#385 Michael Dell｜Founders

there's a book that ken griffin recommends reading it's called hardball and 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 sounds like it could have been written by any of the almost 400 founders that you and i have studied on the podcast so far and the line 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 we can your competitors and expand your

influence. The first move is to drive down your costs faster than your competitors can and use that cost savings to upset their strategy.

That sounds like the author was describing Dell, as you will hear me mention.

In his autobiography, Michael Dell says that one of the ways he was able to out -compete his better -funded competitor, Compaq, was with a structural cost advantage.

Compaq's operating costs were 36 % of their of their revenue.

40 years later, Dell is thriving and Compaq no longer exists.

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Matt is talking about the importance of cost control.

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That is Rampp .com. One other thing that you will hear me mention this episode is that all of History's Greatest Founders studied History's Greatest Founders, and one way to help you do this is by subscribing to Notice, for seven years, I've been adding all of my notes and highlights about History's Greatest Founders to a giant searchable database.

It's over 20 ,000 notes in Founders Notes.

Now, if you subscribe to Founders Notes, you get access to all of my notes and you could search them by keyword, or you can have the AI assistant that I built for Founders Notes, which I call Sage, read everything and summarize it for you.

I use Sage almost every day.

This is a tool that I built for myself that you can use too.

The same exact version of Founders notes that I use, is the one that you use if you subscribe.

Jensen Wong, the founder of NVIDIA, said that in the future everyone will have a virtual assistant, almost like a brilliant intern with near -perfect memory, capable of instantly recalling any piece of knowledge.

Sage is that now, except Sage is hyper -focused on the collective knowledge of history's greatest founders.

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I You can do that by going to foundersnotes .com.

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I put a lot of time and effort into making this episode.

Took me about twice as long as a normal episode.

I think the story is very important and I hope you enjoy it.

Carl Icahn was trying to take my company away from me.

I was sitting at Carl Icahn's dining room table with Icahn and his wife eating Mrs. Icahn's meatloaf.

That evening was almost the precise midpoint in a nine month drama in which the personal computing company I started in my freshman dorm room at the University of Texas in 1984.

The company with my name on it almost slipped away from me and then changed forever, changing me along with it.

I'd like to tell you that story and a couple of other ones.

Dell had enjoyed a pretty uninterrupted run of growth in revenue and profits and cash flow for almost two decades, but by 2005 Dell was beginning to hit serious headwinds.

Personal computers and laptops, which accounted for roughly 60 % of our sales, were no longer the rich profit center they used to be.

We needed to build new capabilities, we needed to invest in new areas, and we needed to move fast. In 2007, we embarked upon a major merger and acquisition initiative, starting with the purchase of the data storage company, Ecologik, for $1 .4 billion.

We then bought Perot Systems for $3 .9 billion.

And in 2010, we really went on a roll, acquiring storage, system management, cloud, and software companies.

But by 2012, all was not well at Dell.

We tried to enter the smartphone and tablet markets without success.

Our PC sales had fallen by double digits.

Our market capitalization had fallen below 20 billion dollars.

The conventional wisdom shouted through the media was that the PC was doomed and therefore Dell was doomed too.

Remember that part for later?

In 2013 the conventional wisdom was that Dell was a dead company.

I was trying to re -share everyone.

We're not really a PC company anymore.

In the last five years we made a concerted shift in our business towards end -to -end IT solutions.

A complete set of capabilities for customers from their data centers, to their client systems, to security, software systems management, storage, servers, and networking.

Also remember that part for later Jenson Wong beautifully describes the transformation that Dell pulled off.

He says, I'll freely admit that some part of me smarted at seeing our share price sink so low.

The company had my name on it.

After my family it meant everything to me.

But my wiser side saw an opportunity for the company.

Back in 2010 I bought a big block of Dell stock in the open market, confident that the share price would rise.

Yet it also occurred to me that if I could buy back all the stock, our transformation as a company could proceed without the tyranny of a quarterly earnings report.

Going private would open up the possibility of dramatically accelerating the growth of the company and allow us to have a far greater impact on the world.

And so in 2010, Dell floated that idea to a major investment bank, and this is what they said.

The banker that analyzed the deal told us it didn't hold water.

Too complicated, too much debt, not gonna happen, he said, forget about it.

That is really funny to me because this winds up, this take private of Dell winds up being the most successful private equity deal of all time, and so you have somebody, you know, a few years before it happens, no no, can't do it, too complicated, too much debt, not going to happen.

So we forgot about it." Then, something very interesting happened.

As I was taking off my microphone backstage at the Aspen Q &A, a guy came up to me and introduced himself.

His name was Egon Durbin and he worked for Silver Lake Partners.

Hey, I'd love to meet with you about an idea I had, he said, I have a house in Hawaii near yours.

Can we get together sometime?

Silver Lake was a major private equity firm with a great track record and a deep expertise in technology and whose first fund I'd invested in when it started in 1999, so I gave Durbin my email address.

This was July 2012.

I still had no idea why Durbin wanted to meet, but we met in August, a beautiful day in Hawaii on August 10.

Let's go for a walk I said.

I do some of my best thinking while I'm walking.

What's up? I asked Durbin as we set out.

We've looked at your company and we think you should consider going private.

He told me. And we think we may be able help you.

Okay, I said, tell me why you think this is a good idea.

We talked and talked for the next hour.

I liked him at once.

He struck me as very smart, aggressive and bold.

He knew why he wanted to talk to me.

He had a pretty strong belief in the idea yet he wasn't trying to sell me anything.

He wasn't saying, we, Silver Lake, are ready to commit to this deal.

We do feel Dell is significantly undervalued.

He continued, Dell has a lot of cash on balance sheet.

If your company has a lot of cash, it's equity can't appreciate nearly as much because cash doesn't appreciate.

If on the other hand you use the cash to buy back stock, the stock can appreciate far more.

If you have a business that generates a lot of cash flow very consistently, a stock buyback could turn out to be a very good thing.

A buy out, Durban said, could turn out to be a very very good thing, especially with Dell's stock at these historic lows, yet we were talking about buying back all of Dell's stock.

We were talking about a great deal of money, 25 billion dollars.

Everything Durbin was saying made sense to me.

I knew in my gut it was time to make a big move.

That was an excerpt from the book I'm going to talk about today, which is Play Nice but Win, a CEO's Journey from founder to leader.

It is written by Michael Dell, So I knew for a long time that I was going to make an episode on Michael Dell.

I'm fascinated and obsessed, and this podcast is dedicated to people that do things for an incredibly long time and do it basically better than almost anybody else, and Michael Dell definitely fits that.

He started Dell at 18, as you and I will talk about in a little bit.

He realized that he was working on Dell for many years before that, but he starts Dell at 18, and he's still at 60, still working on it and still on the top of his game.

I think there's a ton of lessons that you and I can learn from it.

So I read this book, he also wrote a book in 1997 called Direct From Dell which I also read that I'll pull out a few things from, but I want to start by saying that Michael Dell sent me the most incredible DM that I've ever received.

It's about a year and a half ago and I couldn't believe it.

He says your podcasts are A plus and he put a little trophy emoji.

I had a double check, I was like this has to be a fake account, this can't be the actual real Michael Dell.

Well, I found that incredibly one kind that he took his time out to tell me that, but two, incredibly motivating that, one of the greatest entrepreneurs of all time is getting value from the podcast. So before I even read this book, I listened to the audio book three times and I'm gonna heavily recommend try to convince you to buy the book.

And I would start with the audio book cause Michael also is the one narrating it and it has a very interesting structure.

Okay, so the chapters alternate.

The first chapter is about the take private and the transformation of Dell that is happening mainly around 2012 -2013.

Then the next chapter will talk about the very beginning of Dell and it'll alternate back and forth for the entire book.

I want to start, I'm going to focus mostly on the early years of Dell, so I want to jump right into his childhood and the family that he came from.

And so he says, I'm a proud Texan by birth born and raised in Houston.

I gotta also mention another thing, Michael's son Zach Dell was very gracious, and we got to speak for quite a while about his dad.

I think the most important lesson, as impressive as I am with what Michael Dell has built, and I think there's a ton of just useful information here for the entrepreneurs, current generation entrepreneurs at the very end.

I'm going to share with you what I think is actually the most important lesson that I learned from, you know, I've spent countless hours, probably over 100 hours, you know, between listening to the audiobook multiple times, reading everything I could find on Dell, watching all these interviews, but I'll share that what I think is the most important lesson at the very end.

So since I'm a proud Texan by birth, born and raised in Houston, my mom and dad were ambitious people.

They relocated from New York City to Houston in the 60s because my father had heard that Texas' largest city was rich with opportunity.

He chose an office building, an office in a building that was literally right next to the synagogue so that means if your teeth weren't straight and you were Jewish there was a pretty good chance my dad fixed you and this is, I love this line because I really think he's describing his dad but he's also describing himself.

He became the city's most successful orthodontist mainly by outworking everybody else.

There's a great interview that Michael Dell just did on a podcast less than a year ago, it's from this podcast called In Good Company and one of the questions that the host was asking him in the early days of Dell.

It's like, well, how many hours did you, when you started your company, how many hours did you work?

And Dell goes, all of them, like what else is there to do?

And so he says, my parents had a saying for when my brothers and I went out to play a street ball with our friends, play nice, but win.

My mom was a brilliant woman with particular skills in mathematics and finance.

And so she was so good at investing in stocks and real estate, she actually becomes a stockbroker.

And this is really important.

This is something we've seen a lot.

I feel in the last few weeks, if you think about the Hess family, the Wallenberg family, even Todd Graves, they're really trying to pass on the lessons.

They think about their business as a family business, and a lot of what their parents discussed with them, and what in turn they're discussing with their children, is they make them aware of business from a young age.

And I've just seen this over and over again, there's a bunch of friends of mine that are wildly successful.

And it turns out their parents did this with them as well, So I think it's really, really smart.

And this example, what was happening when Dell was a kid, when my mom and dad talked, it was, they were constantly discussing the economy.

What were the oil prices and interest rates?

What about the stock market?

We had Forbes and Fortune and Barron's in the house.

We had these huge value line books with pages and pages of information on individual companies.

I soaked it all in.

Soon, my heroes became business people, especially entrepreneurs who challenged the status quo and build businesses out of nothing.

So in that same interview, Del talked about, he just loves business.

He thinks it's fun.

It's because it's an interesting puzzle to solve.

This is very similar to what Ken Griffin said on the last episode, maybe the episode before that.

Where Ken was like, I don't even know if I thought of being an entrepreneur.

I just thought I like to solve problems. And this seems like the area in which I can solve the most fascinating problems. in the interview that I referenced the In good company episode Michael Dell says something because he was asked about this like you know most kids grow up they're they're idolizing you know baseball players or football players and like you're obsessed with these business people with these entrepreneurs and he says this is what Michael does that there's a history of other entrepreneurs that you can look to that I look to and say well they did it so maybe I can do it and so maxim

I have for this that is obvious and all these biographies is that all of history's greatest entrepreneurs studied history's greatest entrepreneurs.

He says, I learned about, then he becomes obsessed with computers, and so he's reading, you know, he's obsessed with the business side of it, he's learning that from his parents, he's reading Forbes and Fortune and reading about all these incredible entrepreneurs, but then he starts to be obsessed with computers, and magazines, the influence of magazines is pretty pronounced in the book.

I think maybe we lost that.

Maybe podcasts were a magazine, podcasts might be today what magazines used to be.

I learned about BITE, this magazine all about microcomputers and microprocessors.

I got a subscription and read every issue cover to cover.

Then I read it again.

One month, there was a piece by the co -founder of Apple, Steve Wozniak.

And he's talking about the Apple II, and this is how Wozniak described that.

To me, a personal computer should be small, reliable, convenient to use, and inexpensive.

He had my full attention.

I had to have one. And the beautiful part about that was I could pay for it out of my own savings.

He is 13 years old.

He discovered early that I like to make money.

I thought it was fun.

So he had a series of jobs, he worked at a Chinese restaurant, he was a dishwasher, a water boy, he wound up doing the same jobs at a Mexican restaurant.

And he starts all these businesses from a very young age.

I thought this was very fascinating because there's this maxim that believe in that true interest is revealed early.

And you start to see him start businesses and he's using a lot of these things, he'll use a lot of these same ideas five or six years into the future when he goes all in on Dell.

But he said he would collect stamps, he goes, well, I don't want to just collect something I want to sell them.

So he winds up not only having his stamp collection but all of his friends, and he buys an ad in another magazine that's dedicated to stamp collecting, right?

And he goes, I sold a bunch of stamps, and I made pretty good money.

So I was sitting on some funds for my 14th birthday.

I was allowed to take almost $1300 of my hard earned savings out of the bank and order an Apple two.

And then we're going to see again, true interest is revealed early.

So he goes picks up the, the, the Apple to unbelievably excited, immediately takes the computer out of the box.

This is beautiful. And then immediately takes it apart to see how it worked and I love this line here.

He goes my parents were horrified So he becomes obsessed because he wants to see he starts taking these apart He's gonna do the same thing with the IBM That and then taking apart leads to in my opinion the genesis of the idea for Dell and this is like the slow evolution So he says I soon began tutoring kids in the neighborhood on how to get the most out of their Apple twos this became a lucrative sideline yet another business that a young Steve Jobs, or young Michael Dell starts.

And I just said Steve Jobs because on the very next page, he's obsessed with the Apple II.

He's about 10 years younger than Steve, okay?

And he's part of all these like user groups.

These like dedicated user groups.

So Apple, he's gonna do this for IBM as well.

And so Steve Jobs is 25 years old, the first time Michael Dell meets him.

Because I read that Steve Jobs was coming to Houston to speak to our user group.

It was 1980. Jobs fascinated me, not just as a computer pioneer, but as an entrepreneur.

I'd read about him in the business magazines with intense admiration.

Jobs has started with little, but an idea, and an intense drive to bring that idea to fruition." That is so ...

that line hits me right in the heart, think about that.

He starts with little, but an idea, and an intense drive to bring that idea to He's describing Steve Jobs, but he's also describing himself.

Jobs was just 25. Jobs in person was even more compelling than he was in print.

When he entered the room at our meeting, it was as though the waters parted.

He spoke with passion about how the personal computer, his personal computer, was revolutionizing the world.

He spoke in soaring metaphors.

with his personal computers people would have the capacity to accomplish the unimaginable.

Soaring metaphors, charisma, passion is infectious.

Without a doubt, how many episodes I've done in Steve Jobs?

I don't know. 10, 15.

I'll probably do another 10, 15, 20, 100 by the time I'm done.

Hopefully I'm working on this podcast when I am 80.

Without a doubt, he believed in what he was saying.

So that is 1980. Usually I don't throughout years.

This isn't history class.

But I think it's really important.

So that's 1980. 1981.

IBM introduced its PC.

That's going to change Michael Dell's life.

It is also remarkable.

I'm obsessed with Game of Thrones.

I've watched it, read all the books, watched it through probably six times.

I literally watch it and take notes on the show.

I have this list of lines from the show that I want to remember because I actually think you can learn about humans from there.

There's a line that's on the margins often come to control the center.

That is a description of Michael Dell.

I was shocked, I went back and read about IBM in the 1980s.

At this time, it's going on.

It's the most valuable company in the world.

And this kid in Texas, with an intense drive and a thousand dollars, is going to take it on and beat it.

It's incredible. Alright, so 1980, Apple II.

everybody's obsessed with it.

IBM, the biggest company in the world, says, okay, 1981, I'm gonna, we're gonna release the PC, and this is gonna change Michael Dell's life forever.

He says, in the 1980s, IBM was by far the most successful and valuable company in the United States.

I'll give you more information on this later.

IBM's entry into the personal computer market would effectively sweep away the competition and they would have the field to itself.

This is what Wired and people around you, they always say the same thing about big companies.

People have a hard time, just like companies make this mistake of having a hard time envisioning a future different from the one in which they succeeded in.

People have the same thing where it's like, oh, okay, biggest company in the world, most successful company in the world, they're gonna release a PC, they're gonna be the only game in town, they're just gonna beat everybody, okay?

So he winds up buying the PC and, you know, taking it apart.

This is, I think, in my opinion, a turning point in Michel Dale's life because he's gonna realize, oh, wee, biggest company in the world just made PC.

It's just a collection of parts from other companies.

As soon as I took apart my 5150, I discovered a couple of striking things.

First of all, as with the Apple II, the 5150's architecture was open.

You could literally understand what every chip was doing.

The other thing I found when I disassembled the IBM PC was that there was nothing inside from IBM.

It was all parts from other companies.

it's incredible how you can be the most successful company in the errors, that you didn't have to.

And what I mean by that is IBM had created the PC quickly with off -the -shelf components out of expediency because they were secretly worried about Apple's inroads into the consumer and education markets.

Instead of creating their own operating system, which they certainly knew how to do, and creating their own microprocessor which they certainly knew how to do, they chose DOS for Microsoft and Intel 8088.

They were such a huge and powerful company, such an American institution, so completely synonymous with the word computer that I don't think they thought anyone could ever challenge them." So now he had this, he has both the Apple II and the IBM.

And he's got this little idea in his mind.

And, you know, I'm just going through the book over and over again, and he just jumps out.

It's like, Michael was a born entrepreneur.

He was a born entrepreneur, right?

So that summer I got a new job.

I sold subscriptions to the Houston Post, the local newspaper.

So how does he sell subscriptions?

he would call random people on the phone.

Now I think he's like 14, 15 years old when he's doing this and try to talk to them in getting the paper.

Being naturally ambitious.

That is an understatement.

In fact, one of the pieces of advice that he gives is make no small plans.

So if you could see the book that I'm holding my hand, I had, just constant in the margin.

I'm constantly writing that over and over again.

Make no small plans.

It's just naturally ambitious, naturally competitive, naturally bold.

I wanted to sell as many subscriptions as possible.

And I observed three things.

if you sounded like the people you were trying to sell subscriptions to, they were much more likely to buy from you.

So essentially what he's doing, and his little 14 or 15 year old as a young man, he's trying to say, how can I find an edge?

Yeah, everybody else is selling subscriptions.

They're probably all doing the same thing.

I'm just cold calling a bunch of people, maybe one out of 50, one out of 100 buys.

This kind of sucks.

How can I find an edge?

The second thing I noticed, that people who were moving into a new residence were more likely to subscribe to the paper.

And the third thing I observed was that people who were getting married were much more likely to buy a subscription.

And what he does next is this is what I mean.

He's just a born entrepreneur.

And this is obvious.

He's like, oh, I have a plan that's gonna pop into my head.

He goes down, he realizes all of that information is public information in the state of Texas.

So if I go down because I'm a Texas citizen, I can go down and go down to the county court courthouse and I can pull all the marriage license applications.

And that's exactly what he does.

In one stroke I had gone from hit or miss of cold calling to discovering a goldmine of people who were far more likely than not to subscribe to the paper.

At first, I had to sit in and then again, relentlessly resourceful.

And a recurring theme in the history of entrepreneurship, invest in technology.

The savings compound can give you an advantage over your slower moving competitors.

And sometimes it can be the difference between a profit and a loss.

That idea comes from, it is a very old idea.

It comes from Andrew Carnegie's autobiography 150, 200 years ago.

And we see Michael does the same thing here.

Okay, I have found my edge.

I have all these interested prospects, but I'm writing all this stuff down by hand.

this sucks there's like no one almost no one on the planet has computers at this time what does he do he goes well i would sit there and write down every name and address but then i realized i can bring in my apple 2 which was much lighter and uh than the ibm pc plug it in and type in all the info so that's exactly what he does this this kid is showing up to the courthouse with his computer typing in you know his list of prospects i love this and then it hit me that there were 16 counties surrounding houston and they all had courthouses and every courthouse had record records of marriage applications,

jackpot times 16." Then what does he do?

Born an entrepreneur.

Then I hire my high school buddies to travel to all those courthouses and get all that info.

And then he realizes, okay, so I have all these consumers, right?

This is like I'm selling individual subscriptions.

And you'll see the reason I'm talking about this because he uses all these ideas at the beginning of Dell to like start out selling directly to like just one individual, one rich architect or one rich dentist in Houston.

and then he moves to the enterprise.

And so the enterprise version of this, he goes, hey, I'm going to go and because there's a building boom in Houston, they're building all these huge condos and apartment complexes.

I would go to these places and say, hey I'm from the Houston Post and we've got this great offer where all your new residents can get the paper free for two weeks, just fill out this little form.

So now I went from selling one at a time, right?

To maybe grabbing 200, 300 at a time, because of all the young married people and all the new apartment dwellers, I made a little over $18 ,000 that summer." The funny thing is that in his high school class, they have to like do a sample tax return and he does it for real.

His teacher is like, No, you obviously got this wrong.

If you made that much money, Michael, you would have made more money than me.

And he's like, well, that is exactly how much. So he's making more money in high school than his teacher.

Here's a clue. There's always a sign about what you really should be doing.

What did Jeff Bezos say?

We don't choose our passions, our passions choose us.

He would sit in his high school classes, he's gonna do the same thing for the one year or half a year he goes to college, and he goes, I would come and go to the back room, sit down and read computer magazines.

That's a sign that you found what you should be working on.

So he says, the moment that I opened up my new IBM PC and looked inside, I thought, how do I soup this thing up?!

Thanks to my steady intake ofSQL and PC magazine, I had plenty of ideas to try.

He'd put in extra hard drives, I'd put in extra memory.

And then this new IBM user group I joined gave me even more ideas.

He talks about the difference between the people that had Apple's and the people who had the IBM PC.

IBM PC leaned way heavier towards business.

So that user group was like, well, how do we use this as a productivity tool?

How do we use this as a way to get better jobs, to make more money?

And so he said that was fascinated by how empowering a tool the PC was for business he was 17.

He says then a miraculous thing happened in June of 1982 the National Computer Conference came to Houston I had this huge multi -day I think there's like thousands of people going to this computer conference and this is hilarious again a sign that he's on the right path.

To me this was like Disneyland.

I saw so many beautiful things in all these booths peripherals and terminals and systems and software, new horizons were opening up for me.

And then this is really the start of his computer business.

Slowly and surely, it's gonna turn into Dell.

So after I soup up a PC, an interesting thing happened.

The lawyer father of one of the kids I was tutoring about computers got wind of what I'd done with the machine and asked if I could do the same thing for his.

So I checked out his PC, he paid for the parts and added a nice fee for my time.

The lawyer was pleased enough that he soon talked me up to a couple of other lawyers and doctors he knew and I got more work.

Then an even more interesting thing happened.

One doctor called and said he wanted to buy an IBM PC for me to customize what model should he get?

I told him, do not bother, I'll buy the computer, put in everything you need, and sell it to him at a reasonable markup.

I delivered that doctor a Michael Dell special.

Then it happened again and again and suddenly I was in business.

And he's making a ton of money.

He loves fast cars too, which is really funny.

There's a couple examples in here and stories that I found humorous.

So my senior year of high school, I went with my parents to a BMW dealership, when it came time to pay the salesman naturally looked at my mom and dad.

I got to enjoy the shock on the guy's face when I took out a cashier's check for $15 ,000 and then had a wad of cash to pay for the rest, thanks to my newspaper subscription funds and my new custom computer business.

That is the end of high school.

He says, the only college that I applied to was the University of Texas at Austin and my life was pretty much planned out for me.

I would go and take premed courses and become a doctor.

This is such an important part, I guess I haven't even talked about yet.

There's a track laid out for him.

In one interview I heard him say like, becoming doctors like the family business.

There's like you know uncles or doctors.

This is what was expected of them and essentially his parents like this is what your life is going to be.

Think about this we're like 30 pages into the book there's no path or track for the entrepreneur.

It's impossible that this personality type, that this person would ever stay on a track laid out by somebody else and you see that because there'll be this you know back and forth and then he his The parents are crying about this, and we'll get into it." But I remember hearing him say something that's very fascinating where he's just like, I was able to convince, finally was able to convince my parents that I'm going to go all in on Dell.

And he has the financial record of what he's doing so far.

He's like, look how well it's working, and I'll make you a deal.

If it doesn't work out, I can always go back to school, university of Texas will accept me.

And he says his parents agreed, but then he says something so important.

And I think if you're listening to this, you obviously understand this.

But even if they didn't agree, I would still do it.

I was still going to do this.

I was not going to let somebody else decide how I spend my life, and lay out a track and a path that I'm supposed to follow.

That's the entrepreneurs don't do that.

This is the fascinating part.

Go back to like just following your curiosity, following your interests.

Maybe I don't even tell you about this later, but I want to tell you about it now.

Michael does one of the most curious people that you can possibly find.

He just wakes up every day, fascinating, and curious about business and about life and about being better.

And so he's like, listen, you know, I'm supposed to have this path.

And so far I'm going with the program.

I was on autopilot.

Meanwhile, there was this other thing, computers, that I was passionately excited about and that I couldn't really tell my parents about because it was so far from what they had in mind.

I loved, and think about the Ken Griffin episode, the most successful hedge fund of all time.

And he says this thing where it's just fascinating.

He's like, for reasons I don't fully understand, and I was obsessed with the stock market.

By the time I got in third grade, I was just completely obsessed with the stock market and how to make money in it.

For reasons I do not understand.

And I think one of the reasons that resonates with me is cause that's how I feel about reading.

I remember somebody asking me at times like, when did you get in the habit of reading?

I was like, I don't have any memories before I just read.

I always read obsessively since I was the age of five.

Before my mom died, I remember her telling me like, I'd read, I'd go in every room and read every single thing on like the walls.

And, when I ran out of books to read, I'd read the back of cereal boxes.

You know, when you're a seven, eight -year -old kid, nine -year -old kid, you're not sitting here thinking like, Oh, this is going to be good for my future self development, you're just obsessed and drawn to this activity.

It's very clear that Michael was drawn both to computers and electronics, and then business as well.

So, he graduates high school, and again, relentlessly competitive, relentlessly driven.

Some kids take the summer off after they graduate high school.

as you can probably guess by now, this wasn't my way.

I was still upgrading IBM PCs, still buying disc drives, and hard drives, and memory trips, and installing them in the base model IBM's that I bought a retail.

Then selling the improved computers for profit to doctors and lawyers and architects.

As soon as I arrived in Austin, I started putting little ads in the local paper, remember, go back to the stamp business.

Right, you just see it over and over again, he's learning.

And I got responses right away, which provided me with the working capital I needed to buy more PCs to meet what appeared to be an ever growing need.

And then there was my other business, relentlessly resourceful.

I don't know how many times I'm gonna have to say that today.

It just like jumps off the pages.

IBM, this is remarkable.

He's just like paying attention to these opportunities.

He's 17, 18 years old, maybe.

IBM PCs sold like crazy from the moment they were introduced.

But what the huge demand led to was all kinds of supply disparities among the retail outlets that carried the product.

Houston might order 10 ,000 units, Dallas, another 10 ,000, Phoenix another 10 ,000, but IBM could not push out all the supply in time.

So some of those dealers wind up getting only four or 5 ,000 units at a time.

What do they do? Right?

They're learning, too.

In response, the dealers start over ordering.

They asked for 20 ,000 or 50 ,000 computers at a clip just so they could get what they needed.

The result was retail chaos.

One city would have way too much stock, another not nearly enough.

I picked up on this.

I figured I could make some money from these supply incongruities.

I'd go to a city that had a surplus of PC's, buy a bunch, and then take them to another city that had a shortage and sell them.

He calls this flying buys.

I would locate a big retail outlet that had way overbought IBM PCs, say, somewhere in Phoenix.

I'd call them up and ask if I could take some off their hands.

In many cases, they would agree to sell some of their surplus for below their cost. I'd get on a haul truck and then load the 30 or 40 pcs into the truck and drive to some store that was under supplied say one in tucson and then i'd sell them my truck full at 50 or 70 or 80 per machine machine over what i paid this is the result instant profit of a couple thousand bucks so it's wild in the direct from dell book which was published i think in 99.

I'm pretty sure he says in that book that Dell was profitable for every single quarter of its existence it's just incredible so he's like well you know you can do the math like I'm buying you know a couple hundred machines these are very expensive like where am i getting the money for this so he says an 18 year old who wasn't dealing drugs did they really have 50 or 60 thousand dollars at a time to lay out on these new computers and the answer is Yep.

My PC upgrade business was doing well enough that I had steady cash flow and my computer reselling business was profitable from the jump.

And then before I move on I just want to share something with you that I think may be a little unusual that popped my mind when I was reading this section.

And by this point, I had read this section three or four times because I go over my notes and highlights for a few days before I sit down and talk to you.

And it's this idea was like people always like we're gonna find the next like Steve jobs, or like, you know, the next Mark Zuckerberg, or something like that.

And there's something that Michael Jordan said that I think is important.

Great people are not discovered.

They reveal themselves.

They make themselves known.

This guy was going to be undeniable.

He was going to, you didn't have to like, I'm going to discover the next Michael Dell.

If you have the talent level of Michael Dell, you make yourself known.

There's a great line that I heard in a video one day, of Michael Jordan talking about, you know, towards the end of his career, Especially when Kobe Bryant came along.

Everybody's like, oh, who's the next Michael Jordan?

And he says something that's very fascinating.

Michael Jordan said, don't be in a rush to find the next Michael Jordan.

First of all, you didn't find me.

I just happened to come along, and you won't have to find that next person.

It's going to happen.

And I think the reason that I'm obsessed with especially autobiographies in particular.

In this book that you could pick up for, I don't know, 20 bucks, you have the best ideas, the most important ideas from four, five decades of excellence.

And there's somebody out there right now that is the same age, maybe even younger than Michael Dell was when he started.

That's gonna pick up the book, build a product that makes somebody else's life better cause that's all a business is and become one of the greatest entrepreneurs in history.

Remember, first of all, you didn't find me.

I just happened to come along and you won't have to find that next person it's going to happen.

All right, so let's go back to this.

He starts out, he starts at school, okay?

In college. In theory, I was a pre -med biology major on a smooth track.

Remember there's that word again, track, path, on a smooth track to becoming a doctor that my parents wanted me to be.

The reality was somewhat different.

I was running a thriving business out of my Austin apartment.

The apartment was packed to the ceiling with computers and computer boxes.

I went to my classes at first. I listened to the professor drone on, But mostly I stared out the window thinking about when I could get back to what I was really interested in.

There is an excellent essay called how to do great work through my program.

I think I did an entire episode on just that essay.

I think it's up episode 314.

There's a line in that essay that I've never forgotten that I think is really important.

I think describes exactly what's going on here.

Hey, I'm sitting here in these pre -med classes.

I'm bored to death and I'm looking out the window and I'm thinking about what I'm really interested in.

And in that essay, there's a line says, if you're interested, you're not a stray.

If you're interested, you're not a stray.

My newspaper ads were building word of mouth among knowledgeable computer users around Austin.

An interesting side note is that I didn't sell any computers to any students ever.

The students at UT knew nothing about computers and couldn't have cared less about them.

This is great. It was a very different time.

And then as you guessed, he's always looking for ways to expand his business.

And so he goes, he goes, hey, you know what, there's another thing that's public.

If I go down to the, now he's in the state capital and the government, the state government is always bidding on things and these bids are public and anybody can bid on them.

And so like, for example, if the highway department needed four PCs and they would say, we need four PCs with such and such specifications.

And so, they would issue requests for bids and the bids are public.

So anyone could walk into the office and say, I'd like to see all the requests for the bids for equipment in the following categories.

I started bidding on these and winning these contracts.

Soon I was racking up revenues between 15, 80 ,000 a month.

I was spending almost every cent on new inventory." So then he moves into his dorm, and this is the dorm room in which Del was going to be born.

"'Dobie was a high rise, 27 stories tall.

By the luck of the draw, I was assigned to a room on the top floor.

Dobie, 27, 13. My roommate," now there's a lesson in here, "'My roommate, to my great fortune, was a member of the U .S. Olympic cycling team.'" That means he spent every day, all day training.

He literally just used the room to sleep.

Every evening, he'd return from his training sessions and drop into his bed exhausted.

Every morning, he'd vanish before I was awake.

He was the perfect roommate.

So the lesson there, interesting.

Olympic level athlete, trying to be the best at what he does, best in the world at what he does and look at how he spends his time, training, working, and then sleeping.

And there's another thing that Michael Dell is gonna have in common with Phil Knight, the founder of Nike.

his parents find out about what he's actually doing, they want him to be a doctor.

This is so, so important.

I absolutely love this.

My mom and dad were hearing more and more about what a terrifically successful business I was running.

So they returned to Austin.

They were both very upset.

Michael, my father said, ''Are you going to school here or are you running a business, a computer business ?'' He made it sound kind of unsavory.

So I wanna pause there, I'm gonna put this book down.

There's a line from Phil Knight's excellent autobiography, Shoe Dog, which I covered, you know, I don't know, several years ago.

It's probably like episode 180, 181, something like that.

Almost exactly, word for word. So, I'm gonna read from Shoe Dog.

This is a conversation he's having with his dad.

Phil's having with his dad.

He hadn't sent me to Oregon and Stanford to become a door -to -door shoe salesman, he said.

Jackassing around, that's what he called it.

Buck, which was Phil Knight's nickname.

Buck, he said, how long do you think you're going to keep jackassing around with these shoes." I shrugged, I don't know dad.

And the note I left myself when I read that is listening to his dad's advice on what to do for a living would have cost Phil Knight $40 billion, which is what his net worth was at the time I was reading that book.

We're gonna see something very similar.

Here, you're running a business, a computer business.

He made it sound kind of unsavory.

Later on, his father unbelievably proud of Michael.

I think he says he's the founder of the founder.

Okay, so these things can change.

If you're interested, you're not astray.

I could see that my mom was about to cry.

My dad shook his head.

"'Michael,' he said.

"'You've got to get your priorities straight.

"'You've got to get your head screwed on straight.

"'This computer thing, it could be a nice hobby for you.

"'But your life, Michael, your life.' "'I was staring at the floor, "'ashamed and proud at the same time.

"'Obedient and rebellious.' "'What do you want to do with your life, Michael?' "'My father asked.

I want to compete with IBM.

I said my dad wasn't amused.

Go back to that line from Game of Thrones.

Those on the margins often come to control the center.

This is a thing about the confidence the self -confidence and self -belief that young Michael Doe had, the idea that like, you know, I have a little business out of my dorm and I compete with the most valuable company in the world.

Incredible. I love it.

You are here for one thing and one thing only, he said, and that is to your education to put you on the right path.

There's that word again.

The right path in life, path, track.

These are not words for founders.

I muttered something about not being so sure the path he was talking about was right for me.

I looked at my mother, her tears were flowing.

I caved. OK, no more computers, only school, only school I promise.

And he tried. He really tried.

For the next 10 days, I went cold turkey.

I literally didn't touch a computer.

I went to my classes and tried my hardest to pay attention.

Didn't work out. In fact, what those 10 days of intense longing really did for me was focus my mind intensely.

I realized that the prospect of practicing medicine had held absolutely no appeal frame.

And then the prospect of building my working life on computers was absolutely thrilling.

By the time the second semester began, I was back in business big time.

Upgrading, flying and buying and reselling.

And in addition to his initial success he gets another sign that oh it might be on the right path.

He travels with his family and goes to England to visit his brother and realizes oh like the same like fervor for personal computing that we're seeing in the United States is happening in the UK.

That's interesting.

And another thing was like wait like these people actually they're terrible.

The stores are terrible.

The salespeople are terrible.

And yet the computers are flying off the shelf.

So he says the other thing that impressed me was the profusion of computer stores.

And just like in the US the profound ignorance of the people who worked in them.

Salespeople knew little to nothing about how these computers worked, nor did the stores offer much in the way of service and support.

But everybody wanted computers, and the pounds and shillings were flying." He says, "'After we returned to Texas, I broke the news for my parents.

It would take a few years for my relationship with my mom and dad to heal." Again, this is somebody that was going to follow his own path in life no matter what.

I think obviously it's the right choice.

I want to go back to the idea.

It's like, well, this is kind of funny.

Like, the stores suck, the salespeople suck, almost no differentiation in product line and yet they can't stay stock, the money keeps flowing.

Mark Andreessen had this blog, it was a blog archive, I think I did it back on episode 50.

And he wrote something in there that I've thought about.

And he talks about what are the factors for a startup success, is it the product, is it the people, is it the market?

And Mark's point is, he would pick market above almost anything and there's a reason why.

And he says integrate market, a market with lots of real potential customers.

The market pulls product out of the startup.

is exactly what's happening in the book.

The market is pulling the product out of the startup.

The market needs to be fulfilled and the market will be fulfilled by the first viable product that comes along.

I think that's what we're seeing where we are in the story.

Now tells us parents, hey, I'm doing this, damages the relationships, takes a few years to heal.

But 1984, my little one man operation formerly became Dell Computer Corporation doing business as PCs Limited.

I left school forever." This is really important, so I'm gonna spend some time here because this is something that's very obvious to me and, you know, when I talk to other people it's not obvious.

They literally have this backwards.

I would say belief comes before ability.

People will tell you, oh you want to have confidence like produce evidence.

No, that's absolutely wrong.

You're a hundred percent wrong.

It's in this book over and all these books over and over again.

The self -belief comes before any evidence.

It becomes before even the ability to do so.

Here's another example.

This is super super important.

I spent time at a store called Compuad, this is in in Austin, and I met the owner, a guy named Bill Hayden.

Hayden told me thanks to Austin's tech boom he was really making big bucks.

I guess he thought he was just impressing some punk kid but when I sized them up I thought I could do everything he was doing and a lot more.

Was I a little full of myself at 19?

Sure I was. I think you have to be to do anything important.

I'm pausing right here.

I'm going to go to Nolan Bushnell, founder of Atari, mentor to Steve Jobs, he wrote a book about what it was like to mentor Steve Jobs to know Steve Jobs.

This is what he says.

He talks about Steve's critique about being arrogant, about being overly self -confident, whatever the case was.

He says, everyone has, this is Nolan Bush now, everyone has creative potential, but only the arrogance are self -confident to press their ideas to others.

Now I think he's using the term arrogant to be intentionally provocative.

Only the self -confident, only those with an abundance of self -belief, like a Nolan Bushnell, like a Steve Jobs, like a 19 -year -old Michael Dell, only the people with full self -belief are self -confident enough to press their ideas onto others.

Bill Walsh wrote this excellent, excellent book called The Squire That Takes Care of Itself.

I think I did it all the way back on episode 106 or something like that.

I need to re -read the book, because it's really good.

And he says this about this.

Don't let anybody tell you that a big ego is a bad thing.

Here's what a big ego really is.

Pride, self -confidence, self -esteem, self -assurance, ego is a powerful and productive engine.

Without a healthy ego, you've got a big problem.

Now, obviously you're smart.

I don't have to explain this to you.

Obviously you could have an ego so big and so unrealistic, right?

That it can damage.

It can get you in a big trouble.

That's not what Bill Walsh is talking about.

That's not what Nolan Bushnell is talking about.

That's not what Michael Dell is talking about.

That's why I think that line, out of a healthy ego, you've got a big problem.

So belief comes before ability.

Was I a little full of myself at 19?

Sure, I was. I think you have to be to do anything important.

You have realized by now that I'm a pretty competitive person.

That's an understatement.

You know what? I'm going to pause there again.

So I love this cause you know, having listened to the audio book three times, already read this book, already read direct from Dell, I already read all this stuff.

There's something that jumps out that I didn't see until after that is really funny because it's surprisingly shockingly accurate assessment and description of Michael Dell from Matthew McConath, the actor.

And I guess I think what I've heard is he's friends with Michael, they both live in Austin.

and this is the blurb that Michael or the Matthew McConaughey did for his book and I didn't see it till after.

He says Michael Dell is the gangster protagonist never looking for a fight but relishing every brawl once he's in it.

That's such a good description based on everything I've read.

Matthew McConaughey nailed that alright so he says you know you can figure out hey I'm pretty competitive person and I thought I had all kinds of ideas that Bill Hayden could never even begin to imagine.

One of my ideas was just an expansion of what I was already doing, placing ads and taking orders over the phone.

I'm constantly on the lookout for lowest prices for computer opponents, saving customers the trouble of comparison shopping, and then passing along the savings to them and I'd still make a profit.

This is how he knows he has edge.

My upgraded machines were both better and less expensive than IBM or Compaq.

Compaq's gonna be his main competitor.

He's going to wind up overtaking them as well.

And they raised way more money.

Michael Dell starts to come up with a $1000.

Compact starts with $25 million, and then it raised, I think, another $75 million.

So he's like, you know, guy's starting with $1000, you're starting with $100 million, and he waxes them.

I love stories like this, you know, I'm obviously always on the side of the founder, I'm always on the side of the underdog.

The Wright Brothers, episode 228.

That book, if you want a book to read this week or a book to read this weekend after you hopefully finish Michael Dell's book, I would pick up Wright Brothers by David McCullough.

For centuries, humans were talking about how do we solve the issue of powered flight.

And a lot of different people, when the Wright brothers had — were trying to do it at the same time, were way better funded.

They had better — they had all the top experts, all the top scientists of the day.

They had the backing of, like, the Smithsonian.

One guy was backed by like $500 ,000.

The Wright brothers solved the problem with $1500.

They solved a century -old problem with just two brothers being relentlessly resourceful and the modest profits of their bicycle shop.

Don't ever let somebody tell you because you have a better funded competitor or a more credentialed competitor that you can't still win.

The history of businesses is full of examples like this.

This is such bullshit.

Back to this my upgraded machines that I'm making with no money in my dorm room are better and less expensive than IBM or Compaq and so he says okay well I have this advantage how do I press that advantage so he was started on in in Austin now he's like hey I'm gonna advertise nationally in PC week and consume and computer shoppers so essentially say hey like who's gonna buy computers well people that are reading computer magazines not like a structure right customers could call in they would tell us how much memory they wanted in their machine what size hard drive and how fast a processor they'd

give us a card number, and then we could put together a customized computer for them in an hour and ship it out the same day." It sounds—this is one of the most important sentences in the entire book— it sounds simple, yet nobody else was doing it.

So we start hiring technicians and salespeople right away.

Again, it doesn't have to be perfect, it just has to work, especially at the beginning.

Here's an example that our order entry system consisted of three closed lines hung between cubicles.

The top line was orders that needed to be filled.

The middle one was for orders waiting for parts to be delivered.

And the bottom clothesline was for orders that we had no idea how to fill.

Everyone in the company wore several hats.

The office was busy and noisy from morning to night.

It was fun. It was stressful.

It was all consuming.

I was 19 years old.

Now what I want to focus on is the building of Dell.

But I do want to just pull out when I find them in the book, just these other lessons I think Michael Dell has for us that happened while he's trying to fight, has his fight with Carl Icahn, and he's going through this really big struggle to take the company private and to really transform it.

He successfully navigated, one of the things that's so fascinating about this, and why there absolutely had to be an episode of Michael Dell, is he successfully navigated so many different technological revolutions from PC, the internet, mobile, Cloud, and now AI.

I can't think of anybody else has done that is still active to this day.

So he's fighting with Carl Icahn, and he says some things here that I think are really important, and there's a lesson, there's a punch line at the end of this.

Activist investor was a euphemism for what Carl Icahn really was.

Corporate rater was more to the point, and maybe trouble -making opportunists was closer still to the truth.

Since the late 1970s, Icahn had shown great skill in gaining significant positions in companies in trouble or flux, and then either forcing them to buy back their stock at a premium, or pushing the company leadership to make decisions that would boost the share price.

He liked to present himself as a great defender of the common man, the ordinary shareholder.

In fact, he was a great defender of Carl Icahn.

He seemed to have little or no interest what a target corporation made or did.

The game was everything to him.

To me, what Michael Dell's doing there is he's comparing and contrasting the difference between a trouble -making opportunist or a cooperator versus a founder.

Somebody started their company when they were 18.

Somebody put their name on their company.

They gave their, the majority of their life, energy over to.

And I think the way to describe this, like the Todd Graves episode, the founder of Raising Cains, I did a few weeks ago.

He has this line, he goes founder, he was talking about like more founders need to stop selling their business, especially in his industry.

He's like, I'm competing.

All the founders are gone.

They sold out. Some of them passed away.

They sold out. And he's like, we need more founders is because founders care, care, care, care.

And that line came to mind when I'm reading this.

So here's the punchline, because he's talking about the fact that ICON was building up this position of Dell and really trying to essentially steal his company from him like he started the book.

In business, this is the punchline.

This is the lesson that Dell is teaching us.

In business, you can surround yourself with the smartest people.

You can plan ahead with the greatest care and intelligence, but one thing you can count on is that from time to time, you're gonna get smacked in the face with a flounder with something that you never anticipated.

And this was one of those times.

So back to the early days of Dell.

I was sitting in the back of a police car, wearing handcuffs.

My crime? Going 92 in a 55 mile an hour zone.

Plus, a big enough pile of unpaid speeding tickets that a warrant had been issued for my arrest. The vehicle that had helped me earn all those tickets was a red Porsche 911.

I had just turned 20.

I was a young man in in a hurry.

Dell generated over $6 million in sales in our first nine months of operation.

That number would turn to 33 million at the end of our first full year.

Thanks to national advertising and community magazines, we were selling to doctors, and lawyers, and architects all around the country.

We started to land orders from some fairly big companies like Texaco, Ford, Monsanto, and many others.

Remember what I said about when he was selling subscriptions, you know, starts with individuals, consumer, and then goes to the enterprise, The Enterprise version of that being the condo and apartment.

You just saw how he did the exact same thing here.

Now there, I got to read this to you because it's so wild.

Michael Dell put out one of the craziest tweets I've ever seen.

It says Dell's revenue during our first 16 years.

Okay, so it's going to start in 1984 at 6 million.

It's going to end in 1999 at 25 billion.

I'm just going to read this to you right in order.

First 16 years, 6 million, 33 million, 67 million, 159 million, 258 million, 388 million, 546 million, 890 million, 2 billion, 2 .9 billion, 3 .5 billion, 5 .3 billion, 7 .8 billion, 12 .3 billion, 18 .2 billion, 25 billion, the first 16 years of Dell.

99 also instincts when the book direct from Dell came out as well.

So he started saying, hey, you know, what work locally is obviously going to work nationally.

So he drastically expands.

And now people all over the country are buying his machines.

And he talks about what this was like.

It was, it was just a little bit, make it up as you go along, maybe more than a little bit.

And then he makes a really important point.

The fact that constraints are your friend is going to sound a lot like Sam Walton.

We didn't start building to the customer's order because we saw some massive paradigm in the future.

We started that way because we didn't have the capital to mass produce.

It turned out to be a pretty lucky handicap and many of the biggest lessons we learned in the company's formative years came about in the same seat of the pants way.

We experimented and improvised our way to success.

So, let me read this to you from Sam Walton's autobiography.

Many of our best opportunities were created out of necessity.

The things that we were forced to learn and do because we started out under -financed and under -capitalized just like Dell.

So he said we started out in these remote, small communities, they contributed mightily to the way we've grown as a company.

Had we been better capitalized or had we been an offshoot of a larger corporation, we might not have ever tried the Harrisons or the Rogers or the Springdales and all those other little tiny towns we went into in the early days.

It turned out that the first big lesson we learned was that there was much, much more business out there in small town America than anybody, including me, had ever dreamed of.

Constraints are your friend.

Michael Dell. We experimented and improvised our way to success.

So I want to read you Michael Dell's explanation.

In this interview that he gave, he beautifully summarizes why this was so fundamental to their success — the idea that constraints are your friends.

He's really describing the series of advantages that he discovered.

He improvised and experimented his way to success.

He says, Something interesting occurred with the personal computer, there was always new technology and the cost of the material was always coming down.

And so if one company has 90 days of collective inventory in its various stages, going from the manufacturer to the ultimate customer — so he's talking about his competitors — his competitors were selling indirect through retail.

He was the only one selling direct.

And so if one company has 90 days of collective inventory in its various stages, going from manufacturer to the ultimate customer, and another company has five days of inventory between the manufacturer and the which is his setup, right, and the material costs are coming down, well there's only one company that's going to win.

Because that company has a structural cost advantage and that is what we had.

That also he's stacking one advantage on top of another.

This business model also had a way better return on capital because we didn't have to have all the capital employed there in excess inventory, right?

The way we came about this is because we didn't have any capital.

So we had to invent something that was way more efficient.

This direct to the customer model also gave us incredible fidelity in the signal of the demand.

If somebody walks into a store, you would have had to have guessed what they were going to buy before they walked in.

But if somebody calls us on the phone, we know exactly what they want because they're telling us.

And that signal can go back to our supplier in a nanosecond, and so you get that is very efficient supply chain, that's also very efficient in its capital return.

And what is even more remarkable is his competitors looked down upon him.

Wait till you hear this.

It says, IBM and Compaq failed to notice this.

To them, we were just a mail order company.

In fact, in this book, I'm gonna pick up the book in The Company of Giants real quick, I'm gonna read this interview, what he said about this in 97, and he talks about the fact that, they have underestimated, he's talking about his competitors.

They've underestimated the business model and continue to do so even to this day.

A lot of people just totally misunderstood what we were doing.

I remember Rod Canian, the founder of Compaq, telling PC magazine that he didn't compete with so -called garage shop operations.

It's a wonderful quote.

I love it. There you go.

You see that little competitive drive in Michael Dell.

You know, this quote that I'm reading, he's almost 30 years old, and he's like, oh, it's a great.

It's a wonderful quote.

I love that you call me a garage shop operation.

and he continues, this is such good advice.

Being detached from the customers is the ultimate death.

And a lot of these guys, they think their customer is the dealer, which is still amazing to me.

So again, hey, your little garage shop, operation.

We don't actually compete with you, we don't actually care.

Being underestimated by IBM and Compaq was a wonderful and powerful motivating force on the face of this is kind of what I was getting at, what I was hinting at when I brought up the Wright Brothers came to mind.

On the face of it, it made no sense.

Here I was, 20 years old, a college dropout with a capital base of a thousand dollars saying, hey, who wants to come work in this company?

We're in a B -C Plus industrial park, not in the nicest part of Austin, where the rents were low.

I was working 16 -hour days, I had a bed in the back of my office so I grab a little sleep on the nights I was working not stop." And, again, it says you know, on the face of this it made no sense.

But what I jotted down on the margin was those other companies don't have a Michael Dell.

There's a great line that I firmly believe in, I think if you use as a metaphor, you use a distraction, it's really powerful, it's from Napoleon.

Napoleon said, In war men are nothing.

One man is everything.

So his business is succeeding while he is being underestimated.

Then something really important happens because remember he damages a relationship with his father and mother temporarily.

His grandfather was a successful entrepreneur and he comes down and he visits Michael and he says I proudly showed him the controlled chaos that was our headquarters.

He started laughing and laughing and laughing.

What is it, Poppy? I asked.

Michael, he said, you're a businessman.

It was the highest praise he could have given me.

Words of encouragement really, really matter.

When I read this, I thought of a young Henry Ford. Henry Ford built the most successful American automobile company.

People forget that his first two auto companies failed, and so a young Henry Ford idolized an older Thomas Edison.

Before he knew Thomas Edison at the time, Thomas Edison was probably the most famous person in America, right?

The most famous inventor in the world.

So young Henry Ford meets him, tells Thomas Edison about this idea, and I'm going to mass produce a car for the car for the Everman, and I'm going to do it with an internal combustion engine which was everybody was like, the gas engine has no future, everybody knows that cars are going to be electric or steam, so because most of the cars manufactured at the time were not even manufactured, they were handmade at the time — were either steam powered or electric powered.

But Henry Ford had belief in this idea, so he tells, he meets Edison, and I think Henry Ford's probably in his late 20s this time.

he might be 30 years old by the time — and tells Thomas Edison, words of encouragement matter.

He talks about this over and over again, and because Edison says to him, young man, Edison got his idea immediately, young man, that's the thing, you have at it, keep at it.

And so Ford would talk about, you know, he had a lot of mistakes and trials and tribulations from the time Edison said that to the time he was successful, but he would think back on those words of encouragement.

He would push him, you know, it would motivate him and push him.

And so the I—the reason I started the podcast is talking about the fact that I cannot believe I got this this incredible DM from one of history's greatest entrepreneurs saying, like, hey, you're good at this.

So again, words of encouragement matter.

I try to do this as much as I can to all the people around me, because I just see this over and over again.

And I just love the idea.

It's like, you know, it's going through hell.

I don't think Michael Dell is going to stop no matter what.

But just to have your grandfather, somebody you love and trust and admire and respect, to say, you're doing it.

You're doing it. It's the highest praise he could have given me.

There's another idea on this page I think is important to point out for you and I, It's something that … Remember the Jensen Wong episode I just did?

It's episode 376. He has this idea of Ship the Whole Cow.

Jensen was obsessed with the book Innovator's Dilemma, and he realized that the threat comes from below, and so his way to offset that was he had this idea of Ship the Whole Cow.

I talk about it more in that episode, but we're starting to see that the threat is going to come from below with Michael Dell in relation to Compaq and then IBM, because he says, we were undercutting them on price, It's way undercutting them.

We introduced our first brand name computer, so now he's not just souping up other machines, he's making his own, okay?

It was $795. If you got the same configuration from IBM, you would have to pay between $1 ,500 and $2 ,500.

So then we see his total dedication to this idea, hey, we're gonna cut out the middleman, right?

It's how he started his business.

We're gonna go to the source.

In fact, let me read something from you, to you rather, indirect from Dell, which is published 20 years before the book that I'm holding in my hand.

He says it's an early age, I've been fascinated with the idea of eliminating unnecessary steps.

So I guess it's not surprising that I started a company based on eliminating the middleman.

He keeps pushing that advantage.

He's just obsessed with eliminating unnecessary steps from a very young age.

So he says, to keep growing quickly, we needed to establish direct relationships with the suppliers of all of our principal components.

I knew the supply chains for the parts we were ordering were full markups that I could radically reduce if I went straight to the source.

I wanted to go to the factories where these things were made.

To Taiwan, Japan, Korea, and Hong Kong.

So I got on a plane and flew out there.

I was 20 years old, full of energy and curiosity.

I was excited. My God, I was excited.

There was a whole new world out there just waiting for me to discover it.

This is, Again, it's very obvious if you study.

No one could start a business in 18 and still work on it, you know, four decades later and, you know, refusing to quit, refusing to just refusing to stop.

Like what are you going to do?

You retire? Well, there's, entrepreneurship is the best game in the world.

And so it's obvious from from reading about him.

But I loved my conversation that I had with Michael's son, Zach. And one of the main themes there that I think is super important and something that motivating to me is like.

He just has a love of the game.

He just loves the game.

He loves business. He loves talking about it.

He loves computers.

He loves working on difficult problems. It's the love of the game.

And I think there's a line where Kobe Bryant was.

Kobe Bryant studied all kinds of top performers and greats in, you know, art and business and sports.

And he's like, the one thing that we have in common is just like love and it's a pure love.

It's not a love for the awards, for the money, for the adulation.

it's a love of the act of itself, the activity of itself, and you see that it's just like, I was excited, my God I was excited!

And so when I got to the section, it's one of my favorite sentences in the entire book, my God I was excited.

It made me think of Phil Knight again.

You know, Phil Knight is, I think he's 80s by now, maybe late 80s, and when he writes that autobiography, at the very end he talks about this.

And he says, my secret regret is that I can't do it all over again.

God, how I wish I could relive the whole thing.

It's such a powerful moment in the book.

There's something he also says that—the advice of future generations of entrepreneurs that Phil Knight gave and I've heard a couple other people give—is like you're in—we're in this right now.

You and I are in this right now.

Write down the experiences you're having.

Write down what you're thinking.

Take pictures. Phil Knight's like the one thing I wish.

He's like, we had so many conversations about the company we were building, and he said something like they they disappeared in time.

You know, they just like disappeared like they were ephemeral, and he's like, God, how I wish I kept a journal or I wrote more of this down.

I documented more of it because we're we're in this right now, and we're gonna feel exact.

I could just imagine Michael sitting there writing that line.

My god I was excited.

Just as we feel tonight saying, you know, my secret regret is that I can't do it all over again God how I wish I can relive the whole thing.

That's a life well spent That's not regret.

The regret is I wish I could do it again Where so many people I think the vast majority of humans I've ever lived Get to the end of their lives with the opposite feeling with man.

I wasted this I am it's just so it's such an important again I'm just like super hyped up that that we just have there's just this thing with entrepreneurs.

They're willing to share because they understand that there's another them that's just like me, that it's gonna go through the same exact stuff I went through, and just writing it down and passing on to the next generation is like one of the best things you could do.

Think... I say it's a lot, sorry, repeat myself.

Sam Walton. Sam Walton knew he was dying.

He was in pain, he talked about it.

Cancer all over his body.

Know the end is near, and yet spending some of his very very limited time left on earth writing his autobiography and documenting everything he learned, it's an incredible act of service.

Alright, so he says, discovering the inner workings of how the supply chain worked was like peeling an onion and going all the way to the center.

Ever since I was 13, I'd been taking computers apart and examining the pieces inside.

Now I was actually visiting the plants where these things were being made.

By the time I flew back home, I felt like I jumped ahead several levels in the game.

Now they're gonna have this idea where they're gonna build their first, this is really important, it was the first 286 based PC.

He needs a really talented person that can build an Intel -based 286 microprocessor that's compatible with an IBM PC.

Now he's going to tell a story here, but I want to talk about the lesson I think is behind it.

This idea that you hire for spikes.

David Ogilvy noticed half a century ago that talent is likely to be found among non -conformist dissenters and rebels, and what happens as a corporation grows, they kind of like, even it out they want like the the middle and they miss all the the spikes of talent i'm gonna read this to you and then i'm gonna tell you a story that i think is absolutely fascinating so he finds this guy named j bell he says the better i got to know j the stranger i found him i think he might have been manic depressive he would get these huge bursts of energy and work for 36 or 48 or 72 hours straight and then he'd

crash daytime or nighttime meant nothing to him so he is going to be the one that builds this prototype and it's going to be a massive success And so I heard this story and I've heard this from a few founders, but there is a story that I found incredibly fascinating.

And it's on an app that is one of the most successful consumer apps of all time.

You have highly likely used this app.

The story was there was a world -class designer, maybe the best designer that they could have found in the world at the time.

Also either manic depressive or schizophrenic, but definitely alcoholic.

But he was so gifted that the founder realized that the only way he could get this designer to work is he'd have to sit down next to him while he works.

And if the founder got up and went to a meeting or any of those, the guy would disappear.

He'd fly out to the wind.

Sounds like J. Bell.

There's stories in this book where this guy's like, the cops are coming to the office because he's tripping out alarms. And it just happened to be because J.

decided he just wanted to go to work at three in the morning.

And he'd have to, you know, go for 42, 72 hours straight.

So everybody around this founder was saying like, is this a bad use of your time?

Like the CEOs has to sit there and babysit them.

And the founder knew that, you know, talent wins, talent always wins.

And so he's like, no, it's actually a great use of my time because this guy's going to design, you know, every single pixel that in the future, hundreds of millions of people are going to see.

And so it's actually a really good use of time.

Now, he also understood that what's the chance that this guy's working at the company in five, 10 years from now, zero, zero, but I'm able to get an immense amount of talent.

of him. And so if I just sit next to him, and that's what happened.

Actually sat next to him, and completed the job.

And then of course, when that stopped happening, the guy disappeared and flew to the wind.

They tried to help him as much as possible, but some of the best talent is very spiky.

Let me go back to Nolan Bushnell, who I mentioned earlier.

He knew Steve Jobs and Wozniak were really talented.

They had two things.

Steve's like, I'll work at Atari, but I have to sleep in the office.

And everybody around Nolan told him, no, you can't let this guy sleep here.

No, I think that like, they're talented.

And so he just realized like, oh, this guy is spiky.

And he smelled really bad because he when we're deodorant stuff.

When he was younger.

I'm going to make an exception.

And I let the two Steve's sleep at the office.

So again, this wind up working out really well.

Because the thing that j .bell created as the circuit board became the basis of the 286 computer that we introduced in March 1986, which was an instant hit.

So again, I think a big corporations like Jay, you're kind of crazy, what's going on, startups, founders, like, no, this guy's talented.

We're going to make exceptions here.

We're just going to deal with, we have to take the good with the bad.

Steve has this great line.

Again, Steve Joseph's great line where he's like, people are packaging gills.

You have to take the good with the bad.

You can't isolate them.

And so it's as crazy as it seems, our hot little company was also in big trouble.

Though our sales were booming, our finances weren't.

Almost all the revenue that came in went right into payroll and parts.

Our bank credit was stretched very thin.

In reality far thinner than I knew.

This is how Michael Dell and Dell solve this problem.

I owned a hundred percent of the stock of the company.

There were no other founders.

There's no venture capitalists or no other board of directors.

I needed somebody with the kind of experience running a company that I didn't have. So he meets this guy.

He's very successful businessman.

Sometimes he's described as an entrepreneur.

Sometimes he's described as a venture capitalist. His name is Lee Walker.

He is 45 I think at this time that Michael was 21.

So he's gonna recruit Lee Walker to be president.

This is this is very important as a turning point for the entire company So at the time Michael meets Lee Lee was trying to take it easy He's like, you know had a very stressful high -strung career very successful They went a meeting they have dinner with a few other people and then a day or two later Michael just shows up pops up at his house decides to have a conversation with them and then says hey Would you like to be president of my company and this is one of the reasons why Lee was the first person?

I'd ever encountered who could understand the business really understand it.

He got it He instantly grasped our supply chain advantages and disadvantages.

He grasped our entire business model.

So I was very curious.

He was like, whatever happened to Lee?

And so I found this interview with him.

Lee is now in this interview, he's 83 years old.

And I'm just gonna pull out a few highlights from this interview.

He goes, he's asked question.

Did you think that Dell, the company would ever get to be 40 years old when you first talked to Michael?

It is really important because on the Ken Griffin episode, if you remember, he's talking about that book, Hardball, you, are you planning to play?

Are you planning to win?

And Ken's thing is like, no, you're not, you, you want to win by a landslide.

You want to take what you're doing very seriously.

And he was talking about one of the entrepreneurs, Ken was talking about one of the entrepreneurs he admired was Michael Dell.

He said, Michael was manufacturing computers in America and he won.

You know how hard that is?

And so now we have Lee Walker, first president of Dell and he's asked, you know, now he's, let's see he's 45 when he starts it, I think he leaves the company at 49, so this is, you know, 30 years later.

did you think that Dell the company would get to be 40 years old when you first talk to Michael?" He goes, one doesn't think in those terms. It's not that I didn't think it wouldn't.

The perishability, he's again, speaking to how difficult it is what Michael achieved.

The perishability of companies is so extreme that if you would bet on any company being around 40 years, especially one in as difficult and competitive an area as the PC, that would have been a very foolish bet, what Michael has accomplished is amazing, just absolutely amazing.

And so Michael talks in the book.

I asked Li to come on and he said no. And so on the follow up in this interview, it's like, well, what made you change your mind?

And he says, Michael was 21 at the time, I was 44.

Michael was the son I never had.

So I think there was a paternal instincts that came out.

I think that's part of it.

I think part of it is also it was a damn fine puzzle.

It looked like, to many of us, the emergence of the automobile industry.

This is very fascinating because, you know, I've done a 13 -part series on all the automobile founders.

And what you learn about the American automobile industry is that, I think there were 2000 car startups and three survived.

So I didn't even draw that analogy like Leigh did and I think it's pretty apt.

There'd be hundreds of companies in the beginning and just maybe several that would emerge.

It was just an interesting puzzle as far as who might emerge out of the pack and what it takes.

He says, I just love puzzles.

And this was a particularly difficult puzzle because Michael had $1 ,000 in capital.

There were no resources.

it had to be through ingenuity and hard work, we were up against IBM and Compaq.

The competition was immense in size.

They were sophisticated and they had tremendous resources.

We had two board of directors, Michael and me.

And so one other thing I just wanna pull out of this, the most important idea at the beginning of the company was the idea that was born out of necessity.

So he says, the one idea that we had, and it was born out of necessity, you know constraints breed imagination.

Since we were constrained by finance, we would start building customer's computer after the order.

The constraint of building them to order one at a time turned out to be brilliant because we created a system where we were mass producing one at a time, which sounds like a contradiction in terms. But when the large corporations came to visit us, they were stunned at how sophisticated we were in terms of our ability to mass produce, not just generically.

Each computer had an identity.

It had a destination.

It had a customer. I think, in the spirit of your question.

The direct thing was key.

So back to this book.

Lee Walker changed his mind and to this day I don't fully understand why.

In his shy and modest way he'll mumble something about having one spin in the same spot himself.

Because I started with a company with only a thousand dollars in invested capital.

As contrasted with the only almost 100 million that compact our rival had, raised from their investors, I had to figure out how to stretch the limited capital we had to the max and I got pretty good at it.

So what he's talking about and this has been study in business schools over and over again is the fact that Dell had a negative cash conversion cycle.

Dell receives payment from their customers before they have to pay suppliers.

Now here's the problem.

When you start selling to enterprises and to governments and to large organizations, you have to extend credit.

Dell didn't have any money in their bank account.

I forgot, I can't remember the number, but they were doing like, I don't know, 60 million a year in sales or some crazy number like that, and they had like 200 grand in their bank account at one time.

It was a wild jaw dropping number.

So he says, credit card sales paying suppliers on terms, stripping parts inventory to the bone.

All these things kept our cash conversion cycle far lower than most other companies.

This was very good.

On the other hand, our fastest growth was selling to companies, government agencies and education and medical institutions, entities that were not going to pay us with credit cards.

We needed to extend the terms, which meant we needed more credit, a lot of it.

his bank at the time would only finance about six days of sales.

You can't survive on that.

Money was sorely needed and Lee Walker knew how to get it.

From the day he walked in the door, we shifted into a brand new gear, again.

This is why the reoccurring theme when you read these biographies, they keep talking about, hey, you really need to work with the best people you can that you can never ever forget the dynamic range of people.

Lee becomes the president.

He says he worked quickly to establish his value, bringing his expertise and his business connections to bear.

Lee had recently helped usher a failed computer company through chapter 11, making sure that the company's financial backer, Texas Commerce Bank, got back every penny.

The president of TCB, and a friend of Lee's, was so grateful he happily extended a new line of credit to Dell.

Lee Walker could go to people like Frank Phillips at Texas Commerce Bank and say, look, Texaco, Exxon, Cento, all these companies companies, not to mention the U .S. government, they all owe this company money.

Give us a loan based on all these receivables." And the bankers would say, Okay, Lee, we don't know about the kid, but we trust you." So eventually Michael and Lee figure out, hey, we need to take the company public, it's a natural progression, and it's going to be the only way to access the kind of capital we need.

And it says when they were talking in these discussions, right about this time, investment banks start to call.

So they eventually select Goldman to do their IPO.

Goldman says, We shouldn't go public just yet.

They recommended a private placement, 20 to 30 shareholders among financial institutions, high net individuals in various funds.

Then came Black Monday, October 19, 1987.

The stock market lost 23 % of its value in a single day.

When Lee came into my office to give me the bad news, he was convinced our private placement had gone kaput.

I was busy, at one of my favorite pastimes, taking apart a competitor's computer to see how it stacked up against ours.

That is why you win.

There's a funny thing that that's sort of reminded me of what Sam Walton was doing on Black Friday.

This is the level of commitment and you know just focus to my business that I would want Sam Walton Gets asked a question by a reporter on Black Friday You know because at the time.

I think he was worth I don't know like six billion dollars or something on paper and his net worth you know dropped over a billion and He was asked like how do you feel that you've lost over a billion dollars today?

And Sam goes I hadn't heard of it to see a young Michael Dell doing the same things like I can't control the stock market But I'm gonna do what I do best which is take a part of computer and see how we can improve as it turned out out of literally hundreds of the financings that were in the process that black Monday ours was a sole survivor.

There was no one else quite like us.

And because you just couldn't argue with the underlying financials.

If you got something that's growing a hundred percent a year that's at least telling you that people like it.

At the time they're doing businesses, PC's limited.

At first he's like really leery of naming the company after himself.

The way to think about it, it's like some of the people I most admire are in some of the business and the business I most admire.

Like they're named after the person and I think there's something to that like James Dyson, Bloomberg, Dell, it's almost like a way of burning the boats, right?

You can't get another, I guess you could get a new last name, but you're not going to.

So he's like, well, what if we went under like so many other computer companies in the mid to late 80s?

Then Dell could have this negative connotation.

And so, he says, I kept thinking about a tech entrepreneur named Adam Osborn, who in the early 80s had come up with a portable computer called the Osborn One.

The machine was very popular for a while until he announced the imminent release of an upgraded model.

The problem was that the internet release the upgraded model wasn't imminent enough in anticipation of the new computer people immediately stopped buying the osborne one and revenues stopped flowing with no new product in the pipeline and a lot of suppliers to pay mr ossborn went bankrupt business writers dubbed the fiasco the osborn effect that is not the way that you want to be remembered so i have a funny adam ossborn story that comes from this book that was written a long time ago it's written by Michael Moritz on like the first, the history of the first like six years of Apple when the book

ends, Steve is still at Apple the first time.

And Steve Jobs is quoted in that book with his own Adam Osborne story.

He says, Adam Osborne is always dumping on Apple.

He was going on and on about Lisa and when would we ship Lisa.

And then he started joking about the map.

I was trying to keep my cool and be polite, but he kept asking, what's this Mac we're hearing about?

Is it real? He started getting under my collar so much that I told him, Adam, it's so good that even after it puts your company out of business, you'll still want to go out and buy it for your kids.

And so let's go back to this idea where he was asked, like how many hours are we working?

He said, all of them, but he's still human.

And still everybody has a desire for relationships and not, it can't just be all work all the time.

I've been happily working 16 hours a day, eating in the office, sleeping at the office.

My work was my life.

I had an enormous desire to succeed, but I was human.

And I knew something was missing from my life.

A salesman of one of our chip suppliers said, hey my dad said you should meet this girl Susan Lieberman.

So he winds up meeting Susan, they get married.

Susan plays a major part in his life, in his company.

He's she's his biggest confidant.

They're still married to this day.

They have four kids that love both their parents and talk about the fact that they have such a great relationship and they'd built a model for a happy marriage for their kids.

And Michael tells a story about their first date and he says 30 plus years later we're still walking and talking.

So Dell files to go public.

They've been in business for four years, from founding to being public in four years.

At the IPO, I think Michael owned over 73, around 73 % of Dell when it went public in 1988.

Now got to the part about IBM that I referenced earlier.

So a mistake that they do, I think is part of human nature, part of, you know, when you see this reappearing in a bunch of large companies or established companies, they couldn't imagine a future different from the world that they succeeded in.

This guy named Glenn Henry, who was an IBM fellow.

It was a distinction of the highest order at one of America's most distinguished companies, okay?

Glenn Henry lives in Michael Dell's neighborhood and just read about his IPO.

And he goes to Dell and says, hey, I wanna work for you.

And so he says offering to jump ship and work for me was a big deal.

He had been at IBM for over 20 years.

As Glenn described it to me, IBM management look down their noses at the PC.

They thought the PC would make a great terminal to a mainframe Period.

Glenn on the other hand saw the personal computer as a game -changer.

At the time there were maybe a couple of million PCs in the world.

He saw that number growing to billions as did I.

So This is a couple things to jump out here.

So thinking about when this is happening and I went looked up market cap In 1987, IBM's market cap was $100 billion.

It was the first company to break the $100 billion market cap threshold, which was surprising to me.

I didn't know that.

And it was the most valuable company in the world.

The most valuable company in the world was getting it wrong.

They could not imagine a future different from the world that they succeeded in.

And this is why there's always opportunity.

And there will always continue to be opportunity because a business is just an idea that make someone else's life better, and there's infinite ways to make somebody else's life better.

Then he talks about taking on Compaq.

Play nice but win, especially versus Compaq.

They started out a couple years before us with much more venture capital.

They had super -smart engineers, powerful R &D, and a special partnership with Intel.

Every advance in microprocessors where Intel enjoyed a monopoly went to Compaq first, yet Compaq had no price advantage.

Their operating costs were 36 percent of revenue as contrasted with our lean and mean 18 percent They sold through retail stores only we knew we could beat them on price and with our build -to -order model on flexibility We were the cheeky outsiders with the killer business model So they start running ads about this and they reflect it as like a David verse Goliath theme Advertising was crucial to us I knew from personal experience how much attention tech people paid to the ads in PC Magazine in PC world because he was one of them right So then they says we're hiring a world -class ad agency would be

expensive but Lee and I deemed the expense to be worth it And it was we more than doubled our advertising budget when we signed with Scheat Day Which is also the firm that Steve Jobs used for Apple the results were very much worth it We went from $69 million in 1987 to $159 million in 1988 and then $257 million in 1989.

Competitive, lean, aggressive underdog that wants to win.

That is where we are in the story of Dell.

In the next section, the founder is the guardian of the company's soul.

It is an extension of who they are as a person.

You know, there's a great line where it says Apple was just Steve Jobs with 10 ,000 lives.

I used to describe that as it's the importance of building a business that's authentic to you.

Michael gave me a better way to describe this.

You build a business that's natural to you.

So it says, in 1990, Inc.

magazine named me its very first entrepreneur of the year.

Lee Walker said some very nice things about me in the accompanying piece.

This is so important.

What Michael Dell does, he said, is so natural to him and flows so spontaneously from him, he has so clear a vision of where he is headed that he can rise above the background noise and avoid the pitfalls that typically take entrepreneurs down.

Lee was also being modest. He was responsible for getting us past any number of pitfalls, but as winter turned to spring He told me it was time for him to go being president of Dell computer had been a five to nine job He later wrote Michael.

Doe gets energy from this Literally what he said it's so natural to him it flow so spontaneously from him where the same exact business broke Lee down And so this is what he talked about it.

It required hard personnel decisions financial attention tradeoffs, strategic direction, country -by -country implementation, and endless domestic tactical operational issues.

I had forgotten that I hadn't wanted to do this in the first place.

I got caught up in the richness of a multidimensional puzzle, got swept up in the competitive fray of defeating IBM and Compaq.

I forgot that once upon a time great clumps of my hair fell out and my back ached terribly when I was starting my own business.

Michael and I were such different personalities.

He was one of those business people who thrived on the stress of international high -tech competition.

I was not. That impossibly complicated arena gave him energy.

It is natural to him.

It had beaten me down to the point that I wasn't physically or emotionally strong enough to continue." And part of this has to do with the fact that it's not business for founders.

It's always personal, and this little anecdote of another run -in with Carl Icahn, after Dell beats him.

He says, Icon really did call.

Michael, it's a hard fight, but you won fair and square, he said, conveniently forgetting all the times he insulted my leadership, and by extension me personally, accusing me, in the most public way possible, of sheer incompetence, not to mention all kinds of corporate finagling and malfeasance.

What I was really thinking was you came after this company.

The thing that means more to me than anything in the world except my family, and you lost, pal.

I sincerely hoped to never see or hear from him again.

Back to the importance of self -belief, back to the importance of making no small plans.

In 1991, we entered the Fortune 500 at number 490 with sales of $546 million.

A very proud moment for me.

We'd been in business for just seven years.

I was 26 years old.

Could I have imagined such a thing as a kid perusing copies of Fortune magazine?

Okay, I'll admit it, that I could have. I always did dream big, but I didn't even think my ambitious younger self could foresee the threshold where we stood.

Our sales for the year that ended in 1982 hit 890 million dollars.

The fabled billion dollar barrier seemed reachable and breachable." And then he mentions again something that I've seen over and over again, founders need a supportive spouse or no spouse at all is the way I put this.

His wife was supportive from day 1.

1993 was our ninth anniversary as a company.

Susan and I had been married for just two and a half of those nine years.

She understood my laser focus on the company, my frequent distraction.

If you want to win an Olympic gold, you have to be fanatical.

It's interesting that he used the word fanatical.

A few weeks ago when I did the Todd Graves Raising Cane's episode, Todd said, nothing ever happens unless someone pursues a vision fanatically.

And then I think another important reason to pick up the book and read the whole thing is because he talks about like when you're scaling like this, essentially you're building a completely different company.

It's not the same thing.

You have to constantly be going and redoing all of your systems, all the different people.

And so he says, we breached the fabled billion dollar barrier.

We posted sales of not 1 billion but $2 billion.

The systems and tools required to run a billion dollar company are very different from those needed to run a hundred million dollar company.

We were outgrowing everything, our abilities, our systems, our people, and our capital structure.

Our rapid expansion had meant lots of new hiring in every department.

In five years, it went from 650 people to 5 ,000.

I was just beginning to realize that the people who got us from point A to point B might not be the same people who can get us from point B to point C.

So I was thinking about this when I got to this part because everything's falling apart.

Again, from the outside, look wildly successful in the Fortune 500, you're entrepreneur of the year, inside, everything's breaking.

My friend Brent Bresor has this permanent capital holding company and he buys a ton of he sees a lot of different businesses And he's got a great quote on this So for every like one acquisition that Brent does he looks at something like 15 ,000 companies It's a good insane number and I texted him about this like dude, don't you have like this great?

Quote about like all companies being held together by duct tape or something He says all businesses are loosely functioning disasters.

Some just happen to make money And so if you're reading this, like I think back to the early days of Dell where he's got orders on clotheslines going through cubicles.

Now, you know, he's hired, he's what, almost 10 X'd his people in like five years.

Everything's breaking.

And then listen to the story.

Just hilarious. So we hired a senior VP of human resources.

We're going to call him Ted, right?

And so one of his other vice -versa comes to Michael one day, he goes, oh dude, we got a big problem.

You have to sit down for this one.

And the guy goes, we have a problem with Ted.

Ted has hired somebody on the second shift in IT and Michael's like, okay, so what's the problem?

He goes well We don't have a second shift in IT and Michael goes have you asked him about it?

He goes it's a little more complicated that she's a stripper It turned out that Ted who was married and had kids had given a no -show job to his girlfriend the stripper and the girlfriend decided she wanted more money so she came to the company and Said she needed a good chunk of change to go away Needless to say it was Ted who went away and then there's just an excellent excellent line in the book He says many people don't reach their greatest potential because they fear failure in avoiding failure they deprive themselves of a great teacher and So in 1993 Dell pushes he's like hey we got to get

into servers This is an existential threat to our company.

He's gonna remind me a lot of like Ken Griffin's hardball strategy It's discussed in that book hardballs Well, so he says in 1983 gave a presentation on why we needed to go into the server business in a big way And then why and if we didn't it could be real trouble one of the most striking things about the server market was how profitable was.

Margin's much, much higher than those on PCs.

Compaq was offsetting the small profits it made from selling its PCs with the rich profits its server business brought in.

We calculated that if Compaq was left alone in the server sector, they would have so much profit that they could use it to attack the PC market and put us out of business.

Another thing that he got to really, really early and really, really fast is we're going to set up our own website and and then sell over the internet.

And again, I think one of the main themes when you study Michael Dell is like, it makes sense to me.

If it makes sense to me, it doesn't matter that other people aren't doing it.

He's very comfortable trusting his own judgment.

So he says, in 1994, there were just 2 ,700 websites in the world, and one of them was dell .com.

At the beginning, customers were unaccustomed to buying this way.

They were leery about putting their credit card numbers out there.

Our website began selling PCs and notebooks in June, 1996.

at the end of that year, online sales reach a million dollars a day.

By the end of 1996, it seemed as if the sky was the limit.

So I'm gonna go to 97.

There is a section that I think is really important because he's talking about, obviously, admiralty jobs.

They try to work on a few things together.

They couldn't get it to work out.

But there's something in this.

Well, let me just read what Dell says first before I pull up this quote from Andy Grove.

And Dell says, It's hard to imagine today.

He's describing what was taking place in 97.

It's hard to imagine today.

But back then, 10 years before the iPhone, Apple really was an underdog.

They were truly fighting for its life.

It was rare to see any mention of the company that didn't begin with the phrase, like trouble plagued or close to bankruptcy.

So there's an excellent quote.

Again, highly recommend you buy both this book and this fantastic book that I'm holding my hand right now called In The Company Of Giants.

It's interviews with two Stanford MBA students from in the late 90s interview, like 16 tech company founders.

And Michael Dell's in the book.

Steve Jobs is in the book, Bill Gates, Bill Hewlett, Andy Grove.

It's just absolutely, absolutely excellent.

And I want to pull out one thing that Andy Grove said, because at this time he was thought to be, you know, the best, maybe the best tech CEO of all time.

And he says the important thing to realize is that a lot of major business decisions are not that obvious.

In retrospect, they might be, but not when you're looking forward. Remember he is being interviewed in 97.

If you read the newspapers about Apple, what they're going through is very similar.

Nothing is obvious about Apple, other than the fact that they're in trouble.

That's very obvious.

But what to do about it is not obvious.

If you lined up three or four of the people in your book and gave them a blank sheet of paper that said, if I were CEO of Apple, I would blank, each would have a different answer.

This is, again, I think it's so important to read from history.

Especially period where you can see what their opinion was at the time.

Very interesting. All right, we kept winning, later that same month in October, 1997.

Sales of our servers, PCs, notebooks and peripherals kept going ever upward in 1998.

With over 12 billion in sales, we surpassed IBM and Apple to become the second biggest PC company in the world.

Only Compaq now stood above us and we had them in our sights.

Our sales climbed to 18 billion in 1999 and 25 billion in 2000.

And then, of course, then you're going to have the dot -com bubble.

January 3rd, 2000 our stock price was $50.

On the last trading day of that year it was $17.

Our earnings fell short of Wall Street and internal expectations for five consecutive quarters.

And in 2001, we had to do our first round of layoffs ever letting go about 5 ,700 people in total.

But they were very, very hard to kill and had to do with that business model.

Yet, the truth is the dot -com bust hit us less hard other than it did other companies.

To a great degree, our lean and fast business model and our relative independence from traditional sales channels insulated us from the troubles that befell our bigger, slower moving competitors.

Our revenues fell only by 2 % in 2002, but our market share grew.

And when I got to this section, I had a funny thought.

I was like, oh, Charlie Munger, would you be proud of Michael Dell.

In Port Charlie's Ominac, Charlie's kids were interviewed and they said that durability was a first rate virtue in their father's eyes.

and he has this great line about this.

This comes from the book Damn Right which was a biography of Charlie Munger.

It says Munger expressed this conviction clearly stating, ''It's a crime in America to build a weak bridge.

How much nobler is it to build a weak company?

In Munger's view, corporations should be designed with the same engineering principles as physical infrastructure built with redundancies and backup systems to withstand extreme stresses.'' That's exactly what Michael Dell just described to you and I.

He built a company that had redundancy backup systems and a business model that was lean, that was able to withstand extreme stresses.

So that was the first 16 or 17 years of the company.

I want to talk a little bit about taking the company private.

And again, accomplishing things that no one else had accomplished before Michael Dell.

It's really fascinating.

Before I get there, I always said that if you love what you do, your extra strategy should be death.

Michael takes it to a different level.

So he says, why didn't you just walk away?

It was a question Even more than one person asked me after the battles of 2012 and 2013, why not simply leave behind all the headaches of trying to buy back your own company?

I could afford to walk off into the sunset or start another company, build a new legacy.

A reporter asked me the question soon after we went private and I gave her a simple answer, one that came straight from the heart.

I didn't want another company.

This was the one with my name on it.

I will care about this company after I'm dead.

I love this stuff. It's fun for me.

So yeah, you're actually, one thing to say your extra strategy is death, another level to say, I'm gonna care about this after I'm dead.

So Dell is going to complete the largest technology buyout ever.

They take the company private in 2013, $24 .4 billion.

It's even hard to comprehend what happens next just two years later.

In 2015, Dell acquires EMC for $67 billion, billion, the largest ever acquisition in the technology sector.

EMC owned VMware. They're going to spin VMware out as its own separate company.

And in 2022, after the book is completed, Broadcom is going to buy VMware for $61 billion.

And what I was told is that Dell took a bunch of, this went to being like a Bonanza for them because they took a bunch of the payment in stock.

And since then, Broadcom stock is up by like three x. So that is where we're going.

I just want to pull out again, the book has a lot more detail.

I just want to pull out a couple interesting ideas that I think are applicable to you and I, and just give a sense of what Dell was thinking.

Go back to that idea, he says, make no small plans.

He goes, literally his acquisition target is the number one person, the number one company.

He says, to acquire a company that has been number six, and he's explaining his thinking, which is very valuable.

And I've been telling this story a lot at dinners in the past week or two.

To acquire a company has been number six or seven in its field, and to take it to number two or three, or even vaulted to the number one was almost impossible.

Companies with leadership positions, if they continue to invest and serve their customers well, are hard to unseat.

It is not impossible, but it rarely occurs.

I kept thinking about EMC and VMware, who together were well on their way to becoming the most important company in the IT infrastructure universe.

Just keep that in mind when Jensen describes what Dell accomplished, that's very important.

They were well on their way to becoming the most important company in IT infrastructure.

Remember, he buys the company in 2015.

The biggest, boldest prize would be EMC VMware.

Make no small plans.

He's applying his own advice.

Right? He said, we're going to go for the very top.

And so the other alternative was, he calls it a string of pearls, where like, hey, we could just do a couple like smaller acquisitions and put them all together.

Would that be better?

Would it be a better company?

Would it be cheaper?

How can we do this?

He says, why not just buy a few storage and virtualization startups and integrate them into Dell?

People had said it would cost vastly less than acquiring EMC and VMware.

And he makes the great point, because you'd go and talk to his own engineers, then you talk to customers of these people.

And it's a great line.

Customers are always the ultimate judge and jury.

I met with each of the companies planning to challenge both EMC and VMware to see if a String of Pearls plan might make any sense.

And what I found was that while some of these startups had interesting ideas, they were far from being able to deliver them at scale, nor did they show any evidence of being able to integrate well with each other.

All these companies were also losing enormous sons of money where VMware and EMC were making a ton of money.

At the same time, they were valued astronomically.

And our acquisition strategy to date had already taught me it was highly unlikely you could acquire a bunch of startups that would challenge an industry leader like EMC VMware.

EMC and VMware's price tag had a lot of zeros in it, but relative to the company's current cash flow and our projections of their future profitability, that valuation seemed like a bargain.

Such an important point.

From the outsiders, that's expensive.

To Dell's perspective, it's cheap.

And if you factor, and you go back to those numbers we just talked about, he acquires the whole thing.

EMC and VMware for 67 billion years later spins out just VMware for 61 billion.

Obviously, Dell was right.

And this was a huge swing.

They were going to have to borrow 50 billion dollars.

There's a hilarious story I need to bring this.

I want to tell you, they were meeting with the EMC board to see if they're going to approve the merger, right?

And Dell brings with him, Jamie Dimon, okay?

And so one of the board members, they're having this meeting, Jamie sitting there quietly.

One of the board members asks a question, gives Michael a serious look and he goes, do you have the money?

We're talking about a lot of money.

And Dell says, before I could say a word, Jamie spoke up.

Yes, they have the money.

The stature and credibility of the man who had spoken sank in.

it was a moment that I will never forget and something for which I'll always be grateful to Jamie." And then I think the best description of this radical transformation that Dell pulled off, and the future value it's going to create.

The stuff that he was doing 10 years ago, 15 years ago, 20 years ago, is paying dividends, and will continue to pay dividends well into the future.

I actually think the best description is I found this interview with Jensen, Wong, and Michael Dell, and he talks about...

he does the greatest summary of this.

He says, there is no one better at end to end systems at scale than Dell.

This is a really important time.

We've re -engineered and reinvented every layer of computing, from the chip to the operating system, to the system servers, to the way these data centers are put together.

There is only one company in the world that has the ability to build the computing system, The storage system, the networking system, all of the software that goes along with it, and the path to the world's enterprises.

Dell. This is why, I need to do this episode.

I'm trying to build and tell these stories about these great entrepreneurs, these people that found what they wanted to do, and they stuck with it for decade after decade after decade as impressive as every, all the early success of Dell in the first 16, 17, 20 years.

Dell is undeniably more successful and will continue to be so, 40 years after it was founded.

There's this great line that Jeff Bezos says, where he's like, we're trying to build something that we can tell our grandkids about.

That we can be proud of.

Such things are not meant to be easy.

Think about the level of fulfillment Michael Dell must feel today.

As I write these words, we recorded our highest ever revenues, profits and cash flow.

If you were keeping score, the value of our equity in the eight years since the announcement of the Go private increased by over 625%, and our enterprise value increased to over $100 billion.

Not bad for a business that was thought to be dead in 2013.

I mentioned earlier, there's very few people that have ever lived that could point to an accomplishment as profound and as impressive as what Michael DelHose built, but I wanted save what I feel is the most important lesson for the very end.

When I got to talk to his son, that is the moment when this really crystallized what, to me, was the most important lesson.

The way that his son described their relationship.

It's almost like they're best friends.

The fact that he knows he can call his dad at any hour of the day.

His dad's running one of the biggest most complicated businesses in the entire world, and he drops everything for his children.

for his son to say that it's one of his best friends, that they talk all the time, that they go on walks, that he's unbelievably grateful for him, that he feels lucky that Michael is his dad.

I remember when I was talking to Zach, I told him this, like I literally had goosebumps and what I told him I was like, I want my son to speak about me this one day.

And I think the important thing is like, you start with that end in mind And then they're like, OK, if I want that to happen, how do I work backwards from that?

I think it's the most important lesson I took away from all of this.

Just how incredible you really can have it all.

You can have a wildly successful career doing something you love, doing it better anybody else in the world and be a good father and a good husband.

And so I want to end on this quote that I think is very, very important.

It comes from the founder of Kinko's.

It's a guy named Paul Orfalia.

He's in his seventies.

He was giving an interview.

He's a multi multi billionaire.

And he goes, you know, what success is Success is when your children want to be with you when they're adults that success How many people have all that other bullshit money material success and their kids?

Don't come home for the holidays.

Come on the most cool thing I've ever been called in my life is dad and That is where I'll leave it for the full story highly, highly, highly recommend reading the book.

I've listened to the audiobook three times.

I've read the hardcover, reread my highlights over and over again.

If you buy the book using the links in the show notes, you'll be supporting the podcast at the same time.

That is 385 books down, 1 ,000 to go, and I'll talk to you again soon.

[마이클 델의 여정: 창업자에서 리더로, 'Play Nice But Win'의 교훈]-[#385 Michael Dell]

📋 Summary

마이클 델: 창업의 본질과 지속적인 성공의 기록

1. 비용 통제와 구조적 우위: 'Hardball'의 정신

2. 창업가의 자질: 호기심과 타고난 집요함

3. 제약이 만들어낸 혁신: 'Constraints are your friend'

4. 진정한 승리: 비즈니스와 삶의 조화

결론

🎯Key Sentences

📝Key Phrases

📖 Transcript