IBM: The Rise and Fall and Reinvention of a Global Icon, by James W. Cortada

Book of the week: Christopher Phelps assesses a bold but flawed history of one of America’s great corporations

June 6, 2019
Technology research
Source: Getty
Cutting edge: IBM invests heavily in new technologies, such as Frances Ross’ research into silicon nanowires at the company’s Thomas J. Watson Research Center in New York

“IBM people are a little smug, a little slow, and slightly overweight,” wrote Robert X. Cringely in Accidental Empires: How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition and Still Can’t Get a Date, his gossipy 1992 history of the rise of the personal computer industry. “Most IBMers are hired straight out of school and have never worked for another company. They are folks who drive Buick Regals and take them to the car wash every Saturday morning, paying extra to get the hot wax.”

Somehow James W. Cortada did not find room to cite that particular characterisation in his new book IBM, an otherwise commodious history 617 pages in length (with 58 further pages of footnotes). The omission is forgivable, for Cortada was among the intended targets. Whether or not he drove a Buick burnished with hot wax, he was employed by IBM for 34 years, from 1974 to 2012, rising from sales into middle management.

The journalistic put-down must have stung – and not merely because of its stereotyping. “Apple is merely a company,” Accidental Empires observed, “while IBM is a country.” By 1992, however, IBM was in its third straight year of negative profits, its once-confident workforce shaken by what would prove to be only the first of many pitiless downsizings. “Smug” no longer applied.

How IBM was reduced to such a predicament after a long and storied existence as the paradigmatic American corporation – and how its profitability was restored – is at the heart of Cortada’s IBM, a story told with explicit object lessons. Although the book appears as part of the MIT Press “History of Computing” series, it touches but lightly on the history of technology and is written primarily with a readership of business historians and corporate professionals in mind. Cortada ascribes IBM’s brand success more to its historical managerial outlook and sales culture than its engineering units.

The International Business Machines Corporation began with the merger of three companies. The German immigrant Herman Hollerith and his punch-card machines are emphasised by historians, but Cortada seeks to rescue the other two businesses from neglect, making a special case for Charles Ranlett Flint, a swashbuckling Gilded Age captain of industry not averse to issuing watered stock. If Flint’s role in capitalisation was key, even in Cortada’s telling the tabulating machines – which calculated data from holes punched in cards, a method Hollerith honed in the federal censuses of 1880 and 1890 – lay at the centre of the fused firm’s business strategy. Hollerith leased his machines, which had considerable scientific, bureaucratic and commercial utility, and made money from the sale of cards. That would be IBM’s signature strategy too.

When the 40-year-old business executive Thomas J. Watson, Sr, arrived at the firm in 1914, he had to contend with Flint and Hollerith but consolidated a reign that would last until his death in 1956. Watson oversaw the company’s renaming as IBM in 1924 and its steady growth through two wars and depression. He fostered a corporate culture of boosterism and sales – based in branch offices with quotas met by listening to customers and helping them create value – that put the company on track to sell more than 4 billion punch cards annually by the mid-1930s.

Watson met the Great Depression with an increase of manufacturing capacity that nearly ran the company aground. Fortune intervened when Franklin Delano Roosevelt’s New Deal created vast new requirements for information. The Social Security Act resulted in a massive expansion for demand of IBM’s services from government agencies and a private sector required to report employees’ hours, wages and pay.

That ought to stimulate deeper reflections on the state in capitalist development, but here Cortada pivots to IBM’s important global expansion into 79 countries by 1939. Unfortunately, his boundless admiration for Watson gets the better of his historical judgement in regard to Nazi Germany, where Cortada stumbles into apologetics, qualifying Watson’s 1937 acceptance of a medal from the Nazi regime by stating that “Hitler’s most heinous activities had not yet started”. In actuality, Mein Kampf was already published, a totalitarian dictatorship installed, Dachau full of prisoners and Jews deprived of German citizenship. Edwin Black’s IBM and the Holocaust: The Strategic Alliance between Nazi Germany and America’s Most Powerful Corporation (2001) is by far the better guide to this deplorable episode.

Cortada regains his footing in describing IBM’s post-war years, when it moved beyond tabulators into electronics to become the world’s premier marketer of mainframe computers by the 1950s. With feats including the development of the first disk drive and a market share of up to 80 per cent for mainframes – giant room-filling computers that it installed and maintained on a lease basis – IBM was a monopoly at the centre of the emergent computing world. White shirts, dark suits and conservative ties defined IBM’s white-collar “organisation man”. The company’s promise of lifetime employment for productive employees and generous bonuses and benefits packages contributed to immense job satisfaction. Technical triumph was capped by IBM’s introduction of the powerful new System/360 under a successor son, Thomas Watson, Jr, in 1964.

The book’s narrow business history and emotional identification with IBM’s fabled days leads Cortada to miss opportunities for wider cultural and political analysis. “Do Not Fold, Bend, Mutilate, or Spindle”, the statement printed on IBM cards, was satirised by youthful rebels in the Berkeley Free Speech Movement of 1964, for whom it epitomised a bureaucratic society. Nor does Cortada specify the uses to which the Pentagon, CIA, NSA and the rest of the national-security state and corporate America put IBM machines – Robert McNamara’s famed body count in Vietnam being but one appalling result.

At the level of the firm, nevertheless, IBM is authoritative. From the early 1970s onward IBM entered a post-Watson age. The company helped create the personal computer revolution of the early 1980s, peaking at an annual $69 billion in revenue, $6 billion in profits and more than 400,000 employees in the 1985-90 period. Cortada explains well how IBM was flummoxed by a cautiousness bred of federal anti-trust prosecutions, the lethargy of 10 layers of management, inexpensive PC clones and an increasingly competitive tech sector. IBM’s leadership team did not understand PCs or use email; they thought the mainframe era would continue forever. The result was the terrifying freefall of 1990-92, IBM’s first crisis in 70 years.

If IBM contains oversights – never explaining, inexplicably, the basis of the company’s “Big Blue” moniker – the book becomes a commendable torrent of passion as Cortada describes IBM’s final transformation. The ode to a venerable company gives way to a long-time employee’s jeremiad against senior management for abandoning core principles. Cortada has no objection to IBM selling off its low-margin hardware lines to reinvent itself as a high-end consulting business and “the world’s largest software firm”, engaged in cloud computing. He recognises artificial intelligence as its future, “Watson” being the name of its impressive question-answering computer that has bested game-show champions and found use in medicine, banking and other sectors.

What Cortada holds in contempt is executive fixation on “shareholder value” – stock price – and financial manipulation of quarterly earnings while laying off hundreds of thousands of workers, menacing pensions and offshoring work. “Employees need to be honored, protected, nourished, paid fairly,” he writes, “and not be treated, to use an ugly, fashionable term, as ‘resources’.”

It is a noble managerial philosophy, well expressed – and one as archaic as an old room-sized mainframe.

Christopher Phelps is associate professor of American studies at the University of Nottingham.


IBM: The Rise and Fall and Reinvention of a Global Icon
By James W. Cortada
MIT Press, 752pp, £35.00
ISBN 9780262039444
Published 12 March 2019


The author

James W. Cortada, senior research fellow at the University of Minnesota’s Charles Babbage Institute, was born in Havana, Cuba, to American parents employed by the embassy. Because his father was a diplomat, he recalls, the family “moved from post to post; I spent the bulk of my childhood in Iraq and Egypt, one year in Rome and two in Washington, DC”.

After attending a small Methodist college in Virginia, Cortada went on to a master’s and then a PhD in European history at Florida State University – an experience that “fed and disciplined my love of and curiosity about all manner of historical inquiry…From my earliest days in college, I began to write history and continued to do so for over 50 years, much like a runner has a daily routine.”

His status as an insider in writing about IBM, in Cortada’s view, gave him the advantage of knowing “what was really important to employees, customers and leaders in the life and times of [the] company” and provided “access to information that might be denied to others, for example, information from staff, corporate archives and employee newsletters”. The danger, on the other hand, lay in “hold[ing] back criticism of a place that you worked for”, “assum[ing] that you already know the basics” and so “not conducting the same level of research that an outsider would be forced to do”.

To avoid such pitfalls, Cortada decided to gain greater distance by waiting several years to write his book. He also made a point of “studying what business historians want to know about corporations and applying their methods. As a result, my research depicts IBM less as a monolithic enterprise and more like a mid-sized city with communities (or divisions) and various advocates for differing strategies and products.”

Matthew Reisz

POSTSCRIPT:

Print headline: No longer holding all the cards

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