Lessons from IBM in Nazi Germany (How top companies just kept doing business with Nazis..)

Prof Geoff Jones of HBS has recently written a case on role of IBM in Nazi Germany.

He discusses the case and its broad lessons in this superb interview:

Brian Kenny: Today, we’re looking at something that’s obviously a little controversial, as we look at IBM in Nazi Germany. Can you just help us by starting the case of what happens as the case opens?

Geoff Jones: The case begins in Berlin, June 28, 1937. TJ Watson is sat down for a cup of tea with Adolf Hitler, who had become the chancellor of Germany in 1933. Watson is the chairman of IBM, and he’s also the president of the International Chamber of Commerce, and he’s come to talk to Hitler to persuade him that a war would be a very bad idea, and everybody should try to work to avoid it.

Brian Kenny: So as a business historian, I’m curious as to how you decide on the cases you’re going to write. What prompted you to think about this as a good case?

Geoff Jones: This case is intended for my second-year MBA course, that looks at the role of business leaders in waves of globalization from the 19th century to the present. Each case has two functions. The first function is to be a building block, explaining the major historical events of the period. This is about Nazi Germany. The second function is to explore a subject of general contemporary importance. In this case, the issue is what an international business should do in a country with a very bad and immoral government.


Why govt likes technology?

Brian Kenny: Why is the technology so important? What does it do and why does it matter so much?

Geoff Jones: Technology. [Governments] count. It enables you to count people. So it’s developed for the US Census, and it’s used in Germany for census purposes too, but as companies have like more and more data, so manipulating the data is absolutely crucial. So this is the most important information technology story in this whole period. Remember, in this period, companies are getting bigger, governments are getting bigger, they’re doing more things. When the US government introduces Social Security in 1935, it needs a huge amount of information about who’s paying into the system and everything else. And it’s IBM which supplies the technology that makes it feasible, and without IBM, people are going to have to manually accumulate data and processes.

Brian Kenny: I’m making the connection back to current times. There’s been a lot of discussion about questions that the current administration has tried to add onto the [2020] US census, and the case talks about the Prussian census. Can you describe why the Prussian census was relevant in the context of the case?

Geoff Jones: When Hitler comes to power in January ’33, he’s extremely keen to know who’s living in Germany, so he moves very quickly to commission a census in the largest single state in Germany at that time, which was called Prussia. It’s a very big contract, and for IBM, getting that contract is like a really, really big deal, so it’s their way into the big time in Germany.

Businesses usually think that they should stay away from politics and continue their businesses irrespective of type of political regimes.

Brian Kenny: Was there any question about what Hitler’s plan for Germany was at that time, what his sort of motivation was?

Geoff Jones: I mean, there’s a lot of evidence of what’s going on. There’s physical violence in the streets towards Jews all the time, and Watson goes to Germany several times, and surely would have seen it. Laws have been passed. The Nuremberg Laws that strip Jews of their citizenship. Trade unions had been abolished. Books had been burned in public. Conscription had been reintroduced. None of that was a secret, because we know there are huge antifascist and anti-Nazi parades in New York City. There’s an anti-Nazi league set up in Hollywood. Winston Churchill and the British Parliament is going on about the odious conditions of the Jews. There’s a lot of stuff what’s going on. There are a lot of people talking about it. But there were also mixed signals. The world community had held the Olympics in Berlin in 1936. At that event, Nazi laws had softened, maltreatment of the Jews had become less visible, so you could say there are mixed signals about where the trend is going.

Brian Kenny: So we’ve got appeasement happening kind of across the board, and government relations, and business relations, and… I’m going to read a quote from the case that that you put in there, that TJ Watson said, and I would just like you to comment on that. He said, “I’m an internationalist. I cooperate with all forms of government, regardless of whether I can subscribe to all of their principles or not.” I thought that was a pretty straightforward statement that he made, but I’m just thinking about it in the context of the discussions that you were having in the classroom. I mean, is that sufficient for a business leader to take that stand?

Geoff Jones: Well, you know, everybody knows what happened after 1937. We’re going to see millions of people murdered, a World War. And there is Watson supplying the key information technology to the Nazis, and he’s saying it’s not his business what they do with them. I would say it is wrong and inappropriate for a company to do business with governments that blatantly engage in human rights abuses. But, you know, what he’s saying has not gone away. We’re going to see in the ’50s, ’60s, and ’70s, numerous Western companies doing business with the apartheid era in South Africa, and they’d say, again, it’s not their business to criticize governments, and the story, you can take the story on to the present day, I’m afraid. So it’s a view that’s held, and asserted, I think a wrong one.

Brian Kenny: Do you think that given the transparency, the social media platforms that we have today, the fact that people have a view into the way firms operate that they may not have had back then, that there’s kind of a new, less tolerance of this kind of activity?

Geoff Jones: Honestly, I have to say I don’t believe so. Companies don’t want to be caught out doing bad things, that’s for sure, but you know, if you look across many regions of the world, there are companies engaged with governments which are not forces of enlightenment or democracy, and the same old reasons come up. You know, “We shouldn’t have a position,” or “We’re not clear what’s going on.” So I’m afraid, disappointingly, a lot of the lessons of the past haven’t been fully internalized, and I think they should be.


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