One day in the early 1950s I stopped off in Washington to change planes and Red LaMotte, who was then in charge of our Washington office, came to see me at the airport. “Tommy,” he said in his casual way, “the guys at Remington Rand have one of those UNIVAC machines at the Census Bureau now, and soon they’ll have another. People are excited about it. They’ve shoved a couple of our tabulators off to the side to make room.” I knew all about the UNIVAC, of course, but the Census Bureau was where punch-card machines got their start back in the 1880s, and it had always been IBM’s backyard. I thought, “My God, here we are trying to build Defense Calculators, while UNIVAC is smart enough to start taking all the civilian business away!” I was terrified.

I came back to New York in the late afternoon and called a meeting that stretched long into the night. There wasn’t a single solitary soul in IBM who grasped even a hundredth of the potential the computer had. We couldn’t visualize it. But the one thing we could understand was that we were losing business. Some of our engineers already had a fledgling effort under way to design a computer for commercial applications. We decided to turn this into a major push to counter univac. Two and a half years later this product would finally come out as the IBM 702, but the name it had while it was still in the lab was the Tape Processing Machine. It was obvious to everyone that we were finally making major strides away from my father’s beloved punch cards.

Now we had two major computer projects running side by side. We had teams of engineers working three shifts, around the clock, and every Monday morning I’d ignore all my other responsibilities until I’d spent a few hours with the project managers and pressed them on how we were doing. People at IBM invented the term “panic mode” to describe the way we worked: there were moments when I thought we were all on board the Titanic. One morning in 1952 McDowell came to me with a new analysis of what the Defense Calculator was going to cost. “You’re not going to like this,” he said. It turned out that the price we’d been quoting to customers was too low—by half. The machine we thought would cost $8,000 a month was actually going to cost somewhere between $12,000 and $18,000. We had no choice but to go around and let the customers know. To my total amazement, we managed to hang on to as many orders as we’d started with. That was when I felt a real Eureka! Clearly we’d tapped a new and powerful source of demand. Customers wanted computers so badly that we could double the price and still not drive people away.

We knew UNIVAC was years ahead of us. Worse still, Remington Rand seemed to be making all the right moves. On election night 1952, as Dwight Eisenhower was beating Adlai Stevenson, a UNIVAC appeared on CBS. The network had agreed to use the computer for projecting election results. So millions of people were introduced to the UNIVAC by Edward R. Murrow, Eric Sevareid, and Walter Cronkite, who called it “that marvelous electronic brain.” It performed flawlessly—so well that the people running it didn’t believe what it told them. All the preelection polls had predicted a close race, but on the basis of a tiny fraction of the returns, the UNIVAC said Eisenhower was going to win by a substantial margin. That made the Remington Rand people so nervous that they disconnected a part of the UNIVAC’S memory to bring its prediction in line with the polls. But the machine was right, and at the end of the evening an engineer came on screen and sheepishly admitted what he’d done. Remington Rand’s machine became so famous that when our first computer came out, we found it being referred to as “IBM’s UNIVAC.”

The Defense Calculator, or the IBM 701 as it was officially called, came off the production line in December 1952. In some ways it was different from any computer that had ever been built. We’d thought of it as a product, not a laboratory device, right from the start. So in spite of its enormous complexity we built it in the factory, not the engineering lab. It also looked different from other computers because we’d designed it to be easy to ship and install. Other machines consisted of oversize racks and panels that were to be delivered in pieces and painstakingly assembled in the customer’s office. The UNIVAC had a main cabinet about the size of a small truck. But the 701 was made up of separate modules, each roughly the size of a large refrigerator, that could fit onto ordinary freight elevators. Our engineers could uncrate the units, cable them together, and have them doing useful work in three days. Any other machine took a minimum of a week.

Dad wanted to launch the 701 with all the usual IBM fanfare, in part because we needed to divert attention from UNIVAC. So we shipped the first 701 to New York, installed it on the ground floor of headquarters, and got ready for a big dedication. To make room for the new machine we dismantled the SSEC—Dad’s giant calculator-to-end-all-calculators was only five years old but already obsolete, thanks to the rapid progress of electronics. The ceremony was held in April, and one hundred fifty of the top scientists and leaders of American business showed up, including William Shockley, the inventor of the transistor, John von Neumann, the great computer theorist, General David Sarnoff, the head of RCA, and the heads of AT&T and General Electric. The guest of honor was J. Robert Oppenheimer, the brilliant physicist who led the scientific team that built the first atom bomb. He gave a speech calling the 701 “a tribute to the mind’s high splendor,” and in our press releases we bragged that the 701 would “shatter the time barrier confronting technicians working on vital defense projects.”

Our visitors were impressed with the new computer, and newspapers all over the country picked up the story. But the noisiest reaction came from the big customers who had been pushing us for years to start building computers. Now that we’d delivered the 701 for scientific use, they wanted us to announce the computer we were designing for businesses. “Stop fiddling around,” said my Time Inc. friend Roy Larsen. “Show us what you’ve got so we can decide whether to buy a UNIVAC” Even at this late date some of our punch-card executives were still insisting that computers would never be economical, but the fact that we had customers waiting helped me to override their objections. We announced the IBM 702 in September, and in the space of eight months we had orders for fifty of them.

Meanwhile I turned my attention to the most important sale of my career. In the 1930s Dad had been able to boost IBM into the top echelon of corporations by supplying punch-card machines for Social Security and the New Deal. There were no such massive social programs under Truman or Eisenhower for us to tap into. It was the Cold War that helped IBM make itself the king of the computer business. After the Russians exploded their first atom bomb in 1949, the Air Force decided that America needed a sophisticated air defense system. They also decided this should incorporate computers—a very bold idea for the time, because computers were still little more than experiments. The government gave a contract to MIT, and some of the country’s best engineers there drew up plans for a vast computer-and-radar network which was supposed to blanket the United States, operate around the clock, and calculate the location, course, and speed of any incoming bomber. The military name for this system was Semi-Automatic Ground Environment, or SAGE. Air defense until then consisted of a few scattered radar stations, where observers did calculations on slide rules and then plotted flight paths by hand. The faster airplanes became, the harder they were to track. An air defense commander might get redundant messages from two or three different radar operators who each thought he had spotted something. The idea of SAGE was to avoid confusion. The commander could use it to monitor his entire region and transmit orders to his interceptors and antiaircraft batteries.

The MIT engineer responsible for procuring the SAGE computers was Jay Forrester, an austere man about my age who was driven by a belief that computers could be made to do more than anyone thought. In the summer of 1952 he was traveling around the industry visiting the five companies in the running—RCA, Raytheon, Remington Rand, Sylvania, and IBM—and everybody was pulling out the stops. RCA and Sylvania trotted him through their huge vacuum tube factories that were supplying everyone in the industry. Remington Rand showed off the UNIVAC and brought in as their spokesman the famous general, Leslie Groves. During the war Groves had been the boss of the Manhattan Project, which built the atom bomb.

I tried not to worry about Groves or the other competitors; I just let IBM speak for itself. I took Forrester to see our plants and introduced him to our most gifted people. He was under extreme pressure to get the system into production as soon as possible, and I think what impressed him was the fact that we were already building computers in a factory. We won a small contract for the first stage of the project, to build prototype computers in conjunction with MIT.

To make SAGE possible the computers had to work in a way computers had never worked before. In those days computing was typically done in what was called batch mode. This meant that you would collect your data first, feed it into the machine second, then sit back for a little while until the answer came out. You could think of the batch processor as a high diver at a circus—each performance involves a lengthy drum roll in preparation, a very fast dive, and then a splash. But the SAGE system was supposed to keep track of a large air defense picture that was changing every instant. That meant it had to take a constant stream of new radar information and digest it continually in what is called “real time.” So a SAGE computer was more like a juggler who has to keep a half dozen balls in the air, constantly throwing aside old balls as his assistants toss him new ones from every direction. As if real-time computing were not enough of a technical challenge, the Air Force also wanted the system to be absolutely reliable. In those days it was considered an accomplishment if someone could build a computer that would work a full eight-hour day without failing. But SAGE was supposed to operate flawlessly around the clock, year in and year out.

When Russia exploded its first hydrogen bomb in the summer of 1953, the need to finish SAGE became even more urgent. We took many of our top engineers off our other computers and put them to work with Forrester and his men. A year after we started we had seven hundred people on the SAGE project, and it took only fourteen months to design and build a prototype that would do the job. It was a monster of a machine, far larger than any computer that had ever been produced. The Air Force called it the AN/FSQ-7—or Q7 for short—and it had fifty thousand vacuum tubes and dozens of cabinets spread out across a large warehouse. It was so big that even though electricity in wires travels at close to the speed of light, signals sometimes took too long to get from one part of the computer to another.

Although we’d built a successful prototype, we weren’t guaranteed the next stage of the project. The lion’s share of SAGE—the contract to manufacture and service the dozens of computers that would make up the actual system—was still up for grabs. I thought it was absolutely essential to IBM’s future that we win it. The company that built those computers was going to be way ahead of the game, because it would learn the secrets of mass production. We had the inside track because we’d built the prototype, but there were times in our dealings with MIT when I thought we’d blown it.

Forrester was a genius at computer hardware, but he didn’t appreciate how hard it is to set up a reliable production process. He thought we were handling the project all wrong. His idea of management was what he called the “man-on-the-white-horse principle.” The man on the white horse was Napoleon; Forrester thought every engineering project needed a dictator, which was not the way our manufacturing men liked to work. His constant criticism made them angry and stubborn, and I was worried he’d shift SAGE somewhere else. I worked harder to win that contract than I worked for any other sale in my life. I was constantly making trips up to MIT. Forrester hemmed and hawed, but I finally told him that if he promised me the production assignment, I would build him a factory without waiting for a contract. “Give me your handshake, and we’ll start on the plant this week,” I said. I knew he was afraid that he might have to wait a long time for the paperwork from the Air Force. So he told me to go ahead.

Within a couple of years we had thousands of people working on SAGE and those big Q7s were in operation all over the continent. We built forty-eight in all. You’d sometimes see a SAGE center if you were driving in a remote place. They were huge windowless concrete buildings, each covering an entire acre and housing two machines. The control room in these places was a big room lit with an eerie blue light. The watch commander would sit in front of a giant map of his entire area. On that board, the computer would plot in yellow the movement of all the airplanes in the sky, along with symbols to show whether they were friends or foes. If there was an attacker, the commander simply had to point to its blip with a device called a “light gun” and SAGE would automatically radio information about its position to interceptor planes and antiaircraft batteries. The system even had the reliability that the Air Force wanted. We’d solved that problem by having the Q7s work in tandem, taking turns. One machine would juggle the radar while its twin was being serviced or standing by. By that method the average SAGE center was able to stay on alert over 97 percent of the time.

SAGE was celebrated as one of the great technical achievements of its day. But although the system worked fine, the arms race made it obsolete before it was even finished. It could guard against attacks by bombers, but not missiles, so when the Russians launched Sputnik in 1958, SAGE became passé. I remember I was sitting in a hotel dining room in Bremen when word of Sputnik came. A waiter who knew I was American walked up and said “Where is your Sputnik? Where is your Sputnik?” We got scared all over again, because we’d left ourselves vulnerable to an attack from space. But in fairness to Jay Forrester and all the military men who decided to build SAGE, none of us ever questioned its suitability at the time it was designed. And it gave IBM the giant boost I was after. Until the late ’50s, SAGE accounted for almost half our total computer sales. We made very little money on the project, in keeping with the policy against war profiteering laid down by Dad. But it enabled us to build highly automated factories ahead of anybody else, and to train thousands of new workers in electronics.

Even though IBM was supplying a large proportion of the Defense Department’s electronic brains, I was never much of a cold warrior. Like most things conceived in a panic, the air defense system only seemed to make sense. We built it because the Russians had the bomb and we were afraid they might fly over here and destroy New York. It amazes me that nobody ever thought to ask why they’d want to do that. Our State Department probably could have told us that the Russians would never attack because they knew we could retaliate against their cities. And in reality they didn’t have any airplanes that could make the flight. So SAGE was a costly fantasy, the SDI of its day. Before long we found ourselves vastly overarmed, faced with the danger of mutual annihilation.

But at that point the country was in a terrible state of paranoia because of the Red scare. Senator Joe McCarthy was holding hearings and claiming to find Communists in every crack in the wall. There was a moment when I truly thought IBM was going to lose its shot at defense work because of the kind of window blinds I had in my office. Window blinds in those days were almost all horizontal—ordinary Venetian blinds. But vertical blinds had just been developed, and some had been ordered for me. An IBM engineer was in my office one day for a meeting and he was interested in getting the same kind of blinds for his office, so he drew a little diagram of how they were attached on axles to the floor and the ceiling. He put that little piece of paper in his shirt pocket and forgot about it. A few days later the man who did the engineer’s laundry was checking the shirt before putting it in the washer, and he found that little slip of paper—just a diagram with no explanation. McCarthy had so spooked this country that everybody thought everybody else was a Red. So the laundry man sent the paper to McCarthy, and pretty soon Senate investigators came and said to the engineer, “We’ve identified this as the plan for a radar antenna, and we want to hear about it. We want to be perfectly fair. But we know it is a radar antenna and the shirt it was found in belongs to you.”

The guy said, “Oh, for Chrissake, those are the blinds in Watson’s office!”

So they asked to see me. When they came to my office they explained what the engineer had told them and I said, “Well, those blinds are right here.” I showed them how the blinds worked. They looked them over very carefully and then left. I thought that I had contained it, but I wasn’t sure, and I was scared. We were working on SAGE, and it would have been a hell of a way to lose our security clearance.

The McCarthy years were a formative period for me. I was only beginning to run the business and I had no idea how forcefully I ought to speak out. My reaction to McCarthy was like that of many other concerned citizens: at the beginning I felt it was possible that he might be onto something, but gradually this gave way to outrage and dismay at his bullying and lies. At one point I took a week off to go skiing in Switzerland and sat in my bedroom reading a story in the International Herald Tribune about accusations McCarthy was making against the top people in government. I thought to myself, “How can we let him go on like this? He is making the United States of America look like Salem of the witch trials.” For the first time in my life, I felt embarrassed for my country, and I told this to Dad when I got back to New York. He shared my disgust for McCarthy, but counseled restraint. “These things usually work themselves out,” he said. It was both a great strength and great weakness of Dad’s that his optimism prevented him from making negative public statements about anything. In this case, I wasn’t sure he was right. He had set a powerful example for me years before by taking an early, vocal stand in favor of Roosevelt and the New Deal.

Shortly after that I was invited to a lunch at Lehman Brothers, a Wall Street investment bank that in those days was all powerful. There were some very important men present and we all sat around a large round table. Bobby Lehman, the head of the firm, talked about McCarthy. He said, “The man is uncouth and I don’t like his approach. But none of us can argue with the idea of rooting Communism out of our government.” Then he asked me what my view was. I said, “I don’t happen to agree with Senator McCarthy. I think he is doing more harm than good. I don’t believe that the highest councils of our government are riddled with Communists. I think it’s undesirable that a few army clerks are Communists, but it’s not terribly important.” It was a very conservative crowd. Of the twenty-odd people present, I was the only one who took that position. That didn’t bother me. What bothered me was that the following week I got letters from several people who had been there, and they all had a similar message: “I didn’t want to commit myself in public, but I certainly agreed with everything you said.”

The businessman whose response to McCarthy I admired most was Walter H. Wheeler Jr. He was the head of Pitney-Bowes, a very successful manufacturing company in Connecticut. “Tiny” Wheeler was well over six feet tall and weighed about 230 pounds. He was really irate over a two-million-dollar lawsuit McCarthy filed against Senator William Benton of Connecticut. Benton had given a speech calling McCarthy a liar and saying his witch-hunt tactics were tearing America apart. McCarthy sued him for libel and slander and helped defeat Benton when he tried to get reelected. Then McCarthy withdrew the complaint just before the case went to court; he said his lawyers had advised him he could not prove damages because they could find no one who believed Mr. Benton’s statement. Tiny Wheeler had no connection to that case, but he sent McCarthy a telegram that said, “Your lawyer could not have looked very hard. I would be glad to testify for you that I believe what Senator Benton has said about you, and am sure there are many millions of others in this country who would be happy to do likewise. Walter H. Wheeler, Pitney-Bowes Incorporated.” Wheeler gave copies of the telegram to the newspapers, and it appeared in the New York Times the following morning. It was one of the most courageous moves I ever saw a businessman make—which sounds peculiar today, but for that brief period McCarthy’s power was awesome. I called Wheeler up, went and visited him, and from then on, Walter Wheeler was one of my business heroes.

I saw a graphic illustration of how not to behave when I went to Washington to watch Army Secretary Bob Stevens testify in the hearings McCarthy held on the army. Stevens was a friend of Dad’s and had been head of the great textile firm J. P. Stevens, which his family owned. He was no match for McCarthy. Stevens was trying to play the Marquis of Queensberry rules with McCarthy, trying to treat him like a Senator. He said, “I certainly want to help you, sir.” And the more he cooperated, the more trouble he got into. I thought, “He must have gone to too many boarding schools. He’s not getting down in the gutter with this guy. The only way to fight a guttersnipe is in the gutter.” Most of the people I knew were eating and breathing those army hearings, the final sessions of which were on TV. It was the first time TV played a role in a great national debate. Stevens’s lawyer, a brilliant strategist, hired a Boston attorney named Joseph Nye Welch to represent the army. He was the man who said to McCarthy, with millions of people watching, “Have you no sense of decency, sir, at long last?” That one sentence was the beginning of McCarthy’s downfall.

By then I’d decided that McCarthy was a symptom of a real weakness in America that I wanted to tackle publicly, even if it meant taking a negative position that would be unlike Dad. I was asked to speak later that year in Fort Wayne, Indiana to a large gathering of salesmen from various industries. My host was Ernie Gallmeyer, head of the Wayne Pump Company. Ernie knew me from the American Society of Sales Executives and thought of me as a bright young businessman. That is a very conservative area of America even today, and back then it was the heart of McCarthy country. I thought it was an ideal forum for an anti-McCarthy speech. “Many of you may not agree with me. That’s good!” I said. The point I made was that in an atmosphere of open discussion, McCarthy would never have gotten as far as he had. I told them that as American salesmen, who made their living by talking, they had a patriotic obligation to promote the thoughtful debate of public issues.

We as salesmen have an added duty beyond selling our products. We ought to put our salesmanship behind the American way of life—and not let evil or unjustified suspicions frighten Americans. We have the duty of helping to form an honest, fair-minded public opinion in this country.… Uncontrolled suspicion is like a plague. It would wreck America. So if this uncontrolled suspicion starts rolling around America again, we must fight it. That will be a time that calls for cool heads and persuasive salesmanship.

When I finished there was modest applause—very modest. Even though many prominent people were critical of McCarthy by this time, and even though my speech had been relatively mild, Ernie Gallmeyer was in shock and tried to get me out of the hall before anybody could talk to me. To judge from Ernie’s reaction, what I said was so distasteful to the people in Fort Wayne that he felt his reputation had been damaged. Unfortunately this was before the days of flying home after a meeting, so I had to spend an awkward night at his house. I guess I had thought I could win all of them over. But the feeling of being treated like an outsider was so disturbing to me that I said to Olive when I got home, “It was as though I had gotten a frightful disease.” Later I talked to my father about it. He said, “Tom, I was always an outsider too, because I spoke for the poor, and higher taxes, and better social programs.” He read my speech and didn’t object in the least. “These are things that need to be brought out. I’m glad you’re saying them. And I’m glad to see you take public positions, even though they’re minority positions.”

After a while I stopped feeling embarrassed when other businessmen dismissed me as a liberal nut. I felt as Dad did. The country had given him an awful lot, and it was in the process of giving me an awful lot. I had a very profitable company. I was young and vigorous and willing to say what I believed. Being able to make liberal speeches is a luxury for a businessman. The whole picture would have been different if IBM’s profit margins had been lower. People wouldn’t have been as interested in having me speak, and I would never have been so outspoken. When I made a public appearance I always had the huge IBM engine behind me blowing a whistle that signaled, “Look at this company. This kid is running it. Don’t take him lightly, because he knows what he’s doing.” If I’d been president of a coal company instead, making, say, six percent a year in profits instead of 23 percent, I could never have gotten public attention for my views.