've purchased. So in those early years, we get up to February fourteenth, Valentine's Day, nineteen twenty four. Watson has an idea. Yes, he decides that this IBM name that they're using in Canada as a good name, and that it should it really reflects the business more than CTR does. UM. The business at this point is international. They have offices elsewhere besides the United States, and so they think, well, we're gonna rebrand ourselves. We're gonna be

called International Business Machines or IBM UM. And by now, so this is ten years after he's he's taken the reins. The the gross income for the company is that remember it was at four million before, it's at eleven million now with the net earnings of around two million. And there there's more than three thousand employees, so they've essentially doubled the size of the number of employees that that

that they hired. Yes, now, UM, going back to for a second, to holler his his tabu lighting machines used punched cards, which we've talked about in the past. Um. In nine they introduced the first electric key punch. Now to record information on these punch cards, you have to have something that pops out. The little chats um actually just punches a hole in the right spot. Right. Originally they did use a circular punch like you would see

in you know, a traditional hole punch. UM, but they were they were becoming more sophisticated, adding this functionality along as they went. UM and Uh. The punched card could now hold as much as eighty columns worth of information UM, which also helped out significantly with what they could do. UM. And then of course we're getting close to the Great Depression in ninety. Yeah, here's an interesting thing. So in nineteen thirty you get the Great Depression, but IBM still

does pretty well. Right, they're not they're not hurting as badly as other companies. In fact, at that point their gross income was nineteen million dollars and their net earnings seven million dollars with sixty three hundred employees. So IBM is actually employing people at the same time the other folks are finding themselves out of work. So IBM was actually doing quite well well. Of course, you know at that time people were laying people off because they couldn't

afford we're going out of business entirely. Um. Meanwhile, this would these machines would help people streamline their business efforts. They wouldn't have to hire as many humans to do the works well, and I mean they kept on developing other things. They developed a public address and signaling system for schools. They called it the schoolmaster's joke. That just sounds. That just sounds so I don't know, sinister anyway. So now we're two decades out from when Watson took control.

They remember they're grossing around nineteen million and earning around seven millions. That's a much more than the four million and one million from two decades before. And they're employing seven thousand, six hundred thirteen people. So yeah, the company, the company is really doing well and the development is really just gonna explode over the next few decades, like to the point where it's it's almost impossible to believe

how big it got. I had my first snicker moment U because it apparently they decided to divest themselves of the Scale division. So they sold it to Hobart, which if you if you're thinking back and going, I know, I know that name, it's because they're still in business and it's apparently from from want to understand, Mr Watson was a little concerned because, as it turns out, immediately that business took off after the after they got rid

of it. So well there you go at. They can't always do everything well all the time, right, well, you know, they made it a decision based on what they thought would happen, and in five IBM introduced the International Proof Machine, which synchronized twenty four adding machines together, and it was meant to process checks in banks as meant as a processing system behind the scenes, but eventually people found other uses for it and you could think of it as

a precursor to the computer. Um it could only do. It had a limited number of operations that could do and uh, it wasn't a true computer in the sense that we think of today, but it showed that by you know, IBM was thinking, how can we create more sophisticated devices without necessarily making bigger ones. In this case, it was linking lots of lots of different adding machines together. Now,

keeping think about what we're talking about here. As we're going on through this timeline, IBM is finding ways to make crunching numbers easier. They're they're finding new ways to to compress the number of items you could put in a punch card. They're finding new ways to link machines together to increase processing power with these machines. And no, we don't think of that in terms of again, the IBM laptops that we're using as we record the podcast

obviously have far more processing power than that. But gradually, over time they're innovating and coming up with new ideas. In thirty five they also came up with the first successful electric typewriter. Yep, yep. So now we'll get more into the electric typewriters. A little later in thirty seven they introduced a test scoring machine. Um, so this is kind of all you folks out there get to play those take those standardized tests. This is sort of the

grandfather to those machines, the Scantron type stuff. But this is this was a little earlier than that, but still same principle. They came out with the pencil marks sensing reproducer, which reproducer. Uh yeah, of course everyone's taking these tests on computers now. So in between thirty seven and forty there's a little event, big event. We have a little big event. Yeah. So world War two here's where we

got to get in some problematic stuff. There was an IBM subsidiary company called de Homag Deutsch hollerth Machine and Gazelle Shuft and that was the that was the full name. So yeah, just just as an aside um, Mr hollow Earth had been working on building the business internationally even before he sold tod CTR, so you know they he had businesses around the world already. Now they were small, but they were divisions of his company, and yes, this

is one of them. So yeah, this was kind of an IBM subsidiary that Hollerwath actually ended up selling of the company back to IBM because the company was in some financial problems. World War One bankrupted Germany, right, I mean Germany was in dire economic straits after World War One and this this company was affected by that. So part of in order to stay solvent, they sold ninety pc of the company back to IBM. So IBM owns this company. And here's where things get really dark and murky.

There's an author and researcher by the name of Edwin Black who wrote a full book about IBM and its role possibly connected to the Holocaust, and now Black alleges that IBM was not just um uh aware of what was happening, but somewhat complicit in what was happening. Ibm UH They they obviously do not agree with that assessment. And in fact, the more you know about Watson, I mean,

I don't know. I didn't know these people clearly, but the more I learned about Watson, the less I was convinced that he was the sort of person who would actively be complicit in this. But here's what happened. Dio magg made this tabulation uh products and Hitler was very much interested in getting to know exactly how many Jews were in Germany at the time, and so they were using this tabulating process to track people, to to classify

people as either being Jewish or not Jewish. And by classifying generations of people, they could actually track people back if they if they claim that they weren't Jewish, they you know, the Germans could look at the generation before the generation before them and see if there were any Jewish ancestors and if there were those, you know, the

people would be classified as being Jewish. This came into play both in the ghettoization of the Jewish communities where Jews were pushed into ghettos and then later during the actual Holocaust. So Dio mag was played a big part in in the third Reich's plan to to eliminate the Jews. And it's a tragic, horrible story. And Black in his book alleges that Watson himself was part of this, that he was taking advantage of the situation in order to

make a profit. Uh, there is some stuff that kind of points to Watson being uh at least at least a part plays a part in this, and that Hitler awarded Watson a medal. It was the Eagle with Star Metal. But I should point out that in n Watson returned

the medal. He had been torn by this because apparently, at least according to IBM, Watson at first thought that the medal was on behalf of his work to try and establish world peace, because Watson actually was concerned about creating a peaceful global environment, and that when he became convinced that that was not the case, he felt that it was necessary to return the medal, which in turn infuriated Hitler and reportedly Hitler then said that Watson would

never again be welcome in Germany. Uh once the United States and Germany entered World War two. Once once the war was declared between the two countries, Germany took control of De Homag and it was no longer under ibm s control at all. It was completely under German government control. So how involved was IBM. According to IBM, they were, you know, it was a subsidiary company. They did not have control over it. They had owned they owned um interest in it, but they were not the ones making

the decisions. So it's it's, like I said, a murky, complicated part of IBM's past, and it's if you read Edwin Black's book, it paints a much darker picture for IBM than what IBM says. I honestly don't know the truth. I cannot. I'm not going to pass judgment because I don't know. And also I should add that Watson has had really backed a lot of humanitarian efforts before and after World War Two, which again kind of suggests that

he was not taking this complicit role. Right. Um, what I just meant to say was that there are situations regarding many companies and individuals and it's unclear, uh, you know many people I've read about and which you know, how much they knew about what was truly going on, how whether or not they were being recruited to the cause, whether they were being uh and bridge to supply continue supplying when it was obvious that, um, there was a

genocide going on. And and IBM for its part, also began to work very closely with the United States military in producing various parts and pieces that were being used in military applications. So there's that as well well the the I know that the United States used IBM equipment

to work on codebreaking. Yep, so that's that's certainly were contributing to the Allied war effort, certainly, yes, yes, So moving beyond that that horrible story, UM, IBM really in the in the forties began to work on developing calculators that that became a big focus of IBM's business. They were still working on tabulating and time recording devices as well as various other kinds of adding machines and uh they uh they founded the Watson Science of Fit Computing

laboratory at Columbia University in New York. That that's true, that's true. UM, yeah, not too long before that, shortly before the war's in, IBM uh gave a large scale computer, the first of its kind to the called the Automatic Sequence Controlled Calculator to Harvard UM. So they're certainly an

interested in education at that point. So we're getting close to wrapping up this first episode of the IBM history and the reason for that is we're very quickly approaching the time when IBM introduces the first production computer for scientific calculations, which is the seven oh one, and that was introduced in nineteen fifty two. We'll we'll probably pick up I would say, probably at the seven oh one for our next podcast, and we'll we'll move up to uh.

I think we'll go from the seven oh one to just before the the personal computer era for IBM because, like we said, this company very large, has a very long and and storied history. UM. And you know this again, this was like the cliffs Notes version to the cliffs Notes version to IBM's history, because you can't cover everything they've done unless you were to do you can dedicate a full podcast just IBM like not not not an episode,

an entire podcast. Yes, yes, and I mean there are other important computing developments going on here, like um, uh, the very large project at the More School of Electrical Engineering at the University of Pennsylvania. Uh, you know in the late nineteen four mid late nineteen FOURI is called I don't know, maybe you've heard of it, Aniac, I think so. Wasn't that a muppet? Um? Yes, I have, But yeah, there are This is a period of advanced

advanced scientific development as far as computers are concerned. Um, the code breaking, the skills that computer programmers were using and trying to break codes, um, and trying to advance computing development, this is all accelerating an immense pace at this point. Yeah. We we've reached the level of mechanic electro mechanical computers already, and electronic computers are right around the bend. So let's let's conclude this episode. We will pick up in nineteen fifty two and we will move

on from there. And uh, you know, you guys, if you have if you would like us to cover specific companies that are were, you know, are or were instrumental in the technology fields, let us know. We've talked before about companies like Apple and Microsoft, and both of those will come up pretty soon in this podcast series. Um, and let's you know, if you if there's some other company, maybe Intel or A and D or uh, you know, I don't know, Infocom, anything you want to hear about,

let us know. We will. We will look into it and cover it. Perhaps not all of them will warrant, you know, multi episodes like IBM does, but we're happy to cover them, and we'll probably have to move off and do some thing else for a while, come back and do another company podcast. Yeah, yeah, no, we'll we'll definitely put some space between these IBM episodes and the next focus on a company, because you know, we don't want to just get ourselves stuck into that routine. So

guys just let us know. You can let's know on Twitter or Facebook are handled there is tech stuff hs W or shoot us an email. That address is tech stuff at how stuff works dot com and Chris and I will taught to you again really soon. For more on this and thousands of other topics, visit how stuff works dot com To learn more about the podcast. Clock on the podcast icon in the upper right corner of our homepage. The How Stuff Works iPhone app has arrived.

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