The Computing-Tabulating-Recording Company, the precursor to IBM, was founded on June 16, 1911. At its beginning, it was a merger of three manufacturing businesses, a product of the times orchestrated by the financier, Charles Flint. From these humble beginnings sprang the company that Thomas Watson Sr. would mold into a global force in technology, management and culture.
In 1911, biplanes dotted the air and Ford Model Ts appeared in the streets. Forward-thinking people wired their homes for electricity and installed their first telephones. In a Belfast shipyard, workers were finishing the hull of the biggest passenger ship ever, the Titanic. The booming US economy was creating a new hunger for information. There was a need to keep track, to understand and to inform.
Into that milieu stepped financier Charles Ranlett Flint. He worked out of an office on Broad Street, just off New York’s Wall Street, and invested in shipbuilding, munitions, rubber, starch and the production of caramel. By the early 1900s, Flint had become friends with Theodore Roosevelt, William McKinley, Orville Wright, Andrew Carnegie and other giants of politics and business.
Starting in 1900, Flint attempted to build a number of trusts by merging several small companies to create one dominant player.
One of these trusts was in time clocks—the kind factory workers would punch on the way in and out of work. The clocks helped employers keep track of hours worked and hourly wages. Flint took a number of companies that made recording time clocks, including the time recording business of Bundy Manufacturing in Binghamton, NY, rolled all the companies into one and called it International Time Recording Co. (ITR).
Around the same time, Flint rolled up several companies that made computing scales, which weighed items and added up the cost of whatever was placed on the scale. One of the largest of those companies was the Dayton Scale Company of Dayton, Ohio. Flint rolled all the companies into the Computing Scale Company of America, and made Dayton the trust’s headquarters.
Through the early 1900s, ITR grew modestly and Computing Scale struggled. Flint, searching for a way to help the companies, realized that both were, at their core, about collecting, quantifying and analyzing information—a mission that would actually be the mainstay of the company through the next century.
He was also at the time becoming interested in another information-based company, Herman Hollerith’s Tabulating Machine Co., based in Washington, DC. Hollerith had built the tabulating machine to count the 1890 US Census. It sorted and counted information recorded by punching holes in cards, and Hollerith had begun selling the machines to governments, railroad companies and retailers.
In 1911, Flint bought out Hollerith, and then merged the Tabulating Machine Co. with Computing Scale, ITR and what remained of the Bundy Manufacturing Co. The new information-based entity was named the Computing-Tabulating-Recording Company, or C-T-R. Headquarters moved to New York, and the company operated factories in Endicott, NY, Dayton, Ohio and a few other cities.
Very quickly, Hollerith’s tabulator emerged as the most promising technology in C-T-R’s catalog. Before the merger, the machines had been used to conduct population censuses in a variety of countries, including Austria, Canada, Denmark and Russia. Not only could the machines count faster, but they could understand information in new ways. In a census, for instance, a single card, about three inches by seven inches, could be punched with holes that form an information portrait of a person—city of residence, age, nationality, job and more. Hollerith’s contraptions were able to sort through millions of cards and count how many teachers lived in Chicago, Illinois, or count any other subset of the population. Society could learn things it never knew it could learn, and at speeds no one thought possible.
Businesses quickly realized that the portraits on those cards didn’t have to be citizens, but of a product a company sells, or a freight car on a rail line, or an insurance customer. Early adopters of the electric tabulation method included the freight office of the New York Central Railroad and the Eastman Kodak Company, which used a tabulating machine to keep track of customers and salesmen.
Despite the progress the tabulating machine line was making, as a whole C-T-R stalled in its first years after the merger. So, in 1914, Flint hired Thomas Watson Sr. to run the company. It turned out to be an inspired move.
Over the following decade, Watson forged the disparate pieces of C-T-R into a unified company with a strong culture. He focused resources on the tabulating machine business, foreseeing that information technology had an ever-expanding future and literally creating the information industry.
Watson also began expanding overseas—beyond the UK, Canada and Germany where its products were already sold—taking tiny C-T-R global. By 1924, he renamed C-T-R with the more expansive name of International Business Machines.
The computing scale and time clock businesses fell away. IBM grew to become the most significant player in every stage of the evolution of information technology over the 100 years after it was first formed.
In 1911, C-T-R had US$800,000 in net income. In 2010, IBM’s net income was US$14.8 billion. One IBM share in 1915, adjusted for all splits and stock dividends, would be equal to 11,880 shares today.
Through the years, the company has changed ideas about how corporations should operate, and contributed cultural touchstones such as the THINK signs, punched cards, the
It has been a rich and historic century.
Words from Charles Flint
“I had the leisure to turn to a field which has since interested me more than any other one—that is, the consolidation of corporations, the forming of what used to be known as ‘trusts.’ I have been called ‘the father of trusts,’ although sometimes I think I have been more nearly in the relation of godfather.”
“Fifty Years a Trader,” System: The Magazine of BusinessAugust, 1921
“In 1911 I made a departure from the practice of bringing about consolidations in single industries by effecting a consolidation of allied interests, that is by consolidating the manufacturers of similar but no identical products. The Computing-Tabulating-Recording Co. is of this class and although it is not the largest of the consolidations in which I have acted as organizer, it has been the most successful.”
Memories of an Active Life: Men, and Ships, and Sealing Wax1923
At the outset of [C-T-R], I pointed out to the Guaranty Trust Co. that the proposed ‘allied consolidation,’ instead of being dependent for earnings upon a single industry, would own three separate and distinct lines of business, so that in normal times the interest and sinking funds on its bonds could be earned by any one of these independent lines, while in abnormal times the consolidation would have three chances instead of one to meet its obligations and pay dividends. … The advantages to be realized by allied consolidations have been fully demonstrated by the Computing-Tabulating-Recording Company, under the leadership of its president, Thomas J. Watson.”
Memories of an Active Life: Men, and Ships, and Sealing Wax1923
In 1916, two years after Thomas Watson Sr. had been running CTR, Charles Flint wrote the person who had referred Watson to him, “Watson is living up to your predictions. If in your travels you run across another Watson, I hope you’ll remember me again.”
“The future of this business, gentlemen, and our future success, depends to a great extent on the progress we make along the lines of development, and along the lines of expansion into new fields and into lines we are not touching today... We must progress and we can’t do it any other way. We can not stand still on development work.”
Time, an IBM publication, vol.2, p31916
Selected team members who contributed to this Icon of Progress:
Thomas J. Watson Sr.
After a modest rural childhood near Ithaca, New York, Thomas J. Watson got his start in business in sales. He worked first for himself—as a traveling peddler—and later at the National Cash Register Company (NCR) in Dayton, Ohio, where he was a sales manager and ascended into the executive ranks over a decade-plus tenure. From NCR, Watson became general manager of the Computing-Tabulating-Recording Company (C-T-R), moving with his young family to New York City in May 1914 to lead C-T-R, whose name he would change to International Business Machines a decade later. As IBM’s founding chairman, Watson built a powerful tabulating machine business that became a business icon. Credited with defining IBM’s distinctive management style and creating its corporate culture, Watson also became the nation’s foremost celebrity businessman. His coining of the “THINK” motto solidified his lifelong success as a salesman and marketer. Watson brought explosive growth to IBM: At the time of his death in 1956, IBM boasted nearly US$900 million in annual revenues—one hundred times C-T-R’s annual revenues when Watson took charge of the company in 1914.
Charles Ranlett Flint was born in 1850 in Thomaston, Maine. The ambitious Flint showed early signs of promise when at age 21 he became partner at a New York ships’ supplies firm. The next year, Flint reached even further to a partnership at the international shipping firm W. R. Grace and Co. Over the course of his business life, Flint formed numerous relationships with diplomats, politicians and industrial visionaries, and became a trusted voice on international affairs. He served, at separate times, as consul at New York for Chile, Nicaragua and Costa Rica, and was appointed a delegate to the International American Conference (1889-90) in Washington where he proposed the creation of an international bank for the promotion of foreign trade. Flint formed some 21 industrial consolidations or mergers in his time, including C-T-R—the precursor to IBM—where he hired Thomas Watson Sr. Such a prolific business career earned him the moniker “The Father of Trusts.” He retired from business affairs in 1931.
Herman Hollerith was born in Buffalo, New York, on February 29, 1860. He dropped out of grade school at a young age but studied under a private tutor until he could apply to Columbia College. He was admitted at the age of 16 and graduated three years later as a mining engineer. Hollerith went on to join the US Census Office in 1879, and quickly saw the need for faster, more efficient tabulation of census data. In 1884, he filed his first patents, and began manufacturing his statistics tabulating machines in Baltimore in 1887. His machines counted the 1890 census and results were available two years earlier than the 1880 census. The entire process cost an estimated US$5 million less than manual tabulation. In 1911, Hollerith’s Tabulating Machine Company merged with two other companies under the auspices of Charles Flint to form the Computing-Tabulating-Recording Company, or C-T-R. Hollerith enjoyed smoking good cigars, drinking fine wine and raising Guernsey cows.