Ross Perot Left IBM in 1962 and Started a Company With $1,000. In 1984, General Motors Bought It for $2.5 Billion

In January 1962, a Dallas salesman at International Business Machines (NYSE:IBM | IBM Price Prediction) met his whole annual quota in 19 days. That left him most of the year with nothing to sell. IBM had already talked about shrinking his territory. When he offered to accept a lower commission rate to keep it, the company capped commissions instead.

Ross Perot used the idle months to listen to his customers. “What I gleaned from my customers was that they were desperate for more than the hardware. They wanted a finished product,” he said later. He pitched IBM on selling that finished product: hardware, software, programming and operations, all for a set price. IBM turned him down because it was content with its near-monopoly on hardware.

A $1,000 Check and 77 Sales Calls

Perot quit. His wife, Margot, lent him $1,000 from her savings as a teacher. Electronic Data Systems was incorporated on June 27, 1962, his 32nd birthday. He made 77 sales calls before he signed his first client, Collins Radio of Cedar Rapids, Iowa.

He had no employees and no computer. So he bought time on an IBM machine at Southwestern Life Insurance in Dallas and resold it at retail prices. Two computer experts worked for him at night after their regular jobs.

Frito-Lay signed a multi-year contract in 1963. What really drove growth was how EDS wrote its contracts. Competitors signed deals that lasted sixty to ninety days. EDS signed five-year fixed-price contracts, which built it into each client’s daily operations.

Then Washington created a market for it. Medicare legislation passed in 1965 produced piles of claims paperwork. By 1977, processing those claims made up nearly 40% of EDS sales.

In 1968, EDS had 323 full-time workers and earned $1.5 million in profit. That same year it sold 7% of the company to the public. By 1980, it had more than 10,000 employees.

Why General Motors Paid $2.5 Billion

In the early 1980s, General Motors (NYSE:GM) wanted to run more efficiently, and fixing its computer systems was near the top of the list. GM came to EDS and bought it on June 27, 1984, for $2.5 billion. The deal closed on the same calendar date Perot had incorporated the company.

The relationship soured quickly. Perot and GM’s leadership clashed openly. In late 1986, GM’s board had had enough: it bought out his stake and removed him as EDS chairman. Perot had built a company GM needed. He could not change how GM was run from inside it.

IBM Still Sells the Service It Turned Down

The irony lasts into 2026. IBM now has a Consulting segment that sells strategy, technology, and intelligent operations services, which is close to the package Perot pitched. That segment grew just 0.2% in IBM’s latest results, while Software grew 8.2%. IBM got in at the services business decades late, after Perot had shown what it could be worth.

What a Pay Cap Is Telling You

IBM’s commission cap was a price signal. The company put a ceiling on what Perot’s selling could earn him, and it valued what he learned from customers at nothing. That gap between what his employer paid and what the market would pay was the whole opportunity. One paying customer and a borrowed $1,000 were enough to show it.

For workers today, the signs to look for are specific. One is customers who keep asking for something your employer won’t offer. The other is a pay plan that stops rewarding you past a set level. When both show up at once, your employer is probably underpricing your skill, and the market may value it far more. “Persevere, no matter the pain, persevere,” Perot said.

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