NCR deployed armies of salespeople, held them all to strict personal standards (good grooming, no alcohol consumption whatsoever), and used this standardized approach to scale fast. Watson had a natural flair for sales and strategy, and had developed his sales technique at NCR. Flint, perhaps operating on the assumption that he'd sell out of the stock before the case was fully resolved, hired Watson anyway. 2 On the other hand, he'd been recently convicted of antitrust violations for some of his work at NCR, and faced jail time. Watson had a somewhat mixed reputation: he'd worked for National Cash Register, a company that was famous for rapid growth, technical sophistication, and an excellent sales organization. The company's most important client was the US Census, but one big contract every ten years did not indicate much business potential.Īs it turns out, the company made one other key acquisition: hiring Thomas J. The company had only a handful of customers railroads, for example, could save money and better track their business using punched cards. The last was a quirky niche product: founded by a German inventor, Herman Hollerith, it built mechanical devices that could tabulate information if it was encoded on punched cards. CTR was an odd mix, including an industrial scale manufacturer, a company that made timecards for hourly workers, and The Tabulating Machine Company. In 1911, he cobbled together a new firm called Computing-Tabulating-Recording Company. The existence of the Sherman Antitrust Act told investors that a monopolist could charge exploitative prices its lax enforcement told them that it wouldn't be shut down for this reason.)Ĭharles Flint was one of many stock promoters who merged together small companies and took them public. (Monopolies were technically illegal, but in practice weren't heavily prosecuted. In the early 1900s, the market was enamored by trusts, and promoters realized that merging a few semi-related companies together could create a combined entity that was a) big enough to issue stock, and b) could tell a plausible story that it would monopolize its industry. In 2021's SPAC-saturated financial universe (and in light of the last few weeks' SPAC drawdowns), it's interesting to note that IBM was born as an act of financial engineering. How did IBM get so dominant? How did "Nobody ever got fired for buying IBM," become a catchphrase among corporate IT buyers and investors? And what changed? Origins: Promoters and Punch-cards It is a parable of pure capitalism, never jam today and a case of jam tomorrow but as any of the Smiths will tell you, anyone who has ever sold IBM has regretted it. And the IBM is there, nursed and watered and fed, the Genii of the House, growing away in the early hours of the morning when everyone is asleep. In short, for three generations the Smiths have worked as hard as their friends who had no money at all, and they have lived just as if they had no money at all, even though the various branches of the Smith family all put together are very wealthy indeed. When he dies, the stock is split up between his heirs, who also hold and never sell, and who also end up as millionaires, as do their heirs. One reason for the company's marvelous performance is, of course, that it retains most of its earnings and pays low dividends. They don’t, and they make the same stipulation to their heirs. His $20,000 becomes millions of dollars, and he insists that his heirs never sell the stock. More interesting is an earlier section on investor psychology, which has a bit called "IBM as Religion: Don't Touch, Don't Touch." It's a story about someone who invests in IBM's predecessor, Computing-Tabulating-Recording Company, and holds the stock for his entire life. ![]() ![]() ![]() In "Adam Smith"'s wonderful book, The Money Game, the concept of a growth stock is illustrated with a five-year table of some high growth companies' earnings per share IBM is at the top of the list. ![]() In fact, IBM reported positive annual earnings growth every year from 1952 through 1979. In this time, they didn't report a loss, and they didn't even report a sequential decline in annual earnings. IBM "bet the company" on one product in the 1960s, with a total budget that exceeded twice the cost of the Manhattan Project. In the late 70s and early 80s, after several industry transitions, the entry of smaller and more agile competitors like DEC and Control Data as well as larger and more resourceful ones like GE and Exxon, IBM's market share was still 70%. By 1956, IBM's market share in computers was 85%. In 1953, UNIVAC was basically the only company selling computers commercially. Learning about IBM in the context of the early history of the computer industry has the same shock value as watching Star Wars: A New Hope for the first time: "That's no moon.
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