The Tim Ferriss Show - #534: Michael Dell, Founder of Dell — Early Failures, Battling Carl Icahn, Learning from the Competition, and How to Play Nice But Win

Starting point is 00:00:00 This episode is brought to you by Tonal, T-O-N-A-L. Get ready for the smartest home gym you've ever seen. That's a men's health headline about Tonal. If you're wondering about the smart part, Tonal's homepage also features a quote from the New York Times. Quote, the machine knew my strength better than I did. End quote.

Starting point is 00:00:16 By eliminating traditional metal weights, Tonal can deliver 200 pounds of resistance in a device smaller than a flat screen TV. Tonal mounts on your wall with no floor space required. I've had a Tonal unit now for six to 12 months, and it allows me to do things I would normally need a much larger gym for, like cable chop and lift or rotational exercises, things I wrote about in the 4-Hour Body, and it allows me to do these things that are nearly impossible otherwise, like eccentric loading, which I'll mention later. Tonal is precision engineered and designed to be the world's most advanced strength studio and personal trainer. It uses breakthrough technology like adaptive digital weights and

Starting point is 00:00:52 AI learning together with the best experts in resistance training so you get stronger faster. So what are these adaptive digital weights? Tonal's patented digital weight system makes thousands of calculations a second to deliver you a smooth weightlifting experience using advanced electronic motor technology. Tonal lets you adjust the weight in one-pound increments, something that was never possible with traditional dumbbells. It's easy to dial weights up and down with the touch of a button right in the grip itself. It's pretty cool. Tonal also has built-in dynamic weight modes like chains, eccentric, that's E-C-C-E-N-T-R-I-C, and their patent-pending SmartFlex technology so that you can experiment with more ways to get stronger, faster, without the hassle of extra equipment like chains and bands. So try Tonal,

Starting point is 00:01:36 T-O-N-A-L, the world's smartest home gym for 30 days in your home. And if you don't love it, you can return it for a full refund. Visit www.tonal.com, that's T-O-N-A-L, and for a limited time, get $100 off of the smart accessories when you use promo code TIM100 at checkout. That's www.tonal.com, promo code TIM100. Tonal, be your strongest. This podcast episode is brought to you by Helix Sleep. Sleep is super important to me. In the last few years, I've come to conclude it is the end-all be-all, that all good things, good mood, good performance, good everything seem to stem from good sleep. So I've tried a lot to optimize it. I've tried pills and potions, all sorts of different mattresses, you name it. And for the last few years, I've been sleeping on a Helix Midnight Luxe mattress.

Starting point is 00:02:32 I also have one in the guest bedroom and feedback from friends has always been fantastic. It's something that they comment on. Helix Sleep has a quiz, takes about two minutes to complete, that matches your body type and sleep preferences to the perfect mattress for you. With Helix, there's a specific mattress for each and every body. That is your body, also your taste. So let's say you sleep on your side and like a super soft bed, no problem. Or if you're a back sleeper who likes a mattress that's as firm as a rock, they've got a mattress for you too. Helix was selected as the number one best overall mattress pick of 2020 by GQ Magazine, Wired, Apartment Therapy, and many others. Just go to helixsleep.com slash Tim, take their two-minute sleep quiz, and they'll match you to a customized mattress that will give you the best sleep of your life. They have a 10-year warranty, and you get to try it

Starting point is 00:03:20 out for 100 nights risk-free. They'll even pick it up from you if you don't love it. And now, my dear listeners, Helix is offering up to $200 off of all mattress orders and two free pillows at helixsleep.com slash Tim. These are not cheap pillows either, so getting two for free is an upgraded deal. So that's up to $200 off and two free pillows at helixsleep.com slash Tim. That's helixsleep.com slash Tim for up to $200 off. So check it out one more time. helixsleep.com slash Tim. At this altitude, I can run flat out for a half mile before my hands start shaking. Can I ask you a personal question? Now would have seemed an appropriate time. What if I did the opposite? I'm a cybernetic organism, living tissue over metal endoskeleton.

Starting point is 00:04:15 The Tim Ferriss Show. Just a quick note, at the very beginning of this conversation, we dive into a little bit of inside baseball, but not to worry, we come right back around later in the conversation and explain everything. So stick around and thanks for listening. Hello, boys and girls, ladies and germs. This is Tim Ferriss, and welcome to another episode of The Tim Ferriss Show. My guest today is none other than Michael Dell. You can find him on Twitter at Michael Dell. Michael is Chairman and Chief Executive Officer of Dell Technologies, an innovator and technology leader providing the essential infrastructure for organizations to

Starting point is 00:04:54 build their digital future, transform IT, and protect their most important information. He is also the author of Play Nice But Win, a CEO's journey from founder to leader. Michael is an honorary member of the Foundation Board of the World Economic Forum and is an executive committee member of the International Business Council. In 1999, he and his wife, Susan Dell, established the Michael and Susan Dell Foundation. You can find Dell online at dell.com. You can find Michael on all social, and I'll link to those at tim.blog forward slash podcast. But for instance, as we mentioned on Twitter, at Michael Dell. Michael, welcome to the show. So nice to see you.

Starting point is 00:05:32 Great to be with you, Tim. Thanks for having me. And I thought we would just dive right into the action and begin with a story to pull people into your life and the many adventures that you've had. You opened the new book with some mention of meatloaf. And I'm a huge fan of meatloaf, so that got my attention. But there are other aspects that got my attention. Could you please elaborate and tell us the story of eating meatloaf and why it made it into the story of your life? Yeah, well, it wasn't meat, Love, the band or the musician.

Starting point is 00:06:05 I was halfway through the go private, and I confront Carl Icahn directly, face-to-face, eye-to-eye in his home, and go over there to have dinner. And I kind of suspected that he didn't have any plan for the company. And that was my objective was to understand, did he really have any cards? Or was he just trying to get me to raise the price a little bit. And I described this very dramatic moment. And I'm at his house having dinner. And it's very clear to me that he didn't have any plan for the company. And it was a fun and exciting moment about halfway through the go private.

Starting point is 00:06:57 Now, for people who don't have any context, who is Carl Icahn? Let's just start with kind of defining some of the players here, and then we're going to bounce around chronologically. But for those who have no idea who that is, who is Carl Icahn? What does he do? So he's a pretty famous financier, sort of corporate raider, green mailer and general troublemaker who kind of finds his way into transactions where he can try to cause trouble and get people to buy him out. And sometimes it works pretty well. Sometimes it doesn't. To him, it's all a big poker game. He showed up in the middle of our go private. He'd never owned any of our stock and found a kind of weasel way into the deal to try to make a little bit of money.

Starting point is 00:07:53 So if we freeze frame that in time, there's media coverage with headlines, for instance, from Fortune, the gamblers behind tech's biggest Deal Ever. But things didn't start there. And I want to go back to childhood and the beginnings, and then we're going to jump around chronologically. But where does the title of the book come from? So Play Nice But Win is something that my parents used to tell my two brothers and I, whenever we would go out in the street to play ball, you know, they would tell us, play nice, but win. And it kind of stuck with me as a pretty good life philosophy to be fair, to be ethical, to be forthright in what you're doing, in your dealings with others, but also don't forget to win, right?

Starting point is 00:08:50 And so some people just remember the play nice part, but there's also that win part, which is also important. But that's one of my earliest memories is our parents telling us, play nice, but win. And so it's something that stuck with me and something we talk a lot about at Dell. Just for people who are wondering or people who might be saying to themselves, yeah, yeah, sure. Okay. That sounds nice. Of course. I must say that as a backdrop to this, when we were first introduced a few years ago, the mutual acquaintance who introduced us said to me, he really is just the nicest guy imaginable and his whole family is nice. And that has been my experience. And it's always fascinated me because I imagine many people listening will immediately conjure counterexamples in the sense that there are many ruthless, win-at-all-cost players. And one would imagine that being nice could be a handicap if you're

Starting point is 00:09:47 taking certain options off the table because you view them as unethical or otherwise that you would be, in a way, tying one hand behind the back when competing against these other people. How do you think about that? I think life is a long journey and your reputation and your integrity matter. And I've seen time and time again that when you do the right thing and you treat people fairly and nicely, it comes back around to you in very positive ways. It's certainly what I feel comfortable with, but it's also a lot simpler way to live your life from my perspective. If we go back again to, I guess, your adolescence, this is from just doing homework for this conversation, which I always enjoy doing with people I've met just because it would seem really creepy otherwise to do all this internet sleuthing. But I have a context and a pretext for doing it when I have these interviews. And what I'm looking at here from an interview is what the journalist

Starting point is 00:10:51 wrote, and that is, he made a reported $18,000 selling newspaper subscriptions at age 17. The secrets to his success, trial subscriptions for new residents and apartment complexes and condo communities, as well as recruiting friends to research public records of new marriage licenses at the county courthouse. So the first thing I have to ask, because you can't believe everything you read, was that part of what happened in terms of the secrets to the success with the newspaper subscriptions? Yeah, yeah, that's very accurate. Yeah. And how did you arrive at, if you remember, recruiting friends to look at the public records? I suppose that's just not something that would immediately occur to a lot of 17-year-olds. I remember exactly what happened.

Starting point is 00:11:35 I got this job and I was a telephone solicitor. And I worked at the Houston Post in Houston. It's now defunct. It was merged with the Chronicle. And they had a bunch of us kind of in this big open bullpen. And we were given sheets of paper that had just like random phone numbers on them. And you would call the phone numbers and try to convince people to buy a subscription to the Houston Post newspaper. And my first full month I was there, I was the top salesperson. I remember that because I got an award. I thought

Starting point is 00:12:11 that was pretty cool. But what I figured out was that there were a couple things you could do to sell newspapers better than anybody else, right? And one of the easiest things was you just sounded like the people you were talking to. So you just sort of picked up whatever accent they had. I won't do any of those for you today. But I think I got reasonably good at that. I also noticed that there were some trends of people, because you talk to these people and you're like striking up a conversation with them trends about people that were tending to buy the newspaper one was that they were often getting married and moving to a new house or apartment or something like that. Sometimes they were relocating to a new place, they were getting a mortgage. And I figured out that in Texas, as in many states, when you want to get married, you have

Starting point is 00:13:14 to get a marriage license. And through the Freedom of Information Act, you can go to any county in Texas, and you can literally go up to the counter and say, I want to see all the marriage license applications for, you know, this period to that period. And on the application, it says where you want the marriage license to be sent to. It gives you an actual address, which is like the perfect address to send this offer to get two weeks free of the Houston Post. And then if you want to continue it, here's the deal. And so I started in Harris County, which is where Houston is centered. But then there's like 16 surrounding counties. So I hired a bunch of my buddies. We had Apple two computers back then. And we go to these counties, type in all the names and addresses.

Starting point is 00:14:07 I did this massive direct mail campaign, and that's when I was 16, 17 years old. A lot of fun. Sounds like a lot of fun. I mean, you've deconstructed the system. Was anyone else doing this, or were you doing this by yourself? Were you sort of a lone ranger in this approach? I was kind of a lone ranger, but I hired some of my high school friends to go to some of these counties because there were 16 of them and I couldn't really do it all myself. The other thing that was happening in Houston was it was kind of a boom town at the time. And sort of like,

Starting point is 00:14:43 you know, in Austin now, there's like all these condo complexes and apartment complexes going up. And you just go up to the person sort of running the thing and say, hey, you know, I've got this great offer for all your new residents. Can you please put this in the welcome kit? And they say, sure. And so that worked really well. So yeah, I was just trying to figure out how to sell a lot of newspaper subscription. And around that time or in your, let's just say, early mid twenties, were there any particular entrepreneurial heroes or figures you looked up to or tracked closely, read about, anything like that? I think it actually started before that. When I was a kid, I saw Charles Schwab, who started this Charles Schwab business,

Starting point is 00:15:35 which was pretty cool. Ted Turner, Fred Smith from Federal Express, William McGowan, who had created MCI. And then, of course, Bill Gates and Steve Jobs, who were about 10 years older than I am. And all of that was super interesting to me. My mom was a stockbroker. Our family, we didn't talk about the football game or things like that. We talked about the economy and oil prices and which stocks were interesting. And I was really intrigued by all that. And so those entrepreneurs were definitely inspirations. You wrote your first book in 1998. So you've taken a 20 plus year break on the books. And I've read that at the time that you published that first book, you didn't feel comfortable disclosing perhaps as much as you feel comfortable disclosing now. You're comfortable sharing more. And I'm curious if you would be willing to share a story or share something that you weren't comfortable talking about then that you are comfortable talking about now? Well, there's so many things. I mean, I was not really comfortable with vulnerability in my

Starting point is 00:16:52 30s when I wrote the first book, In the Way I Am Now. So one of the stories, I talk about how I got arrested. Probably not a story I would have told 20 years ago but i was sort of a irresponsible young guy you know running around in fast cars and got way too many traffic tickets and i got one too many got pulled over and literally i was taken downtown at the back of an Austin Police Department cruiser, fingerprinted and everything. Fortunately, they let me go. I felt really bad about it because I always had a lot of respect for the police and any member of the public service.

Starting point is 00:17:37 There's a bunch of stories in there about things that went wrong and mistakes made. And I wanted to kind of tell the raw and authentic story about how the company really got going. And there were plenty of lessons along the way. I mean, we had people that were doing things they weren't supposed to be doing and I was kind of surprised by it, but maybe I shouldn't have been surprised. I'd love to dig into some of the specifics and talk about the things that haven't worked or perhaps some of the mistakes or failures

Starting point is 00:18:14 that stick out to you. Are there any particular formative experiences that fit into either of those categories that come to mind? I'll give you two that happened both in the late 80s, right about the time, the year after we went public, and we did a pretty public face plant, as it were. The first one was we were ramping up our technical capability and sort of getting bolder and bolder in engineering. And it was around the time of the 88 Olympics.

Starting point is 00:18:49 And we had this big program that we codenamed Olympics. And it had multiple microprocessors and all kinds of new inventions and turned out to be way too aggressive and bold, and it failed. Now, I think the lesson from that was to be a lot more pragmatic and focused on our innovation. And actually, the engineering muscle that we built allowed us to, in quick succession, create a broad array of products that were hugely successful and led us to a lot of growth. One of the other big mistakes we made around the time, now a lot of people talk about Dell's supply chain and just-in-time inventory and all that great stuff. Well, it turns out the root of that was a horrible mistake we made in managing our supply chain because there was one of these transitions from one type of memory chip to another.

Starting point is 00:19:53 And we had designed our products with the older type and got caught in a real mess, which caused our fledgling company to almost go out of business and stock to go down. It was really embarrassing, but painful lesson that we learned. And that became the basis of an enormous muscle that we built around just-in-time inventory and supply chain excellence that served us incredibly well and went on to fuel all sorts of successes for us. It makes me think there's so many examples that come to mind, like James Cameron and the Abyss, where the Abyss didn't do very well at the box office, but helped develop the technology that led to the newer Terminator and Terminator 2. So from the ashes of that so-called failure, there were all of these technological innovations that then came to bear on future projects. How do you think about failure in the sense that do you view these

Starting point is 00:20:59 various initiatives, product launches, et cetera, all as experiments, especially in the early days. Were you ever emotionally deeply affected by some of these events? Or did you maintain a certain degree of stoicism through it all? No, I was super bummed about it. And unhappy, but it just made me want to go at it harder. And I probably didn't internalize the lesson in the moment as much, but there's no such thing as success by itself. Failure is always an ingredient of success. And in a business, when you're doing new things, it's always experiment, try, fail, learn, do it again. And then finally, hopefully, maybe you get some success. But failure is a key ingredient in any success. When you mentioned, this might seem off topic, but I'm curious,

Starting point is 00:21:57 being more vulnerable now or more comfortable with vulnerability now, is that just a function of age? or have you done certain things, have certain other things changed that have enabled you to feel comfortable being more vulnerable? I think it's a function of age somewhat and just maturity. And also I would say, you know, when I started, I got off to an early start in life and I found myself in the position where people were always asking me for things. It was pretty uncomfortable. And so I kind of developed a little bit of a Teflon coating to distract or deflect those requests. And at the same time, I'm pretty introverted, maybe deeply introverted,

Starting point is 00:22:48 right? And so all of that combined left me in the situation where I wasn't very disclosing, wouldn't really explain failures or what was going on. And I think some people looked at the origin story or the first decade or so. Maybe we didn't really explain all the difficulty that went into starting a business like this. And I wanted to talk about all that. What were any of the toughest periods for you personally with respect to the business and the trajectory that it has had? Were there any particularly dark days that come to mind? Specifically, I just want to talk about what got you through that period, what happened, and how you coped with it. Certainly, with the success ingredient, you have the failure component. And I would love to explore that a bit

Starting point is 00:23:47 just to humanize the entire journey that you've been on. I would say I'm pretty high on the determination and grit scale. And so I was always looking through to the other side, no matter how dark it was. I mean, there were periods, certainly in the early 90s, where we had grown really fast and everything started to fall apart. We kind of went from a half a billion to 2 billion in revenues in a very short period of time. A lot of people talk about you hit the wall at a billion. We went right from 890 million to 2.1 billion in one year. Wow. Everything started to fall apart. We didn't have the systems, the processes, the people, capital, everything was just not ready. And there was a period there during that time where

Starting point is 00:24:42 it seemed like every day, every month, the news just kept getting worse and worse. And it's a problem you have to solve. But certainly, when you're in that time, you go home and as you try to go to sleep, it's hard to not think about all the people you're responsible for, their lives, their families, the commitments that they've made, and they're counting on you to make this work. They move their whole family to Austin to help this company grow. And if I screw it up, it's going to be not only really bad, but embarrassing and a great tragedy. Certainly during the go private, there were some very dark moments. There was one point where the board asked me not to talk to any members of the management team.

Starting point is 00:25:46 It makes things hard. Yeah. And I'm the CEO of the company. It was just a short period of time, but it was pretty weird. And if you go back and look at the press, there were times when it was totally unclear what was going to happen. And yeah, those were some pretty dark moments. I mean, fortunately, my wife was there supporting me and had lots of friends that were encouraging me on. But what is it, Winston Churchill, if you're going through hell, keep going. So that's what we were doing. I'd love to tie that into the introvert piece. So I also play the extrovert on occasion, but am deeply introverted. My girlfriend's the opposite.

Starting point is 00:26:34 She's very charged and recharged by being around, in some cases, large numbers of people. I get very depleted. I'm curious, through those experiences, or just really in general, with the, I imagine the high volume of communication and the numbers of people you must interact with, particularly during those crunch times, what type of self-care did you have for yourself or what did you do to recharge or how did being an introvert play into that? You can tackle that. I know it's a number of questions combined into one, but I'm just curious about how you factor that in, if at all. To recharge, it's sleep, big fan of sleep. We've had some separate conversations about that. And exercise, going on a long walk

Starting point is 00:27:27 in the woods, sometimes with my wife, sometimes by myself or with a friend. But the onstage stuff, it's all an act, right? I mean, it's not my natural state of being. But of course, you have to do it. And it's important to do it, to be able to tell the stories of the company and describe what you're doing, communicate the value of what we're bringing to all these people and get them motivated and inspired. Yeah, you have to do that. But it's not something I would naturally do left to my own devices.

Starting point is 00:28:05 Yeah. I want to ask you two questions. I'll keep them a little simpler. The first is about that hyper growth that you were describing going from, I think it was 890 million to 2.1 billion in a year, something along those lines. In retrospect, do you think you should have constrained that in some way, or was it necessary to just completely blow things up in order to rebuild? Would you give advice to someone in your similar position to add constraints of some type or

Starting point is 00:28:39 do something differently? On the one hand, we needed to balance our growth with also liquidity and profitability, just because we were running out of capital. And our new CFO that joined us helped me understand that and figure it out. On the other hand, if we had gotten larger and scaled, we probably would have gone out of business anyway. So it was a bit of a difficult choice that we had to make. And fortunately, we're still here to tell the story.

Starting point is 00:29:13 I think to answer your question, if we'd only grown from 890 million to 1.3 billion, I think we might've been too small and on a trajectory just to be eliminated in the industry. Of course, we went on to become much, much larger, over a hundred billion this year, but yeah, we had to kind of go for it. And it's always hard to rerun the simulation. There are definitely things you would have done differently, but it's worked out pretty well for the most part. Yeah, it seems to have worked out quite well. And like you said, you're here to tell the tale. I would like to next just ask you to walk us through your thought process and the process overall for taking the company private and then public again,

Starting point is 00:30:04 because most people listening will be, and some will be very familiar with this kind of stuff, but a lot of folks will have a passing familiarity of at least the term going public and they'll know what an IPO is. But I suspect a very small percentage will know anything about then taking a company private and why someone would want to do that. So could you just walk us through what happened and how you thought about it? The company had grown, gotten quite large, and the growth started to stall out. And we knew we needed some new horizons of growth.

Starting point is 00:30:39 And we started investing in new areas like software and services and security and started acquiring new companies. And the more we did that, the more the financial investors kind of didn't like it. And they kind of just kept associating us with the original product of the company, the PC. And this was at a time when the smartphone and the tablet were really on the ascendancy. And even to the point where there was kind of this narrative out there that, oh, well, you know, you're really not going to need a PC anymore because you do everything on your phone or you do everything on your tablet. And we kind of had the view that,

Starting point is 00:31:25 well, those devices are great, but it's going to be an ad, not an or when it comes to these devices. And when you're making all these investments and doing all these things, but your stock price is going down, it's kind of depressing. But at some point it goes down low enough where the capitalist in me, I can't get that out of me, says, wow, there's like a silver lining here that's incredible. And that is we can buy back our stock at this really low price and we can accelerate the transformation and go faster. In fact, we're going to buy back all the stock from the public shareholders. You basically pay a premium, you pay a price that's higher than current price. So the public investors get some of the benefit of the transformation

Starting point is 00:32:20 strategy if it's successful without taking on any of the risk. And then we, as the owners of the company, myself and Silver Lake, who joined me in the go private, can really go much faster on the transformation. We can make investments without having to think about the quarterly earnings shot clock that is there when you report every single quarter. And so I thought it was a relatively straightforward thing to do. It turns out it's a lot harder to buy your own company back. And we had the Joker showed up, Carl Icahn, to sort of make it much more interesting and difficult. And yeah, it started in August of 2012. And we finally completed it in October of 2013.

Starting point is 00:33:18 And then we just started investing super aggressively in research and development, hiring more salespeople, and it was working. We were generating tons of cash flow. And we decided to quadruple down after we'd done the biggest take private ever in technology. We said, let's do the biggest merger acquisition ever in technology. We said, let's do the biggest merger acquisition ever in technology. We bought EMC and VMware and created the largest cloud IT infrastructure company on the planet. And ultimately, through a complex series of transactions, we had a tracking stock. We wanted to simplify the

Starting point is 00:34:06 capital structure and we had transformed the company in a material way. And so it was kind of time to go public again in late 2018. I have some follow-up questions. This is extremely interesting to me because I remember watching from the sidelines. I remember when this happened, but I was only getting the headlines, but also getting the interpretation of commentators, not the people actually on the field. So the first thing I have to ask, and I'm embarrassed that I need to ask this, but in this context, what is a tracking stock? You mentioned a tracking stock. When we acquired EMC and VMware combined with them, it was like $67 billion. But we didn't have $67 billion. We had the equity in Dell. We took on substantial more debt. And to compensate the shareholders, we gave them a combination of cash and a tracking stock,

Starting point is 00:35:10 which tracked, see, EMC owned an 81% interest in VMware. And so the tracking stock was created for a portion of that EMC ownership to compensate the EMC shareholders. And tracking stocks are kind of arcane. You don't really see them very often. And the tracking stock appreciated well, but it's still traded at a substantial discount to the underlying VMware shares. And a better way to do this was to align all the interests of shareholders, which is why we ultimately combined with the tracking stock in late 2018. Just a quick thanks to one of our sponsors, and we'll be right back to the show. This episode is brought to you by Wealthfront. Did you know if you missed 10 of the best performing days after the 2008 crisis,

Starting point is 00:36:08 you would have missed out on 50%, 5-0% of your returns. Don't miss out on the best days in the market. Stay invested in a long-term automated investment portfolio. Wealthfront pioneered the automated investing movement, sometimes referred to as robo-advising, and they currently oversee $20 billion of assets for their clients. Wealthfront can help you diversify your portfolio, minimize fees, and lower your taxes. It takes about three minutes to sign up, and then Wealthfront will build you a globally diversified portfolio of ETFs based on your risk appetite and manage it for you at an incredibly low cost. Wealthfront's software constantly monitors your portfolio day in and day out so you don't have to. They look for opportunities We'll see you next time. They've really thought of a ton. They've checked a lot of boxes. Smart investing should not feel like a rollercoaster ride. Let the professionals do the work for you. Go to wealthfront.com

Starting point is 00:37:09 slash Tim and open a Wealthfront investment account today, and you'll get your first $5,000 managed for free for life. That's wealthfront.com slash Tim. Wealthfront will automate your investments for the long term, and you can get started today at wealthfront.com slash Tim. So when you were thinking about taking the company private, and as you went through the process, how did you think about risk and mitigating risk? What were the risks in terms of downside scenarios or worst case scenarios? And how did you sort of mitigate the likelihood of ending up in those? When you take a company private, basically you're putting it up for sale and anybody can buy it. I wanted to be the person who was going to buy it and thought that I knew more about it than anybody else. And I thought it was worth a lot more than the market thought it was

Starting point is 00:38:06 worth. Otherwise, I wouldn't be buying it, right? But a lot of things could have gone wrong. I mean, somebody else could have stepped in and said, well, I'm willing to pay a little bit more. And then I would have either had to top that offer or at some point get priced out. And of course, the process can cause a lot of disruption. It can be used by competitors who can create fear and uncertainty and doubt in the market about your business. Imagine the family members inside the company reading about this or hearing about it on TV and wondering what's going on with this company. And during the process, a lot of the downside scenarios played out. I mean, we had multiple bidders. There were times when people were speculating about who was going to run the

Starting point is 00:39:05 company and it wasn't going to be me. It was a pretty messy, ugly process. With respect to ultimately going public, and I suppose I should just add as context. So I know a fair number of public company CEOs and more than a few just hate the shot clock, as you put it. They're like, hey guys, we're trying to make investments for long-term growth and innovation. This is ridiculous and it bothers them a lot. And then I know the CEOs of some very, very large privately held companies. Ultimately, was the decision to go public again necessary because shareholders needed liquidity? Is that how the decision was made? I wouldn't say it was necessary because shareholders needed liquidity.

Starting point is 00:39:56 None of the shareholders have really accessed liquidity in any material way. Yeah. But it certainly allowed us to clean up the capital structure, simplify things, pay down debt faster. We just got an upgrade to investment grade by one of the rating agencies, which we kind of expected was going to happen, which is great to see it in print.

Starting point is 00:40:22 But I would say one of the things we did during the go private was we reignited the entrepreneurial spirit of the company, which was its origin. And I actually believe we've kept that going even as we're public. And so we're very clear with our investors that our horizon is not just the next 90 days, right? We're thinking about the medium term and the long term, and we've reoriented the business and it's working. We had 15% growth this last quarter. And at our size, that's a substantial growth rate.

Starting point is 00:41:01 It's a huge growth rate. Was there anyone who stands out, could be more than one person who was particularly helpful that you're comfortable sharing during the take private chapter of your experience? Jamie Dimon from JP Morgan Chase was particularly helpful. And there's one story about the combination with EMC and VMware where he comes with Egon Durbin from Silverlake and I to the EMC board meeting where we're basically trying to convince them to let us buy their company. And they're asking us all these various questions. And at one point they ask, well, do you have the money? It's like $67 billion. And Jamie just says, yeah, yeah, they have the money.

Starting point is 00:41:53 He said it and he has stepped in and helped our company many, many times and super helpful, thoughtful, and been a great friend. I'd love to ask about investments, but maybe not in the traditional sense. I'd love to ask you what are one or some of the most worthwhile, valuable investments you've made. That could be an investment of money, time, energy, anything at all, just to give an example. I think Warren Buffett, when he's asked this question, your best investment, he talks about a public speaking course, I believe it was with the Dale Carnegie Institute or something along those lines, because it multiplied so many other skills. It was complementary to so many other things that he was focused on. So it could be really

Starting point is 00:42:42 anything at all. Does anything come to mind that would fit that question? Well, certainly for me, my best investment by far would be the thousand dollars that I invested in starting our company. So that one has turned out to be certainly one of my all-time best investments. My mother, may she rest in peace, she recognized when I was in about the second or third grade, I was stuttering. I had a pretty bad stuttering problem. And she got me a speech coach.

Starting point is 00:43:23 And it seemed like every day, I probably wasn't every day, but it seemed like every day after school, I would go there and the speech coach would work with me. And after about, but my mother kind of knew what not you have to change your playbook or opt out of certain competitions given you have this north star of playing nice but winning well there are certain kinds of things that you just opt out of because you're not willing to play dirty. And I'd say you see some of that in certain countries around the world. I won't name any in particular, but you know who I'm talking about. And so we kind of avoid those things. And for me, competition is interesting and often motivating. I think also it can be limiting. If you're comparing yourself to competition, the competition might not be very good. You could totally be setting the wrong benchmarks, right? If you're measuring yourself against a competition that's not really

Starting point is 00:45:07 that great. And you can also learn a lot about what not to do from competition. But I actually think it sounds quaint. You learn a lot more from your customers than you do from competition. And we always talk about having big years and designing the company from the customer back and solving the unsolved problems of customers. You're not going to get those things from the competition as much as you will from a real understanding of what the customer is trying to do. You have been a true pioneer in, I suppose, what all the kids would call DTC these days, direct-to-consumer. I mean, you have tested and tested and refined and refined and in the beginning certainly pioneered a lot of approaches. I would be curious to hear since that the direct-to-consumer model is much more prevalent now than it was when you started,

Starting point is 00:46:13 what are some of the common mistakes or things that people miss when they are novices engaged or trying to engage with a direct-to-consumer business model? I think there are many, many flavors to it. I think some of the advanced moves are understanding the information advantage that you have with the direct relationship and connection with the customer. And the way to think about this is in the simple retail versus direct to consumer or direct to customer online context. If you have 10,000 retail stores and you're trying to predict what people are going to go in those stores and buy, yeah, you can have really sophisticated AI and try to guess that. But ultimately, it's just a guess. And you're having to stage and prepare all sorts of things

Starting point is 00:47:12 and anticipate. And ultimately, it's going to be wrong to some degree, right? And demand's going to change and unexpected stuff is going to happen. Whereas if you have perfect information and the quality of your demand signal is actually perfect because you're in direct contact with that customer, you don't need any inventory to prepare for that. You can use that signal to feed your supply chain in real time. And that creates an enormous capital efficiency. But the information advantage coupled with the capital efficiency, coupled with the customer intimacy, and the ability to improve the product, either with telemetry data or feedback in one form or another, the compounding effect of that is quite valuable versus delegating that to a series of other parties.

Starting point is 00:48:13 Why don't more people do that? Why do people delegate it out to third parties? What makes it difficult? Well, I think you're seeing more and more direct-to-consumer, but supply chains were traditionally long. People had multiple levels of distributors and dealers and that sort of thing. But now with digital channels and everything going online, you see much more of that. So now it's becoming more the norm. But you think about a product or service

Starting point is 00:48:46 today is continually improving even once you have it, right? It's being upgraded with software and with data and with AI all the time. And that's obviously far better than just a static product. So I think more companies are figuring out, even the ones that had those traditional channels, are trying to figure out, gee, how do we create this persistent connection with our customer so we can be more in touch with their actual needs? And I believe fundamentally that organizations like ours and others will be successful if they solve the future problems that customers have. If they don't, they'll just go out of business. So you have to be in touch with those problems and you have to have the capabilities to innovate around addressing

Starting point is 00:49:39 those unmet needs. Now, customers aren't always going to tell you exactly what the problem is. They might articulate some difficulty they're having. A company has to understand all the ingredients and all the sort of molecular components that go into creating the solution. And that's often where the magic occurs in product or service creation is this understanding of all the ingredients and all the unsolved problems. So I have to ask you about this book as a project. There are a million and one things you can spend your time on. You're a busy guy. You are a fully engaged human being with the world. Why dedicate the time and energy to a book project, to this book project? A lot has happened in the last decade from the go private to the biggest merger acquisition in history and in technology, going public again, transforming the company. Again, the first book I wrote back in the 90s, I really didn't disclose very much. And I wanted to tell the kind of real authentic

Starting point is 00:50:55 story. A number of friends encouraged me to write a book about everything that occurred. And it was fun to go back and tell some of the stories about the origin that I'd never talked about before, as well as kind of explain the real story of the struggle to keep the company and transform it. Is there anything you really hope people will come away with after reading the book, or in a particular impact you'd like it to have on readers? I hope people will take more risk. I mean, I have this belief that a lot of human potential is sort of left unrealized because people are afraid to fail, seeking perfection, and unwilling to experiment and make mistakes.

Starting point is 00:51:46 And you read the story, you'll see that at the root cause of what is ultimately a very large, successful company were all kinds of learnings and mistakes that went into it. And you have to be willing to break some rules. And if you're always following instructions and doing what you're told, you're not going to drop out of college and start a company, right? Michael, I always enjoy our conversations. I am very excited about the book. And the title could not be more accurate as far as I'm concerned. Play Nice But Win is the title of the book. Subtitle is CEO's Journey from Founder to Leader. People can find, of course, Dell Online, Dell.com, at Twitter, at Michael's Dell. You're also at Michael Dell at Instagram, Facebook, Michael S. Dell, LinkedIn, MDell.

Starting point is 00:52:49 Is there anything else that you would like to say, any request of the audience, any closing comments you'd like to add before we wrap up this conversation? No, I think you got it. The other things I talk about in the book are curiosity. And I think curiosity has been a driver for me. I was interested in math and electronics and computers from an early age. And that has led me on the path I've been on. So I think being curious, learning, experimenting, failing, taking risks. There you go. Yeah, I do think that the combination of stories sort of allude to principles and playbooks that people can borrow and apply. And moreover, that it's possible to win and be nice while doing it. So I really appreciate you taking time to have this conversation. And hopefully we'll be back in Austin before very long. But thank you for making the time to hop on the podcast with me. Awesome, Tim. Great to be with you. Thank you. And to everybody listening, we'll have links to everything in the show notes, all resources, as well as links to play nice, but when and everything else at

Starting point is 00:54:11 Tim.blogs slash podcast. And until next time, thanks for tuning in. Hey guys, this is Tim again, just a few more things before you take off. Number one, this is Five Bullet Friday. Do you want to get a short email from me? Would you enjoy getting a short email from me every Friday that provides a little morsel of fun for the weekend? And Five Bullet Friday is a very short email where I share the coolest things I've found or that I've been pondering over the week. That could include favorite new albums that I've discovered. It could include gizmos and gadgets and all sorts of weird shit that I've somehow dug up in the world of the esoteric as I do. It could include favorite articles that I've read and that I've shared with my close friends,

Starting point is 00:54:57 for instance. And it's very short. It's just a little tiny bite of goodness before you head off for the weekend. So if you want to receive that, check it out. Just go to 4hourworkweek.com. That's 4hourworkweek.com all spelled out and just drop in your email and you will get the very next one. And if you sign up, I hope you enjoy it.

Starting point is 00:55:17 This podcast episode is brought to you by Helix Sleep. Sleep is super important to me. In the last few years, I've come to conclude it is the end-all be-all, that all good things, good mood, good performance, good everything seem to stem from good sleep. So I've tried a lot to optimize it. I've tried pills and potions, all sorts of different mattresses, you name it. And for the last few years, I've been sleeping on a Helix Midnight Luxe mattress. I also have one in the guest bedroom, and feedback from friends has always been fantastic.

Starting point is 00:55:51 It's something that they comment on. Helix Sleep has a quiz, takes about two minutes to complete, that matches your body type and sleep preferences to the perfect mattress for you. With Helix, there's a specific mattress for each and every body. That is your body, also your taste. So let's say you sleep on your side and like a super soft bed. No problem. Or if you're a back sleeper who likes a mattress that's as firm as a rock, they've got a mattress for you too. Helix was selected as the number one best overall mattress pick of 2020

Starting point is 00:56:18 by GQ Magazine, Wired, Apartment Therapy, and many others. Just go to helixsleep.com slash tim take their two minute sleep quiz and they'll match you to a customized mattress that will give you the best sleep of your life they have a 10-year warranty you get to try it out for 100 nights risk-free they'll even pick it up from you if you don't love it and now my dear listeners helix is offering up to 200 off of all mattress orders and two free pillows at helixsleep.com slash Tim. These are not cheap pillows either. So getting two for free is an upgraded deal. So that's up to $200 off and two free pillows at helixsleep.com slash Tim. That's helixX sleep.com slash Tim for up to $200 off. So check it out one more time. Helix,

Starting point is 00:57:08 H-E-L-I-X sleep.com slash Tim. This episode is brought to you by Tonal, P-O-N-A-L. Get ready for the smartest home gym you've ever seen. That's a men's health headline about Tonal. If you're wondering about the smart part, Tonal's homepage also features a quote from the New York Times. Quote, the machine knew my strength better than I did. End quote. By eliminating traditional metal weights, Tonal can deliver 200 pounds of resistance in a device smaller than a flat screen TV. Tonal mounts on your wall with no floor space required. I've had a Tonal unit now for six to 12 months, and it allows me to do things I would normally need a much larger gym for, like cable chop and lift or rotational exercises, things I wrote about in the 4-Hour Body, and it allows me to do these things that are nearly impossible

Starting point is 00:57:55 otherwise, like eccentric loading, which I'll mention later. Tonal is precision engineered and designed to be the world's most advanced strength studio and personal trainer. It uses breakthrough technology like adaptive digital weights and AI learning together with the best experts in resistance training so you get stronger faster. So what are these adaptive digital weights? Tonal's patented digital weight system makes thousands of calculations a second to deliver you a smooth weightlifting experience using advanced electronic motor technology. Tonal lets you adjust the weight in one pound increments, something that was never possible with traditional dumbbells.

Starting point is 00:58:29 Easy to dial weights up and down with the touch of a button right in the grip itself. It's pretty cool. Tonal also has built-in dynamic weight modes like chains, eccentric, that's E-C-C-E-N-T-R-I-C, and their patent-pending SmartFlix technology so that you can experiment with more ways to get stronger, faster, without the hassle of extra equipment like chains and bands. So, try Tonal, T-O-N-A-L, the world's smartest home gym for 30 days in your home. And if you don't love it, you can return it for a full refund. Visit www.tonal.com, that's T-O-N-A-L,

Starting point is 00:59:00 and for a limited time, get $100 off of the smart accessories when you use promo code TIM100 at checkout. That's www.tonal.com, promo code TIM100. Tonal. Be your strongest.

The Tim Ferriss Show - #534: Michael Dell, Founder of Dell — Early Failures, Battling Carl Icahn, Learning from the Competition, and How to Play Nice But Win

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.