Michael Dell, Dell Technologies | David Senra

I wanna jump right into what we were talking about before we started recording that. You said somebody was, you've been obsessed, you know, you've been running Dell for 41 years. You've been obsessed really since you were like 11 or 12. So you've been running it for 50 years 'cause you were, it was, there was a Dell before a Dell, right? But you were saying somebody was telling you this story about you in middle school.

When I was in junior high school in the summers in Houston, There were classes at Rice University for young kids. Okay? And so you could go to Rice University and take these classes. And my mom kind of signed me up, and it was great. They had these college professors, and they were teaching these classes. And the way I would get to Rice University is I would take the bus from our house. Right. And it would take you downtown. And, and I was, I was curious. So I was like, okay, if I just stay on the bus, it takes me all the way downtown to where the really tall buildings are. So I go down there, it's like really tall buildings. I'm like roaming around like 11 or 12 years old. And I see like they've got like the stock exchange there and all these tickers going. I'm like, wow, that's pretty cool. So I just started, started learning about the stock market. So anyway, it's just something I remembered. And You know, my parents were always talking about financial markets and it just sparked sort of this interest really, really early in life.

There's a great line I've seen from both Ken Griffin and Larry Ellison describing you. They're like, just, this guy was manufacturing computers in America at a time when there was like thousands of other people doing the exact, very similar thing. And he was the only one that survived. And the reason I just thought about that is because I was watching this talk that Ken gave, I think at Yale, and he says something, he's like, for reasons I can't explain, I don't know why, I've just been obsessed with the stock market, with business since I was in the 3rd grade. And, you know, 60 years later, or however old he is, like, that obsession has not dulled. We were just in your office and you were showing me one of your new unreleased products that we can't film or photograph. But you were like, I was like, this is, This is like a kid on Christmas. Like, you're still—

Super cool product. Yeah, I'm very excited.

I told you I'll buy one. I think it's cool too. I'm gonna buy one as soon as it comes out. But I just love this enthusiasm that is just not dulling. What do you think? I was just with your son Zach last night, and I was— we were talking a lot about his business. It's absolutely ripping. He's super intense, and like, he's just in it right now, right? And then it was like 95% of our conversation, and he's like, all right, I have some things that you should talk to my dad about. And then I— it was so good. I was like, shit, he just did the outline better than me. So one of the things he's like, you need to get on record what motivates him. He's like, it's one of the most fascinating things. He's like, just ask him what motivates him. So what motivates you?

You know, it's all just like fun and interesting and I want to learn. And it's like, it's like a big puzzle to solve. And understand, and you think about the impact that technology has on the world. What could be more exciting than to be in the middle of that, and and to figure it out, and to you know help help advance it? And it's an infinite game, right? It never never ends. Love love to win, hate to lose, and um. Yeah, it's just like the most exciting thing you could do to be in the middle of a business like this and to see it all unfold and play out.

Yeah, that's one of the things he's like, he's addicted to puzzles. So that's the way you look at it?

Yeah, I mean, it's like the curiosity, solving a puzzle, understanding things, And figuring it out. Yeah, that's, that, that's, you always want to do that. I mean, I would feel unfulfilled if I couldn't figure out a puzzle, a question. So yeah, there's like a burning desire to understand things and to figure them out. Puzzles and math have always been important.

When did you realize that about yourself?

I never really realized it. You just asked me about it. It's just, just, it just what I did. I just wanted to understand things. And, you know, when I was dealing with physical things, the way I would understand them is to take them apart. It's like, how can you understand something if you don't take it apart?

Yeah.

And my parents would get pretty frustrated, you know, taking apart things in the house. Sometimes I put them together. Sometimes they would still work. But it's just the desire, it's to understand things, to, you know, the curiosity.

Yeah, that's just one of your character traits. You have a great story in the book where I think you save up for the Apple II. It was a computer and it was, you know, relatively expensive, especially I think you were like 12 or something at the time. And then you bring it home and your parents are like, oh, he's, you know, he's gonna plug it in and play with it. It's like, no, I immediately took it apart. I needed to understand how it worked.

Well, it's like this machine, it's like, It does really cool stuff, but how does it work? It's like, what's inside it? And how do all those things work?

And how do they fit together?

And why did they put these things versus those things? And, you know, sort of getting down to the essence of it.

I had a thought when I was reading your book. You know, at the time you're taking apart IBM, you know, this is, I'm pretty sure before you were a teenager. So this is before you start Dell officially. But it's, you know, and I didn't know this about IBM. I had to go back and look it up. It's like the most valuable company in the world at the time. It was the first company to ever hit a $100 billion market cap, which also blew my mind. But you take it apart and you're like, oh wait, it's just components. This is the biggest company in the world and this is their product. And if you take it apart, it's just made of components from other companies. And it's just like, it's implied, or at least this is what I was reading through the lines when reading your books, like, Well, I can do the same thing. Like, what are they doing here that I couldn't do? Did you have that thought?

Yeah, absolutely. I mean, so it's back to when you open the thing up, you look inside, what's there? Well, there's chips, right?

Yeah.

And there's wires and there's power supplies and disk drives and all these components. It's like, well, where do those things come from? Who makes those, right? What's inside those? How do they make those? And so you sort of peel the onion, you know, and you understand all the different elements. And, you know, when I originally got the first IBM PC, you know, yeah, probably took it apart before I turned the thing on, you know, just to see what's inside.

Yeah.

And one of the, really cool things back then was that you didn't have these sort of application-specific integrated circuits, they call them ASICs, right? Or these big sort of chips that nobody really knows what's inside except the designers.

Yeah.

All the chips were off-the-shelf chips. So you could see, you could sort of understand what the logic was the logic flow was and what each chip was supposed to do inside the circuit. And inside the IBM PC, none of the chips were made by IBM, right? And none of the disk drives were made by IBM. The power supply wasn't made by IBM. And so, you know, I was also interested in the economics of it. It's like, well, what does this chip cost? What does that chip cost? And you sort of add it all up and then you compare it to the cost that they're selling the thing for and you go, wow, this is, they're really charging an incredible markup for this.

That's an incredible insight to have as a teenager though. It's like figure out what the like actual cost of the components are and then go look up. And it sounds like what Elon did with rockets. It's just like the Russians won't sell it to me. I'm on the flight back. These famous stories in all of the books. And he's just like, well, What is a rocket made of? Like, okay, well, there's a list of components. How much do those components cost? What you just said is like, you just kept asking questions like, oh, I'm gonna take it apart. It's like, okay, well, this is all the components. This is what it is. This is like where you get 'em from. This is the co— look, the company name's right here. I can just call them up and find out how much this is.

Well, you could go to the distributors.

Yeah.

And you'd say, you know, okay, how much does this chip cost? And they'd say, well, it's this price for 100 of 'em.

Yeah. Right?

And you could, you could literally map out the cost of every chip inside the thing.

There is a book Ken Griffin, the founder of Citadel, recommends reading called Hardball. The subtitle of that book is, are you playing to play or are you playing to win? It is a book about extreme winners and some of the best operators in business. There is a line in that book that says, if you have not examined your costs in detail, It is very likely that there exists lurking somewhere in your cost structure a major opportunity to improve your profits, weaken your competitors, and expand your influence. The first move is to drive down your costs faster than your competitors can and use the cost savings to upset their strategies. That sounds like the author was describing Dell in his autobiography. Michael Dell says that one way that he was able to outcompete his better-funded competitor Compaq was with a structural cost advantage. Compaq's operating costs were 36% of revenue compared to Dell's 18% of revenue. More than 40 years later, Dell is thriving and Compaq no longer exists. The best operators in business have this in common: they know their business from A to Z and their costs down to the penny. Ramp makes doing this effortless. Ramp gives your business easy-to-use corporate cards for your entire team, automated expense reporting, and cost control. All on a single platform. Ramp's corporate cards are fully programmable. You can set limits so the spending of your team never gets out of hand. Most companies only find out about excessive spending after the fact. With Ramp, you can stop it before it happens. Matt Paulson, who listens to this podcast and who's a founder of MarketBeat, recently switched to Ramp, and this is what he said about it. Ramp is the best. The amount of money you will save from unwanted renewals and employees who think Company credit card equals buy whatever you want will far exceed the best credit card rewards program. Matt is talking about the importance of cost control. Ramp helps you make this an obsession. Almost all of the top founders and CEOs I know are running their company on Ramp. Go to ramp.com to learn how they can help your business play to win today. That is ramp.com.

Something I don't even know if I've ever like verbalized before, but it's in all these biographies that I read. What I feel is just like there's just like a lot of common sense where they just the founder tends to just keep asking more questions and just like going to it like an— you just said, I think, peeling an onion. It was like, yeah, just like, okay, I got that answer. What's the next one? And then what's the next one? And there's something in human nature where we just like, we stop at the first question. But you have this like infinite curiosity that was very obvious, like from childhood. And I think based on what we were just talking about in your office, it's obviously still present. But yeah, it's just very fascinating. It's like, it's not rocket science. Just like keep asking questions and collecting information and thinking about the answers that you're getting.

Yeah. Hey, you want to understand things.

Yeah.

At a very deep level.

Yeah.

And so that's always been a thing for me.

Yeah, I think that's what I'm very interested in. It's like if you read the life story of somebody, like I'm very interested in understanding who the person is and like why they're doing what they're doing. And this is the genius line from Charlie Munger, which is like, well, if you just— it's way more effective to tie the ideas to the personality that developed them. And the way you tie it to the personality you developed, it's like you read about their life story, you read about their childhood, you read about what their interests were. I love the part in your book, I was rereading it yesterday, where your parents confront you, okay? You've started Dell, and you're a dorm room at University of Texas, and they're just distraught, which is really funny given what's occurred over the next 4 decades. Like, what are you doing, Michael?

You're supposed to be, you're supposed to be, you know, on this path to be a doctor.

Yeah. And I think your mom's crying, you know.

She was, yeah.

Very emotional.

Yeah.

And so you were like, okay, in the book you said, I caved, okay, which is very unusual 'cause you have a super strong personality from a young kid. But then the very next page, I can see it in my mind right now, you're like, cold turkey, didn't even look at a computer for 10 days. I tried to take notes in classes. And then when I realized, like, no, like, it was like you were compelled. Like, I thought working in computers was going to be thrilling. I'm going to drop out with $1,000 and I'm going to take on the biggest company in the world.

I think the fact that they, they put all that pressure on me is the thing that caused me to really reflect on it and decide that, no, this is more than a little hobby or a side thing. This is just like, I have to go do this.

Do you feel it was all-consuming even at that age? 'Cause at the time you're like sleeping in the office when you do start. Like you start, I know we talked about this last time, it's hilarious where somebody asked you, it was like, well, when you started Dell, like how many hours did you work? And you're like, all of them.

Yeah, I mean, I wasn't doing anything else. I mean, there wasn't really anything else that was important to me. And so yeah, it was totally all-consuming. And super exciting and wasn't doing anything else.

Yeah. Were you more of like before that, somebody that just focused on one task at a time?

I would get pretty obsessed with, you know, individual topics and sort of go deep on them. So yeah, I wouldn't consider myself, you know, generally interested in a bunch of things. I was like, super deep on certain things that excited me or interested me.

Is that still the case today? Or is it just basically—

Yeah, it continues to be, yeah.

Yeah, Zach told me, he's like, he'll call me at like 5:00 AM and he was like, I have an idea, like we should do this product or this acquisition or whatever. He's just like, he just can't help himself. And I asked him, I go, what would get him to stop? He's like, you have to kill him. What made you decide to write the book?

You know, we had gone through a whole lot with the going private and buying EMC and VMware. And there had just been so much that happened. I wanted to kind of document it. And it was during COVID I had some time and started writing this stuff down. And it felt like a logical place to— sort of capture everything that had happened. And, you know, one of the main reasons I wrote it was for our team inside the company, because I want them to understand, you know, how we think about the business and where it came from. And, you know, as a business grows larger, It's harder to be able to tell the stories directly with everyone. And so it's just a great opportunity to encapsulate all that and share what happened, really, the good and the bad, the things that worked well, things that didn't work well. And You know, I certainly benefited from reading the stories or hearing the stories of other people and thought it'd be a good idea.

I said this on the episode I made about it. It's like a great gift to like future generations of entrepreneurs. I actually think that idea of like having like a singular piece of media, whether it's a book— there's another idea for you for a podcast— for people as the company grows to understand like this is the decisions that were made, this is why it was, this is what we've gone through. Uh, Spotify has this. Originally they did— Gustav is the head of product at Spotify, and he's the actual one that made this. And originally, um, I talked to them about this, they were just gonna do— it was like an 8-part series. Uh, it was gonna be a private podcast inside the company which tells the history of Spotify.

Mm-hmm.

So if you come in now, you know, 20 years into its existence, it's like, well, What were we— what was it like year 1 in an apartment? You know, we got a server in a closet. And so what they did is they did this beautiful, like, narrative. And they would also include the people that were important at the— in the early days. Like, you know, some people don't last in the company, but they were really important.

Right, right.

First 2, 3, 4 years. But I listened to the thing like 2 or 3 times. And thank God that now it's public. Anybody could just type in Spotify Product Story, I think is the name of the podcast. I'm like, why don't more companies do this? Like, I'm not an employee, but if I was coming into Dell or any other company now and I could have, here's 8, you know, 8 1-hour episodes and they say not just this decision was made, it's like, why? These are the constraints we were under. This is what was going on.

Exactly.

Yeah.

So, you know, if we walk downstairs right below this room where we are, there's a new class of small business salespeople being trained, okay? You would love for those team members to be able to understand, okay, how did we get here? What are all the things that, that, you know, we did right and wrong? And to really deeply understand the culture, the values, the beliefs, and then to be able to build on that with their own contributions.

Yeah. Kind of bring them up to speed. And this is the context. I also think there's an additional benefit. for it to make it public-facing, because humans buy stories. Money flows as a function of stories. And I've experienced this. It's like if I read, I spend, you know, 40 hours reading about this person that had this idea in their head, they built a company. At the end of that, you're going to have a way better appreciation. I find out buying their products that I never even would have thought of because now I understand the story. I just reread James Dyson's autobiography, which is one of my favorite books, probably my number one recommendation out of the 400 books I've read so far, just because it's like 90% is just struggle. The first autobiography is just like, I'm failing for 14 years. This guy is like a mule. He won't give up. 5,127 prototypes. But there's an idea in the book that I thought was smart where he understood the power of storytelling.

Okay.

And so he's like, you're going to walk into the retailer, you're going to see 6 different vacuum cleaners. His obviously is designed different, so it's going to catch your eye. But he insisted they wrote like a 200-word story on like a little flyer Right? Maybe like a little piece of cardboard and you could attach it to the handle of the vacuum cleaner. And what happens if that person— humans are attracted to stories, they're attracted to people, right? And so they would read that and then it would increase their sales because they understood who's behind this, why did they make it, how is it different? Like, it was a very effective sales tool. So I think like doing podcasts like this, books, anything like this where you can actually tell like why you're doing what you're doing. This is the crazy thing. I've heard from, I don't know, I've probably got thousands of messages about the episode I did on you. And the most common thing was, I knew the name, I had no idea. Everybody knows Dell, the brand name, right? But they didn't understand just how crazy your story and the multiple different transformations you've had to make over 41 years. And now they're like, oh, this guy, like, I'm so glad you put that in front of me. I think it's like a super important idea.

It's all been a lot of fun and still is. And it feels like we're just getting started, actually, when I think about the business and the opportunities we have. And yeah, it's all fun.

You mentioned earlier that you benefited from studying people that came before you, and this is, you know, you wanted to pass that forward. Like, who are a few of the people that you study, you felt you learned from, or that influenced like your thinking? About how you're building, how you built your business?

You know, when I was a kid, you would read about entrepreneurs, you know, that were starting companies. Charles Schwab or Fred Smith, certainly Sam Walton, some of the early telecom pioneers, people that were doing it right then, like in the '70s. Those stories were also were just super interesting to me, and I grew up in Houston, which was kind of a boomtown. You'd see these new companies being created, and parents were talking about that. And so those those stories were always just interesting and compelling, and you want to understand well how did they do that, and why did they do that, and you know what happened, and. You know, I never imagined myself doing anything else other than starting a business. You know, the idea just was in my, in my consciousness from, from a very early age.

There's this great line that Jeff Bezos says where he's like, our passion— we don't choose our passions, our passions choose us. I think there's multiple— like, my notes to myself in the margins, like, oh, he's compelled. He's like, this is coming through him. Like, he's just like, he has no choice. This is going to happen. But is there anybody in particular that you like really like honed in on and admired and tried to emulate in some way?

I always think you can learn from just about anybody, whether they succeeded or failed. And so I tried to just understand, you know, as many people as I could that were entrepreneurs that were starting businesses. How did they struggle? What worked? What didn't work? And Those were always the compelling and interesting stories.

When you were 15, you met— you were, I think, at some kind of conference with— and then this is the first time you ever were in the presence of Steve Jobs. I think Steve was like 25 at the time. So when was he somebody like— when you saw him at 15 and you saw, okay, wait, this is a young kid in his 20s building a computer company, was like that a model for you or? Like, what was your interpretation of like that experience? I guess what I'm trying to get at.

Yeah. So, you know, in the early days of the computer industry, you know, as I knew it, the microprocessor-based computer industry, you know, Apple was a leading company and Steve was obviously this sort of legendary figure. So I was in this Apple user group, which was a bunch of, you know, geeky people who would like get together and—

You don't say.

Exactly. And, And, you know, sort of compare, you know, how they had souped up their computers and software they had written and learned from each other. And so, you know, Steve came to speak to our user group. And yeah, I mean, he, you know, he was like using these incredible, you know, metaphors and, you know, like listening to him. And looking at what Apple's doing and going, wow, that's really cool. And you'd also started hearing about Bill Gates, who's also about the same age as Jobs. And they're both about 10 years older than I am. And you kind of look at them and go, well, okay, they did something cool. Maybe I've got a shot.

Yeah. That's really cool. There was something you mentioned to me when we had dinner that has been rattling around in my head, and I think it's probably the reason that I couldn't sleep. And I don't even think it was like explicit advice. I think you were just making an observation, but you said something along the lines that, you know, you've seen countless different companies and entrepreneurs come and go over, you know, 4 decades, 4-plus decades, and— You said something that terrified me unintentionally, that most of the entrepreneurs and founders that you've known were never taken out by competition, that they sabotaged themselves. Can you say a little bit about that?

Yeah, I mean, I think you could make the argument that they made mistakes along the way that, you know, were fatal and You know, ultimately, you know, the companies didn't succeed, but it's all of their own doing, right? You know, you have to make the right choices in order to continue on and survive and ultimately thrive.

What do you think are some of the causes of mistakes? You have obviously smart, talented, competitive people, right? Charlie Munger has this great line where it's like intelligent people are taken up by 3 things: ladies, liquor, and leverage. So like, what have you seen any common like causes for somebody to sabotage themselves or to not live up to what they should have?

Charlie's right about those 3 things. You know, we, we stay away from those. Yeah. I sort of go back to understanding things and curiosity and it's like you got to, you got to know why something is working or not working. And if you're in the middle of a super competitive endeavor and you don't really completely understand what's going on, well, you're going to make mistakes, right? And so when I look at the competitors that are no longer around, Yeah, they had either overzealously expanded or made design errors, or they failed to understand the competitive landscape. I mean, there's lots of ways to fail, right?

You have a great example of one in the book with Adam Osborne. where he had a very successful, I think the Osborne 1 was relatively successful, right?

Yeah.

Okay.

Yeah.

And he's like, all right, now we're coming out with Osborne 2. It's even new and improved and it's great. And you make the point, it's just like, yeah, maybe, but it didn't ship in time. And so now you just made this big announcement where you're like, we have this great new product, it's even better than 1. What are you telling to the market?

The Osborne effect. I don't think people talk about it so much anymore, but back then the Osborne effect was a thing where You introduce a new product that's better than your first product, and nobody buys your first product anymore, and you're out of business. And so, you know, yeah, don't want to do that. So go make some mistakes nobody's ever made before. Try to make them in small increments. Fix your mistakes as fast as you find them.

Mm-hmm.

And you actually want to make mistakes. You just want to make them small and you know, iterate and fix them quickly. I mean, one of the things when you're creating a new business in an area that has never been done, or with some new technology, new business model, there's no playbook. There's no like book you can read that says, here's how you do it, right?

Yeah.

And if you hire the people from the adjacent, you know, industry companies, and ask them to go do it, well, they're just going to go do what they were doing before, right? And so that's not going to work. So you need a lot of creativity and you need to sort of intuit your way to the answer by experimenting. It's like, okay, here's a theory that we think will work. Let's try it, right? And, and, and, and, you know, does it work? Great. Okay, let's do 2x that. Okay, let's do 10x that. Let's do 100x that. Doesn't work? Okay, let's stop, you know, restart, come up with another theory, and just keep experimenting until you find the answer.

You're kind of going through that now. In fact, I wanna read something that you said that was one of the most interesting things. You said it on a podcast, and you made this essentially talk to your entire company. And you said, I'm just gonna read this quote. I stood up and told the company that 5 years from now, I love this so much. I stood up and told the company that 5 years from now, we will have a new competitor And that new competitor is going to be in every business that we are in, except they're gonna be faster, more efficient, and more capable, and they're gonna put us outta business. And the only way that we're gonna prevent that is we are going to become that company. It's gut-wrenching stuff to reinvent and reimagine your business, but if you don't do it, you go out of business.

Yeah, exactly. So, you know, when ChatGPT came out, In November of '22, we're sort of looking at this and going, wow, this is a big deal. This is, this is pretty interesting. And you started to see the rate of improvement in the LLMs. And you, you know, in technology, you can, you can sort of look at the, the rate of improvement and the learning curve and you can sort of plot, well, where's this thing going, right? Where's it going to be in a year or 2 years or 3 years? And you look at, okay, we're gonna have agents and multi-agent systems, and we're gonna be able to reason over incredible amounts of information. Well, what does that actually mean for the way knowledge work gets done and the tools that humans are gonna have? So you think about that, you go, wow, this is a big, big deal here. We need to totally reset how we're thinking about the business. And reimagine it, reframe it, and understand what the processes are going to look like in five years. And so you do all that, and you say, if we keep doing what we were doing before, we're going to be in serious trouble because some new company is going to come along, and yeah, they're gonna have all these new tools. They're not gonna have this. Legacy of crap from the past, right? And old ways of doing things, and they're just going to do it the new way. And so we have to change, or we're going to go out of business. You know, I also believe in this idea that if you don't have a crisis, make one, right? You get people excited, motivated. And to drive the necessary change. I mean, in one sense, this is not a technology problem. The technology is there whether you use it or not. It's a question of how do you organize the team and people to actually go and get this thing done? How do you motivate them? How do you give them the right tools? How do you structure the ways people work together so that you can do it quickly? And it's very hard for people to— if you've been doing something for 10 years or 20 years or 30 years the same way, and all of a sudden it's like some new thing comes along, you're like, no, I don't want to do that. People don't like to change, but you have to. And so that's what we've been doing.

Yeah, this is excessively rare. I mean, think about the story in the book where I think the line that I summarized where you were saying about IBM's like, yeah, the personal computer's fine, it's gonna be a great terminal for the mainframe. And it's just like, oh, you see this over and over again in these biographies if you're studying something that's occurring over multiple decades. It's like companies and people cannot envision a future that's different from the present that they succeeded in. So they kind of dismiss it or kind of ignore it. I'm trying to think though, like, so you just said, okay, there's no books, like what you guys are doing right now at Dell, right? You can't, there's like, you're on the cutting edge. There's no books you can read about it, but you have surfed how many different technological revolutions? You did the microprocessor, right? Microcomputer, sorry. The personal computer. Then obviously the internet was invented.

Client-server technology a little bit before the internet.

How many? So like I got 4 or 5. How many have you successfully navigated and had to reinvent Dell over and over again. How many of these, like, huge shifts do you think you've now—

Yeah, there's probably been 6 or 7 of them.

So if you've done that 6 or 7 times, and then I think in the book, you know, obviously you say we did really great on this one, not good on this one, but we've fixed it. You have to fix that. You're not going to be perfect over that many decades. But do you see, like, is there like an echo between all of these, like, that you can apply, like certain ideas you could take away and like form a structure? It was like, oh, that's kind of similar to what we had to do when we had to reinvent for X. Yeah, there are.

Although the, the The timeframes that these things occur tend to be shrinking.

Ooh, say more about that.

So if you think about the internet, you know, when, you know, first you had the internet, you had the World Wide Web, right? And websites started popping up in the mid-'90s. And then, you know, but it took like a decade before there was really a boom in, things like e-commerce. And I mean, it was, it was going on in the late '90s and early 2000s, but it really didn't— it took a long, long time. So now maybe it's like 5 to 10 times faster. Yeah. You know, if you look at the growth in the usage of these tools and part of it is that each successive wave of technological improvement is built on the prior foundations. And so they're able to go faster. So if you have 5 billion people connected with all kinds of devices, well, now they can use these tools and that just goes way faster. I think you have to have this idea in your head that any new thing has some chance of succeeding, right? And—

Say more about that.

So there's a lot of wild ideas out there, and if you dismiss them all, you're going to miss some, some things. So, so you, you, you kind of have to hold this idea in your head that any of these wild ideas has a chance of succeeding. And let's sort of understand what do all these things mean and Figure out what is the point of intersection, right? You know, what should we be doing about this? And when, when is it actually relevant, interesting, valuable? And it sort of, you know, hits escape velocity. And if you're, if you're sort of stuck in a particular paradigm or you're like dismissing things, you're going to miss them.

Yeah.

And so, you know, you need to be open-minded enough to consider all possibilities.

But your ability to do that is so counter to human nature, 'cause we're habitual, like we're habitual creatures, you know? It's like, oh, I found what I want, or I found like what I like to do, and like, this is the best. You know, like if you look at like what music people listen to, for example, it's like, Music you listen to when you're like high school and college, and maybe you've added a couple, but like, you're kind of like just stuck on that where you are just like completely open, maybe addicted to, you know, new technology and new ways to think about or new ways to solve like old problems.

Yeah, I love, I love this stuff.

But how do you not squash new ideas? Like you just said, like, you know, that, that was a great line. It's like any idea can work now. Everybody's connected and they can grow faster than you can possibly imagine. So how do you like, do you have a process for like, how do you not, you know, new ideas are fragile and, you know, they need some kind of protection and some time to grow. Like, but most people just like kind of snuff 'em out or dismiss 'em immediately.

Well, you know, sometimes it's a good idea, but it's the wrong time. Sometimes it's a good idea, but it's the wrong company. Sometimes it's just a bad idea, right? And so, But there's no absolutes here, right?

Yeah.

You just have to be open-minded and consider the possibility that things are changing fast enough that, you know, some new thing comes along. If you took the top computer scientists, you know, and researchers in AI or just broadly, you know, 5 years ago and you said, okay, you know, this is what's going to happen with LLMs in the next 5 years, probably 99 out of 100 would say, no, no, that's not going to happen. Right. And so that's a, that's a pretty good example in contemporary periods here, you know, where you just need to be open to the possibility that things are gonna change. And, and, and there's also this thing where about every 10 years or so, something comes along and just completely expands the opportunity set for the industry. And that's part of the fun, the excitement, the super interesting aspect of what we get to do every day.

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I just had a thought listening to you speak tied to something else that you said earlier. It's like basically humans inability to have accurate predictive behavior predictions about the future. It's kind of tied to the importance of iterating and make sure you're doing a lot of experiments and then having that like tight feedback loop to constantly like get information. Oh, that didn't work. Okay, we ran an experiment, didn't work. Let's try it a different way. Like those two, like those two things work really well together. It's like we're, we're not going to predict the future. We're going to create the future through iteration.

Yeah. And, you know, it's okay to try to predict it as well. It's just really hard to do. And, you know, you might want to have a lot of experiments. I mean, if you go back and say, okay, let's say you had somebody who was supposed to be really smart or supposed to be an expert at something, right? 10 years ago, how good were they at predicting what was going to happen? Not very good. No, it's terrible. So, so don't rely too much on that, right?

This is why I think entrepreneurs have to like study past entrepreneurs too. And it's like obviously very valuable. Like, it's no surprise that like you were reading about these people. Like, what I would say is like the greats all studied the greats. This is like very common. Like, they were doing it today, they were doing it 40 years ago, they were doing it 200 years ago. If you took like an average person in normal society and the way they think about experts, okay, and the way it's discussed in all these biographies, it's like they're very dismissive of experts, right? I just mentioned I was reading James Dyson's autobiography. You know, the whole thing is just like he believes in the Edisonian principle of design, this constant iteration. You learn as you go. You can't predict. Like, you're— you just, you know, change one thing and then test it and see how it goes. And he mentions studying Henry Ford a lot in that book. And then James Dyson wrote an autobiography 30 years after that, that he also mentions Henry Ford a lot. And the reason I thought of that is because as you were speaking about, you know, you go and ask an expert from 10 years ago, what's going to happen? Like, they're not going to tell you that ChatGPT is absolutely, you know, that my 13-year-old I use ChatGPT all the time, but I'm a nerd. I like to research stuff. I like to read about stuff. She uses it as like a therapist, a shopper, a friend. Like, it's an entire ecosystem to them. There's no way you can, you can predict that. So there's a great line in Henry Ford's autobiography, which was written 120 years ago. Okay? This is not a new phenomenon. Human nature does not change. History doesn't repeat. Human nature does. And he says, if I ever want to sabotage my competition, I would fill their ranks with experts. Experts tend to know so much And they're so convinced that they're right, they'd get no work done.

Yeah, at the limit, nobody knows anything, right? And it's not a bad philosophy when you're thinking about the future. It's good to have a hypothesis though, right? And ideas and experiments and to keep an open mind.

So what was— when we go back to that, hey, this— they're coming for us. They're gonna be faster, more efficient, more capable, and they're gonna put us out of business. And we're not gonna let that happen 'cause we're gonna transform. We are going to be that business.

Right.

What was your hypothesis back then? Do you remember?

Oh, it's pretty simple. It's that it will be possible to dramatically improve the way we do things in all the core processes of the business. From software development to support to sales to every major function, our supply chain, everything can be improved in a dramatic way. And that's what we're doing. And we're finding, you know, as we take our data, as we reimagine the processes and simplify and standardize them, we can make them way more effective. So, you know, an example would be in support. We have incredible amounts of data. We have telemetry data that the machines are giving us all the time, right, about, you know, soft errors and all these things that are going on, you know, inside the usage patterns from customers. We have warranty data. You know, we have previous call logs, we have all these knowledge bases, we have Jira databases. It's like millions and millions of documents. No human could ever interpret all this. And so we created this tool called Next Best Action, which takes all this data and understands what problem the customer's trying to solve. And it helps either the customer or the agent that's trying to help the customer get to exactly the best way to solve that problem in the fewest possible steps. And so the person helping them feels like, wow, I'm way better at my job than I used to be because now I got this genius on my shoulders telling me exactly how to solve this problem. The customer's way happier, the problem solved way faster, and the tool summarizes The call, so that saves a ton of time, and so everything gets way better. So you can take that same example, and you know software development with coding assistance. Our sales teams have access to incredible tools, and so we're doing this all over our business. And of course, our customers are doing it. And what is this doing? It's unlocking the power of data using compute and using all these models, which also happens to be. You know, we're in the business of compute and storage and networking. So it's an enormous opportunity for Dell itself to be able to help all of our customers unlock the power of their data.

You couldn't predict like the actual tools that were going to be invented. You just knew that now we have this new— there's this new technology that it will transform every single process inside the business. We won't be able to predict all the tools, but we just know that they're coming.

If we didn't do that and our competitors did, we'd be finished. And so we're not going to do that. And even if we did it and our competitors did it, let's say it just neutralizes. You have to do it. You have no choice.

Yeah, there's a line in Andrew Carnegie's biography. It was really fascinating because, you know, he dabbled in a bunch of different businesses. He was pretty wealthy before he started the steel company. But once he realized that, you know, think about how important steel was at that time. It's like everything. This is the new, the new product that everything else, every other product is going to be made out of, from bridges to railroads and everything else. Like, this is the biggest opportunity of my life. I'm going to go all in on it. To the point where he didn't even want any distractions. He sold all of his stocks 'cause he didn't wanna find himself looking at the newspaper to wonder like what the price of the stock was. Like fully focused on the greatest opportunity of my entire life. He went into an existing business that was run by older gentlemen, right? He had this new way to do steel. I think it's Bessemer steel that he got from England. So he took that idea from England, imported it into America, which it's kind of weird how often that is in the history of entrepreneurship where it's like, oh, this idea is working in one geography, will it work over there? It's like, yeah, 'cause humans are kind of the same everywhere. There's some, you know, cultural differences, but you know, our, our core motivations are very similar, and they were very resistant to change. So they're like, no, that's not the best process. And then they would ridicule him for investing in the newest technology. He was spending a ton of money. Every time there's a better machine, a more efficient machine, he would immediately rip out the old machine and put in the new technology of his day. We wouldn't think about it as technology today. It's definitely technology. back then. And when you read his autobiography, which, you know, is in the public domain, anybody could read it for free. It's an incredible gift to humanity. There, I remember getting to this part of the biography, which is exactly what you just said. It's like, okay, even if this doesn't give us advantage over our competitors, if we don't do it, like, they will have the advantage. So even if we're on, like, on the same level, and the summary of what Andrew Carnegie was saying, these guys wind up not adopting the technology and they went out of business. So he says, invest in— this is not a direct quote, this is me summarizing his idea. He says, invest in technology. The savings compound. It can make the— it gives you an advantage over your slower-moving competitors, and it can be the difference between a profit and a loss. If he didn't do that investment into the new technology that his competitors were dismissing, the stupid young kid with his fancy machine, right, that wound up making his company profitable in a year or two and their company unprofitable. And then slowly and slowly, they just, they kept losing money and then they went outta business. It's very fascinating how these like themes just keep reappearing.

Yeah, exactly. You don't necessarily want everybody to know what you're doing.

Also, the maxim I have from this I use on the podcast all the time is that bad boys move in silence. And so you mentioned earlier that, uh, there's no, sometimes there's no book, you're on the cutting edge. And so I remember there's this great line in this biography of Steve called Becoming Steve Jobs, which I actually think is the best biography written about him. And Steve's like, I don't even know what the business model of animation is. And they start partnering with Disney. And he has this great line. He goes, you can't go to the library and check out a book called The Business Model of Animation because there's only one company that's ever done it well. It's Disney. And they don't want anybody else to know how lucrative it is. One thing that was hilarious that your son Zach wanted me to ask about was what he calls Dad Terminal.

Yeah, so Dad Terminal is what he refers to as when he kind of taps in and wants to talk about a particular topic or has a question. And it's one of my favorite times with Zak because we're talking about solving problems or challenges inside his business. And You know, I get to share the mistakes I made, mistakes I saw other people make, lessons learned, and hopefully save him some pain and suffering and, you know, steps from, you know, learnings along the way.

Yeah, he says instead of typing in the— I was like, why is it called— I was like, why is it called Dad Terminal? I didn't understand what that was. And he's like, well, Bloomberg Terminal. He's like, you know.

Exactly. Yeah, yeah.

He's like, you subscribe, you log in, and you have a question, and then like you type it in, you get this really advanced answer. He's like, I don't use Bloomberg, I use my terminal.

I use that terminal.

And I was like, give me an example. Like, what is— what's the last query into that terminal? And he goes, supply chain. He said it like it was like obvious. I was like, I don't have a supply chain. I run a podcast, I read books. Like, explain it to me. He's like, my— there's a handful of things, not even a handful. He's like, there's a bunch of things my dad is world-class at. And he's just like, one of them is supply chain. And I'm curious as to like why you think you're— why other people describe you as really good at that. Is that— is supply chain just related back to how we started this discussion? It's just like another puzzle for you to like direct your curiosity to?

It's definitely an important puzzle and a critical puzzle. I mean, I think if we had not figured out how to do our supply chain well, we would not be here today. It's as simple as that. So it's a fundamental thing that is just super important in our business.

So it's just you've thought more about this area?

Over and, and made, and made a ton of mistakes and learned a ton of lessons and, uh, sort of, you know, figured out what works and what doesn't work.

Yeah, there's a line in the book, I think the first time you realize, hey, I don't like these— your whole thing is eliminating middlemen and like getting as close to the source as possible. And, um, I think you're like 19, you might be 20 years old at the time. But you're taking your first trip to China, if I'm not mistaken.

Well, so that would have been 1985. It really wasn't— you couldn't really go into mainland China at that point. There was nothing really to do there. They weren't making anything.

So where were you going? To Asia?

You're going to Asia. So yeah, I went to Japan, Hong Kong, Taiwan, and South Korea.

Yeah, but what I love is just like how excited you were.

Oh yeah.

Because it's like you said, it's something you said earlier. It's like you got a deep love for your business and then now you get to keep peeling back the onion and getting closer and closer to how now it's like, oh, I'm like spending 16 hours a day. I'm sleeping in my office. I'm working. We have customers, we have— we're hiring employees, we have revenue growth. But now I'm getting like deep, deeper and deeper, deeper understanding. And like, so as I read these biographies of people, I try to like build like, you know, I think I have a good sense of like how you think and like what's important to you. And what I realized is like that instinct that you had as a 20-year-old man or however old you were at that time, it's like that has not— it's never been alleviated. It's just like this constant, like, keep going lower and lower and lower to like seek more, a deeper understanding of like the world around you, but also how your business like fits in that world and how you can build technology to like enhance everybody else around you.

Yeah, of course. I mean, that's what you're supposed to do, right? You're supposed to understand things, right?

You say, of course, like, this is the fun. This is another thing I told you when we had dinner.

Like, how else would you do it?

I don't know. But to you, this is why I think like writing the book and having conversations like this is important because like there's so much shit in your head that is so unusual and like, like just it's so valuable, like getting it out and putting it like out into the world because I remember like—

I wouldn't know I don't know any other way to do it.

I know, because you don't understand how abnormal you are. So we were halfway through our dinner. I looked at you and I was like, dude, I have this paradox in my head that I cannot reconcile between, like, the crazy career that you've had. It's like, I study uncommon people for a living. You are uncommon amongst uncommon people, right? You have this. So the paradox I couldn't reconcile between this crazy ride that you had, that's described beautifully in your book, this 4-decade, you know, mission that you've, that you've been on, that you've relentlessly given a lot of your life energy to, and just how normal you are. Like, you're like, not— I'm talking about like your affectation, your personality. Like, you're very polite and calm and measured, but it's just like, you understand how rare this is.

No.

I know, because you're like, of course you would. It's like, it's— this is what I love.

It's like, just wake up every day and go do the thing.

This is why you're great. That's why. But that's, that's why you're great. So like—

Seems pretty normal to me.

There's nobody that reads this book like, this guy's normal. No, it's not at all. So there's what I love about this, and this is why it's so important, because, and I mentioned this on the episode I made on you, but there's this, this engineer turned founder, Sidney Harman. You know the company Harman Kardon? Sure. Yeah.

Yeah.

So he has a great line. He said that the founder is the guardian of the company's soul, that it's impossible to separate You know, the, the, the creation from the creator. And I think over time, like the—

I resemble that.

Goddamn right you do. This is also, again, how abnormal you are. I used to say it's like you need to build a business that's authentic to you. And then in this book, Lee was, you know, talking about he was only able to last 4 years, I think. And he's just like, you know, we're fighting IBM, we don't have any money. And He's like, my back's hurting, I'm losing my hair, like I can't sleep. And he's just like, Michael's ecstatic. He's like tap dancing to The Office every day. And he said a line that changed, like really made me think about things. He's just like, he built a business that was natural to him. Of course you, it's not abnormal to you because you built a business that's natural to you.

Yeah. And if, if you've been doing it every day for 41 years, it, Seems pretty normal, right?

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Lee Walker. Tell me how important like that was finding a person, 'cause you were relatively persistent in recruiting him and you were like 21, I think at the time.

21, yeah.

And he was 45 or something like that.

Yeah.

Like what's the role that you feel he played at that point in Dell's history?

Well, yeah, the company was, I mean, it's like our rocket had sort of taken off, but you know, it was, pretty fragile, right? And, you know, we had some good ideas, but there was a lot of missing pieces. And Lee helped fill in those missing pieces and, you know, sort of organize the uncontrolled chaos and helped us sort of really, you know, scale up the business.

In like operations? Like what do you think?

Yeah, I mean, it was, well, first of all, we were growing so fast, we just didn't have the balance sheet or the capital to support our growth. And so he helped us get some credit lines and that freed up capital and then sort of organized some of the operations. and stuff I didn't really know about or have a great interest in, you know, 'cause it wasn't the technology or the customers.

Yeah.

And so he helped sort of get all that stuff on the right path. And then as we needed even more capital, you know, with a private placement and then going public, you know, he helped sort of get all that going. You know, just basically, how do you, how do you scale this thing up to get it ready for 10x or 100x growth?

One thing I thought was very fascinating that Lee Walker said, right, is you got to the point where, you know, you had that negative cash conversion cycle where— but you were selling to like individuals. So individuals like, oh, I want a computer, Michael. Okay, give me your credit card. You're like, great, I got this money, which we'll talk about in a minute. But now you've moved up and now you're doing enterprise. And some of these companies are huge, like Texaco and like these giant companies. And I remember at one point in the book, it was something you were doing like $60 million a year in revenue and you had like $200 grand in your bank accounts or something. It's just like, there's just no cash here. And what was smart is he went to the banks and I was curious, it sounds like he had relationships with the bankers. And I always have this maxim that relationships run—

He did.

Okay.

Yeah.

So relationships run the world. You see that over and over again. And so Lee had relationships with these, these bankers that I assumed in the book, and you just verified. But then what I thought he did was really smart. They're like, listen, we trust you, Lee, but we don't know this kid. And his whole point is like, you don't have to even trust me or the kid. He's like, look at all the purchase orders. Like, do you think Texaco's gonna pay us or not? And using the, like, the brand and the prestige and the, you know, essentially the value, like Texaco's not going out of business. They're gonna pay them, pay this kid that you say you don't know, lend us against our receivables.

I was like, yeah, that's a really good idea. Yeah, it was receivable-based financing. The problem was that, you know, as a 21-year-old, you know, starting a business with really no capital, you know, infusion from the beginning, you know, $1,000, right?

Yeah.

You know, a banker looking at it, with no one known inside the business to trust, would sort of— their general reaction would be, I think I'll go do something else. Right?

Yeah.

But Lee had those relationships. He was trusted, and he was able to kind of explain it to them. And that helped sort of break open that logjam, and that gave us some of the capital we needed to continue to grow and expand.

So can you explain how you stumbled upon the negative cash conversion cycle and why that was so powerful?

Yeah, so, you know, we didn't have any capital, right? And so, you know, what we figured out was that if we could dramatically shrink our inventory and get paid from our customers customers faster and, you know, maybe not pay our suppliers, you know, instantly, pay them a little bit later, then if you're growing and you have a negative cash conversion cycle, you actually generate a lot of cash. And so you don't need as much capital to raise to be able to grow the company. You have a high return on capital. And so we started looking at the business that way. And of course, we also there was this really interesting thing where our competitors who didn't really understand what we were doing, they had these elongated supply chains. They had distributors and dealers. And so they would have, you know, like 90 days of collective inventory from the time that they actually made the product to when it actually got to the customer. And you could actually understand this because if you opened up the computers The chips had dates on them that showed the weeks they were made.

Whoa.

So, you know, it would say like 42-92, and that meant it was— that chip was built in the 42nd week of the 92nd year. And so you could literally date how old the inventory was by opening these things up. But anyway, so they had like 90 days in their collective supply chain, and we figured out how to have like 5 days. I mean, it was crazy. It was like, it was like a massive advantage. Now, the other reason this is important is because it turns out that the price of electronic components generally goes down, right? And, and, you know, it's, it's a pretty predictable And so if our components are 5 days old and the competitor's components are 90 days old, well, theirs cost a lot more than ours do, right? And so now you've got this structural competitive advantage. Now, another element of this is that you also have the freshest and the newest and the best technology. You're not selling the 90-day-old fish or bananas, right? You're selling the, the, the, the new chip, the, the latest capability. And so now you've got even another advantage, right?

Yeah.

And so, and then you've got this feedback loop because you're getting signal from the customers of, oh, I like this, I want that, change this. And so you're able to, you know, create this dynamic feedback loop. So That was what we created and it worked, you know, and we kept iterating it and evolving it. The competitors, you know, they kind of dismissed it. And one of the best things was they just didn't understand it. They like misunderstood it, which was fantastic.

How is that?

So I— it's like you don't want them to understand what's going on. You don't want to explain it.

But how do you explain their inability to?

Now you can explain it.

Yeah.

But back then, you don't want them to know what's happening. You just want them to maybe not even see what's going on.

So I have a funny story about this, and then I'm going to get back to Compaq and IBM. So I had dinner with one of the wealthiest people in the world. He's 76 years old. He's been in the family business. He's the second generation. of this privately held, like, dynasty. And he started working in the business since he was 6. And it was like crazy stories. It started on the shipping. They own one of the largest privately held shipping companies in the world. And he's this raconteur. He's like super charismatic. And just like, I was— it was an incredible dinner. But I had found out, same reason where you're like, hey, I'm writing this book because I want, you know, people that come to Dell to understand the history. They had commissioned, the family had commissioned a real author, right? I have some of these books at my house, not from this guy, where these family businesses or, you know, these people at brokerage companies, they have, they'll hire, you know, an actual author, pay them whatever, $1 million, write the book, and then they'll print it just like this, but there'll be no ISBN number on the back because it's not available for sale. So I have a couple of these in my home library that people have given me because of the podcast. But he was telling me the story. It's like, yeah, we had, we commissioned a biography of the patriarch who passed away a long time ago. And then we did one for me, and I was just like, dude, give me those books. I like leaned in. I was like, I want those books. I was like, I'll crush the episodes. The episodes would be great. Like, because he had so many crazy stories. And without hesitation, he goes, absolutely not. I was like, why? He goes, I have no desire to educate my competitors.

Yeah.

So that— you just nailed it. It's like, obviously, if you have an edge, shut up about it. This is what I don't understand. So maybe IBM and Compaq are the two people 2 main companies are not understanding the advantage that you had at this time, right? IBM is a big old stodgy company. Okay, that makes somewhat more sense. Compaq was run by its founder. How do you think he deliberately misunder— like, how is that possible for him to not be able to accurately analyze? Do you think he was just dismissive of you? He didn't think you were a threat? Like, what was going on there?

He's still alive. You can go ask him. You know, I, I, I, I I, you know, I think, I think when you're, you know, you're in a bubble, you know, people tell you things are working and maybe you just don't want to believe that there's alternate information. And so you dismiss it.

Did you read the new biography of Jensen Huang called The Nvidia Way? Actually, it's a history of Nvidia, but he's heavily featured. Nvidia Way?

I haven't read the whole thing.

No. I did an episode on it. I'll send it to you.

Yeah.

But he has this whole thing where the threat comes from below. And his— I think he reduces everything to maximums. He's like a really good communicator. And so his thing is like, we're going to ship the whole cow because the threat goes from below. And I think I mentioned this in the episode I did on, on your book where it's just like you at the time came out with a— you just beautifully described like you're just stacking one advantage on another advantage on another advantage. So you're like, okay, We have the latest technology. We have way better supply chain management than you. We are putting out— I think you put out a computer that outperformed Compaq's, which you sold direct to the consumer for $795, if I remember correctly. It was faster than theirs, and they sold a worse computer for $1,500, and it was only through retail stores. It's like that exact— the manifestation of all these advantages you had. You could just look at the market and be like, it's very curious to me how this founder could be like, hey, this is the best.

Yeah. And you, you know, you kind of hope that they don't even see it.

Yeah.

Right.

I mean, I think there's a human instinct to, to say, hey, look at me, I'm doing this great thing. Isn't this cool? Right. But actually in business, it's better if the competitor doesn't understand or doesn't see you.

So because you weren't in stores, the only way they would know that is if they were ordering directly from you. And they probably weren't doing that.

Yeah, or if they were sort of paying attention, you know, but you kind of hope they don't notice and don't pay attention.

I think this is tied back to the importance of following like your natural star and something you're just obsessed with. Because I didn't know that part where you could take these things and see, oh, this is the 42nd week of the 96th year. That's insane. There's a line in the book—

It's not that hard. The numbers are right there.

It's not that hard to do.

The numbers are just sitting there. It's like they're just staring at you. They're talking to you.

I 100% agree with you. It's like, but this is the difference between somebody that's obsessed and somebody that's not. Like, that guy wasn't taking apart computers compulsively. There's a story in the book, and no disrespect to him, I'm not trying to throw any shade at anybody. There's a story in the book where you guys are doing, I think, the private placement or the IPO, and Black Friday happens. And I think Lee Walker walks in your office to tell you that, oh shit, there might be some trouble. There's trouble brewing in the capital markets. At this point. And he said Michael was in his office taking apart another computer.

That's what you do.

That's what you do. That's exactly— I think that's the biggest thing, man. It's like, it's an unfair advantage if you can direct your energy at something that you— there's no— we talked about this at dinner. We have a mutual friend in Sam Hinckley. And one of the things that's interesting about Sam is if you analyze who he keeps around him, they have different interests. You know, it's like this podcaster dude, this investor guy, this entrepreneur, this like athlete. And he's like, what, what, what I'm drawn to, what all these people have in common that may not be obvious to you, David, is that there's no end to— like, you can't get to the end of what they're interested in. You think he used the analogy of like a cup. He's like, you just pour and pour and pour. It's just like, it just keeps going. Like, they can never get to the end of their curiosity. And I think you're a perfect example of that. Where if you look at other founders that are doing things for fame or status or whatever the case is, it's like Jerry Seinfeld has a great line. He goes, if you just do it for the money, you're only gonna go so far.

Yeah, when it's like a passion or an obsession, there's, there's, you just, there's no end to it.

Yeah, and you're, you're taking more chips and analyzing like, oh, I have a 90-day advantage over here and I'm not worried about the capital markets 'cause we're just gonna keep serving our customers. And like eventually that is going to, Change. There's not gonna be a depression forever. So what can I focus on? I can just focus on understanding what I'm working on, what's in front of me, and then following this deep curiosity, you know, and, and, and actually taking the curiosity that comes from your head into like an actual product that makes somebody else's life better. It's like the miracle of entrepreneurship.

You got it.

So we were just talking about the fact that Compaq and IBM They were almost like, essentially you got fuel from being underestimated. You've mentioned in the book that like you found it, I think you said something that's like a powerful motivating force. Do you recall why you felt that way?

Yeah, it was just like, okay, wow, this is gonna be a multiplier for us because they underestimate us. They don't understand what we're doing. And, and so they, they didn't see us coming because they were underestimating us. You know, I think the CEO of Compaq, you know, would refer to us as a mail order company or, you know, garage operation or whatever, you know, and you'd hear that and you'd go, oh, wow, this is, this is great. It's like they have no idea what we're doing. All that was motivating. Anytime there was sort of a setback and the conventional wisdom or even whatever interpretation was, okay, they're going to fail, they're going to go out of business, all that incredibly motivating.

Is it still like that today?

Of course. Yeah, absolutely.

I love how everything is of course and of course it is.

Yeah. If it wasn't, I'd probably be dead. I mean, I—

And still caring about the company.

Yeah.

Even from the grave. It's a common, I think, misconception. I'm curious to get your take on this, where people are like, well, you know, if you don't raise all the money at the beginning and your competitor does, like, you're automatically dead. And I hear that a lot. And I was like, I don't know, like, Compaq raised $75, $100 million. and you had $1,000 and a dorm room, do you feel that like it is actually different today? Like if you were advising like a younger entrepreneur?

I think it's very situation-specific in terms of the company, industry, et cetera. So I don't think you could give generic advice there.

Yeah, that's why I think like, The generic advice is you have to do this or you're dead. I'm like, I don't— I'm pretty sure that's not the case.

I don't think, you know, like I was saying earlier, I don't think there are ever these absolutes. I think you always have to hold out the possibility that somebody is gonna figure out some clever, interesting way to do something that nobody's ever thought of that is different. And, you know, that's just gonna happen, right?

Yeah, that's actually an interesting area to go down where it's like, who else— you figured out by accident, like, because, you know, necessity is the mother of all inventions. Like, I don't have capital, so how do I get money? Well, I'll just ask my customers for the money. And then you accidentally discovered all these advantages and had a deeper understanding as you went along.

Yeah.

Are there any other examples of like entrepreneurs or businesses that you've studied where it's like, wow, that's like a really clever way to do something effectively, inexpensively?

Well, I mean, you think about some of the retailers, you know, like Walmart and Costco and Amazon obviously came up with super clever ways of winning in that space by, you know, doing things inexpensively, taking out all kinds of cost.

Yeah, the other one that came to mind was Sam Zamuri, the Banana King. He essentially builds the second largest banana empire, and at the time, then later on overtakes the first largest, which is United Fruit Company. But I guess one thing that he figured out, and he was actually your same age, he was 19 years old, he had no money, and he was trying to figure out a product to sell. And so what he did, he's just like, well, I was working the docks down, I think in Alabama at the time, And he's like, all these fruit companies, they have these things called ripes, which are the bananas that are going to go bad in like 2 days from now. And they just take them off the boat and throw them in the garbage because they can't get it fast enough to the store. And his idea is like, well, I can use this new technology of the day, which is the railroad, and I can buy this for almost nothing because they're not getting anything anyways. And I'm going to put their ripes and get on the railroad with it and then sell it at every single stop. And then he was generating so much cash and then he could start working down the line all the way to when he had his own banana plantations. Just like that idea, it's like it starts out with like this little nugget of like, oh, this is like an interesting opportunity. And not understanding as you pull and pull and pull and pull, it gets more and more like you're— you keep stacking these advantages one, one on top of another. Yeah, I got to find— I should organize and like look into like more examples of like, is there another example of like what you had at the beginning of Dell? Because I think that's the key. Like, I think some degree it's like The easier, more path is just to go and like sell part of the company or raise more money or find essentially like solve the problem with money where you solved it with like creativity and hustle and like intelligence. Those, those ideas are like excessively fascinating to me. IKEA is another one where he, you know, same thing where he was just selling mail order. He's a mail order company and he has a great line in—

Yeah, there's that mail order thing again.

I know. I think it's like still, still viable. He has that great line where he's like, expensive solutions to any problem are signs of mediocrity. So he was like, you have to be more creative.

We had this whole thing in the '80s and we called it Beat the Mail Order Stigma.

Really?

And it was sort of like as we were establishing our brand, you know, sort of the conventional wisdom was, mail order company, which was sort of like a pejorative, like an insult. Yeah. Okay. It's like, okay, it's a mail order company. And it's sort of like a stereotype. It's like, oh, you can dismiss it because it's a mail order company. Right. And all the press, you know, for years they were like, mail order company Dell, you know, mail order company Dell introduces server. You know, it was like, what? It's like, okay, we have 30,000 patents. When are we not a mail It's like, what is this mail order thing? It's like, so, so anyway, we had to like get rid of that.

So how did you beat it?

Just kept doing our thing, you know? And, and eventually people go, I guess it's not really mail. I mean, it's internet and it's not mail order.

I was like, what?

Nobody orders stuff in the mail. What is it?

I think you just made me realize something that I didn't understand when I read the book, when you were talking about how important it is to like not squash ideas and that, you know, ideas can come from anywhere and they can like, you know, they seem small, but they can have a huge impact. I think Dell was like one of the first companies to sell on the internet, right?

Yeah, well, so we were selling direct, right? You know, like people would call us on the phone and we used to have these rooms with like a gazillion fax machines and they would send us their orders on faxes. It was crazy. And they had catalogs, right? And so then, you know, the World Wide Web comes along and you have websites and you're like, oh, you mean we can create a website and people can go on there and like the catalog is there and they can like press a button and order the thing? That's the coolest thing ever. We gotta do that, right? And so in my first book, you notice on every page at the bottom it said www.dell.com.

I read that other— I read that book too.

Like obsessed with, getting people to the website because it just became like the easy way to interact with people.

And that book came out in '97, right? '99?

I think '98. Yeah. '98.

Yes.

So yeah, you were— '98. But yeah, we started, you know, with one of the first websites. I mean, there weren't many websites. I mean, I remember when there—

It was a small number.

I remember when you could like go to all the websites, like in the whole world.

Yeah, I'm done for the day.

People were like, there's no more websites. It's like, kind of, it sounds crazy now, but there used to be not that many websites. And you could like go to them and like, okay, I'm done. Like, it's just, there's nothing else to see. That obviously changed quickly.

So how the hell do you even build a store? Like you were collecting, do they have to like call a number in? 'Cause I remember like taking credit cards online. Well, maybe not in '90, if you were doing, do you remember what year you launched the site? '97, probably '96.

I think it was probably '96. We had built all the stuff. '95, '96.

We had built all the stuff.

We had to build the whole thing.

Okay.

Yeah.

Yeah, and it's funny, I forgot about the fact that Dell.com is on the bottom of every page. But what's fascinating is if you read Bezos's shareholder letters, it's not— he never refers to it as Amazon. Every single shareholder letter up until, you know, you don't have to do it anymore. And then every single interview, it's Amazon.com, Amazon.com, Amazon.com. Then it turns into Amazon because he's just like, we gotta push you guys to this new thing. thing called the internet where you can buy things. It's such a fascinating, like, thought, like how novel it was. But you kind of saw it like right away, like, this just— we should just do this because it's cool.

We'd experimented with how do you create an electronic version of the catalog, even like we're going to send you a floppy disk or a CD-ROM and you put it in your computer and you load it up and the catalog is there. Yeah, right. Those are some of the ridiculous things that happened before the internet, before the World Wide Web.

Did you ship that?

Yeah, yeah, we did.

So you just kind of like what— remember AOL? They just like essentially carpet bombed the entire country.

Yeah, we didn't do it like that, but ours was more targeted. But, you know, you wanted to make it easy for the customer to understand your offerings. And then the World Wide Web just made that, you know, kind of infinitely accessible to anyone.

The idea of just mailing out a floppy or a disc of a catalog is just like a hilarious idea.

But then people were surprised when people started ordering computers online. And I remember, you know, we sold like a server for $50,000 online. People were like, no way. You know, it's like it didn't happen as fast as some of the things that are happening now.

Yeah.

But obviously for a business that was selling directly to businesses and You know, individuals, you know, all over the world. It was just total rocket fuel.

How soon into Dell were you starting to sell, like targeting institutions over individuals?

You know, it's really interesting. If you go back to the very, very beginning, like the first full year, like over 80% of the business was to businesses.

Okay, so it started with like doctors and dentists, right? Or lawyers were some of your first? But they were using it for business purposes.

An individual doctor, Dennis, I would think of them as more like an individual. But, uh, well, first of all, let's level set here. So if you look at all technology spending, uh, roughly 75 to 80% of it is businesses, not consumer. And so that's kind of been the thing for a long time.

So within the first year, You got the same, similar percentages?

Similar percentage, yeah. You know, there were companies, universities, they were buying 5, 10, 20, 50 machines at a time.

One final thing that I want to talk to you about that I think is like one of the most important ideas in your book, especially when you're trying to like push these stories down the generations. Like, I see it in a lot of the biographies, and I think it's like another misconception, how we just talked about the misconception between like entrepreneurs know, beware of experts and like how they can kill new ideas, where like a normal person would revere them, right? So there's like this difference of understanding between that. Another one that I would say is like the importance of ego and self-belief and self-confidence. And my, you know, general society might say, you know, you should generate evidence and then be confident. And I hear this a lot, which is perplexing to me because in the books, this is— no, you have that completely backwards. Belief comes before ability. And so I would go back to this part in your book that I think is super important when you're 19 years old and your dad's like, what do you want to do with your life? And you're like, I want to compete with IBM. And you sit there and like, again, I don't think you should be reading these books quickly. It's just like there's no test at the Like, sit with the ideas and really think about what's happening on this page. And I think it's one of the most important pages in the book. I can actually see the page in front of me. And what you realize, you say on that page where it's just like, was I a little full? The idea is like, I have $1,000, I'm in UT dorm room, I'm going to take on the biggest company in the world. And you said, was I a little full of myself at 19? Sure I was. I think you have to be to do anything important. Yeah. Can you explain that mindset?

Yeah, I think I think it's a combination of of naivete, right? Which is an important element. It's like you don't know enough to know that maybe this won't work. Okay, and confidence. But you know, you never sort of want to go over into the arrogant zone because that's really I think a dangerous. Place to be. So it's like, okay, uh, I have not been in this industry for a long time, and so, uh, you know, all these reasons why it won't work are unknown to me. Okay, so that's the naive part, right? Um, and that can actually be sometimes a good thing, right? Because you're sort of bound by those conventional thinking that maybe are no longer as relevant, or maybe you come up with some clever new way of doing it. And then the confidence piece is, all right, I'm going to go make it work. I'm going to go figure it out. Right. But there's always that little voice in your head. It's like, Well, what if it doesn't work? And you know, what about this? What about this? And so you you you know you never want to sort of assume okay this is absolutely going to work no matter what because then you're going to ignore those little voices about well what about this?

What about that?

So so so yeah it's sort of I think a combination of naivete being real here and confidence.

I think a perfect illustration of that would be your reluctance, initial reluctance to name the company after you, because it was PCs Limited, right? At the very beginning.

It was, it was, it was officially Dell Computer Corporation doing business as PCs Limited, right? Yeah, right.

Yeah. But then you realize, like, why don't we just do Dell? And then that's when I thought of the Osborne thing, because you're like, wait a minute, this guy, he named his company after that.

Like, there's no—

What if it doesn't work? Yeah. But it's interesting because you just said It's like, yeah, I have a lot of confidence I'm gonna do this, but the doubt never goes away.

Yeah.

And, and, uh, you know, fear.

Thank you. That's actually the last thing I want to talk to you about. When we— one of the first things when, when we saw each other last month, we talked about— we were like walking around, uh, Zach's office, and I don't know how it came up, but it came up almost immediately. And it wasn't a surprise to me because I feel the exact same way. But your fear of failure, in my experience from studying all these histories of entrepreneurs, but I think you said the same, it's just like the fear of failure to this day is a bigger motivator than like the love of success.

Yeah, totally. 100%. Yeah, you know, you don't want to fail, although Failing is how you learn. Pain is the best teacher. And so you have to have some little failures along the way. But that fear of— you can't have it paralyze you where you don't want to make any decisions because you're afraid to fail.

Has that happened to you?

Not really, no. You know, what you wanna do is sort of be incremental. And again, it's back to iterating. It's like, okay, we're not sure if this is a good idea, let's try it, right? Let's experiment, let's get started, we'll figure it out. And we're not, you know, betting the whole company on this decision. We're just experimenting. And if it doesn't work, great. We learn something, we move on.

That's perfectly said. Thank you for writing the book. Thank you for the time. I really appreciate it, Michael.

Thank you, David.

I hope you enjoyed this episode. Please remember to subscribe wherever you're listening and leave a review and make sure you listen to my other podcast, Founders. For almost a decade, I've obsessively read over 400 biographies of history's greatest entrepreneurs, searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through Founders.