The origins of IBM

America in the early 1900s was a picture of a fast-emerging future. Model Ts honked in the streets. Telephones connected families and homes. Electricity began lighting up the nation’s cities. The US economy, meanwhile, was largely dominated by a few major players: the so-called robber barons — like Andrew Carnegie and John D. Rockefeller — whose oil and steel monopolies amassed colossal fortunes in a yet-to-be-regulated environment. Through their influence, big business was on the rise.

Against this backdrop, from his office near New York’s Wall Street, Flint had invested in a wide range of industries and facilitated several multi-company mergers. Around the turn of the century, however, he shifted from traditional manufacturing to information technologies. He had particular interests in the time clock, a mechanical device used by factory workers to punch in and out of work; the computing scale, for weighing items and adding up their costs; and the tabulating machine.

In these tools, Flint saw technologies that shared a common emphasis on data, and he envisioned them collectively providing a great deal of value in industry. So in 1907, he convened the principals of three companies — the International Time Recording Company, the Computing Scale Company, and the Tabulating Machine Company — to propose a merger. Talks continued for four years, until June 16, 1911, when C-T-R was officially incorporated as a holding company to control the three separate firms. The headquarters moved to Endicott, New York (considered by many to be IBM’s birthplace), while factories continued to operate in the cities where the businesses had long run production, including Dayton, Ohio; Detroit, Michigan; and Toronto, Canada.

After C-T-R was founded, the tabulating machine quickly became its most promising technology. Invented in the late 1800s by a young engineer and former census clerk named Herman Hollerith, it was originally designed to help the US Census Bureau collect data on the country’s rapidly expanding population.

Building on two previous hole-punch technologies, Hollerith’s design consisted of a pattern of holes in cardboard cards, coding for an individual’s data: city of residence, age, nationality, job and so forth. This simple system was put to the test calculating data for the 1890 census and reportedly saved the US government two years and USD 5 million. Soon after, various census agencies around the world adopted the tabulating machine for their efforts.

It didn’t take long for the tabulating machine to expand its utility. Businesses quickly discovered that the tabulator’s hole-punch system could prove useful in gathering information on products, train traffic and insurance customers. Early adopters 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 salespeople.

Despite the tabulator’s success, C-T-R’s business stalled within a few years. The balance sheet carried significant debt, and some of the managers from the three previous companies remained resentful of the merger and resisted full integration. Flint recognized that in order to move forward, the company needed a uniting force, a charismatic leader.