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Big Blue in the Bottomless Pit: the Early Years of IBM Chile

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Big Blue in the Bottomless Pit: the Early Years of IBM Chile Big Blue in the Bottomless Pit: The Early Years of IBM Chile Eden Medina Indiana University In examining the history of IBM in Chile, this article asks how IBM came to dominate Chile’s computer market and, to address this question, emphasizes the importance of studying both IBM corporate strategy and Chilean national history. The article also examines how IBM reproduced its corporate culture in Latin America and used it to accommodate the region’s political and economic changes. Thomas J. Watson Jr. was skeptical when he The history of IBM has been documented first heard his father’s plan to create an from a number of perspectives. Former em- international subsidiary. ‘‘We had endless ployees, management experts, journalists, and opportunityandlittleriskintheUS,’’he historians of business, technology, and com- wrote, ‘‘while it was hard to imagine us getting puting have all made important contributions anywhere abroad. Latin America, for example to our understanding of IBM’s past.3 Some seemed like a bottomless pit.’’1 However, the works have explored company operations senior Watson had a different sense of the outside the US in detail.4 However, most of potential for profit within the world market these studies do not address company activi- and believed that one day IBM’s sales abroad ties in regions of the developing world, such as would surpass its growing domestic business. Latin America.5 Chile, a slender South Amer- In 1949, he created the IBM World Trade ican country bordered by the Pacific Ocean on Corporation to coordinate the company’s one side and the Andean cordillera on the activities outside the US and appointed his other, offers a rich site for studying IBM younger son, Arthur K. Watson, to head the operations outside the US and Europe. The operation. By 1965, IBM World Trade had a history of IBM Chile adds a new dimension of gross income of more than $1 billion. geographical richness to the existing studies of Thomas Watson Jr. had a low opinion of IBM because it tells the company’s history the Latin American market. The phrase from a Latin American perspective. This ‘‘bottomless pit’’ leaves little room for mis- history also illustrates how the purchase, interpretation. However, his statement is adoption, and use of computers and tabulating highly misleading from a Latin American machines intersected with other historical standpoint. It overlooks IBM’s long history developments in Chile, such as changing of selling office machines to countries in presidential administrations and economic Central and South America and IBM’s dom- policies. inant position in the Latin American com- In addition, the history of IBM Chile sheds puter market for most of the 20th century. new light on the famous corporate culture that IBM had begun investing in Latin America IBM developed and promoted throughout its before 1914 under its original acronym, CTR world operations. The scale and scope of IBM’s (Computing Tabulating Recording Compa- international business required the company ny), with operations in Buenos Aires and to address cultural difference as an important soon after in Brazil and Uruguay.2 The part of its strategy for growth and continued Chilean market, concentrated in the city of market dominance. IBM Chile provides a case Santiago, constituted IBM’s fourth office study for understanding how the company within the region. By the end of World War worked to reproduce its corporate culture II, IBM had opened at least 19 offices in no outside the US and how it then used that fewer than 12 Latin American countries, corporate culture to smooth over the cultural each facility dedicated to selling punched- variations of different nations. The strong card tabulating machinery to Latin American sense of identification that IBM employees felt governments and businesses. toward to their company helped them to 26 IEEE Annals of the History of Computing Published by the IEEE Computer Society 1058-6180/08/$25.00 G 2008 IEEE communicate across national boundaries and relocate when called upon to do so. In the case of Chile, IBM’s strong company culture also enabled the company to withstand the effects of political instability and social revolution. In the beginning IBM began exporting punched-card tabu- lating machinery to Chile as early as 1921.6 In 1925, the Chilean State Railroad Company, seeking to mechanize its department of statis- tics and finance, ordered tabulating machines directly from IBM headquarters in New York, as did the Customs Office, which wanted to calculate statistics on import and export activity (see Figure 1).7 IBM Chile quietly opened its first office in downtown Santiago on 10 April 1929. The Figure 1. The Chilean Customs Office uses IBM tabulating machines in newbranchofficebeganoperationswithonly 1933. (Image reproduced with permission from IBM Chile) two employees—Sydney Wharin, an American who served as the first general director, and Daniel Toriello, a Chilean—both of whom The story of IBM Chile is tightly linked to were charged with assisting the newly formed the expansion of Chilean public administra- Chilean Statistics Bureau and its effort to tion, which began at the end of the 1920s and conduct the population census in 1930.8 continued until 1973. IBM began its Chilean Wharin and Toriello took turns watching the operations during the presidency of Carlos office and attending to their few clients, which Iban˜ez del Campo, a general in the Chilean included the railroad company, customs of- army who ascended to the presidential office fice, State Budget Office, and statistics bureau.9 after a controlled election gave him approxi- 13 The opening of the Chilean branch office mately 96 percent of the popular vote. signified the beginning of IBM’s corporate Iban˜ez, who strengthened the state through infrastructure within Chile and of a dedicated bureaucracy rather than by force, became the effort to increase the size of the Chilean symbol of a new, strong Chile. He subscribed market for punched-card tabulating machines. to the philosophy that programs of state Despite its move into South America, IBM ‘‘socialism,’’ or welfare from above, could remained focused on its European clients.10 prevent genuine socialist revolution from 14 Nor did IBM’s presence in Santiago elicit much below. His government increased the gener- attention from the Chilean general public. The ation of statistical data and demanded greater technological marvel of the time that had precision in its collection. He also favored the caught the attention of Chile’s major newspa- hiring of university-trained technical experts, pers was the automobile, not tabulating or te´cnicos, a decision that further reinforced machines. The oldest Chilean newspaper, El the application of scientific techniques to Mercurio, mentioned the application of tabu- government practices and increased the quan- 15 lating machinery to the 1930 census effort in a tity of data recorded from 1927 to 1930. tiny article hidden on page 7, nearly one year Using IBM tabulating machinery to com- after IBM Chile opened its doors.11 plete the 1930 census was one manifestation Within Chile’s government offices, howev- of a larger government effort that introduced er, the adoption of IBM tabulating machines scientific techniques, modern technologies, was part of a larger shift toward greater state and university-trained technical experts into bureaucracy and the increased collection of state administrative practice.16 These changes statistical data by the state using Western helped create a market for IBM products and scientific methods.12 The limited scope of this services and motivated the government to article does not permit a detailed discussion of purchase IBM machines. On one hand, the this shift, but a brief overview of Chilean opening of the IBM Chile office in 1929 history during this period will allow the reader illustrates the company’s desire to expand its to better appreciate the significance of the new operations within Latin America. However, it IBM Chile office and why it is important to tell also illustrates the government’s interest in this story in the context of Chile’s past. acquiring these machines. October–December 2008 27 Big Blue in the Bottomless Pit: The Early Years of IBM Chile tural, and industrial sectors.19 In the 40 years between 1925 and 1965, the number of employees in the Chilean public administra- tion tripled, whereas the national population only doubled.20 The Chilean bureaucracy and IBM’s Chilean operations grew in tandem during the 1930s and 1940s. As Chile struggled to recover from the devastating effects of the Great Depression, Wharin and Toriello decided to hire their first Chilean employee: Mena Verdaguer took over sales. Although the depression had caused sales to drop initially, IBM Chile had continued to Figure 2. A Chilean Hollerith Service Bureau in 1936. A picture of Thomas expand its operations. In the early 1930s, the Watson Sr. above the company motto, ‘‘Think,’’ hangs on the back wall. company added a training school; by 1933 the ‘‘Think’’ was later translated in Spanish as ‘‘Reflexione,’’ a word choice number of Chilean employees had swelled to that emphasized the reflective definition of the verb. (Image reproduced 20. By 1939, 70 employees were on the 21 with permission from IBM Chile) payroll. Wharin continued as director of IBM’s Chilean branch until 1937, establishing The Great Depression of 1929 confirmed separate departments for unit record machines, IBM’s decision to open a branch office in scales, and clocks, and opening a Hollerith Chile. The company responded to the stock ‘‘service bureau’’ department for small busi- market crash by increasing its international nesses and administrative offices (see Figure 2). sales coverage and converting independent Toriello took over as general director after dealers of IBM products into company-owned Wharin left in 1938 and remained in the post operations.
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