Authors: James Essinger
Census agreed that these were remarkable. As one admiring journalist wrote at the time: ‘The apparatus works as unerringly as the mills of the Gods, but beats them hollow as to speed.’
Unfortunately for Hollerith, the very effectiveness of his machines eventually made them temporarily redundant, for by
1893
there was little left to do on the Census. The rented equipment was returned, leaving Hollerith with a warehouse full of dormant tabulation machines.
174
The first Jacquard looms that wove information
With no prospect of the US Government using the machines again until the Census of
1900
—an assignment for which, in any case, he would have to submit a tender—Hollerith decided to seek new government markets abroad. This decision was an example of his short-sightedness as a businessman; he would have done better to have marketed his machines for commercial use back home. But Hollerith was overly focused on the role the machines could play in handling a census. Like Babbage, he could on occasion be limited in his horizons.
His short-sightedness in this respect was particularly surprising for quite apart from anything else, the decision to seek new markets abroad was an uncomfortable one for Hollerith personally. He hated travelling and had little or no interest in seeing foreign countries. Many of his letters home from abroad are written during times of great political excitement in the countries he visited. Another man might have relished this turmoil, even tried to take part in it as Jacquard had done. But Hollerith was an engineer, not an explorer. His letters simply reveal a world-weary and homesick inventor who can’t wait to get home.
Foreign contracts also took longer to come to fruition than Hollerith had hoped. Much of his travel in the
1890
s was done on a shoestring. At one point he received a cable from his wife telling him she did not have a cent in the house; he managed to wire her $
20
to keep her going until he returned. But eventually he succeeded in persuading several foreign governments to rent his machines. The resulting contracts gave him financial security for the first time in his life.
Perhaps Hollerith’s most notable success was convincing the Tsarist Russian Government to use his machines for Russia’s
1896
Census. What would nowadays be described as the ‘customer benefit’ of the machines was too compelling to be ignored, even by the decadent and anachronistic Romanov Government. The Russians were as interested in benefiting from the cost savings and comprehensive analysis facilities offered by Hollerith’s 175
Jacquard’s Web
machines as the Americans had been. Not for the first time, technology had shown itself to be a fundamentally neutral kind of tool that readily crossed national borders because it met needs that were relevant to people everywhere.
On
3
December
1896
, Hollerith organized his commercial ventures into a corporation he called the Tabulating Machine Company. Despite the success with foreign governments that he was now winning, he still refrained from developing his business in the private commercial sector. This appears to have been partly the result of his lifelong sense of being a researcher and inventor rather than a businessman, and also because his eyes were by now on the big prize of the
1900
United States Census.
After a nerve-racking tender—Hollerith had to compete against other inventors who had developed different types of tabulation machines—he did in fact win this extremely important contract. The Census sustained the Tabulation Machine Company for another three years, but when the work wound down, Hollerith was back where he had been ten years earlier.
It was only at this point that Hollerith, again faced with financial pressures and forced to confront the reality that his competitors were themselves targeting the commercial sector with great energy, launched a major initiative himself to win commercial customers in the United States. In doing so, Hollerith learned a lesson that all vendors of data processing devices and computers have learned at some point: that the biggest market for information processing systems is usually not the government sector, still less scientific or mathematical laboratories, but the offices of commercial organizations.
The commercial organizations of the nineteenth century could not, of course, dispense with the need for information processing if they did not have access to tabulators. They had to find a way of doing the job manually. To this end they employed armies of clerks, who worked with innumerable slips of paper at 176
The first Jacquard looms that wove information
enormous expense and at a cripplingly slow pace. Fortunately for Hollerith, his competitors had not made too many inroads into the commercial market to prevent him from using his superior technology to become a prominent player within a few years. For the Tabulating Machine Company, it was a case of better late than never.
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There will be IBM machines in use everywhere. The sun never sets on IBM.
Thomas Watson, IBM’s founder,
1924
By the year
1911
, Hollerith had more than one hundred major customers and hundreds of smaller ones. His rivals had moved into the commercial market before he did, but the superiority of his machines, his punched cards, his technology, and his quality control quickly allowed him to overtake them. Hollerith finally achieved dominance of the very market he had created: the market for what were becoming known as
business machines
, that is, machines which handled information. Alternatively, they might be seen simply as information-weaving Jacquard looms. Hollerith’s Tabulating Machine Company was the first market leader in the US information technology industry.
It was true that the market itself was still not especially large.
There were tens of thousands of corporations in the US that stubbornly clung to the old-fashioned manual ways of recording data on handwritten or typewritten slips of paper and storing them in 179
Jacquard’s Web
vast libraries containing oceans of files. But the tide had turned, and the days when businesses could afford to deal with data in this manual fashion were numbered. The punched-card data storage, sorting, and retrieval system of Hollerith’s tabulators was too powerful and effective to be ignored.
Hollerith was grudging about his success. There was a sense in which he never seemed entirely to believe in it. He accepted the financial rewards, but saw the growth and profits of his corporation as at heart irrelevant to his spirit of inventive enquiry and practical research. Still, he had finally been obliged to accept that the kind of research he loved to carry out needed to be funded by sales in the commercial world. He had also learnt from bitter experience that trying to base a secure business around processing census data was likely to end in debts and desperation.
He had seen reason just in time.
But his health was not good. He was overweight. He had a lifelong addiction to good food and, according to his wife, a particular fondness for chicken salad. He was only fifty-one years old, but a lifetime of overwork and stress about his business was starting to take its toll. Hollerith’s doctor, concerned about his patient’s heart, was insistent that Hollerith change his lifestyle and play a less active role in running his business. Hollerith was not used to following the dictates of others, but on this occasion he found he had little choice.
In any event, there had been a development that might be seen as fortuitous. A few months earlier, a millionaire investor, Charles Ranlegh Flint, famous for his skill at putting together mergers, had approached Hollerith to see whether he had any interest in selling his business. Flint was the kind of businessman who turns everything he touches into gold. He had made several fortunes and kept them all. Short in stature, terrifyingly shrewd, and with the face of a thoughtful walrus, he found the tabulation machines fascinating. There was something about the eye-baffling speed of the machines, the way they processed hundreds of cards in a few seconds and sent each one into its own correct hopper 180
The birth of IBM
after first counting it, that overwhelmed Flint’s otherwise largely fiscal imagination. Watching a tabulator in action, Flint felt he was observing not just an ingenious machine but the very future of business.
Today, when working tabulation machines exist only in a few museums around the world, opportunities to see them operating are few and far between. But if you do manage to watch one in action it is not difficult to understand why Flint’s imagination was so thoroughly captivated by the machines. They are indeed like a kind of magical loom weaving chaotic information into systematic, coherent, and logical patterns. Flint found the tabulators a perfect model for his own passion for imposing order on chaos and creating a pattern of understanding and direction from a maze of haphazard information. Crucial decisions in business are taken as much for emotional reasons as for logical ones, perhaps even more so. The tabulators inspired a level of emotion in Flint and in other powerful American businessmen that did indeed make these people feel certain they were witnessing a momentous breakthrough in humankind’s mastery of information.
As indeed they were.
Hollerith had turned Flint down when the merger king made his first approach. But after a sobering appointment with his doctor, Hollerith thought again. He went to see Flint and re-opened discussions with him.
Flint’s aim was straightforward enough: he wanted to combine Hollerith’s corporation with other organizations to create a major force in precision business machines. Flint greatly admired the tabulators and what Hollerith had achieved with them, but he felt that the Tabulating Machine Company was too small to make the most of the opportunities out there that Flint was convinced were ripe for the picking.
The discussions between the two men progressed quickly.
Finally, Hollerith made up his mind; he would sell his business to 181
Jacquard’s Web
Flint. The decision was helped by the fact that Flint had made Hollerith an offer he could hardly refuse—$
1
.
2
million for his shares, about $
20
million today. It was a vast sum for a business that was still in truth in a growth phase rather than in a state of maturity. One of the many reasons why Hollerith decided to accept Flint’s offer was that many of his directors and employees, who had given him their lifelong loyalty, also owned shares in the Tabulating Machine Company and would become prosperous themselves as a result of the deal. Hollerith was not an especially emotionally expressive man, but he always remembered those who had shown him loyalty.
Once Flint had secured Hollerith’s agreement, the merger king moved quickly. He made the Tabulating Machine Company the centrepiece of a merger with three other companies. These were the Computing Scale Company of Dayton, Ohio, which made scales and cheese slicers; the International Time Recording Company of Binghamton, which made clocks for keeping track of employees’ hours; and the Bundy Manufacturing Company of Endicott, New York, which also made time recording machines.
These other organizations were distinctly low-tech—even absurdly so—compared with the Tabulating Machine Company, but Flint was convinced the merger would work, and being wrong was not one of his vices. The new organization started to trade as a consolidated unit on
5
July
1911
. Its name, drawn from its separate components, was now the Computing-Tabulating-Recording Company, or C-T-R. It was not an age when organizations needed trendy, eye-catching names in order to succeed.
As Flint himself later admitted, the merger was something of a first for him. His other deals had tended to bring together companies from the same industry horizontally, or merge customers with their suppliers vertically, or bring together firms involved in different steps of manufacturing or marketing: this was known as a circular merger. But the merger that had 182
The birth of IBM
produced C-T-R was, as Flint put it when he looked back on it later in his career,
neither horizontal nor vertical nor circular. In fact, it was so uncommon as to almost justify the description
sui generis
—in a class by itself
.
Flint soon turned out to be right yet again. The C-T-R merger was a success from the outset. Flint was careful to ensure that a gospel of technical excellence and constant improvement of the new organization’s products was fundamental to its business phi-losophy. Each area of C-T-R’s activity drew energy from other areas in what would nowadays be termed synergy. Above all, Flint focused on meeting customer needs. Just as Hollerith’s tabulating machines had been a response to the dire pressures facing those charged with processing the results of the
1890
Census, C-T-R’s office machinery was designed to meet the current commercial crises in information handling.
As for Hollerith, he had sold his company and retired to the country. But he retained an interest in C-T-R, acting as a sort of
‘elder statesman’ in the organization, with a seat on the board of the former Tabulating Machine Company.