Michael Dell，Dell Technologies｜David Senra

I want to jump right into what we were talking about before we started recording. You said you’ve been running Dell for 41 years. You’ve been obsessed since you were 11 or 12, so you’ve been running it for 50 years, because there was a Dell before Dell, right?

When I was in junior high school, in the summers in Houston, there were classes at Rice University for young kids. You could go to Rice University to take these classes. My mom signed me up, and it was great. They had college professors teaching these classes.

The way I would get to Rice University was by taking the bus from our house. It would take you downtown.

Okay.

I was curious, so I thought, “If I just stay on the bus, it takes me all the way downtown to where the really tall buildings are.” So I went down there. There were really tall buildings, and I was roaming around. I was 11 or 12 years old, and I saw they had the stock exchange there with all these tickers going. I thought, “Wow, that’s pretty cool.”

I started learning about the stock market. My parents were always talking about financial markets, and it sparked this interest really early in life.

There’s a great line I’ve seen from both Ken Griffin and Larry Ellison describing you. They’re like, “This guy was manufacturing computers in America at a time when there were thousands of other people doing the exact same thing, or something very similar, and he was the only one who survived.”

The reason I thought about that is because I was watching a talk that Ken gave, I think at Yale, and he said something like this: “For reasons I can’t explain, I don’t know why, I’ve just been obsessed with the stock market, with business, since I was in third grade.” Sixty years later, or however old he is, that obsession has not dulled.

We were just in your office, and you were showing me one of your new, unreleased products that we can’t film or photograph. I was like, “This is like a kid on Christmas.” You’re still so—

It’s a super cool product. I’m very excited.

I told you I’ll buy one because I think it’s cool, too. I’m going to buy one as soon as it comes out. I just loved this enthusiasm, that it’s not dulling.

I was just with your son, Zach, last night, and we were talking a lot about his business absolutely ripping. He’s super intense—

Yeah.

—and he’s just in it right now, right? That was 95% of our conversation. Then he said, “All right, I have some things that you should talk to my dad about.” It was so good, I was like, “Shit, he just did the outline better than me.”

One of the things he said was, “You need to get on record what motivates him.” He said, “It’s one of the most fascinating things. Just ask him what motivates him.” So, what motivates you?

It’s all fun and interesting, and I want to learn. It’s like a big puzzle to solve and understand. You think about the impact that technology has on the world. What could be more exciting than to be in the middle of that, figure it out, and help advance it?

It’s an infinite game, right? It never ends. I love to win and hate to lose. It’s just the most exciting thing you could do: be in the middle of a business like this and see it all unfold and play out.

Yeah. That’s one of the things he said: “He’s addicted to puzzles.” So that’s the way you look at it?

It’s the curiosity of solving a puzzle, understanding things, and figuring them out. You always want to do that. I would feel unfulfilled if I couldn’t figure out a puzzle or answer a question. There’s a burning desire to understand things—

Mm-hmm.

—and to figure them out. Puzzles and math have always been important.

When did you realize that about yourself?

I never really realized it. You just asked me about it. It’s just what I did. I wanted to understand things.

Mm-hmm.

When I was dealing with physical things, the way I would understand them was to take them apart. How can you understand something if you don’t take it apart?

Yeah.

My parents would get pretty frustrated with me taking apart things in the house. Sometimes I’d put them together, and sometimes they would still work. It was just the desire to understand things—the curiosity.

Yeah. That’s one of your character traits. You have a great story in the book where you save up for the Apple II. It was a relatively expensive computer, especially since I think you were 12 at the time. You bring it home, and your parents are like, “He’s going to plug it in and play with it.”

It’s like this machine that does really cool stuff, but how does it work? What’s inside it? How do all those things work, and how do they fit together? Why did they put these things in it instead of those things? It’s about getting down to the essence of it.

I had a thought when I was reading your book. At the time, you were taking apart IBM. I’m pretty sure this was before you started Dell officially. You were a teenager, and I didn’t know this about IBM. I had to go back and look it up. It was the most valuable company in the world at the time. It was the first company ever to hit a $100 billion market capitalization, which also blew my mind.

You take it apart and think, “Oh, wait. It’s just components.” This is the biggest company in the world, and this is their product. If you take it apart, it’s just made of components from other companies. It’s implied—or at least this is what I was reading between the lines in your book—“Well, I can do the same thing. What are they doing here that I couldn’t do?” Did you have that thought?

Yeah, absolutely. It goes back to when you open the thing up and look inside. What’s there? Well, there are chips, wires, power supplies, disk drives, and all these components.

You think, “Where do those things come from? Who makes them? What’s inside them? How do they make them?” You peel the onion and understand all the different elements.

When I originally got the first IBM PC, I probably took it apart before I turned the thing on just to see what was inside. One of the really cool things back then was that you didn’t have these application-specific integrated circuits. They’re called ASICs, or these big chips that nobody really knows what’s inside except the designers. All the chips were off-the-shelf chips, so you could understand what the logic flow was and what each chip was supposed to do inside the circuit.

Inside the IBM PC, none of the chips were made by IBM. None of the disk drives were made by IBM, and the power supply wasn’t made by IBM. I was also interested in the economics of it. I thought, “What does this chip cost? What does that chip cost?” You add it all up, compare it to the price they were selling the thing for, and think, “Wow. They’re really charging an incredible markup for this.”

That’s an incredible insight to have as a teenager: to figure out what the actual cost of the components are and then look up where they come from. It sounds like what Elon did with rockets. The Russians wouldn’t sell him one, so on the flight back—this is a famous story, and it’s in all of the books—he thought, “What is a rocket made of? There’s a list of components. How much do those components cost?”

What you just said is that you kept asking questions: “I’m going to take it apart. These are all the components. This is where you get them from. The company name is right here. I can just call them up and find out how much this costs.”

You could go to the distributors and say, “How much does this chip cost?” They’d say, “It’s this price for 100 of them.”

Yeah.

You could literally map out the cost of every chip inside the thing.

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

There's something I don't know if I've ever verbalized before, but it's in all these biographies that I read. What it feels like is there's just a lot of common sense in the way a founder tends to keep asking more questions and, as you just said, keep peeling the onion. It's like, “Okay, I got that answered. What's the next one? And then what's the next one?” There's something in human nature where we just stop at the first question.

But you have this infinite curiosity that was very obvious from childhood, and based on what we were just talking about in your office, it's obviously still present. It's fascinating. It's not rocket science: just keep asking questions, collecting information, and thinking about the answers you're getting.

Yeah, you want to understand things at a very deep level. And so that's always been a thing for me.

I think that's what I'm very interested in. If you read the life story of somebody, I'm very interested in understanding who the person is and why they're doing what they're doing. This is the genius line from Charlie Munger, where he says, “It's way more effective to tie the ideas to the personality that developed them.” And the way you tie it to the personality that developed them is you read about their life story. You read about their childhood; you read about what their interests were.

But I love the part in your book—I was rereading it yesterday—where your parents confront you. You'd started Dell in your dorm room at the University of Texas, and they were distraught, which is really funny given what's occurred over the next 4 decades. They were like, “What are you doing, Michael? You're supposed to be on this path to be a doctor.” And I think your mom was crying.

She was.

It was very emotional. So you were like, “Okay.” In the book, you said, “I caved,” which is very unusual because you have a super-strong personality from a young age. But then, on the very next page—I can see it in my mind right now—you went cold turkey, didn't even look at a computer for 10 days, and tried to take notes in classes. Then what I realized was, no, you were compelled: “I thought working on computers was going to be thrilling. I'm going to drop out with $1,000, and I'm going to take on the biggest company in the world.”

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

Do you feel it was all-consuming even at that age? Because at the time, you were sleeping in the office when you started. We talked about this last time; it's hilarious. Somebody asked you, “When you started Dell, how many hours did you work?” And you were like, “All of them.”

I wasn't doing anything else. There wasn't really anything else that was important to me. So, yeah, it was totally all-consuming and super exciting, and I wasn't doing anything else.

Before that, were you somebody who just focused on one task at a time?

I would get pretty obsessed with individual topics and go deep on them.

Mm-hmm.

So I wouldn't consider myself generally interested in a bunch of things. I was super deep on certain things that excited me or interested me.

Is that still the case today?

Yeah, it tends to be.

Zach told me he'll call me at 5:00 a.m. And he'll be like, “I have an idea. We should do this product or this acquisition or whatever.” And he's just like, “He just can't help himself.” I asked him, “What would get him to stop?” He's like, “You have to kill him.” What made you decide to write the book?

We had gone through a whole lot with going private and buying EMC and VMware, and there had just been so much that had happened. I wanted to document it. It was during COVID; I had some time and started writing this stuff down. It felt like a logical place to capture everything that had happened.

One of the main reasons I wrote it was for our team inside the company, because I want them to understand how we think about the business and where it came from. As a business grows larger, it's harder to tell the stories directly with everyone. It's a great opportunity to encapsulate all that and share what happened—the good and the bad, the things that worked well and the things that didn't work well. I certainly benefited from reading the stories or hearing the stories of other people, and thought it'd be a good idea.

I said this on the episode I made about it: it's a great gift to future generations of entrepreneurs. I actually think there's an idea in having a singular piece of media, whether it's a book—there's another idea for you: a podcast—for people, as the company grows, to understand: these are the decisions that were made, this is why they were made, and this is what we've gone through.

Spotify has this. Originally, they did. Gustav is the head of product at Spotify, and he's the actual one who made this. Originally, I talked to them about this, and they were just going to do an 8-part series. It was going to be a private podcast inside the company that told the history of Spotify.

If you come in now, 20 years into its existence, it's like, well, what was it like in year 1 in an apartment? We got a server in a closet. What they did was create this beautiful narrative, and they would also include the people who were important in the early days. Some people don't last in the company, but they were really important in the first 2, 3, 4 years.

Right.

But I listened to the thing 2 or 3 times. Thank God it's public now; anybody can just type in “Spotify: A Product Story,” I think is the name of the podcast. I'm like, “Why don't more companies do this?” I'm not an employee, but if I were coming into Dell or any other company now, I could have 8 one-hour episodes, and they would say not just, “This decision was made,” but, “Why?” These are the constraints we were under; this is what was going on.

If we walk downstairs, right below this room where we are, there's a new class of small-business salespeople being trained. You would love for those team members to understand, “How did we get here? What are all the things that we did right and wrong?” They could really deeply understand the culture, the values, and the beliefs, and then build on that with their own contributions.

Bring them up to speed. And that's the context. I also think there's an additional benefit to making it public-facing, because humans buy stories. Money flows as a function of stories.

I've experienced this. If I read for 40 hours about this person who had an idea in their head and built a company, at the end of that, I'm going to have a way better appreciation. I would end up buying their products that I never even would have thought of because now I understand the story.

I just reread James Dyson's autobiography, which is one of my favorite books—probably my number-one recommendation out of the 400 books I've read so far—because it's 90% struggle. The first autobiography, it's just like, “I'm failing for 14 years.” This guy is like a mule; he won't give up: 5,127 prototypes.

But there's an idea in the book that I thought was smart: he understood the power of storytelling. He says, “You're going to walk into the retailer, and you're going to see 6 different vacuum cleaners.” His, obviously, is designed differently, so it's going to catch your eye. But he insisted they write a 200-word story on a little flyer—maybe a little piece of cardboard—that you could attach to the handle of the vacuum cleaner.

And what happens? Humans are attracted to stories; they're attracted to people, right? So they would read that, and then it would increase their sales because they understood who's behind this, why they made it, and how it's different. It was a very effective sales tool.

So I think doing podcasts like this, books, anything like this, where you can actually tell why you're doing what you're doing, is powerful. This is the crazy thing: I've probably got thousands of messages about the episode I did on you. And the most common thing was, “I knew the name. I had no idea.” Everybody knows Dell, the brand name, but they didn't understand just how crazy your story is and the multiple different transformations you've had to make over 41 years. And now they're like, “Oh, this guy. I'm so glad you put that in front of me.” I think it's a super-important idea.

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

You mentioned earlier that you benefited from studying people who came before you, and you wanted to pass that forward. Who are a few of the people that you studied, learned from, or that influenced your thinking about how you built your business?

When I was a kid, you would read about entrepreneurs who were starting companies: Charles Schwab, Fred Smith, certainly Sam Walton, and some of the early telecom pioneers. People who were doing it right then, in the ’70s—that was all super interesting to me. I grew up in Houston, which was kind of a boomtown. You'd see these new companies being created, and parents were talking about that.

Those stories were always interesting and compelling, and you wanted to understand, “Well, how did they do that? Why did they do that? What happened?” I never imagined myself doing anything else other than starting a business.

Yeah.

The idea was in my consciousness from a very early age.

There's this great line that Jeff Bezos says: “We don't choose our passions; our passions choose us.” I think I have multiple notes to myself in the margin, like, “Oh, he's compelled.” It's like this is coming through him. He has no choice. This is going to happen.

But is there anybody in particular that you really honed in on and admired and tried to emulate in some way?

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

When you were 15, you were, I think, at some kind of conference, and this was the first time you were ever in the presence of Steve Jobs. I think Steve was about 25 at the time.

Yep.

Was he somebody you looked to as a model when you saw him at 15 and thought, “Okay, wait, this is a young kid in his 20s building a computer company”? What was your interpretation of that experience, I guess is what I'm trying to get at?

Yeah. So, in the early days of the computer industry, as I knew it—the microprocessor-based computer industry—Apple was a leading company, and Steve was obviously this legendary figure.

I was in this Apple user group, which was a bunch of geeky people who would get together to compare how they had souped up their computers, the software they had written, and learn from each other. Steve came to speak to our user group. He was using these incredible metaphors, and we were all listening to him, looking at what Apple was doing, and going, “Wow, that's really cool.”

You also started hearing about Bill Gates, who was about the same age as Jobs. They're both about 10 years older than I am. You look at them and go, “Okay. They did something cool. Maybe I've got a shot.”

Yeah, that's really cool. There was something you mentioned to me when we had dinner that has been rattling around in my head, and I think it's probably the reason that I couldn't sleep. I don't even think it was explicit advice. I think you were just making an observation.

You said something along the lines that you've seen how countless different companies and entrepreneurs come and go over 4-plus decades. And you said something that terrified me, unintentionally: Most of the entrepreneurs and founders that you've known were never taken out by competition; they sabotaged themselves. Can you say a little bit about that?

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

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

Charlie's right about those 3 things. We stay away from those.

I go back to understanding things and curiosity. You've got to know why something is working or not working. If you're in the middle of a supercompetitive endeavor and you don't completely understand what's going on, you're going to make mistakes, right?

When I look at the competitors that are no longer around, they either overzealously expanded, made design errors, or failed to understand the competitive landscape. There's lots of ways to fail, right?

You have a great example of one in the book with Adam Osborne. The Osborne 1 was relatively successful, right?

Yeah.

Okay.

Yeah.

And he's like, “All right, now we're coming out with Osborne 2. It's new and improved, and it's great.” You make the point that maybe it was, but it didn't ship in time. Now you've just made this big announcement where you're saying, “We have this great new product. It's even better than the first one.” What are you telling the market?

The Osborne effect. I don't think people talk about it so much anymore, but back then, the Osborne effect was a thing: You introduce a new product that's better than your first product, nobody buys your first product anymore, and you're out of business. So, don't want to do that.

Go make some mistakes nobody's ever made before. Try to make them in small increments. Fix your mistakes as fast as you find them. You actually want to make mistakes; you just want to make them small, iterate, and fix them quickly.

One of the things when you're creating a new business in an area that has never been done, or with some new technology or new business model, is that there's no playbook. There's no book you can read that says, “Here's how you do it,” right?

If you hire the people from the adjacent-industry companies and ask them to go do it, they're just going to do what they were doing before, right? That's not going to work. You need a lot of creativity, and you need to intuit your way to the answer by experimenting.

“Okay, here's a theory that we think will work. Let's try it. Does it work? Great. Let's do 2× that. Okay, let's do 10× that. Let's do 100× that. Doesn't work? Okay, let's stop, restart, and come up with another theory.” Just keep experimenting until you find the answer.

You're going through that now. In fact, I want to read something that you said that was one of the most interesting things. You said it on a podcast, and you essentially gave this talk to your entire company. You said—and I'm just going to read this quote; I love this so much:

“I stood up and told the company that 5 years from now, we will have a new competitor, and that new competitor is going to be in every business that we are in, except they're going to be faster, more efficient, and more capable. And they're going to put us out of business. And the only way that we're going to prevent that is we are going to become that company. It's gut-wrenching stuff to reinvent and reimagine your business, but if you don't do it, you go out of business.”

Yeah, exactly. When ChatGPT came out in November 2022, we were still looking at this and going, “Wow, this is a big deal. This is pretty interesting.” You started to see the rate of improvement in the LLMs. In technology, you can look at the rate of improvement and the learning curve, and you can plot, “Well, where's this thing going? Where is it going to be in a year, or 2 years, or 3 years?”

You look at it and think, “Okay, we're going to have agents and multi-agent systems, and we're going to be able to reason over incredible amounts of information.” What does that actually mean for the way knowledge work gets done and the tools that humans are going to have? You think about that, and you go, “Wow, this is a big deal here.”

We need to totally reset how we're thinking about the business and reimagine it, reframe it, and understand what the processes are going to look like in 5 years. You do all that and say, “If we keep doing what we were doing before, we're going to be in serious trouble.” Some new company is going to come along, and they're going to have all these new tools. They're not going to have this legacy of crap from the past, right?

I also believe in this idea that if you don't have a crisis, make one, right? You get people excited and motivated to drive the necessary change. In one sense, this is not a technology problem. The technology's there whether you use it or not.

It's a question of how you organize the team and people to actually go and get this thing done. How do you motivate them? How do you give them the right tools? How do you structure the ways people work together so that you can do it quickly?

It's very hard for people if you've been doing something for 10 years, or 20 years, or 30 years the same way, and all of a sudden some new thing comes along. You're like, “No, I don't want to do that.” People don't like to change, but you have to.

And so, that's what we've been doing.

Yeah, this is exceedingly rare. Think about the story in the book where I think the line I summarized, where you were talking about IBM, was, “Yeah, the personal computer is fine. It's going to be a great terminal for the mainframe.” You see this over and over again in these biographies if you're studying something that's occurring over multiple decades. Companies and people cannot envision a future that's different from the present that they succeeded in, so they dismiss it or ignore it.

I'm trying to think, though. You just said there are no books about what you guys are doing right now at Dell, right? You're on the cutting edge, so there are no books you can read about it. But you have survived how many different technological revolutions? You did the personal computer, then obviously the internet was invented.

Client-server technology.

Yeah.

A little bit before the internet, yeah.

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

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

So, if you've done that 6 or 7 times—and I think in the book you obviously say, “We did really great on this one, not good on this one, but we obviously fixed that.”

Right, right.

You're not going to be perfect over that many decades. But do you see an echo between all of these that you can apply? Are there certain ideas you could take away and form a structure around? “That's kind of similar to what we had to do when we had to reinvent for X, and we're doing that now.”

Yeah, there are, although the timeframes in which these things occur tend to be shrinking.

Oh, say more about that.

If you think about the internet, first you had the internet and the World Wide Web, right? Websites started popping up in the mid-'90s. But it took a decade before there was really a boom in things like e-commerce. It was going on in the late '90s and early 2000s, but it really took a long time.

Now, maybe it's 5 to 10 times faster if you look at the growth in the usage of these tools. Part of it is that each successive wave of technological improvement is built on the prior foundations, so they're able to go faster. If you have 5 billion people connected with all kinds of devices, now they can use these tools, and that just goes way faster.

I think you have to have this idea in your head that any new thing has some chance of succeeding, right?

Wait, say more about that.

There are a lot of wild ideas out there, and if you dismiss them all, you're going to miss some things. You have to hold this idea in your head that any of these wild ideas has a chance of succeeding. Let's understand what all these things mean and figure out what the point of intersection is. What should we be doing about this? When is it actually relevant, interesting, valuable, and when does it hit escape velocity?

If you're stuck in a particular paradigm or dismissing things, you're going to miss them.

Yeah.

You need to be open-minded enough to consider all possibilities.

But your ability to do that is so counter to human nature, because we're habitual creatures. It's like, “I found what I want,” or, “I found what I like to do, and this is the best.” If you look at what music people listen to, for example, it's the music you listened to when you were in high school and college. Maybe you've added a couple of artists, but you're mostly stuck on that.

You're completely open—and maybe addicted—to new technology, new ways to think, and new ways to solve old problems.

Yeah, I love the stuff.

But how do you not squash new ideas? You just said some great lines: any idea can work now, everybody's connected, and ideas can grow faster than you can possibly imagine. New ideas are fragile and need some kind of protection and time to grow, but most people snuff them out or dismiss them immediately.

Sometimes it's a good idea, but it's the wrong time. Sometimes it's a good idea, but it's the wrong company. Sometimes it's just a bad idea, right? But there are no absolutes here.

Yeah.

You just have to be open-minded and consider the possibility that things are changing fast enough that some new thing comes along.

If you took the top computer scientists and researchers in AI, or just broadly, 5 years ago, and said, “Okay, this is what's going to happen with LLMs in the next 5 years,” probably 99 out of 100 would say, “No, no. That's not going to happen.”

Yeah.

That's a pretty good example in the contemporary period, where you just need to be open to the possibility that things are going to change.

There's also this thing where about every 10 years or so, something comes along and completely expands the opportunity set for the industry. That's part of the fun, the excitement, and the super-interesting aspect of what we get to do every day.

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I just had a thought listening to you speak, tied to something else that you said earlier. Humans' inability to make accurate predictions about the future is tied to the importance of iterating, making sure you're doing a lot of experiments, and having that tight feedback loop to constantly get information: “That didn't work. We ran an experiment, it didn't work. Let's try it a different way.”

Those 2 things work really well together. We're not going to predict the future; we're going to create the future through iteration.

Yeah, it's okay to try to predict it as well. It's just really hard to do, and you might want to have a lot of experiments.

If you go back and say, “Let's say you had somebody who was supposed to be really smart or supposed to be an expert at something. Ten years ago, how good were they at predicting what was going to happen?” Not very good, right?

No, terrible.

So don't rely too much on that, right?

This is why I think entrepreneurs have to study past entrepreneurs, too, and it's obviously very valuable. It's no surprise that you were reading about these people. What I always say is, “The greats all studied the greats.” They were doing it today, they were doing it 40 years ago, and they were doing it 200 years ago.

If you took an average person in a normal society and looked at the way they think about experts, and the way it's discussed in all these biographies, they're very dismissive of experts.

I was reading James Dyson's autobiography. The whole thing is about how he believes in the Edisonian principle of design: constant iteration, learning as you go, and not being able to predict. You change 1 thing, test it, and see how it goes.

He mentions studying Henry Ford a lot in that book. Then James Dyson wrote another autobiography 30 years after that, and he also mentions Henry Ford a lot. The reason I thought of that is because, as you were speaking about going to ask an expert from 10 years ago, “What's going to happen?” they're not going to tell you that ChatGPT is going to become what it is today.

My 13-year-old uses it. I use ChatGPT all the time, but I'm a nerd. I like to research and read about things. She uses it as a therapist, a shopper, and a friend. It's an entire ecosystem for them. There's no way you can predict that.

There's a great line in Henry Ford's autobiography, which was written 120 years ago. This is not a new phenomenon. Human nature does not change. History doesn't repeat; human nature does. He says, “If I ever want to sabotage my competition, I would fill their ranks with experts. Experts tend to know so much, and they're so convinced that they're right, they get no work done.”

Yeah. At the limit, nobody knows anything, right? It's not a bad philosophy when you're thinking about the future.

Yeah.

It's good to have a hypothesis, though, right? Ideas and experiments, and keeping an open mind.

So, when we go back to that—“They're coming for us. They're going to be faster, more efficient, more capable, and they're going to put us out of business. We're not going to let that happen, because we're going to transform. We are going to be that business.”

Right.

What was your hypothesis back then? Do you remember?

It was pretty simple: It will be possible to dramatically improve the way we do things in all the core processes of the business, from software development to support to sales to every major function in our supply chain. Everything can be improved in a dramatic way, and that's what we're doing.

We're finding that as we take our data, reimagine the processes, and simplify and standardize them, we can make them way more effective. An example would be in support. We have incredible amounts of data. We have telemetry data that the machines are giving us all the time about soft errors and all these things that are going on inside the usage patterns from customers. We have warranty data, previous call logs, all these knowledge bases, and Jira databases. It's millions and millions of documents. No human could ever interpret all this.

We created this tool called Next Best Action, which takes all this data and understands what problem the customer is trying to solve. It helps either the customer or the agent who's trying to help the customer get to exactly the best way to solve that problem in the fewest possible steps. The person helping them feels like, “Wow, I'm way better at my job than I used to be, because now I've got this genius on my shoulders telling me exactly how to solve this problem.” The customer's way happier, the problem's solved way faster, and the tool summarizes the call, so that saves a ton of time. Everything gets way better.

You can take that same example and apply it to software development with coding assistance. Our sales teams have access to incredible tools, and so we're doing this all over our business. Of course, our customers are doing it, too. What is this doing? It's unlocking the power of data, using compute and all these models. We're in the business of compute, storage, and networking, so it's an enormous opportunity for Dell itself to help all of our customers unlock the power of their data.

You couldn't predict the actual tools that were going to be invented. You just knew that there was this new technology, and that it would transform every single process inside the business. We wouldn't be able to predict all the tools, but we just knew that they were coming.

If we didn't do that and our competitors did, we'd be finished. We're not going to let that happen. Even if we did it and our competitors did it and it just neutralized things, you have to do it. You have no choice.

There's a line in Andrew Carnegie's biography that was really fascinating because he dabbled in a bunch of different businesses. He was pretty wealthy before he started the steel company, but once he realized how important steel was at that time—this was the new product that every other product was going to be made out of, from bridges to roads and everything else—he thought, “This is the biggest opportunity of my life. I'm going to go all in on it.” He didn't even want any distractions. He sold all of his stocks because he didn't want to find himself looking at the newspaper, wondering what the price of the stock was. He was fully focused on the greatest opportunity of his entire life.

He went into an existing business that was run by older gentlemen. He had this new way to make steel. I think it was Bessemer steel that he got from England. He took the idea from England and imported it into America. It's kind of weird how often that happens in the history of entrepreneurship: “This idea is working in one geography. Will it work over there?” It's like, yeah, because humans are kind of the same everywhere. There are some cultural differences, but our core motivations are very similar.

They were very resistant to change. They said, “No, that's not the best process,” and ridiculed him for investing in the newest technology. He was spending a ton of money. Every time there was a better, more efficient machine, he would immediately rip out the old machine and put in the new technology of his day. We wouldn't think about it as technology today, but it was definitely technology back then.

When you read his autobiography, which is in the public domain and anybody can read for free, it's an incredible gift to humanity. I remember getting to this part of the autobiography, which is exactly what you just said: “Even if this isn't going to give us an advantage over our competitors, if we don't do it, they will have the advantage. Even if we're on the same level, we have to do it.” These guys wound up not adopting his technology, and they went out of business.

This is me summarizing his idea, not a direct quote: Invest in technology. The savings compound. It gives you an advantage over your slower-moving competitors, and it can be the difference between a profit and a loss. If he hadn't invested in the new technology that his competitors were dismissing—the stupid young kid with his fancy machine—that investment wound up making his company profitable in a year or two and their company unprofitable. Slowly, they just kept losing money, and then they went out of business. It's very fascinating how these themes just keep reappearing over and over again.

Yeah.

You don't necessarily want everybody to know what you're doing, either. The maxim I have from this, which I use on the podcast all the time, is that bad boys move in silence.

You mentioned earlier that sometimes there's no book. You're on the cutting edge. I remember there's this great line in this biography of Steve called Becoming Steve Jobs, which I actually think is the best biography written about him. Steve says, “I don't even know what the business model of animation is.” They start partnering with Disney, and he has this great line: “You can't go to a library and check out a book called The Business Model of Animation, because there's only one company that's ever done it well. It's Disney, and they don't want anybody else to know how lucrative it is.”

One thing that was hilarious, and that your son Zach wanted me to ask about, was what he calls “Dad Terminal.”

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

Instead of typing in the—I was like, “Why is it called Dad Terminal?” I didn't understand what that was. He's like, “Well, Bloomberg Terminal.”

Exactly.

He's like, “You subscribe, you log in, and you have a question. Then you type it in, and you get this really advanced answer.”

Yeah.

He's like, “I don't use Bloomberg. I use my Dad Terminal.”

Yeah.

I was like, “Give me an example. What's the last query into Dad Terminal?” He goes, “Supply chain.” He said it like it was obvious. I was like, “I don't have a supply chain. I run a podcast. I read books. Explain it to me.”

He's like, “There's a bunch of things my dad is world-class at.” One of them is the supply chain. I'm curious why you think other people describe you as really good at that. Is supply chain related to how we started this discussion, as just another puzzle for you to direct your curiosity toward?

It's definitely an important puzzle.

Mm-hmm.

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

So you've just thought more about this area?

And made a ton of mistakes, learned a ton of lessons, and figured out what works and what doesn't work.

There's a line in the book—I think the first time you realized, “Hey, I don't like these...” Your whole thing is eliminating middlemen and getting as close to the source as possible. I think you might have been 20 years old at the time, but you were taking your first trip to China, if I'm not mistaken.

That would have been 1985. You couldn't really go into mainland China at that point. There was nothing really to do there.

Mm-hmm.

They weren't making anything.

So you were going to Asia.

You're going to Asia. So, yeah.

Okay.

I went to Japan, Hong Kong, Taiwan, and South Korea.

What I love is how excited you were.

Oh, yeah.

It's like something you said earlier: You had a deep love for your business, and then you got to keep peeling back the onion and getting closer and closer to how it worked. Now it's like, “I'm spending 16 hours a day, I'm sleeping in my office, I'm working. We have customers, we're hiring employees, we have revenue growth, but now I'm getting a deeper and deeper understanding.”

As I read these biographies of people, I try to build a sense of how they think and what's important to them. What I realized is that instinct you had as a 20-year-old man, or however old you were at that time, has never gone away. It's this constant drive to keep going lower and lower and lower, to seek a deeper understanding of the world around you, but also how your business fits into that world and how you can build technology to enhance everybody else around you.

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

You say, “Of course,” and, like—

How else would you do it?

But to you, this is what—

I don't understand.

This is why I think writing the book and having a conversation like this is important, because there is so much shit in your head that is so unusual and valuable to get out and put into the world.

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

I know! Because you don't understand how abnormal you are. We were halfway through our dinner, and I looked at you and said, “Dude, I have this paradox in my head that I cannot reconcile between the crazy career that you've had.” I study uncommon people for a living. You are uncommon among uncommon people, right?

The paradox I couldn't reconcile was between this crazy ride that you've had, described beautifully in your book—this four-decade mission that you've been on, to which you've relentlessly given a lot of your life energy—and just how normal you are. I'm talking about your affect, your personality. You're very polite, calm, and measured, but do you understand how rare this is?

No.

I know! Because you're like, “Of course, this is what I love.”

You just wake up every day and go do the thing.

This is why you're great. But that's why you're great.

Seems pretty normal to me.

There's nobody who reads this book and thinks, “This guy's normal.” No, it's not at all.

What I love about this—and this is why it's so important—is that I mentioned it on the episode I made about you. There was this engineer-turned-founder, Sidney Harman. You know the company Harman Kardon?

Yeah, sure.

He has a great line—

Yeah.

He said, “The founder is the guardian of the company's soul.” It's impossible to separate the creation from the creator. I think, over time—

I resemble that.

Goddamn right, you do. This is also, again, how abnormal you are. I used to say, “You need to build a business that's authentic to you.” Then, in this book, Lee was talking about how he was only able to last 4 years, I think. He was like, “We're fighting IBM. We don't have any money.” He was like, “My back's hurting. I'm losing my hair. I can't sleep.” And he's like, “Michael's ecstatic. He's tap-dancing to the office every day.”

He said a line that really made me think about things. He said, “He built a business that was natural to him.” Of course it's not abnormal to you, because you built a business that's natural to you.

Yeah, and if you've been doing it every day for 41 years, it seems pretty normal, right?

On the last episode, during my conversation with Daniel Ek, he said one of the most important ideas that I've heard. He said, "I'm not obsessed about time. I'm obsessed about energy management. If you have time, but you have no energy, you're not going to accomplish anything anyways." I signed up for Function long before they were a sponsor of this podcast, and when you sign up, they ask you what your health goals are. And my response, in all caps, was 'MAXIMUM ENERGY.' All of the founders, CEOs, and extreme winners I have studied have excessively high energy levels. If you're going to be the best at what you do, you need to maximize your energy and output. And that is why I've partnered with Function. Function provides access to comprehensive blood tests and other lab testing to help you improve your health, so you can perform at your highest level. Function has made it easy for me to monitor and improve my internal health markers, so that I feel at my absolute strongest. As a member of Function, you get access to test over 100 of your biomarkers, from hormones to toxins, to markers of heart health, inflammation, and stress. Function gives you a straightforward analysis of all your results along with advice from expert doctors on how to improve things like your testosterone, your stress hormones, how to reduce toxins in your body, and much more. The platform is absolutely beautiful and provides an easy-to-understand picture of your overall health. Once you try Function, you'll immediately understand why it's the fastest-growing health platform in the country. To learn more about Function and to join, go to functionhealth.com/senra. Right now, Function is offering $100 credit to the first 1,000 people who sign up for a Function membership. To get this $100 credit, just visit functionhealth.com/senra. Again, that's functionhealth.com/senra.

Lee Walker, tell me how important—

Mm-hmm.

—that was, finding a person. You were relatively persistent in recruiting him. You were 21, I think, at the time?

21, yeah.

And he was 45 or something like that.

Yeah.

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

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

In operations? What do you think?

Yeah. Well, first of all, we were growing so fast. We just didn't have the balance sheet or the capital to support our growth. He helped us get some credit lines, and that freed up capital. Then he organized some of the operations and stuff I didn't really know about or have a great interest in, because it wasn't the technology or the customers.

Yeah.

He helped get all that stuff on the right path. Then, as we needed even more capital, with a private placement and then going public, he helped get all that going. Basically, how do you scale this thing up to get it ready for 10X or 100X growth?

One thing I thought was fascinating that Lee Walker said is that you got to the point where you had that negative cash-conversion cycle, but you were selling to individuals. An individual would say, “I want a computer, Michael.” You'd say, “Okay, give me your credit card.” You'd get the money, which we'll talk about in a minute.

But then you moved up and started doing enterprise, and some of these companies were huge, like Texaco. I remember at one point in the book, you were doing something like $60 million a year in revenue and had something like $200,000 in your bank accounts. There's just no cash there.

What was smart was that he went to the banks. I was curious—it sounds like he had relationships with the bankers. I always had this maxim that relationships run—

He did.

Okay.

Yeah, yeah.

—relationships run the world, and you see that over and over again. Lee had relationships with these bankers, which I assumed from the book, and you just verified that. But then what I thought he did was really smart. They said, “Listen, we trust you, Lee, but we don't know this kid.” His whole point was, “You don't even have to trust me or the kid. Look at all the purchase orders. Do you think Texaco is going to pay us or not?”

Using the brand, the prestige, and the value—Texaco's not going out of business. They're going to pay this kid you say you don't know. Lend us against our receivables. I'm like, “That's a really good idea.”

Yeah. Yeah, it was receivables-based financing.

Yeah.

The problem was that, as a 21-year-old starting a business with really no capital infusion from the beginning—$1,000, right?—a banker looking at it, with no one known inside the business to trust, would sort of—

Their general reaction would be, “Nah, I think I'll go do something else,” right?

Yeah.

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

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

We didn't have any capital, right? What we figured out was that if we could dramatically shrink our inventory, get paid from our customers faster, and maybe not pay our suppliers instantly—pay them a little bit later—then, if you're growing and you have a negative cash-conversion cycle, you actually generate a lot of cash.

You don't need as much capital to raise to be able to grow the company, and you have a high return on capital. We started looking at the business that way. There was this really interesting thing where our competitors, who didn't really understand what we were doing, had these elongated supply chains. They had distributors and dealers, so they would have 90 days of collective inventory from the time they actually made the product to when it got to the customer.

You could understand this because, if you opened up the computers, the chips had dates on them that showed the weeks they were made.

Whoa.

It would say something like “42-92,” and that meant that the chip was built in the 42nd week of the 92nd year. You could literally date how old the inventory was by opening these things up.

Anyway, they had 90 days in their collective supply chain, and we figured out how to have 5 days. It was crazy. It was a massive advantage.

Mm-hmm.

The other reason this is important is because it turns out that the price of electronic components generally goes down, right? It's a pretty predictable thing. If our components are 5 days old and the competitor's components are 90 days old, theirs cost a lot more than ours do. Now you've got this structural competitive advantage.

Now, another element of this is that you also have the freshest, the newest, and the best technology. You're not selling the 90-day-old fish or bananas, right? You're selling the new chip, the latest capability, and so now you've got yet another advantage, right?

Yeah.

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

How is that?

It's like you don't want them to understand what's going on.

Oh, for sure.

You don't want to explain it.

But how do you explain their inability to—

Now you can explain it.

Yeah.

But back then—

No, I know.

You don't want them to know what's happening. You just want them to maybe not even see what's going on.

So, I have a funny story about this, and then I'm going to get back to Compaq and IBM. I had dinner with one of the wealthiest people in the world. He's 76 years old. He's been in the family business. He's the second generation of this privately held dynasty. He started working in the business when he was 6, and there were crazy stories. It started in shipping. They own one of the largest privately held shipping companies in the world.

He's a raconteur. He's super charismatic. It was an incredible dinner, but I found out that, just as I was saying, “Hey, I'm writing this book because I want people who come to Dell to understand the history,” the family had commissioned a real author. I have some of these books at my house—not from this guy, but these family businesses, or people with brokerage companies, will hire an actual author, pay them whatever—a million dollars—have them write the book, and then print it just like this. But there'll be no ISBN number on the back because it's not available for sale.

So I have a couple of these in my—

Mm-hmm.

—home library that people have given me because of the podcast. But he was telling me this story. He said, “Yeah, we commissioned a biography of the patriarch who passed away a long time ago, and then we did one for me.” I was just like, “Dude, give me those books.” I leaned in. I was like, “I want those books.” I was like, “I'll crush the episodes. The episodes will be great,” because he had so many crazy stories.

Without hesitation, he goes, “Absolutely not.” And I was like, “Why?” He goes, “I have no desire to educate my competitors.”

Yeah.

So you just nailed it. It's like, obviously, if you have an edge, shut up about it. This is what I don't understand. Maybe IBM and Compaq are the 2 main companies that didn't understand the advantage that you had at this time, right?

Yep.

IBM is a big, old, stodgy company. Okay, that makes somewhat more sense. Compaq was run by its founder. How do you think he deliberately misunderstood it? How is it possible for him not to analyze it accurately? Do you think he was just dismissive of you? He didn't think you were a threat? What was going on there?

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

Did you read the new biography of Jensen Huang called The NVIDIA Way? It's actually a history of NVIDIA, but he's heavily featured.

I haven't read the whole thing, no.

Okay.

No.

I did an episode on it. I'll send it to you.

Yeah.

But he has this whole thing where the threat comes from below. I think he reduces everything to maxims. He's a really good communicator. His thinking is like, “We're going to ship the whole cow because the threat goes from below.”

Mm-hmm.

I think I mentioned this in the episode I did on your book, where, at the time, you came out with a— You just beautifully described how you were stacking one advantage on another advantage on another advantage. You were like, “Okay, we have the latest technology. We have way better supply-chain management than you. We are putting out—”

I think you put out a computer that outperformed Compaq's, which you sold direct to the consumer for $795, if I remember correctly. It was faster than theirs, and they sold a worse computer for $1,500, and it was only through retail stores. The manifestation of all these advantages you had—you could just look at the market and be like—

It's very curious to me how this founder could be like, “Hey!”

Yeah.

“This—”

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

Yeah.

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

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

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

I think this is tied back to the importance of following your natural star and something you're just obsessed with. I didn't know that part where you could take these things and see, “Oh, this is the 42nd week of the 92nd year.” That's insane. There's a line in the book, though.

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

It's not that hard to you.

I mean, the numbers are just sitting there.

Of course.

It's like they're just staring at you. They're talking to you.

I 100% agree with you. But this is the difference between somebody who's obsessed and somebody who's not. That guy wasn't taking apart computers compulsively. There's a story in the book—and no disrespect to him; I'm not trying to throw shade at anybody—where you guys are doing, I think, the private placement of the IPO, and Black Friday happens.

I think Lee Walker walks into your office to tell you, “Oh, shit, there might be some trouble. There's trouble brewing in the capital markets at this point.” And he said, “Michael was in his office taking apart another computer.”

That's what you do. Exactly. I think that's the biggest thing, man. It's an unfair advantage if you can direct your energy at something that you're obsessed with. We talked about this at dinner. We have a mutual friend in Sam Hinkie, and one of the things that's interesting about Sam is, if you analyze who he keeps around him, they have different interests. It's like this podcaster dude, this investor guy, this entrepreneur, this athlete.

He's like, “What I'm drawn to, what all these people have in common that may not be obvious to you, David, is that there's no end. You can't get to the end of what they're interested in.” I think he used the analogy of a cup. So you just pour and pour and pour. It just keeps going. They can never get to the end of their curiosity.

I think you're a perfect example of that. If you look at other founders who are doing things for fame or status or whatever the case is, it's like— Jerry Seinfeld has a great line. He goes, “If you just do it for the money, you're only going to go so far.”

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

Yeah. And you're taking apart chips and analyzing them: “Oh, I have a 90-day advantage over here, and I'm not worried about the capital markets because we're just going to keep serving our customers. Eventually, that is going to change. There's not going to be a depression forever.”

So what can I focus on? Again, just focus on understanding what I'm working on, what's in front of me, and then following this deep curiosity—and actually taking the curiosity that comes from your head and turning it into an actual product that makes somebody else's life better. It's the miracle of entrepreneurship.

You got it.

So we were just talking about the fact that Compaq and IBM were essentially fueled by being underestimated. You mentioned in the book that you found it to be “a powerful motivating force.” Do you recall why you felt that way?

Yeah, it was just like, “Okay, wow, this is going to be a multiplier for us because they underestimate us. They don't understand what we're doing.” So they didn't see us coming because they were underestimating us.

I think the CEO of Compaq would refer to us as a “mail-order company,” a “garage operation,” or whatever. You'd hear that, and you'd go, “Oh, wow, this is great. They have no idea what we're doing.” All that was motivating.

Anytime there was a setback, and the conventional wisdom—or even whatever the interpretation was—was, “Okay, they're going to fail. They're going to go out of business,” all that was incredibly motivating.

Is it still like that today?

Of course. Yeah. Absolutely.

I love how everything is, “Of course.” “Of course it is.”

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

And still caring about the company—

Yeah.

—even from the grave. It's a common misconception, and I'm curious to get your take on this, where people are like, “Well, if you don't raise all the money at the beginning and your competitor does, you're automatically dead.” I hear that a lot, and I was like, “I don't know. Compaq raised $75 million or $100 million, and you had $1,000 and a dorm room.”

Do you feel that it is actually different today? If you were advising a younger entrepreneur—

I think it's very situation-specific in terms of the company.

Mm-hmm.

Industry, et cetera. So I don't think you could give generic advice there.

Yeah. Yeah, that's why I think the generic advice is, “You have to do this or you're dead.” I'm like, “I'm pretty sure that's not the case.”

Like I was saying earlier, I don't think there are ever these absolutes.

Mm-hmm.

I think you always have to hold out the possibility that somebody is going to figure out some clever, interesting way to do something that nobody's ever thought of that is different. That's just going to happen, right?

Yeah. That's actually an interesting area to go down. You figured it out by accident because necessity is the mother of all inventions. “I don't have capital, so how do I get money? Well, I'll just ask my customers for the money.” Then you accidentally discovered all these advantages and had a deeper understanding as you went along.

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

You think about some of the retailers. Walmart, Costco, and Amazon obviously came up with super-clever ways of winning in that space by doing things inexpensively and taking out all kinds of costs.

Yeah. The other one that came to mind was Sam Zemurray, the Banana King. He essentially built the second-largest banana empire and then later overtook the largest, which was United Fruit Company.

I guess one thing he figured out—and he was actually your same age; he was 19 years old—was that he had no money and was trying to figure out a product to sell. He was working the docks, I think, in Alabama at the time, and he said, “All these fruit companies have these things called ‘ripes,’ which are the bananas that are going to go bad in 2 days. They take them off the boat and throw them in the garbage because they can't get them to the store fast enough.”

His idea was, “I can use this new technology of the day, which is the railroad. I can buy these for almost nothing because they're not getting anything anyway. I'm going to put their ripes on the railroad and then sell them at every single stop.” Then he was generating so much cash. He could start working down the line all the way to when—

Mm-hmm.

—he had his own banana plantations. It was just that idea. It starts out with this little nugget of, “Oh, this is an interesting opportunity,” and then you understand it as you pull and pull and pull. It gets bigger and bigger. You keep stacking these advantages one on top of another.

I should organize and look into more examples of that. Is there another example of what you had at the beginning of Dell? I think that's the key. To some degree, it's easier just to go and sell part of the company, raise more money, or find a solution with money, whereas you solved it with creativity, hustle, and intelligence. Those ideas are excessively fascinating to me.

IKEA is another one—same thing—where he was just selling by mail order. It was a mail-order company.

Yeah, there's that mail-order thing again.

I know. He has that great line where he's like, “Expensive solutions to any problem are signs of mediocrity.” So he was like, “You have to be more creative.”

We had this whole thing in the ’80s, and we called it “Beat the Mail-Order Stigma.”

Really?

Yeah. As we were establishing our brand, the conventional wisdom was that a mail-order company was—

Mm-hmm.

—sort of like a—

Pejorative.

Like an insult, you know?

Yeah, okay.

It was like, “Okay, it's a mail-order company,” and it was sort of a stereotype. It was like, “Oh, you can dismiss it because it's a mail-order company,” right?

Mm-hmm. Yeah.

All the press, for years, was like, “Mail-order company Dell,” or “Mail-order company Dell introduces server.” I was like, “What?” It's like, “Okay, we have 30,000 patents. When are we not a mail-order company? What is this mail-order thing?”

Yeah.

So anyway, we had to get rid of that.

How did you beat it?

Just kept doing our thing. Eventually, people go, “I guess it's not really—no. I mean, it's the internet, and it's not mail order.” I was like, “Nobody orders stuff in the mail. What was it?”

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

Yeah. Well, we were selling direct, right?

Yeah.

People could call us on the phone. We used to have these rooms with a gazillion fax machines, and they would send us their orders by fax. It was crazy. They had catalogs, right? Then the World Wide Web comes along, and websites, and we're like, “Oh, you mean we can create a website, and people can go on there, and the catalog is there, and they can press a button and order the thing?”

Yeah.

“That's the coolest thing ever. We've got to do that,” right?

Yeah.

In my first book, you'll notice that on every page at the bottom, it says, “www.dell.com.” We were just obsessed with getting people to the website because it became the easy way to interact with people.

And that book came out in ’97, right? Or ’99?

I think ’98, yeah.

In ’98, yeah. So, yeah, you were—

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

It was a small number.

I remember when you could go to all the websites in the whole world, you know?

You're like, “I'm done for the day.”

People were like, “There's no more websites!” It sounds crazy now, but there used to be not that many websites. You could go to them and say, “Okay, I'm done.”

Yeah.

Like, “There's nothing else to see.” That obviously changed quickly.

Yeah. So how the hell do you even build a store? You were collecting—did they have to call a number in? I remember taking credit cards online. Do you remember what year you launched the site? In ’97, probably? In ’96?

I think it was probably ’95 or ’96.

Well, you had to build all the stuff.

In ’95, ’96.

You had to build all the stuff custom.

We had to build the whole thing.

Okay.

Yeah.

Yeah, and it's funny. I forgot about the fact that dell.com is at the bottom of every page. What's fascinating is that if you read Bezos's shareholder letters, he never refers to it as Amazon. Every single shareholder letter up until you don't have to do it anymore, and every single interview, it's “amazon.com, amazon.com, amazon.com.” Then it turns into Amazon because he's just like, “We've got to push you guys to this new thing called—

Yeah.

—the internet, where you can buy things.” It's such a fascinating thought, how novel it was. But you kind of saw it right away: We should just do this because it's cool.

We had experimented with how to create an electronic version of the catalog. We were even going to send you—

Mm-hmm.

—a floppy disk or a CD-ROM, and you put it in your computer—

Yeah.

—and you load it up, and the catalog is there.

Yeah.

Those are some of the ridiculous things that happened before the internet—or before the World Wide Web, I should say.

Did you ship that?

Yeah. We did.

So you just, kind of—

Yeah, we didn't do it like that.

Okay.

Ours was more targeted. But you wanted to make it easy for the customer to understand your offerings. Then the World Wide Web just made that kind of infinitely accessible to anyone.

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

But then people were surprised when people started ordering computers online. I remember we sold a server for $50,000 online. People were like, “No way!” It didn't happen as fast as some of the things that are happening now.

Yeah.

But obviously, for a business that was selling directly to businesses and individuals all over the world, it was total rocket fuel.

How soon into Dell were you starting to sell to institutions rather than individuals?

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

Okay, so it started with doctors and dentists, right? Lawyers were some of your first customers, but they were using them for business purposes.

An individual doctor or dentist—

Yeah.

—I would think of more like an individual.

An individual, okay.

But first of all, let's level-set here. If you look at all technology spending, roughly 75% to 80% of it is in businesses, not consumers. That's kind of been the thing for a long time.

So within the first year, you got to the same, similar percentages.

Similar percentage, yeah. There were companies and universities that were buying 5, 10, 20, or 50 machines at a time.

One final thing that I want to talk to you about, which I think is one of the most important ideas in your book, especially when you're trying to pass these stories down through the generations. I see it in a lot of the biographies, and I think it's another misconception: that entrepreneurs need to be wary of experts, and how they can kill new ideas.

Whereas a normal person would revere them, right? So there’s this difference in understanding between that. Another one that I would say is the importance of ego, self-belief, and self-confidence.

General society might say, “You should generate evidence and then be confident.” And I hear this a lot, which is perplexing to me, because in the books it’s, “No, you have that completely backwards. Belief comes before ability.”

I would go back to this part in your book that I think is super important. When you’re 19 years old and your dad’s like, “What do you want to do with your life?” and you’re like, “I want to compete with IBM,” you sit there—and again, I don’t think you should be reading these books quickly. There’s no test at the end. Sit with the ideas and really think about what’s happening on this page.

I think it’s one of the most important pages in the book. I can actually see the page in front of me. What you realize—you say on that page, “Was I a little full…” The idea is like, “I have $1,000. I’m in a UT dorm room. I’m going to take on the biggest company in the world.” And you said, “Was I a little full of myself at 19? Sure, I was. I think you have to be to do anything important.” Can you explain that mindset?

Yeah, I think it’s a combination of naivete, which is an important element.

Right.

It’s like, you don’t know enough to know that maybe this won’t work, okay? And confidence, but you never want to go over into the arrogant zone.

Mm-hmm.

Because that’s really, I think, a dangerous place to be. So it’s like, “Okay, I have not been in this industry for a long time, and all these reasons why it won’t work are unknown to me.” That’s the naive part, right? And that can actually sometimes be a good thing, because you’re not bound by conventional thinking that maybe is no longer as relevant, or maybe you come up with some clever new way of doing it.

Then the confidence piece is, “All right, I’m going to go make it work. I’m going to go figure it out.” But there’s always that little voice in your head that’s like, “Well, what if it doesn’t work? And what about this? What about this?” You never want to assume, “Okay, this is absolutely going to work no matter what,” because then you’re going to ignore those little voices about, “Well, what about this? What about this?”

So, yeah, it’s a combination of naivete—

Yeah.

—being real here, and confidence.

I think a perfect illustration of that would be your initial reluctance to name the company after you. It was PC's Limited, right, at the very beginning?

It was officially Dell Computer Corporation—

Yeah.

—doing business as PC's Limited.

Business as—

Right.

Yeah, but then you realized, “Why don’t we just do Dell?” That’s when I thought of the Osborne thing, because you’re like, “Wait a minute. This guy named his company after himself.” There’s no—

Yeah, what if it doesn’t work?

But it’s interesting because you just said, “Yeah, I have a lot of confidence I’m going to do this,” but the doubt never goes away.

Yeah, and fear.

Thank you. That’s actually the last thing I want to talk to you about—one of the first things we talked about when we saw each other last month. We were walking around Zach’s office, and I don’t know how it came up, but it came up almost immediately. It was a surprise to me because I feel the exact same way.

The fear of failure, in my experience from studying all these history’s greatest entrepreneurs—and I think you said the same—is just like, “The fear of failure to this day is a bigger motivator than the love of success.”

Yeah, totally.

Yeah.

One hundred percent. You don’t want to fail, although failing is how you learn. Pain is the best teacher, and so you have to have some little failures along the way. But that fear of—you can’t have it paralyze you to where you don’t want to make any decisions because you’re afraid to fail.

Has that happened to you?

Not really, no. What you want to do is be incremental. Again, it’s back to iterating. It’s like, “Okay, we’re not sure if this is a good idea. Let’s try it. Let’s experiment. Let’s get started. We’ll figure it out.”

We’re not betting the whole company on this decision. We’re just experimenting. If it doesn’t work, great. We learn something, we move on.

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

Thank you, David.

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