[Music] [Music] this is Mike usim I'm a member of the Wharton School faculty and today I'm at the headquarters of IBM here in armont New York with Sam Pomano who joined IBM in 19 1973 became chief executive in O2 and today having stepped down nine days ago as chief executive he continues as chairman of the company Sam it's my privilege to have a chance toh talk with you and I'm going to pick up on that moment when you did become chief executive here of the company back in O2 and as you look back on the challenges you faced as you after many years with the company now we're responsible for the entire company just to reflect on those early days back in ' 02 what did you see as the biggest challenges for your leadership taking over at that time well I think it's you know and you first take over it's hard to separate uh your leadership from the company itself uh because basically when you're a brand new CEO I mean I was President for a period of time you know so 18 months or so and I had run all the businesses along the way I've been here all 40 years now so it isn't like I didn't have experience with the operations of the IBM company but uh as L said to me and as I said to Jenny until you're in it you can't describe it and so you you start out just trying to manage the company which is a big complicated thing even though you grew up in it so your first reaction is I have to keep the performance going and uh and we had a wonderful financial performance we had writed the course financially uh I didn't believe at that time we had done the business TR transformation I mean remember we got ourselves in trouble uh we missed the shift and called the PC but we missed that client server shift and got ourselves uh financially in trouble because of that shift M margin pressure restructuring the company Etc so we've been through a lot of financial transformation or change but not business model transformation so I really believed in the beginning that when I had to keep the business going at the same time uh start the transformation of the business model I didn't think the business model as it was at that point in time was going to sustain itself over the next 10 or 15 years just say why not well primarily because of technical Trends and the macroeconomic environment um and by that I mean when I say to start the technology Trends uh the doccom bubble had just collapsed so uh all of the valuations in Tech had been reset because of the bubble and also there was excess inventory uh because of a bubble and everyone in the industry was telling itself that it was going to return the PC would return it just was a a it was a cycle an economic cycle and we believe that IBM and I really strongly believe myself that it was a systemic shift that this platform that had propelled the industry for 15 or 20 years which these platforms do that's their course normally if you look at the history of our industry uh had run its course and it wasn't going to be the future and so if it wasn't going to be the future we needed to shift to the Future because we learned a lesson of when didn't shift because we missed the PC shift even though we invented it you know we didn't exploit it so I thought that was important and then the other one which was pretty obvious but now is extremely obvious is the fact that the world was going to economically begin to globally integrate and that these emerging countries were going to be as they are in 2012 The Lion Share of economic growth and that we needed to get that company positioned to take advantage of that both participate in the markets as well as access to skill and resources build the relationships you know all the things it takes to really take advantage of those kinds of opportunities I'm going to pick up on that and ask a question about how you saw the future five or 10 years out evidently better than many other people in the in the technology industry and I say that by way of uh picking up on the notion that to transform the company to become what it should be looking that far out you do have to have an appreciation for what's out there that's better than a lot of your competitors many want to become more Savvy about where the industry and where the markets are going uh here at IBM youve probably done that better than most out there so what Sam was your secret of coming to know what that future entailed well I think the from the technology side we have a wonderful research organization and uh I know a lot of people under business model pressure really curtail reseearch Investments we have obviously have not we still spend six billion a year on research and development but it's a huge brain trust so uh we have we do this thing called the global technology Outlook it's about a 10-year View and we argue about these Trends and they they're real debates at the top of the business it's almost like a faculty environment you know it's a peer review in a sense the research scientists come in they say these are the technology Trends the business guys will argue that they don't see it that way or what the business model impact of that Trend you know the usual debates that you'd have and it goes on and uh so I think that you know probably a lot of companies had those debates as I would say I don't think there was anything in the technology that we were seeing that others weren't seeing we just decided to act upon it you know right and so uh others chose not to act upon it uh and I understand that because when the PC thing came along we almost failed we saw the trend we invented it with Microsoft and Intel but we didn't exploit it because we were wedded to the Past a business model called the Mainframe uh there there were people that were phenomenally successful in the PC era that were wedded to a business model and I said well what is act two and IBM's case is like act five because we're 100 years old but lot a lot of companies have a hard time seeing what I'll call the act two because they get so wetted to the product so wed to the financial uh rewards of their business model if they've been successful and they just don't see or if they see they uh have a a conservative view upon acting they're slow down act you know right they think well maybe it's wrong maybe it's really not going to happen I'm making so much money in this business do I really want to take the risk of transformation kind of get the people there I mean you know these are all questions that you you're going to ask yourself before you take this on let me ask if you were haunted as you did take charge back in ' o02 by the not so far back in the past near-death experience that IBM went through in the early 1990s that's when lner came in got to ship back ont course but that was uh pretty tense there in 1993 1994 you were here at the time to what extent did that near-death look affect your thinking as you took charge in O2 well I mean you learned the impact of missing the shift you know I mean we all knew it because I mean you can put it in Stark terms we went from a peak of uh 412,000 people down to a bottom of 27 so 200,000 of our friends were no longer here you know right and most people companies that wouldn't have the balance sheet or the cash flows of IBM would never have made it you know you wouldn't have gotten through it but because of our strength of our balance sheet and our cash assets and things we could get through that right uh and deal with all the restructuring charges that we had to take so uh you learned it and if you look at the history of IBM and uh this is our Centennial year I've been sort of studying this anyway getting prepared for the Centennial if you go back to the Watsons what they were really good at they they didn't miss the shifts they always moved to the Future even though it was a father and a son they moved from you know scales and meat weighing and all that cheese slicing machines to tabulators to Modern to Office Products typewriters selectric typewriter to Modern Computing that's what the sun did to the 360 huge bet on the product called the 360 bet the company at the time like an entrepreneur would you know different than you see I think in a large company today but that was the Father's son and they rolled the dice and so that became the modern Computing europea but that's what it was you know so you saw the fact if you miss the shift the impact of missing the shift you see you see it all the time uh especially in uh it's true in technology Industries because most of the companies are so young so if you look at a lot of the people that have a great start they could run for 10 15 maybe 20 years but then there's no act two the founder the entrepreneur retires what have you maybe they physically can't go any longer whatever and then there isn't this act too so if they don't come back management comes in but they really struggle with moving to the Future that's the challenge uh and I just think technology is more ruthless I mean is as an industry because it's not forgiving versus other Industries where it's not as abrupt and as harsh in its correction you know among the ways that you transform the company O2 through today were some of these Landmark decisions for example to acquire PWC right to sell the PC line back there in 0405 to get into the cloud before some other people did yes talk a bit about how you reach those critical transformative decisions well if you go through um let's start the I think you know they they're all different in a way um so I'll take them very quickly I won't dwell on each one but uh price water house was really about the fact that we felt that the technology was going to become embedded in the business process so it was going to be buy a computer and apply a computer there was no separation we called this thing sensors and and and realtime information Now smarter planet right we saw that occurring so we needed more knowledge of the business process when we did the PWC acquisition I mean we had a good valuation for it but besides that you know people asked me well you know what was this all about I said well we're already the largest IT services company so it's not about being bigger when you're the largest it's about having assets and skills we didn't have and PWC had really deep insight Healthcare and financial systems and the like where we understood technology we understood how to apply technology to a banking system or to the healthare system but we didn't know the process of a payment system or trading derivatives or what have you and the Deep process knowledge and so the our the colleagues that came from PWC gave this that knowledge now we married it to the technology guys we married it to the research and that led to a lot of the things that become smarter Planet but that's what we were missing so we were trying to add to a technology gap or skill Gap really in that sense uh to me PC was um culturally hard but simple economically I mean it was the easiest business decision I've ever made now how you do it and who who do we partner with that was complicated but when you looked at the PC and where it was headed and again this is we looked this is 203 we did the transaction I believe in ' 05 but we ran the model uh and you could see you could see it was going to become consumer and we were positioned in the Enterprise um andell was also Enterprise uh HP was more consumer because of their printer business and you had the uh tashias of the world the aces of the world you had a lot of guys that are very consumer oriented and but D and IBM were primarily the Enterprise guys and so was the old compact but compact then moved the HP which became more consumer when you saw this thing moving cons consumer you could see that the uh the economics of the business were not going to be be as attractive as they were and they already weren't great I mean they really weren't I mean you were looking at a you know operating margin a 4% business a 3% Business Without subsidies from Microsoft and int Intel and people say well what do you mean by Subs so it's in all the justice department suits so it's not like it's not public information when I say this that's what do you mean sub well just read this filings I mean you know it's all there we're not making it up at IBM we Haven to be part of it so we understood it but uh it's not a great business and so and it was going to be under pressure because of moving to the consumer space more consumer electronics like than Enterprise like so the things that we could do robust engineering the great mobile ThinkPad weren't going to be as valued in that space and so that was a simple economic decision the complexity of the decision was the part who to partner with who should we sell the asset to could you get it approved that was phenomenally complex let's dwell on that for just a second in that arguably a vital feature of anybody's leadership is the ability to think strategically to appreciate all the pieces and all the players out there I know you talked with tpg about acquiring the PC line uh you thought about Dell right ultimately you sold to China's Lenovo which had been a purely Chinese company up till that point why why did you pick Lenovo well the reason we did and you know this is one of these things that um if you look at it tactically the the easiest transaction for us would have been a private Equity transaction the guys know what they're doing tpg is a very professional firm we know the guys or there others as well General Atlantic you know they guys that are really good at this stuff they know exactly how to conclude a transaction you know right very little issues with government approval you know straightforward financial transaction right um however when we looked at it uh we kind of came to the conclusion uh that China was going to huge space I mean we were uh small there uh even with the PC business in the company IBM China and that if you looked at the economic model of China or the goals of the government they were trying to expand Beyond just be a domestic manufacturer the largest you know Manufacturing Company in the world the big outsourcer for manufacturing right and that was uh the government's ambition you know the premier and the president when and who that was their goals right and so uh we believe as we do believe that you know as part of our rol as of companies why do you get permission in society to operate well you need to partner with the societ is where you operate you you just can't kind of be anti the society and expect a partnership and so we felt that strategically I felt very strongly about this that that this was a better strategic transaction for IBM even if the economics maybe weren't as attractive but long term this would be a better deal if we could align with a uh one of their Champions by Lenovo and so uh now that added the whole neev another level of complexity uh there were a lot of people that advised me to' be really hard to get this done uh and their advice was right it was hard to get this done I mean they were not misguided but they also believed we could get it done but it was just going to be hard uh and so we took a shot and uh it worked out and so we were fortunate enough to be able to have a partner Lenovo well Clos the transaction from a a deal perspective and we we worked with both the US and the Chinese government both sides uh to get the thing through and it was complex uh but both governments ran a fair process and this thing called CIF is here but if you run a fair process and as the governments defined it uh it should have been approved and it was approved uh as long as it doesn't become politicized that's a whole different you know discussion we didn't think it would become size it was a PC after all I mean it wasn't some big National secret we were selling all the stuff was manufactured in China anyway so it wasn't like we were giving something to away they didn't already have but you know we were fortunate the process didn't get politicized because if it had become politicize I it might have become a different outcome you know these decisions to acquire PWC to sell off the PC line really helped Define your leadership of the company another defining element I believe believe is the bringing to IBM uh a commitment to develop leadership throughout the ranks and if if L gersner the prior CEO's signature or or stamp on the company was to transform the culture I think one of your has been to think about to focus on building leadership among the some 50,000 managers you have why had you why had you earlier on chosen to give it that focus and how how does that work right well it goes back to the business model and and by that I mean um I believe and I believe then that you can't run IBM from here I Happ we're happy to be seing our corporate headquarters in our monk today for the audience you can't do it uh and it's 170 countries today 426,000 people different cultures different religions different local priorities and you need talent to do that and you need people who can deal in a complex Global world and and so um and we had this thing called globally integrate the IBM company and lower the center of gravity which meant move delegate more decision making down and it wasn't just an efficiency statement a lot of people say well you're doing that because you want to get rid of overhead of course we need to get rid of overhead we need to be competitive I mean that's obvious but that's not necessarily some people don't connect that with have the talent on the ground to actually operate this company and then have the Business Systems so they can do the analysis without having thousands of people do the analys is for them the analytics and of course we should be good at computer models given the business that we're in but nonetheless you have to connect the two so we felt it was really really important that we developed that skill base and so we invested uh numerous programs but many of the programs were Beyond just traditional management development and a lot of it was to give people a global perspective because if you're going to globally integrate the company and you're going to expand in all these markets they need to be able to operate in a multicultural environment so one of the things we actually came up with called the corporate uh citizens core we actually took younger people in their careers and said go off and work in Ghana or Tanzania or these emerging places Nigeria or have you uh Philippines and do some work with NOS or the government do some you know uh through the foundation do worthwhile projects but establish relationships work in a multicultural team because the team was formed from Young town all over the world you know and spend to n months doing that and then come back and teach your colleagues what you've learned and we'll have more teams established that was that kind of the um early management level the executive level we created these things called get teams to go out and decide how we should enter in Egypt or what should we do to transform lowering the center of gravity and we sent those guys around the world but the goal was to give an IBM project but then put them in a multicultural environment uh the reason why we got there I worked overseas before I was in the old model go off I was in Japan mostly worked in IBM Japan to tail and I was in our Asian operation uh so I learned what it was like to work in a non- US country IBM Japan with 20 those days 23,000 Japanese and two ging two Sams CFO and myself I was the operating guy um and I learned a tremendous amount about how do you have to work in a different culture uh which was much harder than just the business problems we were trying to solve and so I was sort of uh very sensitive to the importance of that you know that just because people aren't comfortable with English as their native language that doesn't mean they don't have a lot to say I mean and how you communicate all those subtleties of language and culture and so it was really really important and if you believed like we believed and it's obvious today that you know most of the economic growth was not going to come out of the G7 uh and that was a demographic statement I mean you know people say well what you mean what do you mean by that so well it's obvious because if you say once these governments decided they were going to engage in the global economy and their middle class was going to emerge it had to be I mean if you have four or 500 million people entering the middle class they're going to have to have Health Care Systems they're going to demand clean water they're going to want a banking system they'll have debits and credits they'll buy homes I mean that's what happens you know and so that's what we do I mean we do all the it associate with all those things so that was a h obvious you know right that that was going to occur I mean people argued the stability of the governments and all that but if you take a longer term view which we did we felt that we might as well get ahead of the curve so you needed people that was the economics of it uh the business model was globally integrated IBM and operate as one not 100 companies and then you needed the people who had the management acument and the cultural sensitivity to do that and we spend a lot of time we do spend a lot of time and money on that I mean um I think the best example of it is this most recent SEC secession we just went through I mean uh Jenny was great she earned the job it's been here for 30 years I mean she's been all over the company just like I had been all over the company uh there were lots of other candidates for the job you know but she won I mean to her credit let's dwell on that for a second around the issue of mentoring and coaching and I know that an axial principle of your leadership here is to provide lots of coaching lots of mentoring looking back on your own career prior to O2 who would you single out as the most important Mentor you had along the way well it's interesting you know because I think the thing I've had so many people help me and the key to having people help me as I say is you have to be a good mentee right because you have to listen and what happens as you become successful you forget the ingredient of getting a good Mente tea right which is is listening to the people that are men toing you but I've had uh obviously lots of previous managers previous CEOs John Acres Lou gersner other guys on the outside they're always willing to help you know uh very successful if you ask and listen you know people are always willing to help you I find that people aren't always willing to listen and so uh that's I think if you say what's the the the shortcoming in being Mentor you have to be able to want to be mentor know right it starts with that and I and I see it so often um and the that is the key but you know you have lots of Role Models uh along the way uh you know people that were always uh a good role model for me is they never put themselves first uh they always put their institution or Society or their Enterprise first and usually they get better results and if you watch if you say well why does it work because you get people more excited because they can contribute versus an individual trying to take all the bows for the team and so uh I actually you know you could say well I'm comfortable in that style but if you put that aside for a second I actually think it's a more successful product at the end of the day let's go back on John Acres then who was chief executive through 1993 question about John if you can single out one thing that you picked up from John i' like to hear about that then separately from L gers who served before you from 1993 through 02 and then just to complete the question as you've worked with your successor now what did you pass on to her that in your view was among the most critical coaching elements that you provided you're probably best asking her she might find coaching she's the recipient of my uh tutelage no uh I think you know the thing uh I've learned a lot from everybody and one of the things that John did that was most impactful to me anyway he's the one that sent me to Japan and I was uh in his office CU we had this program at the time and you know he had been the executive assistant to carry and opal to Watson who was another CEO so it was one of these things where they groomed young people it was a part of management development so he worked for the chairman and the CEO as a flunky basically but you did learn a lot I mean but you were as flunky I mean I don't want to you weren't Chief of Staff or something trying to glorize the position but uh you were a refined Administrative Assistant so anyway but you know the thing was that and I say that and I was being offered all kinds of U very significant promotions in the US and John said no you should do this and there's a guy over there by the name of Tak shinosan he's a great executive and he'll teach you a lot and I want you to go work in IBM Japan and in Japan there's no structure to the job I mean what's is there is there a position nope you're working for him he'll figure something out when do I go go first of the year and I had kids and family and you know I mean all this sort of stuff but I think you know what uh I learned from that was what he was teaching me is that if you're going to be successful you're going to have to learn to operate in all these different kinds of environments and going back and doing something comfortable even it's a big position in the United States is not going to prepare you for the future so to get prepared for the future right you need to really put yourself in an uncomfortable space uh y and you know not all not all advice is always communicated but you could see it you know now you should just go do this you know right and so and it that was exactly what it was that was from John and then his successor Lou gersner what would you single out there the thing I learned about Lou is that uh other than his phenomenal analytical capability which I can't it's almost unmatched but you know Lou always had the ability to put the market or The Client First M and not and and so the analysis always started outside in you know right and you could say got got back connected with the marketplace or the customer but that the point of it was to get the court the company and the analysis focused on outside in not inside out and I think when you miss these shifts you're inside out if you're outside in you don't miss the shifts because they're going to hit you now acting on them as a you know as a different uh uh characteristic right but you can't miss the shift if you're outside in if you're inside out it's easy to delude yourself from the shift so he taught me the importance of uh always take the view of outside in the other thing Lou does extremely well is always take the opposite position even if you believe the position that that's being represented you as the correct position and he does he used to do that and it it drove a high level of uh discussion really or debate and you got to a better conclusion and he was really good at it I mean Al it was the McKenzie training or whatever he was really really good at taking the opposite even when it seemed obvious to all of us he would take the opposite position so therefore he had to go through the analysis to make sure that your uh your conclusions were correct that your convic your convictions were supported with data and those sorts of things so outside in uh John was more personal development so completely different things I think the key with Jenny which I've tried to you know kind of really coacher through H is that and it's a measure of I think is the most important measure is you know leave the Enterprise better than you find it that should be your measure of success don't get absorbed in the external metrics of success you know I mean yeah our stock is done extremely well terrific I mean we like that right obviously everyone's been rewarded because of that but the company is much better position today we have better Talent the brand is stronger we're much more innovative we have deeper client relationships than we had that's why large investors have come in because they see what we have is more sticky as to use their terminology uh so the company is in better shape so think about you know the next 10 years you know not the next 10 quarters here what can you do to make leave the your company in better shape than you found it and it's not about you the CEO it's about the Enterprise and you know and she'll do that I mean I I think she's that kind of personality she's not absorbed in herself I mean she's absorbed in how do I take this thing to the next level and a lot of the stuff we just the analytics smarter plan We've Just Begun I mean so there's so much ahead of us going into Africa we just started you know I mean so people say well what more can be done we just we just entered Africa I mean you know it's going to be the next China in 10 15 years and so those kinds of things smarter Planet you know we have thousands we started with a hundred references they have thousands we should have tens of thousands you know before this thing's all said and done so it really is about to me it's about that I think it's the most important thing now I mean I understand the whole time I was in the job that the external measure is very short-term oriented it's earnings and stock performance they're distorting compensation today tied to that it's a huge Distortion my personal opinion uh which will only destroy value of the long term and that's driven by people who don't understand value creat ation either third parties or government organizations who are looking for something simplistic to measure reward against something complex and it won't work uh we were blessed in a way because we came up with this long-term model the 2010 road map and now the 2015 road map and we were uh lucky that we could convince the investor that it was good and it made sense if we hadn't been able to persuade them then of course we would have had to have changed but the investor I mean I agree on the 2010 map they all said we could never do it we did a year in advance in the terrible economy say well incredible now they look at the 2015 road map and they say well God they're going to beat that they're well ahead of that already I mean that's their conclusions you know but my only point is we came up with a methodology that fit where you could take that longer term view you could focus on the company it did did create and stocks up 100% so it did create shareholder value uh We've outperformed everything uh so I'm going to pick up on that and uh make the statement that your leadership of the company the forward-looking the outward looking in is really a product of many events over over your lifetime in your career so I'm going to begin to conclude here with a couple more personal questions on that uh you came out of college you joined in sales back in 1973 IBM your first job out you did have an opportunity to try out for the Oakland Raiders yes uh on a very personal Frontier here have you ever had a regret that you didn't actually give that a try at the time I no I I tell you it's a funny uh quick funny story friends of mine actually we were playing D3 foot division 3 football which is you know it's below the ivies even you know I mean uh nonetheless I mean you know we play for them in Columbia or something maybe you know we' have a really hard time and Columbia doesn't have a great record so that's where we were that's our position in football at Hopkins lacrosse is different but this was football and so anyway friends of mine actually did try out for professional football but they were receivers and punters and things so I said and I was going to have to gain weight I my playing weight was like 235 in those days I could have the position I could be maybe 250 260 I would have been midsized not like today' be 300 or something but in those days 40 years ago I could have put on 25 or 30 pounds um of muscle not fat probably fat would have been easier but no I asked my friends I said so what was it like what do you think and they said the position you're playing like a center or a defensive end it we made it two weeks as receivers you'll be dead you're going they're going to kill you so I said well maybe I don't want to do that I should they said yeah why you go to a diet lose 25 lbs not gain 25 lbs so um and that was so I never had any regrets uh about that at all I mean I I just didn't I don't think had the physical characteristics to have been successful I mean maybe I would have been a specialty player for a couple years but then I would have been broken up you know shoulders and knees what have you right let's turn that around uh with a great interest in football in your college days not to mention music and history how has sports music and history informed how you lead in in years since then well I think Pro probably the of the thing that uh if you go through all those characteristics um history in a sense that it does give you a sense of perspective you know right and you see things in a Continuum of time which is uh one of the things I think uh that has influenced me is this view that I me I really did I grew up with the Watsons but then I studied the Watson not just because of the Centennial and then we got back into the values I had read the book A ACC company's beliefs when I first took over to see a first annual meeting even though I had to read it as a new employee you know so I went back through all that stuff again so you you have this inclination to understand and study what worked in the past understanding that it repeats itself and I'll give you a good example I mean at post World War II The Watsons expanded into a lot of the European markets at that point in time expanded IBM's Global footprint well ahead of its time you know opened up facilities Berlin and places like that but then of course as Europe you know NATO and Europe reconstructed itself right we had huge benefit of those decisions that the Watsons had made later but certainly huge benefit associate with that well I mean that today is the correlation is with Jenny created the growth Market units he's the chines the brazils the indias the Russia the Eastern europees the africas it's the same thing expand the footprint you know right Beyond just where you've been concentrated historically so you can see how that repeats itself I think on the sports things you learn in sports really and even in music you learn the importance of orchestration or Teamwork because you if you don't work together it doesn't work right and you also especially in sports you learn competitiveness and and you uh you realize that you have to work together you have to many ways to I was in selfless positions and you know I mean literally Center defensive end it's a selfless position you know really I was in the orchestra I wasn't the star performer I was in a pit with a miners helmet on a light reading music playing my role was not exactly a big role right I was just in the literally the pit with a light on your head trying to read the music you with 20 other people whatever happened to be so you accept it for what it was I was never the star performer so you were all always in a role and you're always trying to be part of this entity or a team that made things successful so I think that has an effect and you need to be competitive I mean there's no doubt that in to survive uh the job of CEO for 10 years or even for any period of time you have to have stamina resilience and you have to be competitive and some self-awareness because you can't get through the ups and the downs I mean there's a lot of ups and downs you know let's take that forward with this uh question question in almost 40 years at the company a decade as chief executive you've made hundreds more than hundreds of major decisions looking back on your bigger decisions what was the toughest single decision and why was that hard to make at the time the hardest decision the hardest decision for me was not the PC every it had to be the PC it really wasn't because it was so economically straightforward the hardest decision for me was dealing with the p problem uh because you were touching the fabric of the business and we had to I mean our pension liability was bigger than our revenue and we had to make the change uh and you know it's obvious to us uh you know the Senior Management the company it should be obvious today to State and local governments and federal governments in the like you know right but it takes a lot of courage and will to make the decision because you're touching so people so you have to have the balance of the change with fairness and so uh and by that Ian I won't take you through all the details how we did it but we we we made sure that certain populations that could have been more severely impacted than others we gave them a more uh attractive transition because it was fair didn't make it easy you know for anybody I mean we eliminated all the executive plans as well so everybody was affected top to bottom but again if you stand back and you make that statement our liability was is bigger than our Revenue people say of course you had to make the change but at the time was controversial there were going to be special bills in the legislature called the IVM amendment that they were being sponsored by people in the legislature we almost ended up in the Supreme Court I mean now you look at the states and you look at the federal government problems St with pensions and say well it's obvious it's they're bankrupt it's obvious well nobody's making a change uh so that's hard I mean I used that example that was a really hard gut-wrenching decision because you're touch in so many people's lives you know you have to do it you're not going to survive you can be an airline or a car company you know you have a role model out there that says if you don't this is what you are you know I got it okay right you don't want to be that but you still have to do it and you know it's it'd be could you push it off to your successor you could you know right I just didn't think it was the right thing to do and it politically political timing was not so great I mean because these problems weren't as aware today I think it'd be easier because everybody sees what they are you look at the problems you know but then this was a well ahead of when they became obvious to society Sam you were not shy about making the big decisions facing up to them getting them done executing around them as you have coached others mentored people that have come up through the ranks in the company is there a line of advice that you offer up for them to make face up to and then make tough decisions how would you phrase that if you're with a mentee yeah the easiest way if you don't put yourself first they're easy decisions to make mhm if you take yourself if it's not about you and I mean it's in all sincerity because if you're worrying about your reputation or your legacy or whatever that you put something first beyond the institution then it's hard because your reasoning is clouded right because you got these dimensions of thought that aren't based on reality because it's your own personality right but if you just look at it and say no it's not about me it's about the future of the IBM company how does IBM stay sustainable for the next 100 years it's simple but you know now that's a you know it's not I mean it's psychologically complex I guess you know right for me it was always easy but you know you can see people that dwell with that all the time they you can watch them make this trade-off between thems and the institution and whenever they make that tradeoff my opinion one individual when you bias it to yourself versus the institution then it gets really hard and you make the wrong decisions you got to be able to almost put yourself in this third party state which I told them all those third party State as if you're just that you're a temporary St in time and you know that's what you are you're not you're not the charismatic Le lead leader you're not going to be the Messiah you're you're a tempor you're a business guy you're a temporary Steward of a wonderful institution and you're role is to preserve the institution it's not about yourself and if they pan you they pan you they're going to pan you okay fine so be it you know right don't read your press Clips I learned that in sports never read your press Clips you know among your biggest decisions along the way made every year actually is to continue to invest in research and development so your R&D budget is one of the biggest out there in our universe uh in in making that decision uh it's pretty obvious but you you've committed to the Future the through technology and Innovation right stepping back from that you want to share with us some of the secrets of remaining Innovative here at IBM oh yeah well the key is I mean you you have to if you want to be rewarded with higher margins you have to do unique things you can't do what everybody else does right so that's why in technology it's research I think it's true for any business by the way if you don't do anything my question is why would they give you your money why would they invest you why would they work for you why would Society let you operate but why would they give you their money as a client you have to do unique things which means you have to innovate and you have to invent right so that's the key so you have to start with funding it and you have to have the smart people uh beyond that you need a process that encourages it you know so you need to let these guys come up with these ideas and give them some Runway because not everything is going to be perfect right uh you know I mean for example there's a great story around watts and the Jeopardy machine which now we're commercializing it but the wonderful story was uh we were I was because I go to research once a year and I tell these guys show me what you're thinking about what's going to change society what's going to change business what's going to be impact IVM so they had all these Technologies and all these know you you know you can barely understand them and I'm around this stuff every day so I said to the guys you know we need we need this game you know we need something people can understand you know how about a game like a video game they can play it and then we'll give scholarships to the kids that win to their schools if they get into top school wouldn't that be great so these guys are off and they're in a bar and they're uh watching they're of course we have you're doing the bar you're having a beer whatever they're doing they're watching Jeopardy and this guy Fu actually is the the inventor behind the David he looks up and goes you know we could do that we could do that so he goes into they had a research thought they was Paul horn in those days and that's John Kelly was Paul and said hey we could do this we could we could we could win that game we could we could Jeff and we could win and uh and pug is come on nobody can do this you know the touring principles and all the scien he arguing back and then the guy goes just give me $10 million to get started just give me $10 million to get started it's not a lot of money and it's six billion right he goes so P go here take the 10 million go hire some people and see what you can do and then they came back three whatever it was two three years later and they invent this thing you know right so you have to have a management system that encourages these people you know right and give them a little bit of funding not get carried away you know they'll give them $100 million to fo around you know right but give them some money to get them started and see where it goes uh and I also think Innovation also applies to the business model like globally integrating IBM you know running as one company and scaling it I mean you can do the same thing on business process too by the way as far as how we operate the company applying analytics and all those sorts of things but you need to give people the flexibility you know and the problem is that if you trade it off um and I just one guy's opinion I feel strongly about this but six billion a year just think how many quarters we could have made cutting out the six billion you know we didn't we still had record performance you know we have record record record record Cash record earnings record this record that you know right but we didn't and because we kept investing but you know you you can respond to the uh the pressures that are put on you multiple different ways easy thing for us to have been do just keep cutting that thing down other companies in Tech have done it and then you see what happens over time so I really go back to this uh create an environment or culture of innovation uh put the Enterprise ahead of the individual you know right you're a temporary Mentor you're a temporary Steward of time look at yourself in the context I guess it's my history p major look in the context of History which you are not in the context of yourself at the moment and you reach a different set of conclusions uh you've presided for a decade over a company that has more than a hundred year history I think you've had nine Chief Executives going back over a hundred years this is a company that indeed was built to last right as people look back on your Reign here as chief executive of IBM what do you hope they will see as your legacy I just hope I like I said that that I left it better than I got there you know if they if people would say that adios I'd be happy as can be and then the other thing is that uh the ability to take IBM into more of these Global markets uh and globalize the back office of the company but most importantly I mean that's how we got the better than where we were when I started but uh that's it uh it's too simple I understand as I say it's so boring Soul fashion it's like our earnings they're so predictable and they're so boring there's no surprise is it's a you know I mean it's it's it's so dull it's like 30 years old nobody thinks that way anymore but I really do believe that you know I mean if you're a company that's 100 years old be consistent in what you do that's a financial statement right be consistent no surprises you're 100 years old act like you're 100 years old you know don't act like you're 100 months old you know and then the other side of it is just Define it as is the institution better off because of the time you spent there uh and it's it's like I said it's so it's so boring nobody's going to be excited about it none of your students are going to go jump up and down and say I really just want to leave it better than I found it that is uninspiring you know I got it you know I have all these kids that go to those schools like yours now so I understand what they what motivates them what they're taught but I uh for for me it works you know right and I think it's and it's worked in the only time I think that we ever got in trouble at ivms we missed the shift you know right and or people put themselves ahead of the company you know let me close by thanking you Sam for your well your 40 years at the company your decade uh as leader of the company for helping us appreciate what it took to do what you've done arguably you took a company that was good under L gersner turnaround and and made a great want to wish you well you continue as chairman of the board here and wish you well for whatever lies ahead so thank you very much oh great I enjoyed it thank you man okay thank you great nice seeing you [Music]