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APRIL 12, 2001

COMMENTARY
By Sam Jaffe

IBM, the Holocaust, and My Grandfather

The intersection of business ethics and profits can be a confusing place -- where heroes are hard to find

On June 6, 1940, Thomas Watson, the chairman of International Business Machines, returned a gold-encrusted, swastika-laden medal to Adolf Hitler, who had personally draped it over Watson's chest three years before. The medal was to thank Watson for making Germany's economy more efficient with IBM technology. Instead, Watson returned it with a letter castigating Hitler for his Nazi policies.

The act of publicly returning the medal soon hindered IBM's ability to do business in Germany and its occupied territories as war raged across the Continent. So was Watson a hero for doing so? Or was he a villain for accepting the medal at all, and keeping it for three long years of public persecution of Jews in Germany? The recent book IBM and the Holocaust by investigative journalist Edwin Black does its best to prove the latter point. With exhaustive research, Black makes the case that IBM and Watson conspired with Nazi Germany to help automate the genocide of Europe's Jews (see BW, 3/19/01, "Did IBM Really Cozy Up to Hitler?"). And in reading the book, I found myself having some strongly ambivalent feelings on the subject.

You see, I grew up with a very different image of Watson. My grandfather, Paul Cooke, worked for the U.S. Army installing IBM punch-card machines in the Philippines. He was killed by the Japanese during the Bataan death March. When it happened, Watson sent a personal letter to my grandmother, conveying his condolences and offering to help the family in any way.

VIVID IMAGE.  Even though my grandfather wasn't an IBM employee, Watson went out of his way to honor his close relationship with the company. And two years later, he was true to his word. My grandmother wrote Watson, requesting a summer internship for her son. Watson arranged for my uncle to work in a punch-card plant, which initiated his interest in engineering and his lifelong work with computers.

I don't think I've ever seen a picture of Thomas Watson. But thanks to that story, repeated many times and often embellished through my childhood, I've always had a vivid mental image of the man. In my mind, he wore a bankers' suit with a gold watch chain stretched across his chest. He had receding light brown hair, plump cheeks, and warm, sad eyes that glowed with gentleness.

It wasn't until just before my wedding when I came across the source of that image while looking through some old photographs. It wasn't my imagination: There really was a picture of a man from Watson's generation that used to sit on my mother's dresser when I was a child. It was a photograph, the only surviving one, of my grandfather.

NO BLENDING IN.  Now, after reading Black's diligent but strident book, I have to repaint my mental image of Watson. Take out the gold watch chain and substitute a swastika-laden medal. While I don't swallow Black's entire argument -- that Watson and IBM were somehow directly responsible for the genocide -- I do agree with him that, when it came to Nazi Germany, Watson was an amoral businessman who knowingly did business with murderers.

Thanks to IBM's punch-card technology, Germany was able to organize a massive census that identified Jews even if only one grandparent had Jewish roots. One of the reasons so few Jews escaped was that they assumed that their traditional method of avoiding persecution would work: blend in with the crowd. The census made that virtually impossible. Even Jews who moved to a new city and assumed new identities were quickly sniffed out by the Nazi demographic machine. IBM's technology gave Hitler the advantage.

IBM has plenty of mitigating factors in its favor. The machines that were used by the Nazis were actually manufactured in Germany by IBM's German subsidiary, Dehomag. Dehomag was majority-owned by IBM, but it operated autonomously and turned over very few of its profits to the parent company.

If Watson had returned his medal earlier, or refused to accept it in the first place, it would have been simple for the Germans to nationalize Dehomag. Or the Nazis could have just converted to competitors' punch-card machines, like France's Groupe Bull or America's NCR. Black goes to great efforts to make the claim that such moves would have been very difficult for the German government to pull off, but in the end his argument is speculative.

REQUIRED READING.  But even if the charge against Watson isn't genocide, he knowingly did business with an evil regime, justifying his decision for three years as business, pure and simple. Watson, if he were alive today, would defend himself by saying that his first duty is to his shareholders. How many times do we hear CEOs use that line while laying off workers, investing in sweatshops, or monopolizing a market?

That's why Black's book is so enlightening: It paints a richly textured picture of how a man, and an entire company, can ignore all sense of morality while not once transgressing the lines of business ethics. If nothing else, this book should be required reading for every first-year MBA student.

As you might imagine, IBM has strongly disputed many of Black's allegations. And one very simple argument in IBM's favor is that "punch cards didn't commit genocide in Europe; people did." That is absolutely true. People following orders activated the showers at Auschwitz, pulled the triggers at Babi Yar, and operated IBM punch-card tabulators in Dachau.

But there's another lesson from my childhood about my grandfather that has stayed with me all these years. It involves the importance of sometimes breaking rules for a greater good. If only all of those people had simply ignored their orders during the Holocaust. If only Thomas Watson had placed humanity's needs above those of his shareholders.

LAST DRINKS.  My family has "stickler for rules" built into its genetic code. Keep in mind that my grandfather was trained as an efficiency expert, one of the original "time and motion men" that IBM is famous for. But one time he broke the rules. My 98-year-old great-uncle, my grandfather's brother-in-law, told me the story. On the night before Corregidor, a small Philippine island near Manila, fell to Japanese forces in World War II, General Stillwell opened the officers' liquor supplies to the troops. Most of the men, knowing that they would probably soon die, got fabulously drunk that night.

But my grandfather stayed sober. Instead, he sat up all night and went through the personnel files, which he had been hired by the Army to automate. He found the combat insurance status of every American soldier at that post. At that time, you could opt for different levels of life insurance that would be paid if you were to die while in service. Most of the enlisted men, assuming that they would never see combat, had chosen the lowest level of insurance.

That night, my grandfather and two other men sat in a bunker by a radio transmitter and changed the life insurance status of each soldier in Corregidor. They then transmitted the change by Morse code to a U.S. Army base in Kansas that kept the original records.

UNSIGNED BUT DELIVERED.  Technically, he broke the rules that night in Manila harbor. He knew that most of those men would die. He didn't go around to each foxhole and get a signature on every policy. If the insurance company execs knew what he was doing, they would have been very upset and probably put a stop to it. Who knows what would have happened to him if he had lived? But he did what he knew was right.

In a sense, I'm relieved that Black's book has changed my image of Thomas Watson. Now that fuzzy childhood image of the gentle-eyed man can go back to its rightful owner -- my grandfather, the war hero.




Jaffe is a senior writer for BusinessWeek Online
Edited by Douglas Harbrecht

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