David Senra - Michael Dell, Dell Technologies

Starting point is 00:00:02 I want to jump right into what we were talking about before we started recording that. You said somebody was, you've been obsessed, you know, running Dell for 41 years. You've been obsessed really since you were like 11 or 12. So you've been running it for 50 years because there was a Dell before a Dell, right? But you were saying somebody was telling you the story about you in middle school. When I was in junior high school, in the summers in Houston, there were classes at Rice University for young kids. okay and so you could go to rice university

Starting point is 00:00:34 you take these classes and my my mom you know kind of signed me up and it was great you know they had these college professors and they were teaching these classes and the way I would get to Rice University is I would take the bus from from our house right and it would like take you downtown and and I was I was curious so I was like okay if I just stay on that the bus takes me all the way downtown to where the really tall buildings are.

Starting point is 00:01:05 So I go down there, it's like really tall buildings. I'm like roaming around, I'm like 11 or 12 years old. And I see like they've got like the stock exchange there and all these tickers going. I'm like, wow, that's pretty cool. And so I just started learning about the stock market. So anyway, it's just something I remembered. And, you know, my parents were always talking about financial markets and, you know, It just sparked sort of this interest really early in life.

Starting point is 00:01:37 There's a great line I've seen from both Ken Griffin and Larry Ellison describing you. They're like, this guy was manufacturing computers in America. At a time when there was like thousands of other people doing the exact, very similar thing. And he was the only one that survived. And the reason I just thought about that is because I was watching this talk that Ken gave, I think, at Yale. And he says the thing, he's like, for reasons, I can't explain. I don't know why. I've just been obsessed with the stock market, with business since I was in the third grade.

Starting point is 00:02:10 And, you know, 60 years later, however old he is, like, that obsession has not dulled. We were just in your office and you were showing me one of your new unreleased products that we can't film or photograph. But you were like, I was like, this is like a kid on Christmas. Like, you're still. The super cool product. Yeah, I'm very excited. I told you I'll buy one. I think it was cool, too.

Starting point is 00:02:30 I'm going to buy one as soon as it comes out. But I just love this enthusiasm that is just not doling. What do you think? I was just with your son, Zach, last night. And I was talking a lot about his business. It's absolutely ripping. He's super intense. And he's just in it right now, right?

Starting point is 00:02:45 And then it was like 95% of our conversation. And he's like, all right, I have some things that you should talk to my dad about. And then it was so good. I was like, shit, he just did the outline better than me. So one of the things, he's like, you need to get on a record. record, what motivates him? He's like, it's one of the most fascinating things. He's like, just ask him what motivates him?

Starting point is 00:03:04 So what motivates you? You know, it's all just like fun and interesting, and I want to learn. And it's like a big puzzle to solve and understand. And you think about the impact that technology has on the world. What could be more exciting than to be in the middle of that? and to figure it out and to help advance it. And it's an infinite game, right? It never ends.

Starting point is 00:03:37 Love to win, hate to lose. And, yeah, it's just like the most exciting thing you could do to be in the middle of a business like this and to see it all unfold and play out. Yeah, that's one of the things. He's like he's addicted to puzzles. So that's the way you look at it? Yeah, I mean, it's like the curiosity, solving a puzzle,

Starting point is 00:04:07 understanding things, and figuring it out. Yeah, that's, you always want to do that. I mean, I would feel unfulfilled if I couldn't figure out a puzzle, a question. So, yeah, there's like a burning desire to. understand things and to figure them out. Puzzles and math have always been important. When did you realize that about yourself? I never really realized that.

Starting point is 00:04:36 You just asked me about it. It's just what I did, I just wanted to understand things. And, you know, when I was dealing with physical things, the way I would understand them is to take them apart. It's like, how can you understand something? something if you don't take it apart. Yeah. And my parents would get pretty frustrated,

Starting point is 00:05:01 you know, taking apart things in the house. Sometimes I put them together. Sometimes they would still work. But it's just the desire, it's to understand things, you know, the curiosity. Yeah, that's just one of your character traits. You have a great story in the book where I think you save up for the Apple 2. It was a computer, and it was, you know, relatively expensive,

Starting point is 00:05:22 especially I think you were like 12 or something at the time. And then you bring it home and your parents like, oh, he's going to plug it in and play with it. It's like, no, I immediately took it apart. I needed to understand how it worked. Well, it's like this machine, it's like they does really cool stuff. How does it work? It's like, what's inside it? And how do all those things work?

Starting point is 00:05:43 How do they fit together? And why did they put these things versus those things? And, you know, sort of getting down to the essence of it. I had a thought when I was reading your book. You know, at the time you're taking part at IBM, you know, this is, I'm pretty sure before you're a teenager, so this is before you start Dell officially. But it's, you know, and I didn't know this about IBM. I had to go back and look it up. It was like the most valuable company in the world at the time.

Starting point is 00:06:08 It was the first company to ever hit a $100 billion market cap, which also blew my mind. But you take it apart and you're like, oh, wait, it's just 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 I read your book. It's like, well, I can do the same thing. Like, what are they doing here that I couldn't do?

Starting point is 00:06:35 Did you have that thought? Yeah, absolutely. I mean, so it's back to when you open the thing up, you look inside, what's there? Well, there's chips, right? Yeah. And there's wires and there's power supplies and disk drives and all these components. It's like, well, where do those things come from? Who makes those?

Starting point is 00:06:54 What's inside those? How do they make those? And so you sort of peel the onion, you know, and you understand all the different elements. And, you know, when I originally got the first IBMPC, you know, yeah, probably took it apart before I turned the thing on, you know, just to see what's inside. And one of the really cool things back then was that you didn't have these sort of application-specific integrated circuits. They call them ASICs, right? Or these big sort of chips that nobody really knows what's inside except the designers. All the chips were off-the-shelf chips.

Starting point is 00:07:43 So you could see, you could sort of understand what the logic. was and what each chip was supposed to do inside the circuit. And inside the IBM PC, none of the chips were made by IBM, right? And none of the disk rise were made by IBM. The power supply wasn't made by IBM. And so, you know, I was also interested in the economics of it. It's like, well, what does this chip cost? What does that chip cost?

Starting point is 00:08:17 And you sort of add it all up, and then you can, you can, compared to the cost that they're selling the thing for, and you go, wow, this is, they're really charging an incredible markup for this. It's an incredible insight to have as a teenager, though. It's like figure out what the actual costs that the components are and then go look up. And it sounds like what Elon did with rockets. This is like, the Russians won't sell it to me. I'm on the flight back.

Starting point is 00:08:41 These are famous stories and all the books on it. He's just like, well, what is a rocket made of? Like, okay, well, there's a list of components. How much those components cost? What you just said is like you just kept asking questions. Like, oh, I'm going to take it apart. It's like, okay, well, this is all the components. This is what it is.

Starting point is 00:08:55 This is like where you get them from. This is the company. Look, the company name is right here. I can just call them up and find out how much this is. Well, you could go to the distributors. Yeah. And you'd say, you know, okay, how much does this chip cost? And they'd say, well, it's this price for 100 of them.

Starting point is 00:09:09 Yeah. Right. And you could literally map out the cost of every chip inside the thing. There is a book, Ken Griffin, the founder of Citadel recommends reading, called Hardball. The subtitle of that book is, are you playing to play or are you playing to win? It is a book about extreme winners and some of the best operators in business. There is a line in that book that says, if you have not examined your costs in detail, it is very likely that there exists lurking somewhere in your cost structure,

Starting point is 00:09:41 a major opportunity to improve your profits, weaken your competitors, and expand your influence. The first move is to drive down your cost faster than your competitors can and use the cost savings to upset their strategies. That sounds like the author was describing Dell. In his autobiography, Michael Dell says that one way that he was able to outcompete his better funded competitor compact was with a structural cost advantage. Compact's operating costs were 36% of revenue compared to Dell's 18% of revenue. More than 40 years later, Dell is thriving and compact no longer exists. The best operators in business have this in common. They know their business from A to Z and their costs down to the penny.

Starting point is 00:10:22 Ramp makes doing this effortless. Ramp gives your business easy to use corporate cards for your entire team, automated expense reporting, and cost control all on a single platform. Ramp's corporate cards are fully programmable. You can set limits so the spending of your team never gets out of hand. Most companies only find out about excessive spending after the fact. With Ramp, you can stop it before it happens. Matt Paulson, who listens to this podcast and who's

Starting point is 00:10:46 a founder of Marketbeat, recently switched to Ramp, and this is what he said about it. Ramp is the best. The amount of money you will save from unwanted renewals and employees who think company credit card equals buy whatever you want will far exceed the best credit card rewards program. Matt is talking about the importance of cost control.

Starting point is 00:11:05 Ramp helps you make this an obsession. Almost all of the top founders and CEOs I know are running their company on Ramp. Go to Ramp.com to learn how they can help your business play to win today. That is ramp.com. Something I don't even know if I've ever like verbalized before, but it's in all these biographies that I read.

Starting point is 00:11:22 What I feel is it's like, there's just like a lot of common sense where they just, the founder tends to just keep asking more questions and just like going to it like, you just said, I think killing an onion. It was like, yeah, just like, okay, I got that answer. What's the next one? And then what's the next one? And there's something in human nature where we just like, we stop at the first question. But you have this like infinite curiosity that was very obvious like from.

Starting point is 00:11:43 from childhood. And I think based on what we were just talking about your office is obviously still present. But yeah, it's just very fascinating. It's like, it's not rocket science. Just like keep asking questions and collecting information and thinking about the answers you're getting.

Starting point is 00:11:56 Hey, you want to understand things. Yeah. At a very deep level. Yeah. And so that's always been a thing for me. Yeah, I think that's what I'm very interested in. It's like if you read the life story of somebody, like I'm very interested in understanding

Starting point is 00:12:10 who the person is and like why they're doing, what they're doing. And this is the genius line from Charlie Munger. It's just like, well, it's way more effective to tie the ideas to the personality that developed them. And the way you tie to the personality developed them, it's like you read about their life story. You read about their childhood. You read about what they're interests for. I love the part in your book. I was rereading yesterday where your parents confront you. Okay. You've started Dell and your dormant University of Texas. 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,

Starting point is 00:12:46 you know, on this path to be a doctor. And I think your mom's crying. You're, you know, she was. Yeah. Very emotional. Yeah. And so you, you were like, okay, in the book, you said, I caved, okay, which is very unusual because you're a super strong personality from a young kid. But then the very next page, I can see it in my mind right now. Like, cold turkey, didn't even look at a computer for 10 days. I tried to take notes in classes. And then I realized, like, No, like, it was like you were compelled. Like, I thought working in computers was going to be thrilling. I'm going to drop out with $1,000.

Starting point is 00:13:21 I'm going to take on the biggest company in the world. I think the fact that they put all that pressure on me is the thing that caused me to really reflect on it and decide that, no, this is more than a little hobby or a side thing. This is just like, I have to go do this. Do you feel it was all-consuming even at that age? Because at the time, you're, like, sleeping in the office when you do start. Like, you start, I know we talked about this last time.

Starting point is 00:13:50 It's hilarious where somebody asked you, like, well, when you start Dell, like, how many hours did you work? And you're like, all of them. Yeah, I mean, I wasn't doing anything else. I mean, there wasn't really anything else that was important to me. And so, yeah, it was totally all-consuming. and super exciting and wasn't doing anything else. Were you more of like before that somebody that just focused on one task at a time? I would get pretty obsessed with, you know, individual topics and sort of go deep on them.

Starting point is 00:14:28 So, yeah, I wouldn't consider myself, you know, generally interested in a bunch of things. that was like super deep on certain things that excited me or interested me. Is that still the case today? Or is it just basically? Yeah, it's just basically. Yeah, Zach told me, he's like, he'll call me at like 5 a.m. And he was like, I have an idea. Like, we should do this product or this acquisition or whatever.

Starting point is 00:14:53 He's just like, he just can't help himself. And I asked him, I go, what would get him to stop? He's like, you have to kill him. What made you decide to write the book? You know, we had gone. through a whole lot with the going private and buying EMC and VMware and there just been so much that happened. I wanted to kind of document it.

Starting point is 00:15:22 And it was during COVID. I had some time and started writing the stuff down. And it felt like a logical place to sort of capture everything that had happened. And, you know, one of the main reasons I wrote it was for our team inside the company because I want them to understand, you know, how we think about the business and where it came from. And, you know, as a business grows larger, it's harder to be able to tell the stories directly with everyone. And so it's just a great opportunity to encapsulate all that and share, you know, what happened, really, the good and the bad, the things that worked well, things that didn't work well. And, you know, I certainly benefited from reading the stories or hearing the stories of other people and thought it would be a good idea. I said this on the episode I made about it.

Starting point is 00:16:32 It's like a great gift to like future generations of entrepreneurs. I actually think that idea of like having like a singular piece of media, whether it's a book, there's another idea for you for a podcast, for people as the company grows to understand like this is the decisions that were made. This is why it was. This is what we've gone through. Spotify has this. Originally they did, Gustav is a head of product at Spotify.

Starting point is 00:16:56 And he's the actual one that made this. And originally, I talked to them about this. They were just going to do, it was like an eight-part series. It was going to be a private podcast inside the company, which tells the history of Spotify. So if you come in now, you know, 20 years into its existence, it's like, well, what was it like a 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 they would also include the people that were important in the early days.

Starting point is 00:17:25 Like, you know, some people don't last in the company, but they were really important. It was two, three 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, a product story, I think, is the name of the podcast. I'm like, why don't more companies do this? Like, I'm not an employee, but if I was coming into Dell or any other company now, and I could have here, here's eight, you know, eight one-hour episodes.

Starting point is 00:17:46 And they say not just this decision is made. It's like, why? These are the constraints we're under. This is what was going on. Exactly. So, you know, if we walk downstairs, right below this room where we are, there's a new class of small business salespeople being trained, okay? And you would love for those team members to be able to understand, okay, how did we get here?

Starting point is 00:18:11 What are all the things that, you know, we did right and wrong? And to really deeply understand the culture, the values, the beliefs, and then to be able to build on that with their own contributions. Yeah. kind of bring them up to speed. And this is the context. I also think there's an additional benefit for it to make it public-facing because humans buy stories. Money flows as a function of stories.

Starting point is 00:18:39 And I've experienced this. It's like if I read, I spend, you know, 40 hours reading about this person that had this idea in their head. They built a company. At the end of that, you're going to have a way better appreciation. I find out buying their products that I've never even would have thought of because now I understand the story. I just reread James Dyson's autobiography,

Starting point is 00:18:58 which is one of my favorite books, probably my number one recommendation out of the 400 books I've read so far just because it's like 90% just struggle. The first autobiography is just like, I'm failing for 14 years. This guy is like a mule. He won't give up.

Starting point is 00:19:11 5,127 prototypes. But there's an idea in the books that was smart where he understood the power of storytelling. Okay? And so he's like, you're going to walk into the retailer. You're going to see six different vacuum cleaners.

Starting point is 00:19:22 His obviously is designed different, so it's going to catch your eye. But he insisted they wrote like a 200-word story on like a little flyer, right? Maybe like a little piece of cardboard and that you could attach it to the handle of the vacuum cleaner. And what happens? If that person, humans are attracted to stories, attracted to people, right? And so they would read that and then it would increase their sales because they understood who's behind this. Why did they make it?

Starting point is 00:19:49 How is it different? Like it was a very effective sales tool. So I think like doing podcasts like this. books, anything like this where you can actually tell of like why you're doing what you're doing. This is a crazy thing. I've heard from, I don't know, I've probably got thousands of messages about the episode I did on you. And the most common thing was I knew the name.

Starting point is 00:20:09 I had no idea. Everybody knows Dell, the brand name, right? But they didn't understand just how crazy your story and the multiple different transformations you've had to make over 41 years. And now they're like, oh, this guy, like, I'm so glad you put that in front of me. I think it's like a super important idea. It's all, it's all been a lot of fun. Yeah.

Starting point is 00:20:29 And still is. And it feels like we're just getting started, actually. When I think about the business and the opportunities we have. And, yeah, it's all fun. You mentioned earlier that you benefited from studying people that came before you. And this is, you know, you wanted to pass that forward. Like, who are a few of the people that you study, you felt you learn from, or that influence like you're thinking about how you're building, how you built your business?

Starting point is 00:20:58 You know, when I was a kid, you would read about entrepreneurs, you know, that were starting companies. Charles Schwab or Fred Smith, certainly Sam Walton, some of the early telecom pioneers, people that were doing it right then, like in the 70s. And those stories were just super interesting to me. And I grew up in Houston, which was kind of a boomtown. You'd see these new companies being created, and parents were talking about that. And so those stories were always just interesting and compelling. And you want to understand, well, how did they do that?

Starting point is 00:21:44 And why did they do that? And, you know, what happened? and, you know, I never imagine myself doing anything else other than starting a business. Yeah. You know, the idea just was in my, in my consciousness from a very early age. This great line that Jeff Faiso says, he's like, our passion, we don't choose our passions, our passions choose us. I think there's multiple, like my notes, myself on the margins, like, oh, he's compelled.

Starting point is 00:22:12 It's like, this is coming through him. Like, he has no choice. This is going to happen. But is there anybody in particular that you, like, really, like, honed in on and admired and tried to emulate in some way? I always think you can learn from just about anybody, whether they succeeded or failed. And so I tried to just understand, you know, as many people as I could that were entrepreneurs, that were starting businesses, how did they struggle, what worked, what didn't work. and those were always the compelling and interesting stories. When you were at 15, you met, you were, I think, at some kind of conference with,

Starting point is 00:22:54 and this is the first time you were in the presence of Steve Jobs. I think Steve was like 25 at the time. So was he somebody, like when you saw him at 15 and you saw, okay, wait, this is a young kid in his 20s building a computer company. Was that a model for you? Or like, what was your interpretation of like that experience? I guess what I'm trying to get at. Yeah. So, you know, in the early days of the computer industry, you know, as I knew it,

Starting point is 00:23:22 the microprocessor-based computer industry, you know, Apple was a leading company. And Steve was obviously this sort of legendary figure. So I was in this Apple user group, which was a bunch of, you know, geeky people who would like get together and you don't say. Exactly. and, you know, sort of compare, you know, how they had souped up their computers and software they had written and learned from each other. And so, you know, Steve came to speak to our user group. And, yeah, I mean, he, you know, he was like using these incredible, you know, metaphors and they were like listening to him.

Starting point is 00:24:10 looking at what Apple's doing and going, wow, that's really cool. And, you know, you also started hearing about Bill Gates, you know, who's also about the same age as jobs. And, you know, they're both about 10 years older than I am. And you kind of look at them and go, well, okay, they did something cool. Maybe I've got a shot. Yeah. That's really cool.

Starting point is 00:24:36 There was something you mentioned to me when we had dinner. that has been rattling around in my head. And I think it's probably the reason that I couldn't sleep. And I don't even think it was like explicit advice. I think you were just making an observation. But you said something along the lines that, you know, you've seen countless different companies and entrepreneurs come and go over, you know, four decades, four plus decades.

Starting point is 00:25:00 And you said something that terrified me, unintentionally, that most of the entrepreneurs and founders that you've known were never taken out by competition, that they sabotaged themselves. Can you say a little bit about that? Yeah, I mean, I think you could make the argument that they made mistakes along the way that were fatal and ultimately, you know, the companies didn't succeed.

Starting point is 00:25:35 But it's all of their own doing, right? you have to make the right choices in order to continue on and survive and ultimately thrive. What do you think are some of the causes of mistakes? You have obviously smart, talented, competitive people, right? Charlie Munger has this great line where it's like intelligent people are taken up by three things, ladies, liquor, and leverage. So like, have you seen any common, like, causes for somebody to sabotage themselves or to not live up to what they should have?

Starting point is 00:26:07 Charlie's right about those three things. You know, we stay away from those. Yeah. I sort of go back to understanding things and curiosity, and it's like you've got to know why something is working or not working. And if you're in the middle of a super competitive endeavor, and you don't really completely understand what's going on, well, you're going to make mistakes, right?

Starting point is 00:26:41 And so, you know, when I look at the competitors that are no longer around, yeah, they, they, you know, had either overzealously expanded or made, you know, design errors or they fail to understand the competitive landscape. I mean, there's lots of ways to fail, right? You have a great example of one in the book with Adam Osborne, where he had a very successful. I think the Osborne one was well-to-le-le-leased successful, right? Yeah.

Starting point is 00:27:22 Okay. And he's like, all right, now we're coming out with Osborne, too, it's even new and improved, and it's great. And you make the point. It's just like, yeah, maybe, but it didn't ship in time. And so now you just made this big announcement. We're like, we have this great new product. It's even better than one.

Starting point is 00:27:36 What are you telling to the market? The Osborne effect. I don't think people talk about it so much anymore. But back then, the Osborne effect was a thing where you introduce a new product that's better than your first product and nobody buys your first product anymore and you're out of business. And so, you know, yeah, don't want to do that. So go make some mistakes nobody's ever made before. Try to make them in small.

Starting point is 00:28:01 increments, fix your mistakes as fast as you find them. And you actually want to make mistakes. You just want to make them small and, you know, iterate and fix them quickly. I mean, one of the things when you're when you're creating a new business in an area that has never been done or with some new technology, new business model, there's no playbook. There's no like book you can read. It says, here's how you do it, right? And if you hire the people from the adjacent industry companies and ask them to go do it, well, they're just going to go do what they were doing before, right? And so that's not going to work. So you need a lot of creativity and you need to sort of intuit your way to the answer by experimenting. It's like, okay, here's a theory that we think will work. Let's try it.

Starting point is 00:28:59 Right. And, you know, does it work? Great. Okay, let's do 2x that. Okay, let's do 10x, let's do 100x that. Doesn't work? Okay, let's stop, you know, restart, come up with another theory and just keep experimenting until you find the answer. You're kind of going through that now. In fact, I want to read something that you said that was one of the most interesting things. You said it on a podcast, and you made this essentially talked to your entire company, and you said, I'm just going to 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 going to be faster, more efficient and more capable. And they're going to put us out of business. And the only way that we're going to prevent that is we are going to become that company. It's gut-wrenching stuff to reinvent and reimagine your business. But if you don't do it, you go out of business.

Starting point is 00:29:56 Yeah, exactly. So, you know, when ChatGPT came out in November of 22, or so looking at this and going, wow, this is a big deal. This is pretty interesting. And you started to see the rate of improvement in the LLMs. And you, you know, in technology, you can, you can sort of look at the rate of improvement and the learning curve and you can sort of plot, well, where's this thing going, right? We're just going to be in a year, two years or three years. And you look at, okay, we're going to have agents and multi-agent systems, and we're going to be able to reason over incredible amounts of information. Well, what does that actually mean for the way knowledge work gets done and the tools that humans are going to have? So you think about that, you go, wow, this is a big, big deal here. we need to totally reset how we're thinking about the business and reimagine it, reframe it, and understand what the processes are going to look like in five years. And so you do all that and you say, if we keep doing what we were doing before,

Starting point is 00:31:13 we're going to be in serious trouble because some new company is going to come along and, yeah, they're going to have all these new tools. they're not going to have this legacy of crap from the past, right, and old ways of doing things. And they're just going to do it the new way. And so we have to change or we're going to go out of business. You know, I also believe in this idea that if you don't have a crisis, make one, right?

Starting point is 00:31:48 You get people excited, motivated, and to drive the necessary change. I mean, in one sense, this is not a technology problem. The technology is there whether you use it or not. It's a question of how do you organize the team and people to actually go and get this thing done? How do you motivate them? How do you give them the right tools? how do you structure the ways people work together so that you can do it quickly.

Starting point is 00:32:27 And it's very hard for people to, you know, if you've been doing something for 10 years or 20 years or 30 years, the same way. And all of a sudden it's like some new thing comes along. You're like, no, I don't want to do that. People don't like to change. But you have to. And so that's what we've been doing. Yeah, this is excessively rare. I mean, think about the story in the book where I think the line that I summarized

Starting point is 00:32:51 what you were saying about IBM is like, yeah, the personal computer is, you know, fine, it's going to 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, you know, something that's occurring over multiple decades. It's like companies and people cannot evision a future that's different from the present that they succeeded it. So they just kind of like dismiss it or kind of ignore it. I'm trying to think, though, like, so you just said, okay, there's no books.

Starting point is 00:33:15 Like, what you guys are doing right now at Dell, right? You can't just like, you're on the cutting edge. There's no books you can read about it. But you have served how many different technological revolutions you did the microprocessor, right? Microcomputer, sorry, the personal computer. Then, obviously, the Internet was invented. Client server technology a little bit before you were. How many?

Starting point is 00:33:39 So, like, I got four or five. How many have you successfully navigated and had to reinvent Dell over and over again? How many of these, like, huge shifts do you think you've now... Yeah, there's probably been six or seven of them. 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 going on this one, but we fixed... Right, right. You're not going to be perfect over that many decades.

Starting point is 00:34:02 But do you see, like, is there like an echo between all of these, like, that you can apply, like certain ideas you can take away in, like, form or structure? It was like, oh, that's kind of similar to what we had to do when we had to reinvent for X. Yeah, there are. although the time frames that these things occur tend to be shrinking. I would say more about that. So if you think about the Internet, you know, when, you know, first you had the Internet, they had the World Wide Web, right, and websites started popping up in the mid-90s.

Starting point is 00:34:33 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 going on. in the late 90s and early 2000s, but it really didn't, it took a long, long time. So now maybe it's like five to ten times faster, if you look at the growth in the usage of these tools. And part of it is that each successive wave of technological improvement is built on the prior foundations,

Starting point is 00:35:13 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. I think you have to have this idea in your head that any new thing has some chance of succeeding, right? Say more about that. So there's a lot of wild ideas out there. And if you dismiss them all, you're going to miss them. some things. So you kind of have to hold this idea in your head that any of these wild ideas has a chance of succeeding. And let's sort of understand what do all these things mean and figure out

Starting point is 00:36:03 what is the point of intersection, right? You know, what should we be doing about this? And when when is it actually relevant, interesting, valuable, and it sort of hits escape velocity? And if you're sort of stuck in a particular paradigm or you're like dismissing things, you're going to miss them. Yeah. And so, you know, you need to be open-minded enough to consider all possibilities. But your ability to do that is so counter to human nature because we're habitual, like, we're habitual creatures. You know, it's like, oh, I found what I want or I found, like, what I like to do and like this is the best. You know, like, if you look at like what music people listen to, for example, it's like music you listen to when you're like high school and college and maybe you've added a couple of like, you're kind of like just stuck on that where 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.

Starting point is 00:37:08 Yeah, I love the stuff. But how do you not squash new ideas? Like you just said, like, you know, there's a great idea. It's like any idea can work now. Everybody's connected and they can grow faster you can possibly imagine. So how do you like, do you have a process for like, how do you not, you know, new ideas are fragile? And, you know, they need some kind of protection and some time to grow. Like, but most people just like kind of snuff them out or dismiss them immediately.

Starting point is 00:37:33 Well, you know, sometimes it's a good idea. but it's the wrong time. Sometimes it's a good idea, but it's the wrong company. Sometimes it's just a bad idea, right? And so, but there's no absolutes here. You just have to be open-minded and consider the possibility that things are changing fast enough that some new thing comes along. if you took the top computer scientists, you know, and researchers in AI or just broadly, you know, five years ago, and you said, okay, you know, this is what's going to happen with LLMs in the next five years, probably 99 out of 100 would say, no, no, that's not going to happen.

Starting point is 00:38:27 Right. And so that's a pretty good example in contemporary period, you know, where you just need to be open to the possibility that things are going to change. And there's also this thing where about every 10 years or so, something comes along and just completely expands the opportunity set for the industry. and that's part of the fun, the excitement, the super interesting aspect of what we get to do every day. The best leaders in business are able to spot patterns, but you can't spot patterns if you can't see your data. And most businesses are only using 20% of their data because 80% of your customer intelligence is invisible, hidden in emails, transcripts, and conversations. Unless you have HubSpot. HubSpot is where all of your data comes together so you can see the patterns that matter. because when you know more, you grow more, and that is a pattern that never fails.

Starting point is 00:39:30 Visit HubSpot.com today. That is HubSpot.com. I just had a thought listening to speak tied to something else that you said earlier. It's like basically humans' inability to have accurate predictive predictions about the future. It's kind of tied to the importance of iterating and make sure you're doing a lot of experiments and then having that tight feedback loop to constantly get information. Oh, that didn't work. Okay, we ran an experiment didn't work.

Starting point is 00:39:55 Let's try it a different way. Like, those two things work really well together. It's like we're not going to predict the future. We're going to create the future through iteration. Yeah. And, you know, it's okay to try to predict it as well. It's just really hard to do. And, you know, you might want to have a lot of experiments.

Starting point is 00:40:14 I mean, if you go back and say, okay, let's say you had somebody who was supposed to be really smart or supposed to be an expert or something, right? 10 years ago, how good were they predicting what was going to happen? Not very good. No, terrible. So don't rely too much on that, right? This is why I think entrepreneurs have to, like, study past entrepreneurs, too. And it's, like, obviously very valuable.

Starting point is 00:40:41 Like, it's no surprise that, like, you were reading about these people. Like, what I would say is, like, the greats all studied the greats. It was, like, very – they were doing it today. They were doing it 40 years ago. They were doing it 200 years ago. If you took like an average person in normal society and the way they think about experts, okay, and the way it's discussed in all these biographies, it's like they're very dismissive experts, right? I just mentioned I was reading James Dyson's autobiography. You know, the whole thing

Starting point is 00:41:06 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 and see how it goes. And he mentions setting Henry Ford a lot in the book. And then James Dyson wrote an autobiography 30 years after that, that he also mentions Henry Ford-a-Lotta. And the reason I thought of that is because, as you were speaking about, you know, you go and ask an expert from 10 years ago, what's going to happen? Like, they're not going to tell you that chat GPT is absolutely, you know, that my 13-year-old, I use chat-chipate all time, but I'm a nerd.

Starting point is 00:41:37 I like to research stuff. I like to read about stuff. She uses like a therapist, a shopper, a friend. Like, it's an entire ecosystem of them. There's no way you can, you can predict that. So there's a great line in Henry Ford's autobiography, which was written 100,000, 20 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

Starting point is 00:42:00 ranks with experts. Experts tend to know so much, and they're so convinced that they're right, they'd get no work done. Yeah, at the limit, nobody knows anything, right? And it's not a bad philosophy when you're thinking about the future. It's good to have a hypothesis, though, right? And ideas and experiments and to keep it open mind. So what was when we go back to that, hey, they're coming for us. They're going to be faster, more efficient, more capable, and they're going to put us out of business. And we're not going to let that happen because we're going to transform.

Starting point is 00:42:39 We are going to be that business. Right. What was your hypothesis back then? Do you remember? Oh, it's pretty simple. It's that it will be possible to dramatically improve. the way we do things in all the core processes of the business, from software development to support, to sales,

Starting point is 00:43:00 to every major function, our supply chain. Everything can be improved in a dramatic way. And that's what we're doing. And we're finding, you know, as we take our data, as we reimagine the processes and simplify and standardize them, we can make them way more effective. So, you know, an example would be in support. We have incredible amounts of data.

Starting point is 00:43:32 We have telemetry data that the machines are giving us all the time, right? About, you know, soft errors and all these things that are going on, you know, inside the usage patterns from customers. We have warranty data. you know, we have previous call logs. We have all these knowledge bases. We have GERA databases. It's like millions and millions of documents. No human could ever interpret all this.

Starting point is 00:43:59 So we created this tool called Next Best Action, which takes all this data and understands what problem the customer is trying to solve, and it helps either the customer or the agent that's trying to help the customer, get to exactly the best way to solve that problem in the fewest possible steps. And so the person helping them feels like, wow, I'm way better at my job than I used to be because now I got this genius on my shoulders telling me exactly how to solve this problem. The customer's way happier, the problem solved way faster, and the tool summarizes the call. So that saves a ton of time.

Starting point is 00:44:43 And so everything gets way better. So you can take that same example and, you know, software development with coding assistance. Our sales teams have access to incredible tools. And so we're doing this all over our business. And, of course, our customers are doing it. And what is this doing? It's unlocking the power of data using compute and using all these models, which also happens to be, you know, we're in the business of compute and storage and networking. So it's an enormous opportunity for Dell itself

Starting point is 00:45:19 to be able to help all of our customers unlock the power of their data. You couldn't predict like the actual tools that were going to be invented. You just knew that now we have this new, there's this new technology that it will transform every single process inside the business. We won't be able to predict 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 finished. All right.

Starting point is 00:45:47 And so we're not going to do that. And, you know, even if we did it and our competitors did it, let's say it just neutralizes, you have to do it. Do you have no choice? Yeah, there's a line in Andrew Carnegie's biography. It was really fascinating because, you know, he dabbled on a bunch of different businesses. He was pretty wealthy before he started the steel company. But once he realized that, you know, think about how important steel. was at that time. It's like everything, this is the new product that everything else,

Starting point is 00:46:18 every other product is going to be made out of, uh, from bridges to roads and everything else. Like this is the biggest opportunity of my life. I'm going to go all in on it to the point where he didn't even want any distractions. He sold all of the stocks because he didn't want to find himself looking at the newspaper, wondering like what the price of stock was. Like fully focused on the greatest opportunity of my entire life. He went into an existing business that was run by older gentlemen, right? He had this new way to do steel. I think it's Bessemer steel that he got from England. So he took an idea from England. imported into America, which it's kind of weird how often that is in the history of entrepreneurship,

Starting point is 00:46:49 where it's like, oh, this idea is working in one geography, will work over there? It's like, yeah, because humans are kind of the same everywhere. There's some cultural differences, but, you know, our core motivations are, you know, very similar. And they were very resistant to change, so they're like, no, that's not the best process. And then they would ridicule him for investing in the newest technology. He was spending a ton of money. Every time there's a better machine, a more efficient machine, he would immediately rip out the old machine and input and put in the new technology of his day. We wouldn't think about his technology today. It's definitely technology back then. And when you read his autobiography, which, you know, in the public domain,

Starting point is 00:47:29 anybody could read you for free. It's an incredible gift to humanity. I remember getting to this part of the biography, which is exactly what you just says. It's like, okay, even if this doesn't give us advantage over our competitors, if we don't do it, like, they will have the advantage. So even if we're on, like, on the same level. And the summary of what Andrew Carnegie was saying, these guys wind up not adopting the technology, and they went out of business. So he says, invest in, this is not direct quote. This is me summarizing his idea. He says invest in technology, the savings compound. It can make the, it gives you an advantage over your store moving competitors, and it can be the difference between a profit and it lost. If he didn't do that,

Starting point is 00:48:06 the investment into the new technology that his competitors were dismissing the stupid young kid with his fancy machine, right? That wind. end up making his company profitable in a year or two and their company unprofitable. And then slowly and slowly, they just 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 also. The maxim I have from this I use on the podcast all the time is that bad boys move in silence.

Starting point is 00:48:34 And so you mentioned earlier that there's no, sometimes there's no book. You're on the cutting edge. And so I remember there's this great line in this biography of Steve called Becoming Steve Jobs. which I actually think is the best biography written about him. And Steve's like, I don't even know what the business model of animation is. And they start partnering with Disney. And he has this great line. He goes, you can't go to the library and check out a book called the business model of animation.

Starting point is 00:48:59 This is 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 this hilarious that your son, Zach, wanted me to ask about, was what he calls Dad Terminal. Yeah, so Dad Terminal is what he refers to as when he kind of taps in and, you know, wants to talk about a particular topic or has a question. And it's one of my favorite times with Zach, you know, because, you know, we're talking about solving problems or challenges inside his business. and, you know, I get to share the mistakes I made, mistakes I saw other people make, lessons learned, and hopefully save him some pain and suffering and, you know, steps from, you know,

Starting point is 00:50:01 learnings along the way. Yeah, he says, instead of typing in the re, I was like, why is it called? I was like, why is it called Dat Terminal? I didn't understand what that was. And he's like, well, Bloomberg Terminal. He's like, you know. Exactly. Yeah.

Starting point is 00:50:16 Yeah. He's like, you subscribe, you log in and you have a question. And then like, you type in and you get this really advanced answer. He's like, I don't use Bloomberg. I use my God. I use that terminal. Yeah. And I was like, give me an example.

Starting point is 00:50:29 Like, what is the last query into that 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. He's like, there's a handful of things.

Starting point is 00:50:41 things. I have a handful. He's like, there's a bunch of things. My dad is world-class at, and he's just like, one of them is supply chain. And I'm curious as like why you think why other people describe you is really good at that. Is that supply chain just related back to how we started this discussion? It's just like another puzzle for you to, like, direct your curiosity to? It's definitely an important puzzle and a critical puzzle. I mean, I think if we had not figured out how to do our supply chain well, we would not be here today. It's as simple as that. So it's a fundamental thing that is just super important in our business.

Starting point is 00:51:28 So it's just you've thought more about this area over? And made a ton of mistakes and learned a ton of lessons. and sort of, you know, 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 don't like these. Your whole thing is eliminating middlemen and, like, getting as close to the source as possible. And I think you're like 90, it might be 20 years old at time, but you're taking your first trip to China, if I'm not mistaken.

Starting point is 00:52:03 Well, so that would have been 1985. It really wasn't, you couldn't really go. into mainland China at that point, there was nothing really to do there. They weren't making anything. So you were going to Asia? You were going to Asia. So yeah, I went to Japan, Hong Kong, Taiwan, and South Korea. Yeah, but what I love is just like how excited you were.

Starting point is 00:52:29 Oh, yeah. Because it's like, it's something you said earlier. It's like you got a deep love for your business and then now you get to keep peeling back the onion and getting closer and closer to how it's like, now it's like, you said, it's like, it's something you said earlier. It's like, oh, I'm like spending 16 hours a day. I'm sleeping in my office. I'm working. We have customers.

Starting point is 00:52:44 We have hiring employees. We have revenue growth. But now I'm getting like deeper and deeper, deeper, deeper understanding. And like, so as I read these biographies of people, I try to like build like, you know, I think I have a good sense of like how you think and like what's important to you. And what I realize is like that instinct that you had as a 20 year old man or however old you were at that time. It's like that has not, it's never been in leaving. It's just like this constant, like, keep going lower and lower and lower to, like, seek more, a deeper understanding of, like, the world around you, but also how your business, like, fits in that world and how you can build technology to, like, enhance everybody else around you. Yeah, of course. I mean, that's what you're supposed to do, right? You're supposed to understand things, right?

Starting point is 00:53:28 You say, of course, like, this is the fun. This is another thing I told you when we had dinner. Like, how else would you do it? I don't know. But to you, this is why I think, like, writing the book and having a conversation, like this is important because, like, there's so much shit in your head that is so unusual. And, like, like, just, it's so valuable, like, getting it out and putting it, like, out into the world. Because I remember, like. I wouldn't know any other way to do it. I know.

Starting point is 00:53:52 Because you don't understand how, how abnormal you are. So we were halfway through our dinner, I looked at you. And I was like, dude, I have this paradox in my head that I cannot reconcile between, like, the crazy career that you've had. It's like I study uncommon people for living. You are uncommon amongst uncommon people, right? You have this, so the paradox I couldn't recognize out was between this crazy ride that you had

Starting point is 00:54:17 that's described beautifully in your book, this four-decade, you know, mission that you've been on that you've relentlessly given a lot of your life energy to. And just how normal you are. Like, you're not, I'm talking about like your affectation, your personality, like you're very polite and calm and measured. But it's just like,

Starting point is 00:54:37 do you understand how rare this is? No. I know. Because you're like, of course you. It's like, this is what I love. It's like, just wake up every day and go do the thing. This is why you're great.

Starting point is 00:54:49 But that's why you're great. So like, he's pretty normal to me. There's nobody that reads this book. Like, this guy's normal. No, it's not at all. So there's what I love about this. And this is why it's so important because, and I mentioned this one,

Starting point is 00:55:04 episode I made on you, but there's this engineer turned and turned founder, Sidney Harmon. You know the company Harmon Cardin? Sure. 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 creation from the creator. And I think over time, like the... I resemble that.

Starting point is 00:55:30 God damn right, you do. This is also, again, how I'm not. I used to say it's like you need to build a business as authentic to you. And then in this book, Lee was, you know, talking about he was only able to last four years, I think. And he's just like, you know, we're fighting IBM. We don't have any money. And he's like, my back's hurting.

Starting point is 00:55:50 I'm losing my hair. Like, I can't sleep. And he's just like, Michael's ecstatic. He's like tap dancing to the office every day. And he said a line that changed, like really made me think about things. He's like he built a business as was natural to him. Of course, it's not abnormal to you because you built a business as natural to you. Yeah, and if you've been doing it every day for 41 years, it seems pretty normal, right?

Starting point is 00:56:17 On the last episode during my conversation with Daniel Eck, he said one of the most important ideas that I've heard. He said, I'm not obsessed about time. I'm obsessed about energy management. If you have time, but you have no energy, you're not going to accomplish anything anyway. I signed up for Function long before they were a sponsor of this podcast, and when you sign up, they ask you what your health goals are, and my response, in all caps, was maximum energy. All of the founders, CEOs, and Extreme Winners I have studied have excessively high energy levels. If you're going to be the best of what you do, you need to maximize your energy and output, and that is why I've partnered with Function. Function provides access to comprehensive blood tests and other lab testing to help you improve your health so you can perform at your heart.

Starting point is 00:57:02 highest level. Function has made it easy for me to monitor and improve my internal health markers so that I feel at my absolute strongest. As a member of function, you get access to test over 100 of your biomarkers, from hormones to toxins to markers of heart health, inflammation, and stress. Function gives you a straightforward analysis of all your results, along with advice from expert doctors on how to improve things like your testosterone, your stress hormones, how to reduce toxins in your body, and much more. The platform is absolutely beautiful and provides an easy to understand picture of your overall health. Once you try function, you'll immediately understand why it's the fastest growing health

Starting point is 00:57:38 platform in the country. To learn more about function and to join, go to functionhealth.com forward slash senra. Right now, function is offering $100 credit to the first thousand people who sign up for a function membership to get this $100 credit. Just visit functionhealth.com forward slash centra. Again, that's functionhealth.com forward slash centera. Lee Walker, tell me how important, like, that was finding a person, because you were relatively persistent in recruiting him.

Starting point is 00:58:06 And you were, like, 21, I think, at the time. 21, yeah. And he was 45 or something like that. Yeah. Like, what's the role that you feel he played at that point in Dale's history? Well, yeah, the company was, was, I mean, it's like our rocket had sort of taken off, but, you know, it was pretty fragile. Right. And, you know, we had some good ideas, but there was a lot of missing pieces. And Lee helped fill in those missing pieces and, you know, sort of organize the uncontrolled chaos and helped us sort of really, you know, scale up the business. In like operations?

Starting point is 00:58:53 Like, what do you think? Yeah, I mean, it was, well, well, first of all, we were growing so fast. We just, we just didn't have the balance sheet or the capital to support our growth. And so he helped us, you know, get some credit lines and, you know, that, that, you know, freed up capital. And then, like, you know, sort of organized some, you know, some of the operations and stuff I didn't really. know about or have a great interest in, you know, because it wasn't the technology or, or, uh, the customers. Yeah.

Starting point is 00:59:32 And so he helped sort of get all that stuff on the right path. And then as we, as we needed even more capital, you know, with a private placement and going public, you know, he helped help sort of get all that going and, you know, just basically, how do you, how do you scale this thing up to get. get it ready for 10x or 100x growth. One thing that was very fascinating that Lee Walker said, right, is you got to the point where, you know, you had that negative cash conversion cycle where, but you were selling to like individuals.

Starting point is 01:00:05 So individuals are like, oh, I want a computer, Michael. Okay. Give me your credit card. You got great, I got this money, which we'll talk about 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. And I remember one point in the book, it was something you were doing like $60 million a year in revenue.

Starting point is 01:00:22 200 grand in your bank accounts. There's just no cash there. And what was smart is he went to the banks. And I was curious, it sounds like he had relationships with the bankers. And I always have this maximum that relationships run. He did. Okay. So relationships run the world.

Starting point is 01:00:38 You see that over and over again. And so Lee had relationships with these bankers that I assumed in the book. And you just verified. But then what I thought he did was really smart. They're like, listen, we trust you, Lee, but we don't know this kid. And his whole point is like, you don't have to even trust me or the kid. He's like, look at all the purchase orders. Like, do you think Texaco is going to pay us or not?

Starting point is 01:00:59 And using the, like, the brand and the prestige and the, you know, essentially the value, like, Texco's not going out of business. They're going to 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 was a receivable-based financing. Yeah. The problem was that, you know, as a 21-year-old starting a business with really no capital infusion from the beginning, $1,000, right?

Starting point is 01:01:34 Yeah. You know, a banker looking at it with no one known inside the business to trust, would sort of their general action 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 sort of break open that logjam. And that, you know, gave us some of the capital we needed to continue to grow and expand.

Starting point is 01:02:05 So can you explain how you stumbled upon the negative cash conversion cycle and why that was so powerful? Yeah. So, you know, we didn't have any capital, right? And so, you know, what we figured out was that if we could dramatically shrink our inventory and get paid from our customers faster and, you know, maybe not pay our suppliers, you know, instantly, pay them a little bit later, then if you're growing and you have a negative cash conversion cycle, you actually generate a lot of cash. And so you don't need as much capital to raise to be able to grow the company. You have a high return on capital. So we started looking at the business that way.

Starting point is 01:02:57 And, of course, we also, there was this really interesting thing where our competitors who didn't really understand what we were doing, they had these elongated supply chains. They had distributors and dealers. and so they would have, you know, like 90 days of collective inventory from the time that they actually made the product to when it actually got to the customer. And you could actually understand this because if you opened up the computers,

Starting point is 01:03:30 the chips had dates on them that showed the weeks they were made. Whoa. So, you know, it would say like 42-92. and that meant that chip was built in the 42nd week of the 92nd year. And so you could literally date how old the inventory was by opening these things up. But anyway, so they had like 90 days in their collective supply chain. And we figured out how to have like five days. I mean, it was crazy.

Starting point is 01:04:06 It was like a massive advantage. Now, the other reason this is important is because it turns out that the price of electronic components generally goes down, right? And, you know, it's a pretty predictable thing. And so if our components are five days old and the competitor's components are 90 days old, well, theirs costs a lot more than ours do, right? And so now you've got this structural competitive advantage. Now, another element of this is that you also have the freshest and the newest and the best technology.

Starting point is 01:04:48 You're not selling the 90-day-old fish or bananas. You're selling the new chip, the latest capability. And so now you've got even another advantage, right? And then you've got this feedback loop because you're getting signal from the customer. of, oh, I like this, I want that, change this. And so you're able to, you know, create this dynamic feedback loop. So that was what we created and it worked, you know, and we kept iterating it and evolving it. The competitors, you know, they, they kind of dismissed it.

Starting point is 01:05:30 And one of the best things was they just didn't understand it. They, like, misunderstood it, which was fantastic. How is that? So I don't. It's like you don't want them to understand what's going on. You don't want to explain it. But how do you explain their inability to it? Now you can explain it.

Starting point is 01:05:52 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. So I have a funny story about this. And then I want to get back to Compact and IBM. So I had dinner with one of the wealthiest people in the world. He's 76 years old. He's been in the family business.

Starting point is 01:06:10 He's the second generation of this privately held dynasty. And he started working the business since he was six. And it was like crazy stories. It started on the shipping, they own one of the largest privately held shipping companies in the world. And he's this rackintore. He's like super charismatic and just like, it was an incredible dinner. But I had found out the same reason when you were like, hey, I'm writing. this book because I want, you know, people that come to Dell to understand the history.

Starting point is 01:06:37 They had commissioned, the family had commissioned, a real author, right? I have some of these books in my house, not from this guy, where these family businesses or, you know, these people at brokerage companies, they have, they'll hire, you know, an actual author, pay them whatever, a million dollars, write the book, and then they'll print it just like this, but there'll be no ISBN number on the back because it's not available for sale. So I have a couple of these in my home library that people have given me because of the podcast. But he was telling me the story. It's like, yeah, we commissioned a biography of the Patriarch who passed away a long time ago, and then we did one for me.

Starting point is 01:07:07 And I was just like, dude, give me those books. I leaned in. I was like, I want those books. I was like, I'll crush the episodes. Episodes would be great because he had so many crazy stories. Without hesitation, he goes, absolutely not. I was like, why? He goes, I have no desire to educate my competitors.

Starting point is 01:07:25 Yeah. So that you just nailed it. It's like, obviously, if you have an edge, shut up about it. This is what I don't understand. So maybe IBM and Compaq are the two people, two main companies that are not understanding the advantage that you had at this time, right? IBM is a big old Saugia company. Okay, that makes somewhat more sense. Compact was run by its founder.

Starting point is 01:07:45 How do you think he deliberately misunderstood? Like, how is that possible for him to not be able to accurately analyze? Do you think he was just dismissively? You didn't think he were a threat? Like, what was going on there? He's still alive. You can go ask him. You know, I, you know, I think, I think when you're, you know, you're in a bubble, you know, people tell you things are working and maybe you just don't want to believe that there's alternate information.

Starting point is 01:08:13 And so you dismiss it. Did you read the new biography of Jensen Wong called in a video? Actually, it's a history of it, NVIDIA, but he's heavily featured in video way? I haven't read the whole thing. Okay. No. I did an episode on it. I'll send it to you.

Starting point is 01:08:26 Yeah. But he has this whole thing where the threat comes from below. And his, I think he reduces everything to maxims. He's like a really good communicator. And so he's saying he's like, we're going to ship the whole cow because the threat goes from below. And I think I mentioned this in the episode I did on your book where it's just like you at the time came out with a, you just beautifully described. Like you're just stacking one advantage on another advantage on another advantage. They're like, okay, we have the latest technology.

Starting point is 01:08:55 We have way better supply chain management than you. We are putting out, I think you put out a computer that outperformed compacts, which you sold direct to the consumer for $795, if you remember correctly. It was faster than theirs, and they sold a worst computer for $1,500, and it was only through retail stores. It's like that exact, the manifestation of all these advantages you had, you could just look at the market and be like, it's very curious to me how this founder could be like, hey.

Starting point is 01:09:24 Yeah. And you kind of hope that they don't even see it. Yeah. I mean, I think there's a human instinct to say, hey, look at me. I'm doing this great thing. Isn't this cool? All right? But actually, in business, it's better if the competitor doesn't understand or doesn't see you.

Starting point is 01:09:42 So because you weren't in stores, the only way they would know that is if they were ordering directly from you. And they probably weren't doing that. Yeah. Or if they were sort of paying attention. but you kind of hope they don't notice and don't pay attention. I think this is tied back to the importance of following like your natural star and something you're just obsessed with because I didn't know that part where you take these things and see, oh, this is the 42nd week of the 96th year.

Starting point is 01:10:09 That's insane. There's a line in the book, though. It's not that hard. The numbers are right there. It's not that hard to you. The numbers are just sitting there. It's like they're just staring at you. They're talking to you.

Starting point is 01:10:19 I 100% agree with you. It's like, but this is different between somebody that's a, obsessed and somebody's not. Like, that guy wasn't taking apart computers compulsively. There's a story in the book. And no disrespect to him. I'm not trying to throw any shade anybody. There's a story in the book where you guys are doing, I think, the private place

Starting point is 01:10:36 one of the IPO and it is Black Friday happens. And I think Lee Walker walks in your office to tell you that, oh, shit, there may be some trouble. There's trouble of brewing in the capital markets at this point. And he said, Michael was in his office. taking apart another computer. That's what you do. That's what you do.

Starting point is 01:10:58 Exactly. I think that's the biggest thing, man. It's like it's an unfair advantage if you can direct your energy at something that you, there's no, we talked about this dinner. We have a mutual friend and Sam Hinky. And one of the things that's interesting about Sam

Starting point is 01:11:11 is if you analyze who he keeps around him, they have different interests, you know. It's like this podcaster dude, this investor guy, this entrepreneur, this athlete. And he's like, what what what I'm drawn to what all these people have in common that may not be obvious to you David is that there's no end to like you can't get to the end of what they're interested in he

Starting point is 01:11:31 you think you use the analogy of like a cup because you just pour and pour and pour and it's like it just keeps going like they can never get to the end of their curiosity and I think you're a perfect example of that where if you look at other founders that are doing things for fame or status or whatever the case is it's like jerry sign follows a great line he goes if you just just do it for the money, you're only going to go so far. Yeah, when it's like a passion or an obsession, there's, there's, you just, there's no end to it. Yeah, and you're taking the work chips and analyzing like, oh, I have a 90-day advantage over here. And I'm not worried about the capital markets because we're just going to keep serving our customers.

Starting point is 01:12:09 And like, eventually that is going to change. It's not going to be a depression forever. So what can I focus on? I can just focus on understanding what I'm working on what's in front of me and then following this deep curiosity, you know, and actually take. making the curiosity that comes from your head into like an actual product that makes somebody else's life better. It's like the miracle of entrepreneurship. You got it. So we were just talking about the fact that compact and IBM, they were almost like essentially you got fuel from being underestimated.

Starting point is 01:12:43 You've mentioned in the book that like you found it. I think you said something that's like a powerful motivating force. Do you recall why you felt that way? You know, it was it was just like, okay, wow, this is going to be a multiplier for us because they underestimate us. They don't understand what we're doing. And so they didn't see us coming because they were underestimating us. I think the CEO of Compact would refer to us as a mail order company or, or garage operation or whatever, you know, and you'd hear that and you'd go, oh, wow, this is,

Starting point is 01:13:28 this is great. I have no idea what we're doing. All that was motivating. You know, anytime, you know, there was sort of a setback and the conventional wisdom or even whatever interpretation was, okay, you know, they're going to fail, they're going to go out of business, all that incredibly motivating. Is it still like that today? Of course.

Starting point is 01:13:55 Yeah. Yeah, absolutely. I love that everything is, of course, and of course it is. Yeah. I mean, if it wasn't, I'd probably probably be dead. I mean, I'm still caring about the company, even from the grave. It's a common, I think, misconception. I'm curious to get your take on this, where people are like, well, you know,

Starting point is 01:14:18 if you don't raise all the money at the beginning and your competitor does, like you're automatically dead. And I hear that a lot. And I was like, I don't know, like Compact raised 75, 100 million, and you had $1,000 in a dorm room. Do you feel that like it is actually different today? Like if you were advising like a younger entrepreneur? I think it's very situation-specific

Starting point is 01:14:43 in terms of the company, industry, et cetera. So I don't think you could give generic. Yeah. advice there. Yeah, that's where I think, like, the generic advice is you have to do this or you're dead. I'm like I'm pretty sure that's not the case. I don't think, you know, like I was saying earlier, I don't think there are ever these absolutes.

Starting point is 01:15:04 I think you always have to hold out the possibility that somebody is going to figure out some clever, interesting way to do something that nobody's ever thought of that is different and, you know, that's just going to happen, right? Yeah, that's actually an interesting. area to go down where it's like who else you figured out by accident like because you know necessity is the mother of all mentions like I don't have capital so how do I get money well I just ask my customers for the money and then you you accidentally discovered all these advantages and had a deeper understanding as you went along there are any other examples of like entrepreneurs

Starting point is 01:15:42 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 I mean, you think about some of the retailers, you know, like Walmart and Costco and Amazon obviously came up with super clever ways of winning in that space by, you know, doing things inexpensively taking out all kinds of costs. Yeah. The other one that came to mind was Sam's a Murray, the Banana King. he essentially, you know, builds the second largest banana empire. And at the time, then later on, overtakes the first largest, which is a United Food Company. But I guess, like, one thing that he figured out, and he was actually your same age, he was 19 years old.

Starting point is 01:16:33 He had no money. And he was trying to figure out a product to sell. And so what he did, he's just like, well, I was working the docks down, I think, in Alabama at the time. And he's like, all these fruit companies, they have these things called Ripes, which are the bananas that are going to go bad in, like, two days from now. and they just take them off the boat and throw them in the garbage because they can't get it fast enough to the store. And his idea is like, well, I can use this new technology today,

Starting point is 01:16:54 which is the railroad. And I can buy this for almost nothing because they're not getting anything anyways. And I'm going to put their ripes and get on the railroad with it and then sell it at every single stop. And then he was generating so much cash and then he could start working down the line all the way to when he had his own banana plantations. Just like that idea.

Starting point is 01:17:12 It's like it starts out with like this little nugget of like, oh, this is like an interesting opportunity and not understanding as you pull and pull and pull, and it gets more and more, like, you keep stacking these advantages one on top of another. Yeah, I got to find, I should organize and look into like more examples of like, is there another example of like what you had at the beginning of Dell?

Starting point is 01:17:33 Because I think that's the key. Like I think some degree it's like the easier more path is just to go and like sell part of the company or raise more money or find essentially like, solve the problem with money, where you solved it with, like, creativity and hustle and, like, intelligence, those ideas are, like, excessively fascinating to me. IKEA is another one where he, you know, same thing, where he was just selling mail order. He's a mail order company. And he has a great line in...

Starting point is 01:18:03 Yeah, there's that mail order thing again. I know. I think it's, like, still... He has that great line where he's, like, expensive solutions to any problem or signs of mediocrity. So he was like, you have to be more creative. We had this whole thing in the 80s, and we called it beat the mail order stigma. Really? It was sort of like as we were establishing our brand, you know, sort of the conventional wisdom was a mail order company, which was sort of like a...

Starting point is 01:18:37 Pejorative. Like an insult. Yeah. Okay. It's like, okay, it's a mail order company. And it's sort of like a stereotype. It's like, oh, you can dismiss it because it's a mail order company, right? And all the press, you know, for years, they were like, mail order company Dell, you know,

Starting point is 01:18:56 mailwork company Dell introduces server, you know. It's like, what? What? It's like, okay, we have 30,000 patents. When are we not a mail order company? It's like, what is this mail order thing? So anyway, we had to like get rid of that. How did you beat it?

Starting point is 01:19:13 Just kept doing our thing, you know? And eventually people go, I guess it's not really mail. I mean, it's Internet and it's not mail order. I was like, nobody order stuff in the mail. What is it? I think you just may realize something that I didn't understand when I read the book when you were talking about how important it is to, like, not squash ideas and that, you know, ideas can come from anywhere and they can, like, you know,

Starting point is 01:19:37 they seem small to have a huge impact. I think Dell was like one of the first. companies to sell on the internet, right? Yeah, well, so we were selling direct, right? You know, like people would call us on the phone, and we used to have these rooms with like a gazillion fax machines, and they would send us their orders on faxes. It was crazy.

Starting point is 01:19:58 And we had catalogs, right? And so then, you know, the World Wide Web comes along, and websites, you know, like, oh, you mean, we can create a website, and people can go on there, and, like, the catalog is there, and they can like press a button order the thing, that's the coolest thing ever. We got to do that, right? And so in my first book, you notice on every page at the bottom

Starting point is 01:20:21 it said, www. I read that. I read that book too. We're just like obsessed with getting people to the website because it just became like the easy way to interact with people. And that book came on 97, right? I think 98. 98.

Starting point is 01:20:42 Yeah. Yeah, you were. But, yeah, we started, we started, you know, with one of the first websites. I mean, there weren't many websites. I remember when there, it was a small number. I remember when you could, like, go to all the websites, like, in the whole world. Yeah, I'm done for the day. Like, there's no more websites.

Starting point is 01:21:01 It sounds crazy now, but there used to be not that many websites. You could, like, go to them and like, okay, I'm done. There's nothing else to see. That obviously changed quickly. So how the hell do you even build a store? Like you were collecting, do they have to call a number in? Because I remember like taking credit cards online. Well, maybe not 90.

Starting point is 01:21:22 If you were doing, do you remember what year you launched the site? 97, probably, 96. I think it was probably 96. You had to build all this out. You had to build all this stuff custom. We had to build the whole thing. Okay. Yeah.

Starting point is 01:21:34 Yeah, it's funny. I forgot about the fact that Dell.com is on the bottom of every page. But what's fascinating is if you read Bezos's shareholder letters. He never refers to it as Amazon. Every single shareholder letter up until, you don't have to do it anymore, and then every single interview, it's Amazon.com, Amazon.com, Amazon. Then it turns it to Amazon. Because he's just like, we've got to push you guys to this new thing called the Internet

Starting point is 01:21:57 where you can buy things. It's such a fascinating thought, like how novel it was. But you kind of saw it right away, like, we should just do this because it's cool. We had experimented with how do you create an electronic version of the catalog, even like, we're going to send you a floppy disk or a CD-ROM, and you put it in your computer, and you load it up, and the catalog is there. Yeah. Right.

Starting point is 01:22:21 Those are some of the ridiculous things that happened before the Internet, before the World Wide Web. Did you ship that? Yeah, yeah, we did. So you just kind of like, remember AOL? They just, like, essentially carpet bomb the entire country. Yeah, we didn't do it like that. Okay. But ours was more targeted.

Starting point is 01:22:36 But, you know, you wanted to make it easy for the customer to understand your offerings. And then the World Wide Web just made that, you know, kind of infinitely accessible to anyone. The idea of just mailing out a floppy or a disc of a catalog is just like a hilarious idea. But then people were surprised when people started ordering computers online. And I remember, you know, we sold like a store. server for $50,000 online. People were like, no way. It was like, it didn't happen as fast as some of the things that are happening now. Yeah. But obviously for a business that was selling directly to businesses and, you know, individuals, you know, all of the world, it was just total rocket fuel.

Starting point is 01:23:26 How soon into Dell were you starting to sell, like, targeting institutions over individuals? You know, it's really interesting. If you go back to, at the very, very beginning, like the first full year, like over 80% of the business was to businesses. Okay, so it's sort of like doctors and dentists, right? Are lawyers or some of your first? But they were using it for business purposes. An individual doctor, Dennis, I would think of them as more like an individual.

Starting point is 01:23:58 But, well, first of all, let's level set here. So if you look at all technology spending, roughly 75 to 80% of it is businesses, not consumer. And so that's kind of been the thing for a long time. So within the first year, you got the same similar percentages? Similar percentage, yeah. You know, there were companies, universities. They were buying 5, 10, 10, 20, 50 machines at a time.

Starting point is 01:24:31 One final thing that I want to talk to you about that I think is like one of the most important ideas in your book, especially when you're trying to like push these stories down the generations. So I, like, I see it in a lot of the biographies, and I think it's like another misconception how we just talked about the misconception machine, like entrepreneurs know, be wary of experts and like how they can kill new ideas where like a normal person would revere them, right? So there's like this difference of understanding which is 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,

Starting point is 01:25:10 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 directly backwards. Belief comes before ability. And so I would go back to this part in your book that I think is super important when you're 19 years old and your dad's like, what do you want to do with your life? And you're like, I want to compete with IBM. And you sit there and like, again, I don't think you should be reading these books quickly.

Starting point is 01:25:35 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 when you realize, you say on that page where it's just like, was I a little full, you know, the idea is like I have $1,000 and in UT dorm room. I take on the biggest company in the world. And you said, was I a little full of myself at 19? Sure I was.

Starting point is 01:25:59 I think you have to be to do anything important. Can you explain that mindset? Yeah, I think it's a combination of naivete, right, which is an important element. It's like you don't know enough to know that maybe this won't work. Okay. And confidence, but you know, you never sort of want to go over into the area. because that's really, I think, a dangerous place to be. So it's like, okay, I did not been in this industry for a long time.

Starting point is 01:26:41 And so, you know, all these reasons why it won't work are unknown to me. Okay? So that's the naive part, right? And that can actually be sometimes a good thing, right? because you're not sort of bound by those conventional thinking that maybe you're no longer as relevant, or maybe you come up with some clever new way of doing it. And then, you know, the confidence piece is, all right, I'm going to go make it work. I'm going to go figure it out, right?

Starting point is 01:27:19 But, you know, there's always that little voice in your head. It's like, well, what if it doesn't work? And, you know, what about this? What about this? And so, you know, you never want to sort of assume, okay, this is absolutely going to work no matter what, then you're going to ignore those little voices about, well, what about this? What about this? I'm sorry.

Starting point is 01:27:43 So, yeah, it's sort of, I think a combination of naivete. being real here, and confidence. I think a perfect illustration of that would be your reluctance, initial reluctance, to name the company after you because it was PCs Limited, right, at the very beginning. It was officially Dell Computer Corporation doing business as PCs Limited.

Starting point is 01:28:09 Right, yeah, right. Yeah, but then you realize, like, why don't we just do Dell? And then that's when I thought of the Osborne thing because you're like, wait a minute, this guy he named his company after that. Like, there's no really good thing. Doesn't work.

Starting point is 01:28:19 Yeah, but it's interesting because you just said, it's like, yeah, I have a lot of confidence I'm going to do this, but the doubt never goes away. Yeah, and, and, you know, fear. Thank you. That's actually the last thing I want to talk to you about. When we, one of the first things when we saw each other last month, we talked about, we were like walking around Zach's office. 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,

Starting point is 01:28:52 from studying all these histories of entrepreneurs, but I think you said it's the same. It's just like the fear of failure to this day is a bigger motivator than like the love of success. Yeah, totally, 100%. Yeah, you know, you don't want to fail, although failing is how you, learn, you know, pain is the best teacher. And so, you know, you have to have some, some little

Starting point is 01:29:27 failures along the way. But that fear of, you know, you can't have it paralyze you where you're, you don't want to make any decisions because you're afraid to fail. Has that happened to? No, really, no. You know, what you want to do is, is, 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, we're not sure if this is a good idea. Let's try it, right? Let's experiment.

Starting point is 01:30:01 Let's get started. We'll figure it out. And we're not, you know, betting the whole company on this decision. We're just experimenting. And if it doesn't work, great. We learn something. We move on. It's perfectly said.

Starting point is 01:30:16 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 400 biographies of history's greatest entrepreneurs

Starting point is 01:30:32 searching for ideas that you can use in your work. Most of the guests you hear on this show first found me through founders.

David Senra - Michael Dell, Dell Technologies

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