Tech

Book Review: Father, Son, & Co, by Thomas Watson jr (rerun)

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(Today marks the 59th anniversary of the announcement of the IBM System/360 series)

Buy the book:  Father, Son, & Co

When Tom Watson Jr was 10 years old, his father came home and proudly announced that he had changed the name of his company. The business that had been known as the Computing-Tabulating-Recording Company would now be known by the grand name International Business Machines.

“That little outfit?” thought young Tom to himself, picturing the company’s rather random-seeming collection of products, which included time clocks, coffee grinders, and scales, and the “cigar-chomping guys” who sold them. This was in 1924.

This is the best business autobiography I’ve read. It’s about Watson Jr, his difficult relationship with his father, the company they built, and the emergence of the computing industry. It is an emotional, reflective, and self-critical book, without the kind of “here’s how brilliant I was” tone that afflicts too many executive autobiographies. With today being IBM’s 100th anniversary (counting from the incorporation of CTR), I thought it would be a good time to finally get this review finished and posted.

Watson’s relationship with his father was never an easy one. From an early age, he sensed a parental expectation that he would follow his father into IBM, despite both his parents assuring him that this was not the case and he could do whatever he wanted. This feeling that his life course was defined in advance, combined with fear that he would never be able to measure up to his increasingly-famous father, was likely a factor in the episodes of severe depression which afflicted him from 13 to 19. In college Watson was an indifferent student and something of a playboy. His most significant accomplishment during this period was learning to fly airplanes—-”I’d finally discovered something I was good at”–a skill that would have great influence on his future. His first job at IBM, as a trainee salesman, did little to boost his self-confidence or his sense of independence: he was aware that local IBM managers were handing him easy accounts, wanting to ensure success for the chief executive’s son. It was only when Watson joined the Army Air Force during WWII–he flew B-24s and was based in Russia, assisting General Follett Bradley in the organization of supply shipments to the Soviet Union–that he proved to himself that he could succeed without special treatment. As the war wound down, he set his sights on becoming an airline pilot–General Bradley expressed surprise, saying “Really? I always thought you’d go back and run the IBM company.” This expression of confidence, from a man he greatly respected, helped influence Watson to give IBM another try.

The products that Watson had been selling, as a junior salesman, were punched card systems. Although these were not computers in the modern sense of the word, they could be used to implement some pretty comprehensive information systems. Punched card systems were an important enabler of the increasing dominance of larger organizations in both business and government: the Social Security Act of 1935 was hugely beneficial to IBM both because of the systems they sold to the government directly and those sold to businesses needing to keep up with the required record-keeping.

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The Great Lightbulb Conspiracy

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This year has seen many historical anniversaries, and one that has gotten some recent notoriety is the 90 year anniversary of the planned obsolescence of the light bulb by an industry cartel.

How exactly did the cartel pull off this engineering feat? It wasn’t just a matter of making an inferior or sloppy product; anybody could have done that. But to create one that reliably failed after an agreed-upon 1,000 hours took some doing over a number of years. The household lightbulb in 1924 was already technologically sophisticated: The light yield was considerable; the burning time was easily 2,500 hours or more. By striving for something less, the cartel would systematically reverse decades of progress.

It’s even more notable because last week three pioneers in LED technology just won the Nobel Prize.

We all know about the efficiency standards for light bulbs that are effectively banning incandescent bulbs in slow motion. I’ve noticed during my usual stops at the home improvement stores that the choices for the vintage bulbs are fewer and farther between, and the prices for what’s left are creeping up.

The promise of the new standards is that the new LED lighting is far superior. While it’s much more expensive, the steady drumbeat of the diffusion of technology is supposed to reduce the costs, eventually putting them within reach of the common household.

The costs have indeed dropped exponentially, but that’s undoubtedly been helped by government aid and deliberate shortages of the old technology. Besides the federal standards, every state has some sort of efficient lighting rebate program that artificially decreases the price. Tax breaks and other incentives have encouraged manufacturers like GE to expand production in the US and create a few hundred jobs, which, although nice, don’t quite make up for the thousands they shipped to China during the Great Light Bulb Leap Forward. How much of the price gains can be attributed to Moore’s Law type improvements and how much to government supports is a legitimate concern.

Now there’s some question about how long prices are going to keep falling going forward.

In stark contrast to the promised dynamics that the technology is supposed to follow, LED prices actually rose considerably last month.

In contrast, 40W equiv. LED bulb prices were up 14.3% in the U.S. market. Manufacturers including Cree, Philips, GE and other renowned brands have raised prices for certain products in the U.S. market.

Because of industry consolidation, the top ten LED manufacturers now control 61% of the market. That much control brings pricing power over the market, and they are apparently now using it.

With green energy executive orders on Obama’s agenda and the unelected EPA issuing mandates, the oligopoly is sure to get worse with permanently higher cost per lumens the possible result.

The LED industry, taking a page from the incandescent bulb industry so many years ago, is discovering the key to the rent seekers’ success – competition is for losers, and unfortunately sometimes so is progress.