Dell Computers: Michael Dell. The College Dropout Who Took on IBM (2018)

Michael Dell was building a tech business in his dorm room long before it became a familiar startup story. In 1983, the UT Austin student began selling PC upgrade kits. Within months, he left college to devote himself to the business. When Dell entered the Fortune 500 in 1992, Michael was just 27—the youngest CEO on the list. In this episode, Michael explains how a teenage job selling newspaper subscriptions taught him to find customers, why he abandoned plans to become a doctor, and how Dell became a global powerhouse in computing technology. He also shares what he learned from the mistakes that came with building a business so quickly. What You'll Learn How Dell sold computers for half the price of IBM's and still made a profit Why a customer visit led Michael to rethink his entire business How Michael scaled his startup to $66 million in annual sales by age 21 Why he returned as Dell's CEO in 2007—and how he navigated a changing PC industry What Michael learned from Dell's early missteps, and why he prioritized customers over competitors Production Credits How I Built This is produced by Podcast Pointman and part of the Vox Media Podcast Network. Follow How I Built This: YouTube → @HowIBuiltThis Instagram → @howibuiltthis X → @HowIBuiltThis Facebook → How I Built This Follow Guy Raz: Instagram → @guy.raz X → @guyraz Substack → guyraz.substack.com Website → guyraz.com Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

  Hey, everyone. So this week, we're bringing you a special episode from the archive. It's one of my all time favorite conversations. It's with Michael Dell, and he takes us back to the dorm room where he started what became one of the biggest computer companies in the world. Now, before that, as a high school kid, Michael made a killing selling newspaper subscriptions. His trick, he checked the marriage registry in Houston to find out who was recently married, knowing that they'd probably want a newspaper subscription. He would also take apart computers just to see how they worked. It's an amazing story about curiosity, about nerve, and some bad decisions he still talks about. So enjoy.

• 0:43Speaker 01

  You know, here I am, supposed to be going to college, and I've got this thriving business in my dorm room. I was buying computers and souping them up with more capability and then reselling them. So I advertised, I bid on state contracts.

• 1:03Guy Raz?

  How did you know how to do all that?

• 1:05Speaker 01

  You know, I don't really remember how I figured that out, but I somehow figured it out.

• 1:16Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how a college freshman turned a dorm room side hustle into Dell, one of the biggest computer makers in the world.

• 1:42Guy Raz?

  Support for the show comes from Stripe. When you're ready to incorporate your startup, Stripe Atlas is ready for what's next. With Stripe Atlas, nearly all companies are formed in just one day, all the legal documents handled. And with Stripe Treasury, you can manage banking, cards, payouts, and more on day one. A global by default business account helps you manage multiple currencies. From incorporation to running your global finances, Stripe is ready for what's next. Start at stripe.com/atlas. Stripe Treasury includes various distinct Stripe products. See applicable product terms. Stripe is not a bank. Checking

• 2:24Guy Raz?

  accounts are provided exclusively by Fifth Third Bank, National Association, Member FDIC. Our presenting sponsor today is Anthropic, the team behind Claude. Every founder on this show started with a hard question, not the marketing plan, the 2 a.m. kind. Is this idea any good? Am I the one to build it? Should I quit my job? Anthropic got built the same way, a public benefit corporation founded on one hard question. How do we make sure AI goes well for people? So they asked over 100,000 people their hopes and their fears, and are publishing what they find, even the uncomfortable parts. Me? I've got

• 3:08Guy Raz?

  my own hard question about AI. Here it is. If everyone has access to something that can help them write the business plan, build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt.

• 3:38Speaker 02

  Support for the show comes from Engine. Running a small business means every dollar has to work hard. But if your team is still booking travel the old way, it's costing you more than you think. Engine is the fastest growing travel and spend platform in the country, built specifically for businesses like yours. Book a trip in as little as 2 and 1/2 minutes. Earn up to 10% back on hotels. And in 2025, Engine customers save more than $300 million on travel with zero booking fees, no contracts, and no BS. More than 1,000 businesses join Engine every month. Join them and get $500 when your business signs up and starts traveling at engine.com/box.

• 4:26Guy Raz?

  Long before anyone heard of the tech wonderkins like Mark Zuckerberg, or Evan Spiegel, or Katrina Lake, back before it was fashionable to drop out of college to pursue your startup, even before people used the term startup, back in the ancient days of the 1980s, the dorm room miracle story you'd have heard of was Michael Dell's. Now, today, the company is enormous. It's beyond enormous, worth billions of dollars. Dell has sold more than 650 million computers since Michael Dell founded it in 1984. And what's amazing about this isn't the money, it's not even the idea.

• 5:05Guy Raz?

  What's amazing about all this is, well, Michael Dell, because he's not a backslapping sales guy. He doesn't come across as particularly charismatic. He's actually on the quiet side, maybe even a little shy. Michael grew up in Houston in the 1970s, and this was just as digital technology was taking off in that city with companies like Texas Instruments and then later Compaq. His dad was a doctor, his mom was a financial consultant, and the expectation was that Michael would become a doctor, like his dad. But even from a young age, Michael Dell felt pulled in a different direction. He was into numbers.

• 5:47Speaker 01

  I mean, I remember when I was a small child, my dad had this adding machine. It was a Victor adding machine. This is before the electronic calculator. And I was just fascinated that you could add up numbers with this machine, and really big numbers, right? And so, and it would just, and it would make this mesmerizing sound every time it did it. And I just kind of loved that. And then I remember when I was about seven or eight years old, I bought a calculator. It was the first semiconductor based calculators. And I was fascinated that this small machine could do complicated

• 6:27Speaker 01

  math problems. So yeah, I got, I got very interested in this stuff. It also turned out that about equidistant between my junior high school and our, and our house, there was a Radio Shack store. And so, when I was riding my bike home, I could stop by the Radio Shack store and see the, you know, early forms of the, of the personal computer and hang out there until they kicked me out of the store.

• 6:55Guy Raz?

  And were you, you know, like, kind of entrepreneurial as a kid?

• 6:58Speaker 01

  Yeah, I kind of liked business. And I had all kinds of businesses, you know, selling baseball cards. I had a stamp auction. I got a job at a gold coin and jewelry store, and I was to negotiate with people that were selling things and buy those things the lowest possible price because the owner gave me a percentage of the cut.

• 7:28Guy Raz?

  And I read that you also worked for the local paper for, for some time?

• 7:32Speaker 01

  Yeah, so I got this job working for the Houston Post newspaper. It doesn't exist anymore. Now they think they combined with Houston Chronicle. And my job, along with hundreds of other, mostly, you know, teenagers, was to call random people on the phone and try to sell them a subscription to the Houston Post newspaper.

• 7:57Guy Raz?

  Right.

• 7:58Speaker 01

  And I observed three things. The first thing I observed is that if you sounded like the people you were talking to, they were much more likely to buy the newspaper from you.

• 8:08Guy Raz?

  Like, like you, you put on a Tex, like a heavy Texas accent?

• 8:12Speaker 01

  Yeah, I'm not going to do it for you here, but I think you can, you can use your imagination.

• 8:17Guy Raz?

  Okay.

• 8:17Speaker 01

  So, second thing I observed was that people that were getting married were much more likely to buy the newspaper.

• 8:26Guy Raz?

  Huh.

• 8:26Speaker 01

  And then the third thing I observed is that people that were moving into a new house or residence were also far more likely to buy the newspaper.

• 8:35Guy Raz?

  Well, how did you know who was getting married and who was moving in?

• 8:39Speaker 01

  Well, you talked to them. You strike up a conversation.

• 8:42Guy Raz?

  Do you just call people and say, and ask them about themselves? I guess this was like, at that time, people were perfectly happy to tell strangers personal details, right?

• 8:51Speaker 01

  Yeah. And so I, I observed this. And what I figured out is that in Texas, when you, as this is true in many states, when you want to get a marriage license, you have to go to the county courthouse.

• 9:04Guy Raz?

  Ah.

• 9:05Speaker 01

  It turns out this is public information.

• 9:07Guy Raz?

  Right.

• 9:08Speaker 01

  And among the information that you give to the county court is the address that you want the license sent to. So with this information, I devised a direct mail program where I sent letters to all of the people that had applied for marriage licenses in a 16 county area surrounding Harris County, which is where Houston, Texas is. And I hired a bunch of my high school pals, you know, to go out to all these county courthouses and type the names into small Apple II computers. And

• 9:51Speaker 01

  I sent, you know, massive direct mail campaign to all those people that were applying to get, you know, marriage licenses.

• 9:59Guy Raz?

  Huh.

• 9:59Speaker 01

  And there were also, at that time in Houston, there was a building boom, and there were these very large apartment and condominium complexes that were going up. And so I would go to these buildings under construction and sort of figure out who was in charge and say, hey, I'm from the Houston Post newspaper, and, you know, we've got this great offer where your new residents can get the paper free for two weeks. And all they need to do is fill out this little form.

• 10:29Guy Raz?

  You were a high school student when you were doing this?

• 10:31Speaker 01

  Yes.

• 10:31Guy Raz?

  How much money did you walk away with?

• 10:33Speaker 01

  I think I was about 17 years old, and I made a little over $18,000 that year.

• 10:40Guy Raz?

  This is like freakishly precocious of a, of a high school senior. Like, it's just weird that you would even know to think of doing those things. I mean, don't, don't you think?

• 10:50Speaker 01

  I didn't really think about it like that. I just, it just seemed like, seemed like a good idea. So I was pursuing it, and it was working. I did plenty of things that didn't work, but that worked, so I kept doing it.

• 11:04Guy Raz?

  $18,000. What did you do with that money? I mean, that must have been more money than you'd ever seen in your life.

• 11:11Speaker 01

  I bought a BMW.

• 11:15Speaker 01

  Because I wanted, I wanted a BMW.

• 11:17Guy Raz?

  What did the other students think of you? Did you have this reputation as like the business whiz kid in, in high school? Or like, what did they think about you?

• 11:28Speaker 01

  You know, I, I don't really know and I, and I didn't really care. So I, I was sort of keeping to myself and, you know, I had a few friends, but I, I wasn't the most social of kids.

• 11:41Guy Raz?

  But you must have been somewhat social because you were going out and selling stuff to strangers.

• 11:47Speaker 01

  Sure, social enough to make the sale.

• 11:50Guy Raz?

  Yeah. So you were on the one hand, doing this entrepreneurial stuff. And then I guess you were also just really into computers?

• 11:57Speaker 01

  Yeah. You know, the original computer that I, you know, got my hands on at home was the same one everybody else had, which was the Apple II.

• 12:07Guy Raz?

  The Apple II, yeah.

• 12:08Speaker 01

  Yeah. And one of the beautiful things about the Apple II was that all of the circuits were discrete circuits that you could understand. So you could go in and start to, you know, play with those and modify them and reprogram the BIOS and upgrade the system and take it apart, put it back together. So, you know, and something happened here around 1981. IBM introduced the IBM PC. And that was sort of a very important moment because if you dial back the clock to the

• 12:47Speaker 01

  late seventies and early eighties, you know, this company IBM had a leadership of the part of the economy referred to as information technology, unlike any other company at any other time in history.

• 13:02Guy Raz?

  Wow.

• 13:03Speaker 01

  They were by far the dominant company. So when IBM introduced the IBM PC, this to me seemed to be a very important moment. So I tried to understand everything that was going on about that. And so when you took apart this IBM PC that was selling for about $3,000, as far as I could tell, it was about $600 worth of parts.

• 13:27Guy Raz?

  Wait, you bought one and you took it apart just to check the insides out?

• 13:32Speaker 01

  Sure, yeah.

• 13:32Guy Raz?

  Yeah.

• 13:33Speaker 01

  What else would you do? So you gotta, you gotta take it apart. How can you understand it if you don't take it apart?

• 13:41Guy Raz?

  But like, most people buy computers to like, you know, at that time, I guess, to do basic, you know, accounting and word processing. You bought it to take it apart?

• 13:49Speaker 01

  Well, I wanted to understand it. And, you know, to understand it, you have to take it apart.

• 13:54Guy Raz?

  Huh.

• 13:55Speaker 01

  And I remember in 1981, I was 16 years old. I'd just gotten my driver's license and they had this thing called the National Computer Conference in the Astrodome in Houston. And I, you know, as soon as I got out of school, I would rush over there and they had all of the computer companies of note in the world in the Astrodome and they were showing off their computer equipment.

• 14:24Guy Raz?

  I mean, that's an amazing coincidence because you went to that convention, which happened to take place in Houston that year.

• 14:30Speaker 01

  Just happened to be in Houston that year. And it just happened to occur like a couple of months after I got my driver's license.

• 14:36Guy Raz?

  Yeah.

• 14:37Speaker 01

  So, yeah, I mean, there's, there's definitely some luck involved here.

• 14:41Guy Raz?

  Right. And that convention, not only were you there, but Rod Canyon went there too, who went on to start Compaq. I mean, Compaq and Dell came out of that convention.

• 14:52Speaker 01

  Yeah. Well, and, and I remember in my chemistry class in high school, the guy sitting next to me was telling me that his dad had just left Texas Instruments to go start this new computer company. And, you know, he was one of the early guys at, at Compaq.

• 15:14Guy Raz?

  Yeah, amazing. So you, so you, obviously you graduate high school and then you go to university, to, to UT Austin, right?

• 15:23Speaker 01

  Yes. I was a pre-med major and, you know, some of this was the programming from my parents because, you know, my father was a doctor, my older brother was a doctor, and I always thought I'd be a doctor. And, and when I started going to school, you know, my parents weren't around all the time, right? Because I'm, I'm in Austin, they're in Houston and you're pretty far away. So you got a lot of free time on your hands. So I start exploring this whole computer thing further. And one of the things that I noticed about the computer business was that it was very inefficient.

• 16:05Speaker 01

  It took a really long time for the technology to get from the people that made it to the people that were buying it. And it was actually rather expensive and, and slow to occur. And to me, that was sort of frustrating.

• 16:20Guy Raz?

  So you are a, you're a student at UT. You're supposed to be doing pre-med training.

• 16:26Speaker 01

  Right.

• 16:27Guy Raz?

  And you start to think, hey, the PC market, like, there's an opportunity here? Is that what, what you start to think?

• 16:33Speaker 01

  So I was in this mode of buying computers and souping them up with more, you know, capability and then reselling them. And it was just sort of a fun thing to do, you know, way to make some money. I loved the computers. It was actually working out great.

• 16:55Guy Raz?

  What would you do? You would go and find like secondhand computers and take them apart and rebuild them and then sell them to people?

• 17:03Speaker 01

  No, no, I was buying new computers.

• 17:06Guy Raz?

  Okay.

• 17:06Speaker 01

  And I would upgrade them with more memory. And actually, the main business became putting hard drives in those machines. So back then, the original IBM personal computers had no hard disk drives. So what I would do is I would buy a couple of these disk drives and buy a controller card and write some software and make some cables and make a hard disk drive system that you would put inside an IBM computer. And then instead of two 160K or 320K floppy disk drives, it would have a 10 megabyte hard drive, right? Which at the time was something amazing, right?

• 17:49Guy Raz?

  Yeah.

• 17:50Speaker 01

  Sounds ridiculous today, but 10 megabytes then was, that was like unbelievable.

• 17:55Guy Raz?

  How long would it take you to upgrade one computer, for example?

• 17:59Speaker 01

  Oh, it didn't take that long, you know? Depending on what you were doing, maybe 30 minutes, 45 minutes, something like that.

• 18:07Guy Raz?

  So you could, so you could do a bunch of computers every day?

• 18:10Speaker 01

  Oh, sure. Yeah, no problem. In between classes.

• 18:12Guy Raz?

  But you really weren't studying. You weren't, there's no way you were doing your schoolwork.

• 18:16Speaker 01

  I was, I was definitely slacking off on the schoolwork during that time, yes.

• 18:21Guy Raz?

  But who would you, I mean, how did you find customers? There was no Craigslist, there was no, I mean, you were 18 or 19 years old, I guess. I mean, how did you even know who to sell these to?

• 18:33Speaker 01

  I advertised in the, in the local newspaper. I bid on state contracts. And it's kind of funny, the, the state office that was responsible for buying computer equipment and everything else was about three or four blocks from my dorm room. So I could just like walk over there and they, they would give you all the dockets for all the things that the state wanted to buy.

• 18:58Guy Raz?

  How did you even know how to do that?

• 19:00Speaker 01

  You know, I don't really remember how I figured that out, but I somehow figured it out. And, you know, but my, my biggest customers were universities in the area, doctors, lawyers, you know, architects, things like that. Students weren't really buying computers at the time. And most of the students that I knew, they weren't really interested in computers at the time. That sounds like crazy right now, but this is back in 1983, 1984. There weren't very many people that had personal computers at the time.

• 19:36Guy Raz?

  Okay, I, I'm hoping that I don't sound like a, a broken record, but I'm just, I'm just thinking, Michael, like, here you are, you are an 18-year-old kid. I mean, you, you probably looked like a, a baby and you were going around hocking computers. So like, why would these architects or businessmen or lawyers have taken you seriously?

• 19:58Speaker 01

  Well, I guess they figured I knew what I was talking about. Nobody ever said, well, I'm not going to buy from you because you don't look the part or something. So I think the early adopters of computers were sufficiently technical and geeky that I was able to relate to them in, in a way that, that resonated. And so I didn't have any problem.

• 20:21Guy Raz?

  And how much money were you making at the time?

• 20:24Speaker 01

  I was doing about $50,000 to $80,000 a month.

• 20:30Guy Raz?

  Wow.

• 20:31Speaker 01

  In business when I was in my dorm room.

• 20:33Guy Raz?

  That, I mean, that's just an insane amount of money. I mean, did you tell your parents that you were, that you were making this much money?

• 20:43Speaker 01

  Uh, no. No, I didn't. Now, you know, they, they eventually, going back to late 83, you know, they became very upset with me and said, you have to stop this and, and focus on your studies. You gotta get your priorities straight, you know? What are you doing with your life and all that stuff? And, you know, I agreed to do that. You know, it was like going cold turkey or something. It just, it lasted about 10 days and I actually realized that this was more than a hobby or a nice way to make some extra cash on the side while I was going to school, but actually something I was very passionate about.

• 21:26Speaker 01

  So during those 10 days, I, I sort of mapped out, you know, the, the beginnings of how I was going to, you know, finish up my freshman year, but then launch this as a real official business. And, you know, I eventually made a deal with my parents that if it worked out, I would continue and if it didn't, I'd go back to school.

• 21:48Guy Raz?

  I mean, it, I can just imagine how exciting it was. You're 18 and you're selling, you're, you're starting a company, basically, without even realizing it, I guess. What, what was it that was more exciting? Was it all this money that was coming in or was it just that you were just selling a bunch of computers?

• 22:06Speaker 01

  Well, it was probably a, a little bit of everything. I mean, the opportunity for, you know, what became Dell Computer Corporation was more and more apparent. And, you know, while you couldn't see out three or four years, you know, you could see far enough out that, you know, you keep going.

• 22:27Guy Raz?

  So you were, I guess, for the first couple of years, or at least for the first two years, you were just buying off-the-shelf computers and making them better?

• 22:35Speaker 01

  That's right. Well, we started upgrading other people's computers, and then we started making these hard disk drive upgrade kits. That became the main business of the company, selling hard disk drive subsystems and memory kits to upgrade the computers.

• 22:53Guy Raz?

  When you say, Michael, when you say "we," who were the "we"? I mean, you started this by yourself in your dorm room, and then who did you bring on to help you?

• 23:02Speaker 01

  Well, I always say "we" because that makes it sound like there's more of us. But when I started, "we" was just me. But I hired about one person a week, every week, for the first year or so, and then it became more and more.

• 23:17Guy Raz?

  Yeah.

• 23:18Speaker 01

  And I remember one time, we had this customer who wanted to come visit us. It was Martin Marietta, which is now part of some much bigger company. And the guy wanted to buy like 150 of these kits, which was, for us, a pretty enormous order. And he wanted to come to Austin and see our factory, right, operation.

• 23:43Guy Raz?

  Yeah.

• 23:44Speaker 01

  And so this was a little bit scary because it sort of looked like a massive dorm room. It wasn't the most put-together place.

• 23:54Guy Raz?

  This is, this was not an actual dorm room, right? Like, you had, by this point, rented out an office space?

• 24:00Speaker 01

  Yeah. Yeah, we were growing quickly, and so we tried to clean this space up and put on some semi-respectable business attire.

• 24:10Guy Raz?

  Yeah.

• 24:11Speaker 01

  So the guy's going through, and we're showing him, here's how we format the hard drives, and here's how we ensure the quality controls, and we're sure we can meet your demand for this order for 150 units. And he says, "Well, what are those?" And I said, "Well, those are the computers that we have to format the hard drives." And by this time, we'd actually been assembling our own computers just to format the hard drives, because it became too expensive to buy them from other people. And he said, "Well, why don't you sell those?" And I was like, "Oh, that's a great idea. I should have thought of that."

• 24:53Speaker 01

  We were so busy making these hard disk drive kits that we hadn't really thought to make our own computers.

• 25:00Guy Raz?

  When we come back in just a moment, how that idea launched Michael down a path that would make Dell one of the biggest computer companies in the world. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

• 25:23Speaker 02

  Support for the show comes from Engine. Running a small business means every dollar has to work hard. But if your team is still booking travel the old way, it's costing you more than you think. Engine is the fastest-growing travel and spend platform in the country, built specifically for businesses like yours. Book a trip in as little as 2 and 1/2 minutes, earn up to 10% back on hotels. And in 2025, Engine customers save more than $300 million on travel with zero booking fees, no contracts, and no BS. More than 1,000 businesses join Engine every month. Join them and get $500 when your business signs up and starts traveling at engine.com/box.

• 26:04Speaker 03

  Black Friday is around the corner. Your biggest chance to grow sales this year, don't wait. With Realize, Tabula's advertising platform for businesses, you can reach people engaging with your competitors across premium websites with 600 million daily active users. And as an exclusive offer for podcast listeners, new customers get $700 credit back. Just search "Realize Podcast" on Google or use the promo code PODCAST26. Ready to get started? Take advantage of this offer while it lasts. Terms apply.

• 26:40Guy Raz?

  So normally, at this point in the show, we start to talk about the slow and steady growth of a business, and the early struggles, and all the hard work that went into getting it off the ground. But in the mid-1980s, pretty soon after Michael hired his first engineers to start making the first Dell computers from scratch, they were selling so many computers so fast that they started to compete with the biggest name in computing, IBM.

• 27:21Speaker 01

  IBM, at the time, had a 6-megahertz 286 computer that they sold for $3,995.

• 27:30Guy Raz?

  Yeah.

• 27:31Speaker 01

  So we introduced a 12-megahertz 286-based computer, and we sold it for $1,995. So our computer was twice as fast and was half the price.

• 27:45Guy Raz?

  How were you able to do that?

• 27:47Speaker 01

  Well, we still made a decent margin selling them. And I think, one, is we had some clever engineers, and we had this great supply chain that we created. And so when we would sell, let's say, 200 computers in a day, we would give that signal back to our suppliers, who would, every day or every few hours, deliver parts to our factory.

• 28:17Guy Raz?

  Yeah.

• 28:18Speaker 01

  And then we would ship those computers out to the customer. So we had an unbelievably efficient supply chain that we created out of necessity because we had no capital. That also meant that we had the freshest parts at the best cost, and as the cost of the materials were coming down, we benefited from that, and we could get the latest technology to the customer faster than anybody else.

• 28:43Guy Raz?

  And you didn't, you were a direct-to-consumer company. You didn't, retail shops were not selling Dell computers, right? You had to call Dell or fax Dell and order a computer.

• 28:53Speaker 01

  At the time, that's right, except most of our business wasn't to consumer.

• 28:58Guy Raz?

  It was to business.

• 28:59Speaker 01

  It was to businesses.

• 29:00Guy Raz?

  Right.

• 29:01Speaker 01

  But that's, what you just said is actually a common misperception. A lot of people thought, "Oh, only consumers buy from Dell."

• 29:06Guy Raz?

  Yeah.

• 29:07Speaker 01

  That's actually not what was happening. We were selling to all sorts of companies and governments and small and medium-sized businesses. And that was most of our business, even from the beginning.

• 29:19Guy Raz?

  And at that point, like, the late 80s, what did you have in mind for the future? Like, what was, what were your ambitions for the company?

• 29:28Speaker 01

  Well, we had some pretty big aspirations. The first one was, we said, "We want to expand globally." It was pretty clear to us that if you were only successful in the United States, that wouldn't be good enough. The second was that we had to go after selling to big companies, because if you didn't sell to the really big companies and the biggest governments in the world, well, you weren't going to be a relevant company.

• 30:00Guy Raz?

  Yeah.

• 30:01Speaker 01

  And then the third one was, we said we had to differentiate on the basis of service. And we created this thing called onsite service. And today, it would be a very common thing. But back then, if your computer broke, you had to put it in the trunk of your car, take it back to the computer store. And then they would take it, and then they'd ship it off somewhere, and you'd wait weeks and weeks, and you'd supposedly get it back. And so we came up with this program where you'd call us on the phone, this is before the internet, and if you had a problem, we'd help you resolve it on the phone. And if we weren't able to

• 30:41Speaker 01

  resolve it on the phone, we'd send a technician with parts to your location to fix your computer onsite. And we did that all across the United States. And we thought, the minute we announced this, our sales would double, because it was so much better than what we were doing before. And they didn't double instantly, but after about three months, they doubled. So.

• 31:05Guy Raz?

  Wow. I want to put this into perspective because we think about really young entrepreneurs and we think, many people think Mark Zuckerberg or the guys who made Instagram. You were 21 years old. I mean, at that time Dell was already doing like multiple, like what, 10, 20, 30 million dollars in sales a year?

• 31:29Speaker 01

  I think it was 66 million that year. And I was 21.

• 31:34Guy Raz?

  66 million dollars. I mean, just for a moment, have an out of body experience for a moment. And don't think about you, but think about this 21 year old named Michael Dell, who's running a 66 million dollar company. I mean, it is unbelievable, right? I mean, it's almost implausible to imagine that happening.

• 31:55Speaker 01

  Yeah, certainly some, but I was more focused on the future and thinking about how do we become three times larger or 10 times larger? What new products are we going to launch into? Do we have the right talent? How do we expand and get more salespeople?

• 32:16Guy Raz?

  What was your lifestyle like at that time? I mean, did it change? Were you still living like a 21 year old? Or all of a sudden, did you buy a giant mansion? And how did it change the way you lived?

• 32:29Speaker 01

  You know, I wouldn't say massive changes. I did buy a nice house. I wasn't wanting for things, but I didn't really have a lot of time to consume things and wasn't really focused on that.

• 32:45Guy Raz?

  I mean, it sounds like you were so busy that you were just, your whole, everything that you were doing was this job. And I mean, I'm assuming you didn't even have a personal life at that time, probably. You were just working all the time.

• 32:57Speaker 01

  Yeah, that's a valid assumption. I did, a couple of years later, take a little time off and managed to find a fantastic partner and get married and have kids and all that. And that's been an amazing part of my life. And I was actually motivated to do this in part by Steve Jobs and Bill Gates.

• 33:24Guy Raz?

  Really?

• 33:24Speaker 01

  Yeah. And the reason I was motivated to do it because of them was because they were not married. And they were about 10 years older than I was. And having had the experience that I had as a child with my family, that's what I wanted. I wanted that family. I wanted that experience. And I didn't want to be a single guy in his 30s or beyond that didn't have that.

• 33:53Guy Raz?

  What would stress you out at that time? Because it seems like you're so even keeled that you don't actually sound like you get stressed out. But I have to imagine there were things that would stress you out.

• 34:04Speaker 01

  Oh, we had plenty of stresses. I mean, I remember one time, we got this letter from something called the Federal Communications Commission, the FCC. And apparently, you know, computers fall under something called the Federal Communications Commission Class B Device, which means they have to be approved by the FCC. So I did not know this. You know, they basically said, you have to stop making these things.

• 34:35Guy Raz?

  Wow. When was this?

• 34:36Speaker 01

  This was back like in 86, 87. So if we had followed their instructions, you know, we wouldn't be on this podcast today.

• 34:45Guy Raz?

  You'd be out of business. Yeah.

• 34:47Speaker 01

  Yeah. So fortunately, I had some pretty smart guys who sort of said, well, what you need to do is call this lawyer in Washington and he's going to help you fix this. So I called up this guy and he'd been one of the prior commissioners of the FCC. And he said, okay, here's what you need to do. You need to go down to this test range. You need to test your computers immediately. And you need to submit an application right away. And make sure they comply, by the way. And so we did all that. And then he went to the FCC and said, hey, you know, these guys are honest, forthright people. They just didn't know. And now they filed their application. They want to do the right thing. And here's what

• 35:30Speaker 01

  we're doing. And we were able to work through it. So yeah, I mean, in the first three, four, or five years, there were actually several things like that. I remember there was a thought at the time that, oh, wow, IBM is going to take back this whole idea of the personal computer and it won't be an open ecosystem anymore. And we could all, poof, be out of business. Well, that didn't really materialize.

• 35:58Guy Raz?

  So you guys decided to go public, I guess, in 1988. You do an IPO and raised tons of money. And why did you decide to do that, by the way? Because at that point, you, I guess, owned the entire company.

• 36:14Speaker 01

  Well, we needed the capital. We were growing at like 80% per year. And the company was only four years old. And we were expanding into all sorts of new countries. We were expanding into new product lines. And we also wanted to be more of a peer with our customers. And being a public company somewhat enabled us to do that because customers could look and see that we were a real legitimate company. That was helpful at the time.

• 36:47Guy Raz?

  Well, here's what I think is hard for lots of people to wrap their head around, which is you were expanding by an order of magnitude every year. There was huge amount of revenue coming in, but yet that wasn't enough cash and capital for you guys to expand.

• 37:04Speaker 01

  Sure. All the revenue is not profit. We weren't a software company. And so we did need some capital to finance the growth of the business and hire more people, open new offices, open new factories, build IT systems. We absolutely needed some capital.

• 37:23Guy Raz?

  And by getting that money, were you able to say, okay, now we're going to beat IBM? We're going to be bigger than IBM?

• 37:28Speaker 01

  Well, we definitely wanted to be the biggest. And I would say it changed a little bit in that timeframe to competing with Compaq. And one of the things I think I learned along the way was that if you obsess on the competitors, you could be making a really bad mistake.

• 37:53Guy Raz?

  Huh.

• 37:53Speaker 01

  And I think that was definitely true in the case of those two, in the sense that we had a better business model. And if we were trying to just look at them, we would miss opportunities by not listening to our customers. And how did we get from a company that started in a dorm room to having a half a billion dollars in sales? Well, we did it because we listened and we learned.

• 38:21Guy Raz?

  Stay with us. I'm Guy Raz and you're listening to How I Built This.

• 38:40Guy Raz?

  So I guess by the year 2000, end of 2000, so 2001, Dell Computers PCs becomes a number one brand by sales, by market share, more than Compaq, more than IBM.

• 38:55Speaker 01

  Yes.

• 38:56Guy Raz?

  What did you, do you remember finding that out?

• 38:59Speaker 01

  Yeah, you know, we sort of have this celebrate for a nanosecond, sometimes a little longer. But we were focused on how do we keep growing? How do we expand into servers and storage and services and software? And how do we solve the next unsolved problems? And 2001, we would have been thinking a lot about China and India and the emerging markets. And so there wasn't a lot of dwelling on any particular success.

• 39:34Guy Raz?

  So, I mean, the company, the story of Dell is just pretty remarkable because it seems like from the moment you started selling PCs out of your dorm room until 2001, it's just success after success after success. Like, there was no moment of failure. There was no- There was no real struggle. Is that true? Is that, is that right?

• 39:57Speaker 01

  No, that's not right at all. There were plenty of struggles. And certainly, if you go back and look at the history there, you'll find all kinds of missteps along the way and dead ends and mistakes.

• 40:11Guy Raz?

  What was the dumbest mistake you did, you made? Because it doesn't, I mean, Michael, I'm being honest with you. It doesn't sound like you made any mistakes. It sounds like you were preternaturally gifted as a high school kid to understand business. And then you understood computers and then you just started this successful company. So what was a, what was a mistake you made?

• 40:31Speaker 01

  Okay, so 1989, we created something called Dell Unix.

• 40:37Guy Raz?

  Which was, which was a software?

• 40:39Speaker 01

  Yeah, yeah, you know, this, this was sort of prior to the whole Linux wave.

• 40:44Guy Raz?

  Yeah.

• 40:44Speaker 01

  And Unix was a well-used operating system in mid-range computer systems. You know, turns out we were really early at that. And that was, that was a really bad idea. And it was a kind of a horrible misadventure.

• 41:00Guy Raz?

  Did it cost the company money? Did it affect the stock price?

• 41:03Speaker 01

  Sure, yeah, all that. You know, around the same time, we also had a wildly ambitious engineering program that our team had cooked up. And it was too big of a technical leap.

• 41:18Guy Raz?

  Yeah.

• 41:18Speaker 01

  The project failed. It was a project called Olympic. We had problems with our inventory control early on. You know, we had all kinds of mistakes. Fortunately, none of them were fatal. And one of the things I learned a long, long time ago, you know, when you find a problem, fix it as fast as you find it. And look, when you're pioneering in a new area with a new business model, there's no playbook. There's no, you know, you, you have to just learn by doing. And you have to intuit and experiment your way through the problem.

• 41:55Guy Raz?

  I'm curious about 2004 because you, you stepped down as the CEO of Dell. I mean, you, the company is just, it's a, obviously a Fortune 500 company. It's been already for more than a decade. Huge revenues. Did you just think, okay, I've made it. I'm 39. Time to move on and start a different phase of my life?

• 42:15Speaker 01

  Not really. You know, I didn't really think about it as stepping down. I had this partner in the company, Kevin Rollins, who was the president of the company. He and I were running the company together. And I decided, okay, you be CEO for a while. I'll be chairman. I'll still be very involved. And after about two years, you know, the industry started changing pretty rapidly. And the board, you know, came to me and said, you know, hey, we think you should go back to being CEO.

• 42:48Guy Raz?

  Yeah. I mean, I mean, what, what happened during that time? Because by all accounts that I've read, there was a decline. I mean, 2004 Dell starts to lose market share. And then a couple of years later, HP becomes the number one PC seller. And then you come back in 2007. So what was going on in those three years?

• 43:08Speaker 01

  Well, I think the market was changing. I think there were new things starting to emerge. The cloud, you know, what people call the cloud today, you know, was starting to show up. I think we weren't being aggressive enough in changing the business, given the shifts that were happening.

• 43:29Guy Raz?

  Yeah.

• 43:29Speaker 01

  You know, it's a change or die business. It's a quick or dead business. And the board asked me to come back into the CEO role and I was happy to do it.

• 43:40Guy Raz?

  But I've read that, that like around that time, the, the quality and the service of Dell was, was in decline. Like the company was getting a lot of heat and I'm, I'm sure you saw that criticism. So how did you, how did you deal with that?

• 43:54Speaker 01

  Look, I think, I think you can, in any anecdote, you know, extrapolate. But there were definitely some areas where we could have been investing more in innovation. And we, you know, changed the focus of the company, starting around 2007, to understand, you know, what we needed to do to be, you know, an important and relevant company in the future. And so, look, I, I felt then and feel now a deep sense of responsibility and commitment to the company. And I'll, I'll care about the company after I'm dead.

• 44:32Guy Raz?

  What, what does that mean? I'll care for the company after I'm dead?

• 44:35Speaker 01

  It means that, you know, this is a lifelong pursuit for me in terms of, you know, helping the company reach its full potential. And, you know, certainly my dream is that the company persists well beyond my lifetime, which, you know, I'm still a pretty young guy. So I think that's a many years away.

• 44:54Guy Raz?

  I wonder, Michael, how much of your success has to do with, you know, your hard work and your brains and, you know, intuition? And how much of it is luck?

• 45:05Speaker 01

  Good question. I don't really know. You know, I'm sure there's some, you know, element of, of luck there. I've probably been lucky a lot.

• 45:17Speaker 01

  You know, I feel like I was really lucky to be born in the United States. That's probably the biggest stroke of luck right there. Because I think in the United States, when you're 20 years old and you show up and you want to sell something to somebody, you know, they, they don't look at you too funny. So I, I think that was my biggest stroke of luck, was just being born here in this country and having the opportunity and the freedoms that that's afforded me.

• 45:49Guy Raz?

  That's Michael Dell, founder of Dell. By the way, Michael is still the CEO of Dell Technologies. And what's incredible is that the company has managed to reinvent itself yet again. For decades, Dell was really known for making personal computers. But today, it's become a major player in the infrastructure powering artificial intelligence. Meanwhile, Michael and his wife Susan announced they're giving away over $6 billion to help millions of American kids build financial security for the future.

• 46:22Guy Raz?

  Our show is produced by Podcast Point Man. I'm Guy Raz and you've been listening to How I Built This.