# The Greatest Capitalist Who Ever Lived by Ralph Watson McElvenny & Marc Wortman - Blinkist

What’s in it for me? Explore an intimate portrait of a business genius.

In 1964, IBM, one of the world’s most powerful tech companies, introduced a product that changed everything: a series of computers called the System 360. You don’t have to know much about computing to understand how revolutionary this was. Without the 360, the technologies underpinning everything from credit cards to the internet wouldn’t exist. 

IBM wasn’t initially destined to make the 360, however. 

Under the tenure of its charismatic and occasionally dictatorial leader, Thomas J. Watson Sr., IBM was entirely focused on electromechanical punched-card systems. (Think of the devices workers once used for “punching” in and out at work.) Watson had built a vast and profitable company on the basis of those systems. When computers came along after World War II, he saw no reason to fix what wasn’t broken. It’s likely that IBM would’ve been swept away by more plucky competitors if Watson Sr. had gotten his way. But he didn’t. In the mid-’50s, just as modern computing was really taking off, he was succeeded by his son, Thomas J. Watson Jr. 

Watson Jr. resented his father – and that resentment saved the company. Defying his old man, he spurred IBM down a new path. By the early ’60s, IBM was at the forefront of the burgeoning computing industry – and well-positioned to launch a revolutionary system like the 360. 

In this Blink, we’ll unravel the layers of a man who was instrumental in shaping the technological landscape not just of his own century, but ours, too.

The rebel

Thomas J. Watson Jr.’s early life was marked by turbulence and rebellion, setting the stage for his unexpected transformation into a corporate titan. 

Born in 1914, he was an angry child and adults called him “Terrible Tommy.” He rebelled against school from the get-go, flunking out of three boarding schools and barely graduating from a fourth. His rage was directed at his emotionally distant, cruel, and occasionally indulgent father. Thomas J. Watson Sr., his son later recalled, was “like a blanket” – he smothered everything and everyone. As much as he hated his father, though, Watson Jr. still craved his approval. 

Watson Jr. was a rebellious teen. He stole, set fires, and shot at animals in a swamp near the family home in New Jersey. But for all his resistance to his father, he was deeply entrenched in the world of the company Watson Sr. had built: IBM. Often, the boy was forced to don a jacket and tie and accompany his father to one of the company’s factories, where dutiful employees lined up to applaud the youngster who would one day succeed their boss. 

There was nothing the younger Watson dreaded more than that day. As he entered his late teens, he used the lavish allowance his father had given him – some $7,000 a month in today’s money – to pursue a life of thoughtless hedonism. He raced sports cars, sailed boats, chased pretty girls, and continued to underperform academically.

His father, though, pulled some strings, so Watson was admitted to Brown University despite his lousy grades. When he graduated with a business degree in 1937, the inevitable loomed: he’d have to join the family business. He did, but he found a new way to defy his father – or so he thought. In 1939, Watson was offered a job selling pavilion space at the 1939 New York World’s Fair. Watson happily accepted – here was his chance to travel the world and dodge the IBM bullet. After landing in Paris, however, Watson learned that his father had orchestrated the entire arrangement, including paying his salary. It was a brutal blow to his pride.

That blow had its intended effect: defeated and dejected, Watson rejoined IBM as a sales trainee. His father, who was used to getting his way, was satisfied. Neither could have predicted what happened next. Within a year, the younger Watson had climbed from vice president to executive vice president; by 1952, aged 38, he was president of IBM. 

He’d always hated the family business, but it turned out he was every bit as shrewd a businessman as his father.

The successor

In 1956, the younger Watson’s father died. Watson, already the president of IBM, also became its CEO. From now on, he’d be in charge of plotting the company’s course. 

There were two critical questions he needed to answer. One: What purpose did IBM serve? Two: What unique products could it offer? Under the leadership of his father, IBM had developed into a cult of personality reminiscent of twentieth-century dictatorships. The company’s offices were decorated with portraits and the sayings of its “dear leader,” and employees even sang songs praising their boss. The company’s product line, meanwhile, primarily centered on electromechanical punched-card systems – a product that spoke to what Watson Sr. had thought was necessary and useful.

These punched-card systems, a significant advancement in the early twentieth century, were integral to data processing. IBM produced all the necessary components: punching machines for data input, tabulating machines to read and organize the data, and sorting machines for efficient data arrangement. These systems were widely used across various sectors, from government census and statistical data processing to banking and industrial management, helping streamline tasks like inventory control and payroll.

By 1956, IBM had become a giant, profiting massively from these systems. However, the mid-twentieth century was a time of rapid technological advancement. Watson Sr., however, was dismissive of the burgeoning field of computing, convinced that electromechanical punched-card systems were the pinnacle of data management technology. This mindset placed IBM in what Harvard Business School professor Clayton Christensen calls the “innovator's dilemma” – a struggle to innovate due to commitment to current profitable products. IBM, profitable and successful with its current technology, faced the risk of stagnation by not embracing emerging computing technologies.

This historical juncture posed a significant challenge for Watson Jr. as he took the reins of IBM. The company was at a crossroads: it had to decide whether to continue with its successful yet potentially outdated technology or venture into the uncharted territory of modern computing. The path chosen by Thomas Watson Jr., as head of IBM, didn’t only have profound implications for the future of the company – it also had a lasting impact on global technology.

The transformer

Innovation wasn’t anywhere close to the top of IBM’s agenda under the tenure of Thomas Watson Sr. When breathless engineers told him about the possibilities of modern computer technology, he reportedly scoffed and said that no one would find more than five Americans willing to buy a computer. IBM, in short, was deeply resistant to the computer revolution. 

That might have proved fatal. Ironically, it was Watson Jr.’s antipathy toward his father that ended up saving IBM. Gaining self-confidence through his service in the Army Air Corps during World War II, Watson returned to IBM with a vision drastically different from his father’s. Once he became CEO, he began to implement that vision. Under his tenure, IBM pivoted to computing, challenging the culture of “yes men” his father had cultivated.

Watson’s leadership marked a new era for IBM. He hired hundreds of electrical engineers to design mainframe computers, despite the skepticism of many of IBM’s technical experts who doubted the practicality of computers, given their scarcity at the time. The SAGE project, a semi-automated missile-tracking and air defense system built at great expense for the US Air Force, played a crucial role in this transformation. Though it brought little profit and cost more than the Manhattan Project, it propelled IBM into advanced electronics and automated manufacturing, training thousands in the process.

Under Watson, IBM’s revenue soared, tripling from around $215 million in 1950 to some $735 million in 1956 – a growth rate that surpassed the best years of his father’s era. Watson wasn’t just a visionary capitalist, though – he was also an exceptional manager, showcasing skills in delegation and talent utilization that were all but unknown at IBM at that time. This shift was most evident in the company’s investment in research and development, which Watson significantly increased from three percent to nine percent.

Watson’s success also owed something to fortuitous circumstances. The US Justice Department’s antitrust actions inadvertently aided his vision by keeping AT&T, a potentially formidable competitor, out of computing. This convergence of skill, foresight, and external factors marked Watson’s time at the head of IBM as a period of unprecedented growth and innovation, firmly establishing IBM as a dominant force in the computing industry.

The revolutionary

The introduction of the IBM System 360 on April 7, 1964, stands as a defining moment in the history of computing. It was also undoubtedly the greatest triumph enjoyed by IBM – and its CEO. 

The 360, a series of fully intercompatible computers, forever changed the computing landscape and the way businesses utilized technology. The System 360 was as bold as it was revolutionary – getting it off the ground cost no less than $5 billion, a front-loaded investment unheard of in the tech industry at that time. 

What set the 360 apart was its groundbreaking design concept. Prior to this, computers were designed for specific, isolated tasks and lacked interoperability. Watson envisioned a radical departure from this norm, creating a family of computers that could communicate with each other seamlessly. This compatibility meant that software and equipment could be used across different models of the 360, enhancing flexibility and reducing costs. A significant technological advancement was the shift from older methods like vacuum tubes to solid-state technology in the 360. The result: computers that were faster, more reliable, and more energy-efficient, mirroring the early versions of components found in modern smartphones.

The adaptability of the 360 was another key to its success. Capable of handling tasks ranging from business accounting to scientific research, it demonstrated incredible versatility and became a commercial hit. However, the impact of the 360 extended beyond its technical prowess – it also fundamentally altered the business model of computer equipment sales and leasing, laying the groundwork for the modern computing industry. During the era of the 360, IBM transitioned from selling to leasing computers, making advanced technology accessible to a wider market, including smaller businesses, and thus democratizing computing. 

The standardization introduced with the 360 also spurred the development of third-party software, streamlining the process for developers and contributing to the growth of an independent software industry. Additionally, IBM started offering comprehensive services such as training, maintenance, and consulting, heralding a service-oriented approach that is now commonplace in the tech industry.

But the 360 wasn’t just a technological breakthrough – it was also a strategic revolution in the computing industry. It embodied Watson’s vision and risk-taking. Under his  leadership, IBM staked its claim to a central place in the history of modern computing.

The final chapter

In 1971, Thomas J. Watson Jr. stepped down from his leadership role at IBM following a heart attack, on the advice of his doctor. His departure from IBM, however, didn’t mark the end of his influential career. Watson later embarked on a journey of public service and adventure. In 1979, he was appointed by President Jimmy Carter as ambassador to the Soviet Union, a position he held until early 1981. This diplomatic role followed his earlier involvement in national defense policy as chairman of the General Advisory Committee under President Kennedy, where he advised on America’s nuclear defense strategy.

Watson’s life outside the realms of technology and diplomacy was equally dynamic. He was a passionate sailor and pilot, with a deep love for exploration and adventure. His dedication to sailing was evident in his ownership of seven sailboats, all named Palawan, with the last acquired in 1991. In one notable adventure, he sailed one of his Palawans up the northern coast of Greenland, farther than any non-military ship had previously ventured. This feat earned him the New York Yacht Club’s highest award. His exploratory spirit also led him to trace the route of Captain Cook across the Pacific.

In addition to sailing, Watson was an enthusiastic aviator. He flew various aircraft, including helicopters, jets, and stunt planes. In 1986, he achieved a unique milestone by becoming the first private citizen to receive permission from Soviet General Secretary Mikhail Gorbachev to fly across all the time zones of the Soviet Union.

Watson’s life, filled with leadership, service, and adventure, came to an end on December 31, 1993, in Greenwich, Connecticut. He was 79 years old at the time of his death, leaving behind a legacy marked by innovation in technology, contributions to international diplomacy, and a life rich with personal achievements and explorations.

Final summary

Thomas J. Watson Jr.’s life saw him transform from a troubled youth to the leader of IBM's revolutionary shift into the computing era. Watson’s life and achievements were shaped by several factors and traits: his complex relationship with his father, his daring risk-taking, and his love of exploration. If we look back over the early years of computing from our own age, Watson stands out as one of the pioneers who laid the foundations for today’s digital world.