My Conversation with Michael Dell

0:00 I have started a new show where I have conversations with the greatest living founders. That show is called David Sunro. It will be on a separate podcast feed from founders. So it is very important that you follow David Center on Spotify, Apple Podcasts, YouTube, or wherever you're listening to this right now, so you don't miss future episodes. The first episode Was with Daniel Eck, the founder of Spotify, and one of the wisest people that I know. That episode spread all over the world, and the response has been greater than anything I could have ever imagined. The next episode is with one of my personal heroes, Michael Dell. A few years ago, Michael was kind enough To send me one of the greatest messages that I've ever received in my life.

0:37 He believes in what I'm doing with founders and thinks it's good for the world. And so I was thrilled that he immediately agreed to be one of the first guests. His career is singular. And he is one of the most impressive people on the planet today. I am posting our entire conversation on this feed so you know what the new show is like. I hope you enjoy our conversation. And please don't forget to follow the new show David Sunro now, so you don't miss future episodes. Oh, and by the way. Nothing is changing with founders. I'm still doing episodes every week and will work on founders until I die.

1:08 I wanna jump right into what we were talking about before we start recording that. You said somebody was uh you've been obsessed. Yeah, we've been running Dell for forty one years. You've been obsessed really since you were like eleven or twelve, so you've been running it for fifty years'cause you were it was there was a Dell before a Dell, right?

1:24 But you were saying somebody was telling you the story about you in middle school. When I was in uh junior high school in the in the summers In Houston. Uh

1:34 There were classes at Rice University. For For Young kids. Okay. And so you could go to Rice University, you take these classes and my my mom, you know, kinda signed me up and

1:46 It was great. You know, and they had these college professors and they were teaching these classes. And Uh the the way I would get to Rice University is I would take the bus. From from from our house, right? And it'll like take you downtown.

2:03 And And uh I was I was curious, so I was I was like, Okay If I just stay on the bus, it takes me all the way downtown to where the really tall buildings are. So so I go down there, it's like really tall buildings. I'm like roaming around. I'm like eleven or twelve years old. And I see Like they've got like the stock exchange there and all these tickers going. I'm like, wow, that's pretty cool. So I just started started learning about the stock market. So anyway, it's just something I remembered and and

2:33 Yeah, my My parents were always talking about financial markets and Uh it just sparked sort of this this uh interest

2:42 Really really er early in in life. There's a great line. I've seen um from both Ken Griffin and Larry Ellison. Describing you. Like just this guy who's manufacturing computers in America. at a time when there was like thousands of other people doing the exact uh very similar thing, and he was the only one that survived. And the reason I just thought about that is because I was watching this, um

3:06 This talk that Ken gave, I think at Yale. He says the thing's he's like For s reasons I can't Explain. I don't know why, I've just been obsessed.

3:14 with the stock market, with business, since I was in the third grade and you know, sixty years later, however old he is, like I that obsession has not dulled. We were just in your office and you were showing me that one of your new unreleased uh products that we can't film or photograph. But you were like I was like this is This is like a kid on Christmas. Like you're still cool product. Yeah. I'm I'm very excited. I told you I'm buying one that's I think it was cool too. I'm gonna buy one as soon as it comes out. But I just love th this enthusiasm that is just not dulling. What do you think? I was just with your son, Zach, last night. And

3:46 I was we we were talking a lot about his business. It's absolutely ripping. He's super intense and like he's just in it right now, right? And then that was like ninety five percent of our conversation. Then he's like all right. I have some things that you should talk to my dad about. And then I he it was so good. I was like Shit, he just did the outline better than me. So one of the things Uh he's like you need to get on record.

4:07 What motivates him. He's like, it's one of the most fascinating things. He's like, just ask him what motivates him. So what motivates you? You know, it's all just like fun and interesting and I wanna learn. And it's like uh it's like a big puzzle to solve. and understand and you think about

4:27 The impact that technology has on the world. What could be more exciting than to be in the middle of that? And and and to figure it out and to uh you know help help advance it. And

4:42 It's a infinite. Game, right? Never never ends. Love love to win. Hate to lose. And um Yeah, it's just it's just like the most exciting thing you you could do to be in

4:58 The middle of a business like this and to see it all unfold and play out. Yeah, he that's one of the things he's like he's addicted to puzzles. So that's the way you look at it? Yeah, I mean it's it's it's like it's like The curiosity, solving a puzzle, understanding things

5:17 And Figuring it out. Yeah, that's that that's uh You always want to do that. I mean I I I would feel Unfulfilled if I couldn't figure out

5:29 A puzzle, a question. So Yeah, there's like a burning desire to understand things. And to and to figure them out. Puzzles and and math have always been uh important. When did you realize that about yourself? I never really realized it. I you just asked me about it. Uh I it's just just it just

5:49 What I Did I just wanted to understand things. Mm-hmm. And and You know, when I was dealing with with uh

5:58 physical things the way I would understand them It's take them apart. Like how can you understand something if you don't Take it apart. Yeah. And um

6:08 My parents would get pretty frustrated. You know, taking apart things in the house. Yeah. Sometimes I put them together, sometimes they would still work.

6:18 Um But It's just the desire to it's to understand things, to you know, the curiosity. Yeah, that's one of your character traits. You have a great story in the book where I think you save up for the apple two. It was a computer and it was, you know, relatively expensive, especially I think you were like twelve or something at the time. And then you bring it home and your parents like Oh, he's gonna plug it in and play with it. It's like

6:38 No, I immediately took a took apart. I needed to understand how it worked. Well, it's like this machine is like it does really cool stuff. How does it work? What's inside it and and how do all those things work and how do they fit together and Why did they put these things versus those things and you know sort of

6:58 Getting down to the essence of it. I had a thought when I was reading your book. Yeah, time you you're Taking part IBM. You know this is I'm pretty sure before you were

7:07 You're a teenager. So this is before you start Dell. Officially. But it's you know, I and I didn't know this about IBM, I had to go back and look it up. It was like the most valuable company in the world at the time. It was the first company to ever hit a hundred billion dollar market cap, which also blew my mind. But You take it apart and you're like, Oh wait.

7:24 It's just component this is the biggest company in the world. And this is their product and if you take it apart, it's just made of components from other Companies. And it's just like It's implied, or at least this is what I was reading through the lines when reading your books like

7:37 Mm. I can do the same thing. Like What are they doing here that I couldn't do? Did you have that thought?

7:45 Yeah, absolutely. I mean, so it's it's back to when you open the thing up, you look inside. What's there? Well there's chips, right? Yeah and there's wires and there's power supplies and disc drives and all these components. It's like well, where do those things come from? Who makes those? How do they make those? And so you sort of

8:08 Peel the onion. You know, and you understand all the different elements and You know, when I Uh originally got The

8:17 first IBM P C You know? Yeah. Probably took it apart before I turned the thing on. Just to see what's what's inside.

8:29 And One of the Really cool things. back then was that You didn't have these

8:37 Uh sort of application specific integrated circuits, they call them ASICs, right? Or these big Sort of Uh chips that Nobody really knows what's inside except the designers.

8:49 All the chips were off the shelf chips. So you could see You could sort of Uh understand what the the the logic flow was.

9:00 And what each chip was supposed to do. Inside the circuit. And Inside the IB and PC None of the chips were made by IBM, right? And and

9:12 And uh none of the dish drives were made by IBM. The power supply wasn't made by IBM. And and so Uh You know, I was also interested in the economics of it. It's like well, what does this chip cost? What does that chip cost? And you sort of Add it all up.

9:27 And then you compare it to the cost that they're selling the thing for and you go Wow, this is They're really charging an incredible markup for For this. It's an incredible insight to have as a teenager though. It's like

9:40 Figure out what the like actual cost of the components are and then go look up Yeah, it sounds like what Elon did with rockets. The the Russians won't sell it to me. I'm on the flight back. There's famous story. It's in all the books and all what is a rocket made of? Like okay, well there there's a list of components. How much those components cost? Well you just said is like you just kept asking questions like oh I'm gonna take it apart. It's like okay, well this is all the components, this is what it is.

10:03 This is Like where you get'em from. This is the co look, the company names right here. I can just call them up and find out how much this is. Well, you could go to the distributors and you say, you know, okay, how much does this chip cost? And I'd say, Well, it's this price for a hundred of them. Yeah, right. Uh and y you could you could literally Map out.

10:23 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.

10:37 And some of the best operators in business. There's 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 ups their strategies.

11:02 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 it a structural cost advantage? Compact's operating costs were thirty six percent of revenue. compared to Dell's eighteen percent of revenue. More than forty years later, Dell is thriving.

11:21 And compact no longer exists. The best operators in business have this in common. They know their business from A to Z. And their cost down to the penny. Ramp. Makes doing this effortless. Ramp gives your business easy to use corporate cards for your entire team.

11:35 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.

11:49 With ramp, you can stop it before it happens. Matt Paulson, who listens to this podcast and who's a founder of Market Beat, recently switched a 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.

12:10 Matt is talking about the importance of cost control. Ramp helps you make this an obsession. Almost all of the top founders and COs I know are running their company on ramp. Go to ramp.com. To learn how they can help your business play to win today. That is ramp.com. Something I I don't even know if I I've ever like verbalized before, but it's in all these biographies that I read. But I feel is like there's just like a lot of common sense where they just the founder tends to just keep asking

12:36 More questions. And just like going to a like an ac you just said, I think peeling an onion. It was like yeah, just like okay, I got that answer. What's the next one? And then what's the next one? And there's something in human nature where we just like we stop at the first question. But you have this like infinite curiosity that was o very obvious, like from child From childhood. And I think based on what we were just talking about in your office, is obviously still present.

12:57 But yeah, it's just very fascinating. It's like it's not rocket science just like keep asking questions and collecting information and thinking about the answers that you're getting. Yeah, you want to understand things. Yeah at a very deep level. It and and so that's Always been a Thing for me. Yeah, I think that's what I'm very interested in. It's like if you read the life story of somebody, like I'm very interested in understanding who the person is and like why.

13:21 They're doing what they're doing. And this is the the the genius line from Charlie Munger, which is just like well if you just And the way you tie to the personality that developed them is like you read about their life story. You read about their childhood. You read about what their interests were. I love the part in your book. I was rereading it yesterday. Where your parents confront you. Okay, you've started Dell in your d dorm on the University of Texas.

13:46 And they're just distraught Which is really funny given what's occurred over the next four decades. Like, what are you doing, Michael? You're supposed to be you're supposed to be you know, and just path to be a doctor. And I think your mom's crying. You're not going to be able to do it.

13:59 She was, yeah. Very emotional. Yeah. And so you you're like, okay. In the book he said I caved. Okay, which is very unusual'cause you're a super strong personality from from a from a young kid. But then the very next page I can see in my mind right now. Yeah.

14:13 I Cold turkey, n didn't even look at your computer for ten days. I try to take notes in classes. And then we realized like No.

14:21 Like it was like you were compelled. Like I thought working in computers was going to be thrilling. I'm going to drop out with a thousand dollars and I'm gonna take on the biggest company in the world. I think the fact that they They uh put all that pressure on me is the thing that caused me to really reflect on it and decide that

14:43 No, this is more than a little hobby or a side thing. This is just like I have to go do this. Do you feel it was all consuming even at that age? 'Cause you're like s at the time you're like sleeping in the office when when you do start.

14:56 Like you start yeah, I know uh we talked about this last time, it's hilarious, where somebody asked you is like, Well when you start Dell, like How many hours did you work? And you're like All of them.

15:06 Mm. Yeah, I mean I I w I wasn't doing anything else. I mean there there wasn't really anything else that was important to me. And so yeah, it was it was totally all consuming. And Uh

15:21 Super exciting and Wasn't doing anything else. Yeah. Were you more of like before that, somebody that just focused on one task at a time? I w I would get pretty obsessed with You know, individual topics and and sort of go go deep on them. Um so yeah I wouldn't consider myself

15:41 You know, uh generally interested in a bunch of things. I was like super deep on certain things that Excited me or interest interested me. Is that still the case today?

15:51 Or is it just basically to be, yeah. Yeah. Yeah. Zach told me, he's like, he'll call me at like five AM and he's like, I have an idea. Like we should do this product or this acquisition or whatever. He's just like he just can't help himself. And I asked him, I go, uh What would get him to stop? He's like you have to kill him. What made you decide to write the book? You know, we we had we had gone through a whole lot.

16:16 Uh with the going private and buying EMC and VMware and They're just Been so much that happened, I wanted to kind of document it and it was during COVID. I had some time and started started writing the stuff down.

16:35 And it felt like a logical place to Uh sort of capture everything that that had happened. And

16:45 Yeah, one of the main reasons I wrote it was For our team inside the company. Uh You know, how

16:56 We think about the business and Where it came from. And you know, as a as a business grows larger It's harder to

17:05 Tell the stories directly w with everyone. And so it it's just a great Opportunity to encapsulate all that. And

17:17 Uh Share you know, what happened really. The the good and the bad, the Things that worked well, things that didn't work well.

17:27 And um Yeah, I certainly benefited from reading the stories or hearing the stories of other People and Thought it'd be a good idea.

17:38 I said this on the the episode I made about it. It's like a great gift to like future generations of um entrepreneurs. I actually think that idea of like Having uh like a singular piece of media whether it's a book, there's another idea for you for podcast. uh for people as the company grows to understand like this is

17:56 The decisions that were made, this is why it was, this is what we've gone through. Uh Spotify has this. Originally they they did Gustav is the head of product at Spotify and he's the actual one that made this. And originally um I talked to them about this. They were just gonna do it was like an eight part series. Uh there's gonna be a private podcast inside the company, which tells the history.

18:17 of Spotify. So if you come in now, you know, twenty years into its existence, it's like well what we What what was like year one in an apartment, you know, we got a server in a closet. And so what they did is they did this beautiful like narrative. And uh they would also include the people that were important at the ear in the early days. Like you know, some people don't last in the company, but they were really important for two or three, four years. But I listened to the thing like two or three times. And thank God that now it's public. Anybody could just type in Spotify or product story, I think is the name of the podcast. I'm like

18:46 Why don't more companies do this? Like I'm not an employee, but if I was coming into Dell or any other company now, I could have here here's eight you know, eight one hour episodes. And they say not just to Did this decision was made. It's like why? These are the constraints we were under. This is what was going on. Exactly. Yeah. So you know, if we walk downstairs right below th this room where we are, there's a new class of

19:09 Small business salespeople being trained. Okay. And You would love for those team members to be able to understand

19:18 Okay, how did we get here? What are all the things that That Yeah, we did. Right and wrong. And

19:26 To really deeply understand the culture, the values, the beliefs. And than to be able to build on that with their own contributions. Yeah. kinda bring them up to speed. And then just the context, I also think there's a a additional benefit. for for it to make it public facing.

19:42 Because Humans By stories. Money flows as a function of stories. And I've experienced this it's like if I read

19:50 I spent you know, forty hours reading about This person that had this idea in their head, they built a company. At the end of that, you're gonna have a way better appreciation. I w find up buying what buying their products. That I never even would have thought of because now I understand the story.

20:04 Um I just reread James Dyson's uh autobiography, which is one of my favorite books, probably my number one recommendation out of the four hundred books I've read so far, just because it's like 90% just struggle. The first autobiography is just like I've been family for 14 years, this guy is like a mule, he won't give up. 5127 prototypes, but there's an idea in the books that I thought was smart. Where He understood the power of storytelling. Okay. And so he's like, You're gonna walk into the retailer, you're gonna see six different vacuum cleaners. His obviously is designed different, so it's gonna catch your eye, but he insisted they wrote like a two hundred word story on like a little flyer. Right.

20:39 Maybe like a little piece of cardboard and it you could attach it to the handle of the vacuum cleaner. And what happens? If that person Humans. are attracted to stories, you're attracted to people.

20:49 Right. And so they would they'd read that and then they It would increase their sales because they understood Who's behind this? Why did they make it? How is it different? Like it was a very effective sales tool.

21:01 Um so I I think like Doing podcasts like this. books, anything like this where you can actually tell of like why you're doing what you're doing. This is the crazy thing. I've heard from I don't know. I've probably got thousands of messages about the episode I

21:12 Did you think? Uh on you. And The most common thing was I knew the name, I had no idea. Everybody knows Dell. The brand name, right? But they didn't understand

21:24 Just how crazy your story. And the the multiple different transformations you've had to make over forty one years, and now they're like, Oh, this guy, like I'm so glad you you put that in front of me. I think it's like a super important idea. It's all it's all been a lot of fun. And and and still and still is. And and it feels like we're just getting started, actually. And the opportunities we have. And uh Yeah.

21:50 It's all fun. You mentioned earlier that You benefited from studying people that came before you. And this is you know, you wanted to pass that forward. Like w who are a few of the people that you study you feel you learn from or that influence like your thinking about how you're building how you build your business? You know, when I was a when I was a kid I I I

22:10 You would read about Entrepreneurs. You know that that we're starting companies. Charles Schwab or Fred Smith. Certainly uh Sam Walton.

22:21 Some of the early uh telecom pioneers. uh people that were doing it right then, like in in the seventies. And Those stories were also were were just super interesting to me. And I g I grew up in in Houston, which was kind of a boom town. You see these new companies being created and

22:41 Yeah. Parents were talking about that. And so th those those stories were always Just interesting and and compelling. And you want to understand, well, how did they do that? And Why do they do that and

22:55 You know, what happened and Yeah, I never Imagine myself Doing anything else other than Starting a business.

23:04 Yeah, the idea just In my consciousness From from a very early age. This great line that's a

23:12 Jeff Fasel says where he's like our passion, we don't choose our passions, our passion shoots us. I think there's multiple like my notes myself in the margins like oh he's compelled. He's like this is coming through him. Like he's like he has no choice. But is there anybody in particular that you Like Really Like honed in on and admired. And try to emulate in some way.

23:33 I always think you you can you can learn from just about anybody, whether they succeeded or failed. And so I tried to just understand. You know, uh as many people as I could that were entrepreneurs that were starting businesses, how did they struggle? What

23:50 what worked, what didn't work. And Those were always the compelling and interesting stories. When you were fifteen. You met

24:00 You were I think at some kind of conference. with and then this is the first time you ever was in were in the presence of Steve Jobs. I think Steve was like twenty five at the time. Yeah. Was he somebody? Like

24:11 When you saw him at fifteen. And you saw okay, wait, this is a young kid in his twenties building a computer company. Was like that a model for you or Like what was your interpretation of like That experience, I guess what I'm trying to get at.

24:23 Yeah, so You know, in in the early days of of the computer industry, you know as I knew it, the microprocessor based computer industry. You know, Apple was a leading company and Steve was obviously the sort of legendary figure. So

24:40 I was in this Apple user group, which was a bunch of, you know, geeky people. It was like get together and and exactly. And You know, sort of compare. Yeah, how they had

24:55 souped up their computers and software they had written and learned from each other. And so You know, Steve came to speak to our user group. And Yeah. I mean

25:08 He you know, he he he he was like using these incredible you know metaphors and It'll like listening to him. And Uh looking at what Apple's doing and going, wow, that's that's really cool.

25:23 And Yeah, d you'd also start Started hearing about Bill Gates. You know, who's also about the same age as jobs.

25:31 And that you know, they're both about ten years older than than I am, and you Kinda look at them and go, Well, okay. They did something cool. Maybe maybe maybe I've got a shot. Yeah. That's really cool.

25:45 There was a Something you mentioned to me, uh when we had dinner that has been rattling around in my head. And I think it's probably the reason that I couldn't sleep. And I don't even think it was like explicit advice. I think you were just making an observation. But

25:58 You said something along the lines that um you know you've seen how countless different companies and entrepreneurs come and go over you know four decades, four plus decades. And You so said something that terrified me uh uh unintentionally. Uh that most of the entrepreneur the most of the entrepreneurs and founders that you you you've known

26:19 В неверно. Can you say a little bit about that? Yeah, I mean. I think I think you could you could make the argument that that

26:31 they made mistakes along the way that that uh you know were fatal and and Yeah, ultimately uh you know the companies didn't didn't succeed. Um But it's it's all of their own doing, right? Uh the the You have to make the right choices in order to

26:50 To continue on and and survive and ultimately thrive. What do you think are some of the causes of mistakes You have uh uh obviously. Smart. Talented, competitive people. Right. Charlie Munger has this great line where it's like intelligent people

27:05 So like what have you seen any common like causes for somebody to sabotage themselves or to not live up to what they should have. Charlie's right about those three things. Uh you know, we we we we we stay away from those. Yeah. Um I sort of go back to understanding things and curiosity and it's like you've got a

27:29 You gotta know why something is Working or not working and If you're In the middle of of a Super competitive.

27:39 Uh Endeavour And you don't really Uh completely understand.

27:47 what's going on, well, you're gonna make mistakes, right? And and so Uh You know when I when I look at the the competitors that that that are no longer around Yeah, they they Uh

28:03 They you know had either over zealously expanded or made You know, design. You know, uh Errors or

28:15 They fail to understand. The competitive uh landscape. I mean There's Lots of ways to fail.

28:22 Right. You have a great example of one in the book with Adam Osbourne. Where he had a very successful I think the Osborne one was relatively successful, right? Yeah. Okay. Yeah. And he's like, All right, now we're we're coming up with Osborne Two, it's even new and improved and it's great. And you make the point, it's just like Yeah, maybe.

28:38 But It didn't ship in time, and so now you just made this big announcement where like we have this great new product. It's even better than one. What are you telling to the market? The Osbourne effect was a thing where you introduce a new product that's better than your first product and nobody buys your first product anymore and you're you're out of business. And So, you know, yeah, don't want to do that. So so

29:05 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 and You actually wanna make mistakes, you just want to make them small and

29:20 You know, iterate and fix them quickly. I mean one of the things when you're when you're creating a new business In an area that is Never been done. Or with some new technology, new business model.

29:33 There's no Playbook. Uh book you can read. And and if you hire the people From the adjacent

29:44 you know, industry companies And ask them to go do it. Well, they're just gonna go do what they were doing before, right? And so that's not gonna work. So you need A lot of creativity. And you need to sort of intuit your way to the answer.

30:00 Buy Experimenting. It's like okay. Uh here's A theory. That we think will work. Let's try it. Right. And and and and you know, does it work? Great. Okay, let's do

30:12 Two X that okay, let's do ten X that let's do a hundred X that doesn't work. Okay, let's stop. You know, restart. Come up with another theory and just keep Experimenting until you Find the answer.

30:24 You're kinda 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 uh You made this essentially talk to your entire company. And you said, I'm just gonna read this quote. I stood up and told the company that five years from now, I love this so much. I stood up and told the company that five years from now, we will have a new competitor. And that new competitor is going to be in every business that we are in, except they're gonna be faster.

30:48 More efficient and more capable. And they're gonna put us out of business. And the only way that we're gonna prevent that is we are going to become that company. It's got Wrenching stuff. To reinvent and reimagine your business, but if you don't do it, you go out of business. Yeah, exactly. So You know, when

31:08 Uh Chat GPT came out. In November of twenty two. Or so looking at this and going. Wow, this is a big deal. This is this is pretty interesting. And

31:19 You started to see the rate of improvement In the L O Ms. And you You you know, in technology you can You can sort of look at the

31:29 the rate of improvement in the learning curve and you can s sort of plot Well, where's this thing going? Right. Where's it going to be in a year, two years, or three years. And you look at Okay, we're gonna

31:41 Uh have agents and multi agent systems, and we're gonna be able to reason over incredible amounts of information. Well what does that actually mean? for the way knowledge work gets done and the tools that humans are gonna have. So you think about that, you go Wow.

31:58 This is a Big big deal here. Um we need to totally reset how we're thinking about the business. And reimagine it, reframe it.

32:08 And Understand What the processes are are gonna look like. In five years. And so You do you do all that and you say

32:18 Uh if we keep doing what we were doing before we're gonna be in serious trouble because Some new company's gonna come along and Yeah. They're gonna Uh have all these new tools.

32:31 They're not gonna have this Legacy of crap from from the past, right? Old ways of doing things. And they're just gonna do it the new way. And so

32:44 We have to change. Or we're gonna go out of business. You know, I also believe in this Idea that uh If you don't have a a crisis.

32:54 Make one, right? Do you get people excited, motivated, And to drive the the necessary change. It one in one sense this is not a technology problem. The technology is there whether you use it or not. It's a it's a question of

33:12 How do you Organized The team And people To actually go

33:19 And Get this thing done. How do you motivate them, how do you give them the right tools How do you Structure.

33:28 Uh you know The Uh Ways people work together. So that you can do it quickly.

33:35 And It's very hard for people to, you know, if you've been doing something for Ten years or twenty years or thirty years. The same way, and all of a sudden it's like some new thing comes along. Like no, I don't want to do that. You know, but people don't like to change.

33:49 But You have to. And so That's what we've been doing. Yeah, this is ex excessively rare. I mean, think about the story in the book where I think the line that I summarized where you were saying about

34:01 IBM's like yeah, the personal computer's, you know, fine. It's gonna be a great terminal for the mainframe. And it's just like, oh, you see this over and over again in these biographies if you're studying s you know something that's occurring over multiple decades. It's like companies and people. can not vision A future that's different. from the present that they succeeded in. So they kind of like dismiss it dismiss it or kind of ignore it.

34:20 I I I'm trying to think though, like so you just said okay, there's no books like what you guys are doing right now, though, right? You can't just like you're on the cutting edge. There's no there's no books you can read about it. But you have surfed how many different Технологіка революція You did the micro Processor.

34:36 Right? Microcomputer, sorry. Uh the personal computer. Um then Obviously the internet was invented.

34:44 Client server technology. How many? So like I got four or five. How how many have you successfully navigated and had to reinvent Dell over and over again? How many of these uh like huge shifts do you think Yeah, there's probably been a lot of the things that we've Six or seven of'em. So if you've done that six or seven times and then I think in the book, you know, obviously you say, We did really great on this one. Not good on this one, but we've we've tried to fix that, you're not gonna be perfect over that many decades. But do you see like Is there like an echo between all of these, like that you can apply, like certain ideas you could take away and and like form or structure? It was like, oh that's kinda similar to what we had to do when we had to reinvent for X. Yeah, there are, although the the the the time

35:26 frames that these things occur Say more about that. So if you think about the the internet. You know, when uh you know, first you had the internet, you had the world wide web. Right, and websites started popping up.

35:41 In the mid nineties. And then you know, but it took Like a decade before there was really a boom in things like e commerce and I mean it was it was going on. uh in the late nineties and you know early two thousands, but it it really didn't it took a long, long time. So

36:00 Now Uh maybe it's like Five to ten times faster. You know, if you look at the growth in the usage of these tools. And

36:11 Part of it is that Each successive Uh wave of Technological improvement is built on the prior we you know foundations.

36:21 And so they're able to go faster. So If you have five billion people connected with All kinds of devices. Well now they can use these tools and That just goes way faster. But I I I think you have to

36:34 have this idea in your head that any uh you know new thing has Some chance of succeeding. Right. And and say more about that. So There's a lot of

36:46 Wild ideas out there. And If you dismiss them all. You're gonna miss some some things. So so you you you

36:56 You kinda have to hold this idea in your head that Uh Any of these wild ideas. Has a chance of succeeding. And uh let's

37:06 sort of understand What do all these things mean and Figure out What is the Point of intersection.

37:13 Right. W w you know what should we be doing. About this. And When when is it actually? relevant, interesting, valuable and

37:23 It's sort of you know, hits escape velocity. And If you're If you're sort of stuck in a

37:30 particular paradigm or you're like dismissing Things. You're gonna miss them. Yeah. And and so and so uh you know

37:40 You need to be open minded enough to Consider All possibilities. But your ability to do that is so counter to human nature. 'Cause we're habitual like we're habitual creatures. You know, it's like, oh I found what I want, or I found like what I like to do and like this is the best. You know, like if you look at like what people what music people listen to, for example, it's like music you listen to when you're like high school and college, and maybe you've added a couple, but like you're kinda like just stuck on that, where

38:08 You are just like a completely open maybe addicted to, you know, new technology and new ways to think about or new ways to solve Like old problems. Yeah, I love I love the stuff. But how do you not squash new ideas? Like you just said, like you know

38:24 Any idea can work now. Everybody's connected and they can grow faster than you can possibly imagine. So how do you like Do you have a process for like how do you not You know, I new ideas are fragile. And you know, they need some kind of protection and some time to to grow. Like but most people just like s kinda snuff'em out or dismiss'em immediately.

38:41 Well you know Sometimes uh it it it it it's a it's a good idea, but it's the wrong time. Sometimes it's a good idea, but it's the wrong company. Sometimes it's just a bad idea, right? And so Um But Yeah.

38:57 There's no absolutes here, right? You you you just have to be open minded. And consider the possibility that Things are changing. Fast enough that

39:10 Uh you know, some Some new thing comes along. If you took The top computer scientists Uh you know, a and researchers

39:21 in AI or just broadly You know, five years ago and you said Okay. You know, this is what's gonna happen with LMs. In the next five years.

39:32 probably ninety nine out of a hundred would say, No, no, that's not gonna happen. Right. And so Uh That's a that's a

39:42 pretty good example in contemporary Period here, you know, where you you just need to be Uh open to the possibility that things are gonna change. And and and there's also this thing where About every ten years or so

39:58 Something comes along. And just completely expands the opportunity set. For the industry. And that's

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40:41 That is hubspot dot com. I just had a thought listening to you speak tied to something else that you said earlier. It's like basically humans Inability to have accurate predictive behavior. predictions about the future. It's kinda tied to the importance of iterating and make sure you're doing a lot of experiments and then having that like tight feedback loop. to constantly like get information, Oh, that didn't work. Okay, we ran experiment didn't work. Let's try it a different way. Like those two like those two things work really well together. It's like we're we're not going to predict the future, we're going to create the future.

41:10 Through iteration. Yeah and and Yeah, it's okay to try to predict it as well. It's just really hard to do and

41:20 You know, you might want to have a lot of experiments. Mean if you go back and and say, Okay, let's say you had somebody who was supposed to be really smart or supposed to be an expert at something, right? Ten years ago, how good were they at predicting what was gonna happen? That's very good. So

41:40 Uh. Don't rely too much on that, right? This is why I think uh Entrepreneurs have to like study past entrepreneurs too, and it's like obviously very valuable. Like it's it's no surprise that like you were reading about these people, like uh what I would say is like the greats all studied the greats. This is like very con they were doing it today, they were doing it forty years ago, they were doing it two hundred years ago.

42:00 If you took like an average person in normal society And the way they think about experts. Okay. And the way it's discussed in all these biographies. It's like They're very dismissive of experts, right? I just mentioned I was reading James Dyson's uh autobiography. You know, the whole thing is just like he believes in the Edisonian principle of design. Just constant iteration, you learn as you go, you can't predict, like you're you just, you know, change one thing and then test it and see how it goes.

42:24 And He mentions setting Henry Ford a lot in that book. And then James I wrote an autobiography thirty years after that. That he also mentions Henry Ford a lot. And the reason I thought of that is because as you were speaking about, you know, these you go and ask an expert from ten years ago, what's gonna happen? What like they're not gonna tell you that Chat GPT is absolutely you know, that my thirteen year old I use ChatGP all the time.

42:45 But I'm a nerd. I like to research stuff. I like to read about stuff. She used as like a therapist, a shopper, a friend, uh like it's an entire ecosystem then. There's no way you can you can um predict that. So there's a great line in Henry Ford's autobiography, which was written A hundred and twenty years ago. This is not a new phenomenon. Human nature does not change. History does repeat, human nature does. And he says if I ever want to sabotage my competition, I would fill their ranks with experts. Experts tend to know so much. And they're they're so convinced that they're right, they'd get no work done. Yeah, at the limit, nobody knows anything. Right. And

43:19 It's not a bad Uh philosophy. Yeah. You know, when when when you're thinking about the future. Um It's good to have a hypothesis though, right? And and and and ideas and experiments and to keep an open mind. So what was when we go back to

43:37 That hey. This they're coming for us. They're gonna be faster, more efficient, more capable. Uh and they're gonna put us out of business and we're not gonna let that happen because we're gonna transform. We are going to be that business. Right. What was your hypothesis? Back then, do you remember? Oh it's pretty simple. It's that

43:55 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

44:10 every major function, our supply chain, everything can be improved. In a dramatic way. And That's what we're doing. And we're we're finding, you know, as we take our data as we

44:24 reimagine the processes and simplify and standardiz them. We can Uh Make them Way more effective. So

44:34 You know an example would be uh in support We have incredible amounts of data. We have Telemetry data that The machines are

44:44 Giving us all the time. Right. About Uh you know, soft errors and all these things that are going on you know in inside the usage patterns from customers. We have warranty data Uh you know, we have previous call logs, we have all these knowledge bases, we have Jira databases. It's like millions and millions of documents. No human could ever interpret all this.

45:07 So we created this tool called Next best action. Which Takes all this Data.

45:14 And understands what problem the And it helps Uh

45:21 either the customer or the agent that's trying to help the customer. get to exactly the best way to solve that problem in the fewest possible steps. And so The person helping them

45:35 Feels like Wow, I'm way better at my job than I used to be because now I got this genius on my shoulders telling me exactly how to solve this problem. The customer's way happier. The problem solved way faster, and the tool summarizes. The call. So that saves a ton of time.

45:51 And so everything gets way better. So you can take that same example and Yeah. Software development with coding assistance. access to incredible tools.

46:05 And so we're doing this all over our business and of course our customers are doing it. And What is this doing? It's unlocking the power of data. using compute and using all these models, which also happens to be You know. Uh

46:19 We're in the business of compute and and storage and networking, so It's an enormous uh opportunity for for for Dell itself to be able to help All of our customers Unlock the power of their data.

46:32 You couldn't predict like the actual tools that were going to be invented. You just knew that now we have this New there's g there's this new technology that it will transform every single Uh Process inside the business.

46:44 We never be able we won't be able to predict like all the tools, but we just know that they're coming. If we Didn't do that. And our competitors did. We'd be we'd be finished. Right. And so

46:56 We're not gonna do that. And Uh You know, even if we did it and our competitors did it. Uh let's say

47:06 It just neutralizes. You have to do it. Uh do you have no choice? Yeah, there's a line in uh Andrew Carnegie's biography was really fascinating because you know, he dabbled in a bunch of different businesses. He was pretty wealthy before he started the steel company. But once he realized that, you know, think about st how important steel was at that time. It's like everything This is the new

47:25 The new product that everything el uh every other product is gonna be made out of, uh, from bridges to railroads and everything else. Like this is the biggest opportunity in my life. I'm gonna go all in on it. to the point where he didn't even want any dishes, he sold all of his stocks because he didn't want to l find himself looking at the newspaper to wonder like what the price of the stock was like fully focused on the greatest opportunity of my entire life. He went into an existing business that was run by older Gentlemen. Right. He had this new way to do steel. I think it's Bessemer Steel f that he got from England. So he took an idea from England, imported into America.

47:54 Which it's kinda weird how often that is in the history of entrepreneurship. Where it's like, oh, this idea is working in one geography, will it work over there? It's like, yeah,'cause humans are kinda the same everywhere. There's some c you know, cultural differences, but you know, our our core motivations are, you know. Uh very similar. And Uh they were very resistant to change, so they're like, No, that's not the best process. And then they would ridicule him.

48:16 For investing in The newest technology. A ton of money. Every time there's a better machine, a more efficient machine, he would immediately rip out the old machine.

48:26 And input. And put in the new technology of his day. We wouldn't think about it's technology today. It's definitely technology. Back then. And when you read his autobiography, which you know is in the public domain, anybody could read it for free, it's it's an incredible gift to humanity. They're I remember getting to this part of the biography, which is exactly what you just said. It's like okay, even if this doesn't give us advantage over our competitors.

48:48 If we don't do it. Like they will have the advantage. So even if we're on po like on the same level. And the the the summary of what Andrew Carnegie was saying. These guys wind up not adopting technology and they went out of business. So he says, invest in this is not direct quote, this is me summarizing his idea. Says, invest in technology. uh the savings compound. It can make the uh it gives you an advantage over uh your slow removing competitors and it can be the difference between a profit and a loss. If he didn't do that the investment into the new technology that his competitors were dismissing the stupid young kid with his fancy machine, right?

49:21 that wind up making making his company profitable in a year or two and their company unprofitable. And then slowly and slowly they just They kept losing money and then they went out of business. It's very fascinating how these like themes just keep reappearing. Yeah. Exactly. You don't necessarily want everybody to know what you're doing.

49:37 Also. The maxim I have from this I use on the podcast all the time is that bad boys move in silence. And so you mentioned earlier that uh There's no sometimes there's no book. You're on the cutting edge. And so I remember there's this great line in this biography of Steve called Becoming Steve Jobs. Which I actually think is the best biography written about him.

49:54 And Steve's like I don't even know what the business model of animation is. And They start partnering with Disney. And he has this great line, he goes, You can't go to a library.

50:04 And check out a book called The Business Model of Animation. 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 that's hilarious that your son Zach wanted me to ask about was what he calls dad terminal. Yeah. Yeah, uh so dad terminal is is what he he refers to as when he kinda taps in and You know

50:33 Wants to talk about a a particular topic or has a has a question. And it's one of my favorite times with Zach, you know, because'cause you know, we're We're talking about Solving

50:46 problems or challenges. inside his business and Um You know, I get to share the mistakes I made, mistakes I saw other people make.

50:58 Lessons learned. And Uh hopefully save him some Some pain and suffering and you know uh Steps.

51:07 From Yeah, um Learnings along the way. Yeah, he says instead of typing in the re I was like, Why is it called Why is it called that terminal? I didn't understand what that was. And he's like, Well Bloomberg terminal. He's like, you know. Exactly. Yeah. Yeah. He's like you subscribe, you log in, and you have a question and then like you type in you get this really advanced answer. He's like, I don't use Bloomberg, I use Bye.

51:33 I used that terminal. Give me an example's the last query at your terminal. And he goes Supply chain. He said it like it was like obvious. It was like I don't have a supply chain, I run a podcast, I read books. Like explain it to me. Uh he's like my there's a f handful of things. I think a handful he's like there's a bunch of things my dad is world class uh And he's just like one of them is the supply chain.

51:55 Um and the I'm curious as like why you think you're why other people describe you as really good at that. Uh Is that is supply chain just gr related back to how we started the discussion is just like another puzzle for for you just to like direct your curiosity to? It's definitely a a an important puzzle.

52:15 And And a critical puzzle. I mean I think if we had not uh figured out how to do our s our supply chain well Um Yeah, we we would not be here today.

52:28 It it's as simple as that. So It's a it's a fundamental A thing that is just super important in it. in our business. So y's just you've thought more about this area.

52:40 Oh, and and made and made. And learned a ton of lessons and Uh sort of You know?

52:51 figure it out what works and what doesn't work. Yeah, there's a line in the book, I think the first time you realize, hey, I I don't like these your whole thing is eliminating middlemen and like getting as close to the source as possible. And um I I think you're like nine you might be twenty years old at the time, but you're taking your first trip to China, if I'm not mistaken. Well, so that would have been nineteen eighty five. They weren't making anything. So were you were going to Asia. You were going to Asia. So yeah, I I went to

53:27 I went to Japan. Hong Kong. Uh Taiwan and South Korea. Yeah, but what I love is just like how excited. You were.

53:37 Oh yeah. You got a deep love for your business and then now you get to keep peeling back the onion and getting closer and closer to how now it's like Oh I'm like Spending sixteen hours a day, I'm sleeping in my office, I'm working, I'm we have customers, we have how we're hiring employees, we have revenue growth. But now I'm getting like deep uh deeper and deeper, deeper understanding. And like so

53:59 As I read these biographies of people, I try to like build like You know, I ha I think I have a good sense of like how you think and like what's important to you. And what I realized is like that instinct that you had as a twenty year old man or however old you were in at that time. Like that has not

54:14 You just never been alleviated. It's just like this constant like keep going lower and lower and lower. cum uh more a deeper understanding of like the world around you, but also how your business like fits in that world and how you can build technology to like

54:30 Enhance everybody else around you. Yeah, of course. I mean that's what you're supposed to do, right? You're supposed to understand things, right? You say of course. How else would you do it? But to you, this is why I think like writing a book and having conversations like this is important because like there's so much shit in your head that It so unusual. And like like just it's so valuable like getting it out and putting it like out into the world because I remember like I wouldn't know any other way to do it. I know because you don't understand how nor how abnormal you are. So We were h halfway through our dinner, I looked at you and I was like, dude, I have this

55:08 paradox in my head that I cannot reconcile. Between like the your cr the the crazy career that you've had. It's like I study uncommon people for a living. You are uncommon amongst uncommon people, right?

55:21 You have this so the paradox I couldn't reconcile was between this this crazy ride that you had, it's described beautiful in your book, this four decade, you know. mission that you've that you've been on that you've relentlessly given a lot of your life energy to. And just how normal you are. Like your like not the I'm talking about like your affectation, your personality, like your very

55:41 Polite and calm and measureed. Well it's just like You understand how rare this is. No. I know. Just wake up every day and go do the thing. This is why you're great. But that's that's why you're right. So like

55:59 Seems pretty normal to me. Th there's nobody that reads this book. I'm like, this guy's normal. No, it's not at all. So the there's What I love about this and this is why it's so important, because Um And I mentioned this on the episode I made on you, but there's this uh This engineer turn and uh turn uh

56:18 Founder. Uh Sidney Harman. You know the the company Harman Carden? Yeah, sure. Yeah. Yeah. So he has a great line. He said that the founder is the guardian of the company's soul. That it's impossible to separate. You know, the the the creation from the creator. And I think over time like the resemble that This is also again how abnormal you are.

56:43 I used to say it's like you need to build a business that's authentic to you. And then in this book. Lee was you know, talking about He was only able to last four years, I think. Um, and he's just like, you know, we're fighting IBM, we don't have any money and

56:57 He's like My back's hurting, I'm losing my hair, like I can't sleep. And he's just like Michael's It's static. He's like ta cap dancing to the office every day and he said a line that changed like really made me think about things. Like he built a business that was natural to him.

57:13 Of course you it's not abnormal to you because you built a business that's natural to you. Yeah, and if if you've been doing it every day. Seems pretty normal, right? On the last episode during my conversation with Daniel Eck, he said one of the most important ideas that I've heard. He said

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59:07 Lee Walker. Tell me how important Like that was finding a person'cause you were relatively persistent in recruiting him. And you were like twenty one, I think, at the time. Twenty one, yeah. And he was forty five or something like that. Yeah. Like what's the role that you feel he played at that point in Dell's history?

59:25 Well yeah, the company was was uh I mean it's like Oh. Rocket had sort of taken off. But you know, it was it was

59:35 Pretty fragile. Right. Uh You know, we had some good ideas, but there was a l a lot of missing pieces And we

59:44 Help. You know, sort of organized The uh uncontrolled chaos.

59:56 And helped us sort of really You know, scale scale up the business. In like operations, like what do you think Yeah, I mean it it w it was uh well well f f well, first of all, we we were growing so fast, we just We just didn't have the balance sheet or the capital to support our growth.

1:00:14 And so he helped us You know, get some. uh credit lines and you know that. That You know, freed up capital and then

1:00:23 Like You know, sort of organized Some you know, some of the operations And Stuff I didn't really

1:00:31 know about or or have a great interest in, you know,'cause it wasn't the technology or or Uh the customers. Yeah. And so he helped

1:00:42 Sort of get all that stuff. And then as we As we needed even more capital, you know, with a private placement and then going public, you know, he helped help sort of get all that going and You know

1:00:56 Just basically How do you how do you scale this thing up? To get it ready for Ten X or Hundred X growth. One thing I thought was very fascinating that

1:01:05 The Walker said, right? Is You got to the point where you know You had that negative cash conversion cycle where but you were selling to like individuals. So individuals like, Oh, I want a computer, Michael, okay. Give me your credit card. You've got great, I got this money, which we'll talk about in a minute. But now you've moved up, and now you're doing enterprises and some of these companies are huge, like Texaco and like these giant companies.

1:01:25 I remember one point y in the book it was something you've been doing like Sixty million a year in revenue and you had like two hundred grand in your bank account or something. And what was smart is he went to the banks And I was curious if it sounds like he had relationships with the bankers. And I always have this maximum that relationships run. He did. Okay. So relationships run the world. You see that over and over again. And so Lee had relationships with these.

1:01:49 these bankers in the book and you just verified. But then what I thought he did was really smart. They're like, Listen, we trust you Lee. But we don't know this kid. And his whole point is like you don't

1:02:02 Have to even trust me or the kid. He's like, Look at all the purchase orders. Like, do you think Texico's gonna pay us or not? And using the Like the brand and the prestige and the You know, the the essentially the value like Texco's not going out of business.

1:02:16 They're gonna pay the pay them. Pay this kid that you say you don't know, lend us against our receivables. Yeah, it's a really good idea. Yeah, it's receivable based financing. The problem was that Yeah, as as a as a twenty one year old.

1:02:33 you know, starting a business With Really no capital. uh you know in in fusion from from the beginning. A banker looking at it with no one uh known inside the business to trust

1:02:51 What sort of their their general reaction would be, I think I'll go do something else, right? Yeah. But You know, Lee had those relationships. He was trusted. And he was able to kind of explain it to them and You know that helped.

1:03:04 Sort of. uh break open that log jam. And that you know, gave us some of the capital we needed to continue to grow and expand. So

1:03:15 Can you explain how you stumbled upon the negative cash conversion cycle and why that was so powerful? Yeah, so uh you know, we d we didn't have any capital, right? And and so Uh You know, what what we what we figured out was that If we could

1:03:32 Dramatically Uh Shrink. Um our inventory. And get paid from our

1:03:40 customers faster. And You know, uh maybe not pay our suppliers, you know. Instantly.

1:03:49 Then If you're growing and you have a negative cash conversion cycle you actually generate a lot of cash. And so they you don't need as much capital to raise to be able to grow the company and you have a high return on capital. So we started looking at the business that way.

1:04:05 And of course we also Uh there was this Um really interesting thing where our competitors who didn't really understand what we were doing.

1:04:15 They had these elongated Supply chains. They had distributors and dealers and so they would have You know, like ninety days of

1:04:26 Collective inventory. From the time that they actually made the the product to when it actually got to the customer. And you could actually uh understand this because if you opened up the computers Yeah. Uh chips.

1:04:40 had dates on them that showed the weeks they were made. Well so you know, it would say like Uh Forty two Ninety two.

1:04:52 And that meant it was That ship was built in the forty second week of the ninety second year. And so you could literally date How old The inventory was by

1:05:04 opening these things up. But anyway, so they had like ninety days in their collective supply chain. And we figured out how to have like five days. I mean it was crazy. It was like a massive advantage.

1:05:18 Now the other reason this is important is because It turns out that the price of electronic components generally goes down. Right. And and you know, it's it's a pretty predictable thing. And so

1:05:34 Uh If Our components are five days old. And the competitors composed are ninety days old. Well, theirs cost a lot more than ours do.

1:05:42 Right? And so now you've got the structural competitive advantage. Now uh another element of this is that Um You also have

1:05:53 The freshest and the newest and the best technology. You're not selling the Ninety day old fish or bananas. Right, you're selling the f the the the new chip, the the the latest Capability.

1:06:07 And so now you've got even another advantage. Right. And so and then you've got this feedback loop because you're getting signal from the customers of oh I like this, I want that, change this. And so you're able to you know, create this dynamic feedback loop. So

1:06:23 That was what we created and it worked. You know, and we and we kept iterating it and and evolving it. The competitors Uh you know, they They um

1:06:36 And one of the Best things was they They just didn't understand it. They like m they like misunderstood it. Which

1:06:46 Was fantastic. How is that so I I I'm it's like you don't want them to understand what's going on. But how how how do you expl how do you explain their inability to now you can explain it. Yeah. But back then you don't want to you don't want them to know what's happening. You just want them To maybe not even see. What's going on?

1:07:09 So I have a funny story about this and then I'm gonna get back to Compact and IBM. So uh I had dinner with one of the wealthiest people in the world. He's seventy six years old. He's been uh in the family business, he's the second generation of this privately held Like dynasty. And uh he started working the business since he was six. And it was like crazy stories. Uh, it started on the shipping, they they own one of the largest privately held shipping companies in the world. And he's just racantor, he's like super charismatic and just like

1:07:36 I was it was an incredible dinner, but I had found out same th reason we were like, Hey, I'm writing this book because I want, you know, people to come to Dell to understand the history. They had commissioned the family had commissioned uh uh A real author. Right. I have some of these books at my house, not from this guy. Where

1:07:53 These family businesses or you know, these people at book great companies they have they'll hire, you know, the actual author, pay'em whatever, million dollars. Write the book. And then the they'll print it just like this, but there'll be no ISPN number on the back. It's not available for sale. So I have a couple of these in my home library that people have given me because of the podcast. But he was telling me the story's like, Yeah, we we had we commissioned a biography of the patriarch who passed away a long time ago, and then we did one for me.

1:08:15 And I was just like Two. And I leaned in. I was like I want those books. Oh crush the episodes, the episodes will be great. Like'cause he had so many crazy stories. He without hesitation goes absolutely not. I was like, Why? He goes, I have no desire to educate my competitors. So that you just nailed it. It's like obviously if you have an edge, shut up about it. This is what I don't understand.

1:08:39 So maybe IBM and Compact are the two people. two main companies that are not understanding the advantage that you had at this time, right? IBM is a big old sodgy company. Okay, that makes somewhat of more sense. Compaq was run by its founder. How do you think he deliberately misunder like How is that possible for him to

1:08:57 not be able to accurately analyze Do you think he was just dismissive of you? You didn't think you were a threat? Like what was going on there? I You know, I think

1:09:11 I think when you're You know, you're in a bubble. You know, people tell you things are working. And maybe you just don't want to believe that there's Alternate information.

1:09:22 And so you dismiss it. Did you read the new biography of Jensen Wong called in a video? History of N NVIDIA. But he's heavily featured in video way or I haven't read the whole thing. Okay. No. I did an episode on it, I'll send it to you. Yeah. But

1:09:37 he has uh this whole thing where the threat comes from below. And his I think he he reduces everything to maximum. He's like a really good communicator. And so he's saying he's like, we're gonna ship the whole cow because the threat goes from below. And I think I mentioned this in the episode I did on on your book where it's just like You at the time came out with a G you just

1:09:57 beautifully described like you're just stacking one advantage on another advantage on another advantage. So like okay We have the latest technology. We we have Way better supply chain management than you. We are putting out I think you put out uh a computer that outperformed Compacts.

1:10:12 Y which you sell direct to the consumer for seven hundred and ninety five dollars, if I remember correctly. It was Faster than theirs. And they for the they sold a worse computer for fifteen hundred and it was only through retail stores. Like that exactly.

1:10:26 the the manifestation of all these advantages you had. You could just look at the market and be like, I it's very curious to me how this founder could be like Hey. Yeah, and you know, you kind of hope that they don't Even see it. Yeah. I mean, I think there's a human instinct to to say

1:10:42 Hey, look at me, I'm doing this great thing. Isn't this cool? Right. But actually in business It's better if the competitor doesn't understand or doesn't see you. So because you weren't in stores, the only way they would know that is if they were ordering directly from you. And they probably weren't doing that. Yeah, or or if if they were sort of paying attention.

1:11:01 No, but but but but you you kinda hope they don't notice and don't pay attention. following like your natural star and something you're just obsessed with. Because I didn't know that part where you could take these things and see, Oh, this is the forty second week of the ninety sixth year. That's insane. There's a line in the book though. The numbers are right there. It's like they're st they're they're just staring at you. They're they're they're talking to you. I I hundred percent agree with you. It's like but this is the difference between somebody's obsessed.

1:11:31 And somebody's not. Like that guy wasn't taking apart computers compulsively. There's a story in the book. No disrespect to him. I just I'm not trying to sh throw any shade at anybody. There's a story in the book. Where you guys are doing I think the Private placement or the IPO and is Black Friday happens.

1:11:47 And I think Lee Walker walks in Your office. To tell you that, oh shit, we there might be some trouble. There's trouble abbrewing in the capital markets at this point. And he said Michael was in his office taking apart another computer. That's what you do.

1:12:05 Ex that's what you do. That's exactly. I think that's the biggest thing, man. It's like It's an unfair advantage if you can direct your energy at something that you there's no We we talked about this at dinner. We have a mutual friend and Sam Hinky. And one of the things that's interesting about Sam Is If you analyze who he keeps around him, they're they're they're they have different interests. You know, it's like this podcaster dude, this investor guy, this entrepreneur, this like athlete. And he's like what what what

1:12:31 I'm drawn to what all these people have in common that may not be obvious to you, David. І за но. Like you can't get to the end of what they're interested in. He think he used the analogy of like a a cop. J pour and pour and pour it's just like it just keeps going. Like they can never get to the end of their curiosity. And I think

1:12:49 You're a perfect example of that. Where If you Look at other founders that are doing things for fame or status or Whatever the case is.

1:12:57 It's like Jerry Seinfeld has a great line. He goes if you just do it for the money, you're only gonna go so far. Yeah, when it's like a a passion or an obsession. There's there's You just There's no end to it. Yeah. And you're you're taking our chips and analyzing like, oh, I have a ninety day uh advantage over here and I'm not worried about the capital markets because we're just gonna keep serving our customers. And like eventually that is going to change. It's not gonna be a depression forever. So what can I focus on? I can I just focus on

1:13:23 understanding what I'm working on, what's in front of me, and then following this deep curiosity. You know, and and and and actually taking the curiosity that comes from your head. Into like an actual product. That makes somebody else's life better. It's like the miracle of entrepreneurship.

1:13:38 You got it. So we we were just talking about the fact that Compact and IBM. They were Almost like Essentially you got fuel from being underestimated.

1:13:51 You've mentioned in the book that like you found it I think you said something that's like a powerful motivate motivating force. You recall why? You felt that way? Yeah, it was it was just it was just like okay, wow, this is gonna be a a multiplier for us.

1:14:08 Because they underestimate us. They they don't understand what we're doing. And And so Uh they they didn't see us coming because they were underestimating us. You know, uh

1:14:23 I think uh the CEO of Compaq you know, would w would refer to us as a mail order company or, you know, garage operation or wh whatever You know, and you'd hear that and you'd go, Oh wow, this is this is great. All all that was motivating. Anytime.

1:14:44 A setback and the conventional wisdom Yeah. Even whatever interpretation was Okay, you know, they're gonna fail, they're gonna go out of business.

1:14:57 All that Incredibly motivating. Is it still like that today? Of course. Yeah.

1:15:04 Yeah, absolutely. I love how everything is of course an off course it is. Yeah. I mean If it if it wasn't Um I'd probably probably be probably be dead. I mean. And still caring about the company. Yeah. Even from the grave. Um

1:15:20 It's it's a common, I think, misconception. I'm curious to get your take on this. Where People are like, Well, you know if you don't raise all the money at the beginning and your competitor does, like you're automatically dead. And I hear that a lot. And I I was like I don't know, like

1:15:34 Compact race. Seventy five, a hundred million. And You had a thousand dollars in a dorm room. Do you feel that

1:15:42 Like it is actually different today. Like if you were advising like a younger Entrepreneur. I think it's very Uh situation specific in terms of the company industry

1:15:55 Et cetera. So I don't think you could give generic Yeah. Uh advice there. Yeah. That's why I think like the generic advice is you have to do this or you're dead. I'm like I don't I'm pretty sure that's not the case. I don't think you know, like I was saying saying earlier, I don't think there are ever these absolutes. I think you always have to hold the out the possibility that somebody is gonna figure out some Clever, interesting way to do something. That nobody's ever thought of that is different and

1:16:25 You know Uh That's just gonna happen. Yeah, th that's a actually an interesting area to go down where it's like who else You you figure it out by accident.

1:16:35 Like'cause necessity is the mother of all mention. It's like I don't have capital, so how do I get money? Well I'll just ask my customers for the money. And then you you d you accidentally discovered all these advantages and had a deeper understanding as you went along. Are there any other examples of like entrepreneurs or businesses that you've studied where it's like, wow, that's like a really clever way. to do something effectively. Inexpensively. Well, I mean you think about

1:17:01 Uh some of the some of the uh Retailers you know, like you know, Walmart and Costco, uh Amazon obviously came up with with uh super clever ways of of winning in that space by Uh

1:17:17 You know. Doing things inexpensively, taking out all kinds of cost. Yeah, I the other one that came to mind. was um Sam Zamurry, the banana king. Uh

1:17:28 he essentially, you know, builds w the second largest banana empire. And at the time. uh then later on overtakes the first uh largest, which is the food company. But I guess like one one thing that he figured out, and he was actually your same age. He was nineteen years old. He had no money. And you're trying to figure out a product to sell. And so what he did, he's just like well, I was working the docks down, I think, in Alabama at the time.

1:17:49 And He's like all these fruit companies. they have these things called ripes, which are the bananas that are gonna go bad in like two days from now. And they just Take them off the boat and them in the garbage because they can't get it fast enough to the store. And his idea is like, Well, I can use this new technology today, which is the the railroad.

1:18:04 And I can buy this for almost nothing because they're not getting anything anyways. And I'm gonna put their ripes uh and get on the road with it and then sell it at every single stop and then He was generating so much cash and then he could start working down the line all the way to when he had his own banana plantations. Just like that idea. It's like it starts out with like this little nugget of like oh this is like an interesting opportunity. And now understanding as you pull and pull and pull and pull, that gets more and more like you're you keep stacking these advantages one, uh one on top of another. Um

1:18:32 Yeah, I gotta find I I should organize And like look into like more examples of like is there another example of like what you had at the beginning of Dell? Because I think that's the key. Like I think some degree it's like The easier more Hath.

1:18:47 It's just go and like sell part of the company or raise more money or or find essentially like solve the problem with money, or you solve it with like creativity and hustle. And like intelligence.

1:19:00 Uh those those ideas are like excessively fascinating to me. Ikea's another one where he, you know, same thing where he was just selling mail order. He's a mailer company. Um and he has a great line in the No there's that Mill War thing again. I know. I I think it's like still still Bosch. Uh he has that great line where he's like expensive solutions to any problem or signs of mediocrity.

1:19:22 So he was like You have to be more creative. We had this whole thing in the in the eighties. And we called it. Beat the mail order stigma. Really?

1:19:32 It was sort of like as we were Establishing our brand. uh you know sort of the conventional wisdom was Mailwater company. sort of like a pejorative. Like an insult. Yeah. Okay. It's like

1:19:49 Okay, it's a mail order company. And and it's sort of like a stereotype. Like oh. You can dismiss it'cause it's a male order company, right? And All the press.

1:20:01 You know, for years they were like Mail order company Dell, you know, does you know Mailware Company Dell introduces server, you know, like what? It's like okay, we have thirty thousand patents. When are we not a mail order company? What is this mail order thing? So so anyway, we had to like get rid of that. How did you beat it? Just kept doing our thing, you know? And and and eventually people go, Well I guess it's not really mail I mean, it's internet and it's not mail order. Nobody orders stuff in the mail. What is it? I think uh you just made me realize something um that I didn't understand when I read the book. When you were talking about how important it is. to like not squash. ideas and that you know ideas can come from anywhere and they can like you know the

1:20:45 But it seems small that it can have a huge impact. I think Gell was like one of the first. Companies to sell. On the internet, right? Yeah, well, so we we were selling direct, right? We you know like people could call us on the phone and

1:20:59 We used to have these rooms with like a gazillion fax machines and they would send us the orders on faxes. Crazy. And we had catalogs, right? And so then Uh you know, the world wide web comes along and you websites, you know, like Oh, you mean we can create a website?

1:21:16 And people can go on there and like the catalogue is there. And they can like press a button and order the thing? That's the coolest thing ever. We gotta do that, right? And so In my first book You notice on every page at the bottom it said w dot doll comes. I read that other book too. Like obsessed with

1:21:35 Getting people to the website. Because Yeah. Just became like the Uh

1:21:43 easy way to Interact with people. And that book came out in ninety seven, right? Ninety nine. Yeah. Um

1:21:53 But yeah, we started we started You know, with with with one of the first websites. I mean there are there were many website. I mean I remember when it was a small number. I remember when you could like go to all the websites like in the whole world. There used to be not that many websites. You could like go to them and like okay, I'm done. It's just there's nothing nothing else to see. That obviously changed quickly. So how the hell do you even build a store? Like you were collecting cr do they have to like call a number in?

1:22:28 'Cause I remember like taking credit cards online. Maybe not ninety if you were doing Do you remember what year you launched the site? Ninety seven, probably, ninety six? I think it was probably ninety ninety six, ninety ninety five, ninety six build all the time. Okay. Yeah. Yeah, it's it's funny. Uh I I forgot about the fact that Dell dot com is on the bottom of every page, but what's fascinating is if you read Bezos' shareholder letters, it's not he never refers to it as Amazon. Every single

1:22:53 Uh shareholder letter up until you know you don't have to do it anymore. And then every single interview, it's Amazon.com, Amazon.com, Amazon.com. Then it turns into Amazon. Where you can buy things. It's such a fascinating like thought. Like how uh novel it was. But you kinda saw it like right away, like this just we should just do this'cause it's cool. We had experiment with How do you create an electronic version of the catalog even like

1:23:21 We're gonna send you a floppy disk or a C D wall and you put it in your computer and you load it up and the catalog is there. Yeah. Right. Those are some of the ridiculous things that happened before the Internet, before the World Wide Web. Did you ship that? Yeah, yeah, we did. So you just kinda like what AO Member AOL they just essentially carpet bombed the entire country. Yeah, we didn't do it like that. Y you know, you wanted to make it easy for the customer to understand your offerings and then The World Wide Web just made that.

1:23:53 You know. Kind of infinitely accessible to to Anyone. The idea of s mailing out a floppy

1:24:02 Or a disc of a catalog. It's just like a a hilarious idea. But then people were were surprised when people started ordering comput. And I I remember, you know, we sold like a server for fifty thousand dollars online. People were like, No way you know, it's like it didn't happen as fast as as some of the things that are happening now. Yeah. But uh obviously for a business that was selling directly to businesses and uh you know, individuals, you know, all of the world it was just total rocket fuel. How l soon into Dell

1:24:37 Were you starting to sell like targeting institutions over individuals? You know, it's really interesting. If you go back to The very, very beginning, like the first full year. Like over eighty percent of the business was Two

1:24:53 businesses. Okay, so go it's sorry like doctors and dentists, right? Or lawyers are some of your first But they were using it for business purposes. An individual doctor design I would think of them as as as more like an individual but Uh

1:25:09 Well f first of all let's just level set here. So if you look at all technology spending Uh roughly seventy five to eighty percent of it is Businesses, not consumer. And so That's kinda been The thing.

1:25:23 For a long time. So within the first year. You got to Similar percentage, yeah. There w you know there are companies universities they were buying

1:25:35 Five. ten, twenty, fifty machines at a time. One final thing that I wanna talk to you about that I think is like one of the most important ideas in your book. Uh Especially when you're

1:25:49 Trying to like pushy stories down the generations. So I Like I see it in a lot of the biographies. And I think it's like a another misconception, how we just talked about the misconception machine, like entrepreneurs know be wary of experts and like how they can kill new ideas, where like a a normal person would revere them, right? So there's like this. This this difference of understanding which are not.

1:26:09 Another one that I would say is like the importance of ego and self-belief and self-confidence. And my you know, general society might say, you know Uh You should generate evidence. And then be confident. And I hear this a lot, which is perplexing to me because in the books this is no, you have that

1:26:26 Direct. Completely backward backwards. Belief comes before ability. And so I would go back. to this part in your book that I think is super important when you're nineteen years old.

1:26:36 And your dad's like, What do you want to do with your life? And you're like, I want to compete with IBM. And you sit there and like, again, I I don't think you should be reading these books quickly. It's just like there's no test at the end. Like sit with the ideas and really think about what's happening on this page. And I think it's one of the most important pages in the book. I can actually see the page in front of me. And what you realise y you say on that that page where it's just like was I a little full you know, the idea is like I have a thousand dollars I'm in U U T dormroom, and we take on the biggest company in the world.

1:27:03 And you said, was I a little full of myself at nineteen? Sure I was. I think you have to be to do anything important. Can you explain? That mindset.

1:27:15 Yeah, I think I think it's a combination of Of Uh Naivete. Right?

1:27:22 Which it's an important element. It's like You don't know enough to know that maybe this won't work. Okay. And confidence. Um

1:27:33 But Yeah, you never sort of wanna g go over into the arrogant zone because that's really, I think, a dangerous place to be So it's like okay. Uh I

1:27:46 For a long time, and so Uh You know All these reasons why it won't work.

1:27:55 Are unknown to me. Okay, so that's the naive part. Right. Um And

1:28:02 That can actually be sometimes a good thing, right? Because you're not Sort of bound by those conventional thinking. Uh the the the that maybe are no longer as relevant. Or maybe you come up with some

1:28:17 clever new way of doing it. And then You know, the confidence piece is All right. I'm gonna go Make it work. I'm gonna go figure it out. Right. Um

1:28:29 But You know, there's always a little voice in your head it's like Well what if it doesn't work and you know, what about this and what about this and so You n you you know, you never wanna uh sort of assume, okay, this is absolutely gonna work no matter what. then you're gonna ignore those little voices about well what about this? What about this? So so yeah, it's sort of

1:28:54 I I think a combination of Naivete. Mm-hmm. Being real here. Conf and confidence. I think a perfect illustration of that

1:29:03 would be your reluctance, initial reluctance to name The company after you. 'Cause it was PCs limited, right, at the very beginning. It w it was it was it was Officially Dell Computer Corporation doing business as PCs limited. Right. Yeah. Yeah, but then you realize like why don't we just do Dell? And then that's when I thought of the Osborne thing because you're like, Wait a minute, this guy he named his company after that. Like there's no what if it doesn't work? Yeah, what but it's interesting because you just said it's like yeah, I have a lot of confidence I'm gonna do this, but

1:29:31 The doubt. Never goes away. Yeah. And and and uh you know, fear Thank you. That's actually the the last thing I want to talk to you about.

1:29:41 When we One of the first things when when we saw each other last month. We talked about We were like walking around. Uh Zach's office.

1:29:50 And I don't know how it came up, but it came up almost immediately. And it wasn't surprised to me because I feel the exact same way. But You fear of failure. In my experience, uh from

1:30:01 studying all these history of entrepreneurs, but y I think you said the same. It's just like The fear of failure to this day is a bigger motivator than like the love of success. Yeah. Totally. A hundred percent.

1:30:16 Uh Yeah, you you know, you don't you don't wanna fail, although Failing is is How you learn. Uh, you know, Payne is the best teacher.

1:30:32 And and so you y you know, you have to have some some little failures along the way. But The that fear of Uh

1:30:43 Yeah. You can't have it paralyze you where you you're you don't want to make any decisions'cause you're a afraid to fail. Has that happened too? Not really. No. I I I you know um

1:30:56 You know, what you want to do is is is sort of be incremental. And again, it's back to iterating. It's like okay. Uh

1:31:05 We're not sure if it's a good idea. Let's try it, right? Let's let's experiment. Let's get started. We'll figure it out. And We're not You know. Betting the whole company on this decision.

1:31:17 We're just Experimenting. And if it doesn't work, it's not a little bit more. Great. We learn something, we move on.

1:31:24 It's perfectly send. Thank you for writing the book. Thank you for the time. I really appreciate 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 four hundred biographies of history's grace 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.

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