Tikalon Blog by Dev Gualtieri

100 Years of IBM

May 6, 2024

There are considerable statistics on human life expectancy. Men in the United States are expected to live 76 years, and women are expected to live nearly 81 years. These are actually lower than for many countries in the world with the United States ranking seventy second in life expectancy. The country with the highest life expectancy is Monaco with men living 85.70 years and women living 93.49 years. But, what about the life expectancy of a company?

Scientists at the Santa Fe Institute (Santa Fe, New Mexico) published a study in the Journal of the Royal Society Interface that found that the half-life of a publicly traded company is about a decade before it merges, it's bought out, or gets liquidated.[1-2] The researchers examined data in Standard and Poor's Compustat, a comprehensive database of more than 25 000 publicly traded North American companies, from 1950 to 2009.[1-2] This ten year half-life does not depend on business sector.[1-2]

Company mortality versus lifetime (Daepp, et al. 2015).[1]

The mortality function closely follows an exponential curve based on a constant hazard rate.

(Fig. 4 of ref 1, released under the Creative Commons Attribution License. Click for larger image.)

In general, smaller companies grow quickly, while the sales of older companies plateaued as they reached maturity.[2] The research team found that a company's risk of dying in the next year was not correlated with its product or how long it had been in business.[2] While the study didn't examine the reasons for this trend, they conjectured that companies, like Living organisms, must compete for scarce resources to survive.[2]

Other research shows that the lifespan of an S&P 500 company has decreased from 67 years in the 1920s to just 15 years today.[3] Interestingly, Japan, a country that ranks fourth in human life expectancy, is host to some of the oldest companies in the world.[3] Japan has more than 20,000 companies that are more than a 100 years old, and a few that are more than a thousand years old.[3] For companies, innovation and reinvention are the most important factors for survival.[3] Startups will often pivot from their initial business idea. Nokia, a cellphone and telecommunications equipment manufacturer, started as a pulp manufacturer; and, Berkshire Hathaway, started as a textile mill in Rhode Island.[3]

The International Business Machines Corporation (IBM) is a company with significant longevity. James W. Cortada, a senior research fellow at the University of Minnesota's Charles Babbage Institute who worked at IBM for 38 years in various positions, has written an article in IEEE Spectrum about the origin of IBM.[4]

Back in the late 19th century, business equipment such as adding machines, cash registers, and weight scales were in increasing demand, as were time clocks for logging the hours of manufacturing employees.[4] A 1911 merger of several companies in these markets resulted in the creation of the Computing-Tabulating-Recording Company (C-T-R).[4] In 1914, Thomas John Watson Sr. (1874-1956) was hired by C-T-R to increase sales.[4] Watson had worked for twenty years at the National Cash Register Company, which was considered to be one of the best managed companies at that time.[4]

Under Watson, C-T-R revenue grew from $4 million in 1914 to $14 million in 1920.[4] In February, 1924, International Business Machines became a New York corporation taking over business and assets of the Computing-Tabulating-Recording Company.[4]

Thomas John Watson Jr. (1914-1993) joined his father's company in 1937, but his tenure was interrupted by World War II when he served as a pilot in the Army Air Forces. Watson returned to IBM in 1946 with a renewed confidence brought about by his military service, becoming Executive Vice-president in 1949, president in 1952, and CEO just days before his father's death in 1956.

Watson was wholeheartedly committed to the production of mainframe computers, which had been a low profitability product for IBM. There were numerous technology advancement made by IBM before Watson left in 1971 after having a heart attack. I've listed many of these that I've judged to be the most important.

• The IBM 701 Commercial Computer, introduced in 1952, was the first mass-produced large-scale electronic computer.

• The IBM 650 Magnetic Drum Data-Processing Machine, also introduced in 1952, was a popular intermediate-sized electronic computer for scientific and business applications.

• The IBM 350 disk storage unit, introduced in 1956, was the first magnetic hard disk for data storage. It stored five million six-bit characters on fifty-two 24-inch diameter disks. The storage capacity was 3.75 megabytes.

• IBM embraced FORTRAN as a programming language in 1957.

A diode-transistor-logic (DTL) NAND gate built from a PNP transistor in 1959.

As can be seen, IBM had an unique way of representing transistors at that time.

(Wikimedia Commons image/ Click for larger image.)

• IBM introduced The IBM 1401, the first mass-produced transistorized computer in 1959. It featured a magnetic core memory and stored program capability.

• The IBM System/360 was announced on April 7, 1964. It was a configurable general purpose mainframe computer system that used interchangeable software and peripherals, such as printers and magnetic tape data storage. The System/360 became the dominant mainframe computer of its time.

A keyboard that only a mathematician would love. This is the layout of the IBM APL keyboard. APL was the timeshare interpretive programming language of the IBM System/360 and System/370. APL was principally created by computer scientist, Kenneth E. Iverson (1920-2004). (Via Wikimedia Commons.)

The announcement of the System/360 was coincident with the invention of vaporware. Some System/360 components in publicity photographs were actually wooden mockups. There was a popular joke about this in technology circles - "Why do women avoid marrying IBM salesmen? In the first year of marriage, the salesmen just sit at the side of the bed and explain how wonderful it will be when it finally happens."

• IBM invented the one-transistor dynamic random-access memory (DRAM) memory cell in 1966.

• To defuse some of its antitrust problems, IBM unbundled software and services from its hardware in 1969.

• IBM announced its System/370, the successor to System/360, in 1970. As a consequence of the popularity of its System/360 and System/370 mainframes, IBM sold 80% of computers in the U.S., and 70% of computers worldwide in the 1960s and 1970s.

• IBM introduced relational databases in 1970.

• Just after Watson's departure, the IBM Personal Computer was introduced in 1981. This event proved more of a boon to Microsoft and PC-compatible manufacturers than to IBM. IBM sold its personal computer business to Lenovo, a Chinese company, in 2005.

IBM PC 5150 with a 5151 green monochrome monitor. This computer is running MS-DOS 5.0.

I once had a CP/M computer with an amber (P3 phosphor) monochrome monitor. I can still remember that soothing display color.

(Wikimedia Commons image. Click for larger image.)

• The United States antitrust lawsuit against IBM was dismissed in 1982 as being without merit. This suit was initiated in 1969, and it spawned another popular joke in its early years - "An IBM engineer invented a time machine. To prove that it worked, he travelled to a date in the far future. When he returned, his colleagues asked him about the first thing he did in the future. He responded that he bought a newspaper to check the status of the IBM antitrust lawsuit."

• In 1998, IBM introduced the first microprocessor with a GHz clock rate.

Beginning in the 1990s, IBM began downsizing operations, divesting some operations, such as its personal computer division, and concentrating on computer services, software, supercomputers, and scientific research. In 2001, IBM became the first company to produce more than 3,000 patents in one year; and, in 2008 achieved 4,000 patents. In its lifetime, IBM has been issued more than 150,000 patents. Among its innovations, IBM introduced the floppy disk, the magnetic stripe card as found on credit cards, and the Universal Product Code (UPC) barcode. IBM scientists arranged 35 xenon atoms in a scanning tunneling microscope to spell "IBM" in 1990. IBM has had five Nobel Physics Laureates that include Leo Esaki (b. 1925) in 1973 for his invention of the tunnel diode, Gerd Binnig (b. 1947) and Heinrich Rohrer (1933-2013) in 1986 for the scanning tunneling microscope, and Georg Bednorz (b. 1950) and Alex Müller (1927-2023) in 1987 for the discovery of high temperature superconductors.

100 Years of IBM

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