In the July 29 board meeting, Heidinger demanded that Schulte-Strathaus be ratified. In fact, Heidinger had already invited him to join the board and Schulte-Strathaus had already accepted.
15
So he expected a unanimous yes.
But Watson was not ready to allow Heidinger to dictate who could sit on the board—even if the proposed man was a personal advisor to Deputy Fuhrer Hess. Zimmermann declared that he was instructed to vote against Schulte-Strathaus. Wielding IBM's majority, the measure was defeated. Watson preferred either Rottke or Hummel, both of whom owned token stock options, or Zimmermann himself. Heidinger staunchly refused to even allow Watson's suggestions to be voted, asserting that German corporate law made employees ineligible for seats on a board of directors. Heidinger insisted on Schulte-Strathaus as a representative of Hess.
16
Heidinger adjourned the meeting in a stalemate. Next, he decided to either cash out of the company, or pressure IBM into essentially walking away from its subsidiary. The stakes were immense for Germany.
Hess' office was not the only one determined to ensure the complete cooperation of Dehomag. Other key Party advisors to
der Fuhrer
's office, soon to emerge, also had plans for IBM's equipment. But the strategic alliance with IBM was too entrenched to simply switch off. Since the birth of the Third Reich, Germany had automated virtually its entire economy, as well as most government operations and Nazi Party activities, using a single technology: Hollerith. Elaborate data operations were in full swing everywhere in Germany and its conquered lands. The country suddenly discovered its own vulnerable over-dependence on IBM machinery.
Millions of cards each week were needed to run the sorters. Indeed, the military alone employed some 30,000 people in their Hollerith services. Adding other governmental and commercial clients, at any given time, thousands of operators were working at Holleriths. Watson presses printed all the cards these people needed moment to moment. IBM's paper and pulp supply lines extended to mills throughout the world. IBM owned the patents for the unique paper stock the Holleriths required. At the same time, Germany's war industry suffered from a chronic paper and pulp shortage due to a lack of supply and the diversion of basic pulping ingredients to war propellants. Only four specialized paper plants in Germany could even produce Hollerith card stock—all were on contract to IBM. The few paper houses in France were running low on coal and cellulose supplies, hence their deliveries could never be assured for more than a month or two at a time. IBM was constantly pooling its global paper resources, including its abundant North American suppliers, to meet the ever-increasing demand. The Reich could not tap into the vital North American paper markets. Holleriths could not function without IBM's unique paper. Watson controlled the paper.
17
Printing cards was a stop-start process that under optimal conditions yielded 65,000 cards per eight-hour shift. The Third Reich consumed cards at an almost fantastic rate. In 1938, more than 600 million per year were consumed from German sources alone. In 1939, that number almost doubled to 1.118 billion. Projected use by 1943 was 1.5 billion just within the Reich. Building a printing press was a six-month process at best, much longer when the metals were not available. Dehomag clients typically stockpiled a mere thirty-day supply of finished punch card paper. Holleriths could not function without cards. Watson controlled the cards.
18
Precision maintenance was needed monthly on the sensitive gears, tumblers, and cogs on thousands of machines that syncopated millions of times each week throughout Nazi Europe. Building new factories might take six months to a year just for the first machine tools to arrive from specialized machine tool works. Long tool manufacturing lead times were always needed. In 1937, IBM ordered three inclinable power presses for planned factory expansion; delivery times for the power presses required ten or eleven months. Three six-spindle drill presses required eight to twelve months. A three-spindle drill required sixteen months. A radial arm drill required twelve months. Two plain milling machines and a vertical miller required twenty-four months. Even working at peak capacity in tandem with recently opened IBM factories in Germany, Austria, Italy, and France, Nazi requests for sorters, tabulators, and collators were back-ordered twenty-four months. Hollerith systems could not function without machines or spare parts. Watson controlled the machines and the spare parts.
19
Watson's monopoly could be replaced—but it would take years. Even if the Reich confiscated every IBM printing plant in Nazi-dominated Europe, and seized every machine, within months the cards and spare parts would run out. The whole data system would quickly grind to a halt. As it stood in summer 1941, the IBM enterprise in Nazi Germany was hardly a stand-alone operation; it depended upon the global financial, technical, and material support of IBM NY and its seventy worldwide subsidiaries. Watson controlled all of it.
Without punch card technology, Nazi Germany would be completely incapable of even a fraction of the automation it had taken for granted. Returning to manual methods was unthinkable. The Race and Settlement Office of the SS was typical of those Nazi agencies frustrated over their long-back-ordered Holleriths. The Race and Settlement Office was a marginal agency that functioned as a marriage-assistance bureau for SS officers, and therefore did not merit its own Hollerith. While it was waiting, Race and Settlement department heads complained in one typical statistical report that the office simply could not keep up with its prodigious raceology responsibilities without a punch card system. "At least 7,000 applicants," the report conceded, "who fulfilled the [racial] requirements for marriage have been waiting years for their Certificates of Approval from the
Reichsfuhrer
-SS." What's more, 50,000 additional applicants were also waiting for further documentation reviews, the report continued, and more than 100,000 applicants had only been provisionally accepted into the SS until the office could properly "complete their family trees back to 1800."
20
"I have determined," wrote the SS Race and Settlement Office's statistical chief, "that the Hollerith punch card system, which is being used successfully by the Reich Statistics Office,
Reichsbahn, Reichspost, Reichsbank,
etc, as well as various research facilities . . . is necessary and would serve our interests best."
21
The Race and Settlement statistical chief succinctly explained the Hollerith difference in these words: "The [manual] way in which the files are [currently] stored, makes any quick and efficient survey impossible. It would require months of work looking through individual files to answer even one [racial] question." He added, "For every single one of the additional future tasks, months of tedious clerical work would be necessary just to determine how many and which [racial] petitions are involved. The punch card system would be able to determine this easily, quickly to the desired date. . . . Therefore, card indexing is indispensable." The SS statistician concluded that the high cost of the IBM equipment was justified because this was the "exact instrument for complete surveillance both on a large scale and down to the smallest detail."
22
The SS Race and Settlement Office was finally allocated its Hollerith, but only in 1943, two and a half years after inaugurating the collection of the marriage data it sought to automate.
23
With punch card technology so vital to German operations, it was no wonder that after Watson ostentatiously returned Hitler's medal, Reich planners suddenly worried about their entire Hollerith infrastructure. Berlin launched the same struggle for autarky, that is, national self-sufficiency, already underway for armaments and raw materials, such as rubber. Outraged Nazi leaders became determined to replace IBM technology with a punch card system they could control. It was a matter of Nazi necessity. It was a matter of Nazi pride.
The quiet effort began in France, which had fallen to German domination in mid-June, just days after Watson returned the medal. Nazi engineer and Dehomag-trained punch card specialists from Berlin quickly began pilfering the machines of IBM's French subsidiary, bringing them back to Germany for urgent assignments. No longer bound to honor Watson as a business partner, Reich agents categorized the machines as "war booty" that could simply be seized.
24
Next, Hermann Goering's circle purchased a majority control of the tiny Powers operation in France, hoping to merge it into a Germanized cartel. Nazi representatives even brought in for examination a rival machine produced by a small fledgling French company called Bull, which enjoyed about 25 percent of the fragmented French market. Plans were already underway to purchase a majority control of Bull, which had wielded no mass manufacturing operation but offered a replicable design. Watson had long tried to neutralize the tiny Bull operation with patent litigation, buy-out offers, employee raids, and even outright purchases of Bull's operations in Switzerland. But Bull, even though dwarfed by IBM, still had a number of machines in operation. And its machinery was considered as good as any Hollerith.
25
But Berlin really didn't know what to do. They stole some IBM machines in France, purchased control of a Powers subsidiary, and brought in Bull machines, all envisioning a new cartel. None of it was coordinated, but something had to be done to counteract Germany's dependence on IBM.
From the Reich's point of view, Watson and IBM clearly possessed an insider's understanding of virtually everything Germany did and indeed all of its advance planning. That had to stop. Argue as they might, IBM NY officials were unable to convince Nazi officials otherwise, even when New York emphasized that only non-American IBM employees possessed access to the Reich's most sensitive secrets. Watson's Berlin attorney, Heinrich Albert, offered a written opinion summing up the problem. "The military authorities are greatly concerned with the whole matter," wrote Albert shortly after the Dehomag revolt began. "Not only are most military agencies and offices equipped with these special machines but the authorities are also afraid that via the majority of IBM in the Dehomag, the USA [itself] might get a far-reaching insight into the activities not only of Dehomag itself, but also of the big German rearmament plants and the German economic structure as a whole. This fear is based on the particular organization of the business of Dehomag and is not quite as unfounded as it might appear from the very beginning.
26
"The Dehomag does not sell its machines," Albert continued, "but lets them out on lease. Before concluding a contract of lease, a thorough study of the [client] company, or business enterprise which wants to have the machines, is made from the point of view whether the use of the machines fits into the system of the prospect, whether the use of them is advantageous, and how the business must be organized to use the machines to the greatest possible advantage. There can be no doubt that this method . . . secures to the Dehomag a contact and insight into the big business of the nation superior to any other company."
27
Albert added that IBM's counterarguments and rationales were simply not credible to the authorities. "It is no use to argue that this fear is absolutely theoretical and has no foundation [in fact] whatever in practice, as not only no American citizen is employed in this part of the business . . . [or that] these studies are kept most confidential and secret according to the strictest general rules and regulations. There the objection and the handicap is and must be taken into consideration."
28
From IBM's point of view, the struggle to create an alliance with Nazi Germany had been too great and the potential for continuing profits too rewarding to simply walk away. Nor would Watson tolerate competitors—existing or newly created—invading IBM's hard won territory. Since the dusty horse-and-buggy days of National Cash Register, Watson had learned not to compete, but to eliminate all competition—no matter how marginal—by any pernicious tactics necessary.
IBM Geneva troubleshooter, P. Taylor, in an August 1940 letter to the New York headquarters, worried openly about the threat should the Third Reich develop Bull machines or an
ersatz
hybrid—even though it would take years to switch. "The danger of this is, of course, that the Bull machines do exactly the same as Dehomag's," wrote Taylor, "whilst also having alphabetic and printing units, and [if obtained] they can easily be exchanged to replace Dehomag machines."
29
Heidinger had obtained a one-week travel permit and on August 15, 1940, he visited Taylor in IBM's Geneva office to lodge his threats and demands. He was not subtle.
30
"Foreign partnerships in German companies are not very much liked," Heidinger told Taylor, "particularly where the foreign interest is a majority. The IBM majority in the Dehomag was not very helpful, but did not cause too much harm—up to now. The situation is entirely changed by the step of Mr. Watson giving back his German decoration and writing a letter to the
Fuhrer
published in the American press. That step is considered as an insult of the highest degree not only to Hitler, but to each individual German. What could be the consequences? Each customer or prospect will try to avoid getting punched card machines from a company which proved or at least appears to be hostile to Germany. Therefore an already existing or a new-formed German company taking up the manufacture and sale of such machines will have excellent chances. Dehomag's business would no longer exist."
31